There’s no denying the potential for the Internet of Things (IoT), the technology that connects mobile devices, wearables, homes, cars and, realistically, any object anywhere via the Internet. The growth projections are mind-boggling, including tech giants Cisco (CSCO) and Intel (INTC) estimating, respectively, that the number of connected devices will climb from 15 billion in 2016 to as many as 50 billion and 200 billion by 2020.
Analysts at MarketsandMarkets forecast a 33.3% compound annual growth rate from 2016 to 2021 that will grow the IoT market size from $157.05 billion in 2016 to $661.74 billion by 2021. With these types of projections, it’s no surprise that companies are investing in IoT and wearables as new profit streams. Even Warren Buffett’s Berkshire Hathaway (BRK.A), a company famous for steering clear of tech plays, is addressing the opportunity. Berkshire’s jewelry manufacturer subsidiary, the Richline Group, is introducing Ela, a wearable smart jewelry line.
The common thread for IoT devices, however, is for tech companies and manufacturers to eliminate the two biggest barriers to wider consumer adoption: convenience and security concerns. Consumers just want their cool tech devices to work and not have to worry about them.
This puts pressure on tech companies to create devices and products that don’t feel like technology at all. As a result, IoT devices are increasingly emphasizing on miniaturized hardware that is equally powerful while consuming less energy. At the same time, with the steady advance of IoT phenomenon, there is a steady advance threats as well, making privacy and security features paramount to safe implementation and industry growth. These are the driving forces in a number of applications and consumer acceptance for the IoT market.
Addressing size and safety is a primary focus of NXT-ID, Inc. (NXTD), a visionary technology company that with its business model centered on mitigating risks associated with IoT and smart devices, as well as mobile computing and m-commerce. To address the needs of these markets, NXT-ID has a spectrum of expertise covering digital payments, biometrics, miniaturization and encryption.
“These four disciplines are part and parcel to the connected world today and of the future,” Gino Pereira, Chief Executive Officer of NXT-ID, told Equities.com of his company’s position in the industry. “They accurately identify who somebody is, complete a transaction, protect the integrity of the transaction and verify the data recipient on the other side. People initially think of payment applications – and rightfully so as fintech is a hot space – but we see the complete picture, meaning that our technologies are tantamount in any form of communication.”
Where IoT and Digital Payments Converge
Ultimately, NXT-ID’s technology focuses on enabling consumers to use IoT devices the way they were meant to be used, securely and intuitively. With upwards of 200 billion new IoT devices coming online over the next few years, the company’s technology could be positioned to serve as a conduit of sorts for the new industry.
“Every single IoT device requires the type of applications we specialize in, which has us participating in an industry expected to grow into many hundreds of billions of dollars in short order,” Pereira told Equities.
To get a sense of the potential for NXT-ID, just look at the company’s underlying technology in the fintech space, particularly digital payments. In March, NXT-ID expanded on this core segment of the company, announcing that it signed a letter of intent to merge businesses with Fit Pay, Inc., a privately-held provider of a white-label technology platform that provides payment, credential management, authentication, capabilities and other secure services to wearable and IoT devices.
This merger is key going forward to NXT-ID because Fit Pay is already approved by Visa and MasterCard as a chip payment technology. This is a natural fit with synergies that will save on expenses and bring a whole new suite of products and sales channels to NXT-ID to cross sell products and services.
“People are going to continue to demand more and more functionality from their devices,” Pereira said to Equities. “Our technology serves as a platform for which we can add bells and whistles upon demand. By the end of 2017, we’ll be shipping IoT products into the marketplace with some name brands that people at home know well. To that point, we’re only scratching the surface and still have a long way to run on that front.”
Fit Pay CEO Michael Orlando says that the combination of the two companies will result in “offering transformational products and services to the marketplace.” As Fit Pay’s top executive, Orlando established relationships that can further catapult NXT-ID into a leadership position in the smart wearables market, including teaming with secure element manufacturer STMicroelectronics and G&D Mobile Security to offer manufacturers and financial institutions worldwide a turnkey service for deploying wearable payment devices, such as bracelets, watches and even key fobs.
Long-Term Vision, Near-Term Results
While NXT-ID certainly has its eyes fixated on the future of IoT, it is also actively diversifying to address many market segments. The company has partnered with travel and lifestyle community membership provider WorldVentures to market the flye smart card. With beta testing running, the flye card will soon be available exclusively to WorldVentures’ more than 500,000 DreamTrip members as a comprehensive wallet alternative. flye is built upon NXT-ID’s miniaturized wireless technology that combines up to 10 records (i.e. credit cards, loyalty cards, identification, etc.) in one small, secure device. The device can be used for any of the cards original applications, while at the same time earning reward points that can be used towards DreamTrip vacations. Even more uniquely, the device facilitates truly personalized experiences by privately announcing the user upon arrival at participating hotels, restaurants, venues and more.
In the healthcare and medtech space, NXT-ID acquired LogicMark LLC in July 2016, bringing a leading provider of unmonitored personal emergency response devices (PERS) under its umbrella. LogicMark manufactures and distributes its PERS systems through the U.S. Department of Veterans Affairs, as well as dealers and distributors of durable medical equipment and security devices. By selling PERS products outright, LogicMark delivers a less cumbersome product to the consumer by eliminating the need for call centers and monthly contracts, while decreasing operational costs for the company. In a world with an aging population and a trend shift away from hospital and care settings to the home, LogicMark has an established position in the growing market.
The impact of LogicMark has been felt immediately, as disclosed in preliminary results for the quarter ended March 31, 2017. Revenues for the quarter rose from $42,302 in Q1 2016 to about $6.6 million in Q1 2017 (+15,502%). Compared to Q4, a more apples-to-apples comparison given LogicMark was integrated in both quarters, revenues improved about 46%. Gross profit for the latest quarter was approximately $3.5 million, reversing from a gross loss of ($32,853) in the year prior quarter, while climbing sharply from gross profit of $2.0 million in Q4 2016.
“Our first quarter results for 2017 show continued substantial growth following the significant progress we reported in Q4 2016,” Pereira stated. “LogicMark had a record sales month during the first quarter and we have started to deliver the flye card in significant quantities to World Ventures in anticipation of their product launch. We remain confident that we will continue the improvement in our operating results during the remainder of 2017 and look forward to the forthcoming merger with Fit-Pay, Inc. to further broaden our capabilities and customers.”
Complete results are expected on May 15, 2017 after the market close.
On top of the improving financial performance thanks to expanded distribution of LogicMark devices, NXT-ID is applying the latest technologies to develop next generation medical bracelets. Pereira explained that the innovations take PERS devices from being much more than the “Help, I’ve fallen and can’t get up!”-type of just emergency uses to include devices that track healthcare and statistics, data that is important to clinicians, healthcare and insurance providers.
“Medtech is an exciting opportunity. We’re also looking at some hospital systems in terms of their needs for verification systems for access to medical records and protecting medical records from breaches by implementing new technologies,” Pereira told Equities.
The Technology Behind the Technology
Pereira further emphasized the company’s model to stay squarely centered on a business-to-business (B2B) growth strategy. To achieve this, the company has meticulously built an impressive list of board and advisory board members with incredible reach, including William Fields, the former President and CEO of Wal-Mart Retail Stores and CEO of Viacom’s Blockbuster Entertainment Group. Other advisors and board members include Ken Moy, director of Global Payments and Emerging Commerce at Subway and formerly SVP and Group Head of US Emerging Payments at MasterCard Worldwide; Lawrence Flanagan, President and CEO of AARP Member Services; and retired Major General David Gust, a principal at his consulting firm specializing in the defense sector, to name a few.
Pereira is adamant that you can’t put IoT into a box and that there are no clear lines between where wearables stop and IoT begins, or the same for smart card and IoT and so on.
“IoT touches everything,” Pereira said. “The key point is that if everything is going to be interconnected frm our clothes to our homes to our personal information, we really need to make sure that the security is as solid as we can possibly make it. There were some 100 million-plus wearable devices in the consumer space last year, with roughly 63% of them payment enabled. The last thing that we need is those devices connected to other devices and for hackers to get in. Cutting edge technologies will lead the charge in increased security, which is where we come in.”
WorldVentures, LogicMark and Fit Pay exemplify some of the opportunities that underpin both near- and long-term catalysts for NXT-ID. As such, the company and its investors find themselves uniquely positioned with revenue generating operations today through all three components, while traveling down the runway to mass adoption of IoT and advanced wearable devices, which the company is presciently positioning itself for right now.
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