Good day, ladies and gentlemen. And welcome to the Conference Call to discuss the Full Year Ending December 2018 and update of previously announced spin-off Conference Call. At this time, all participants are in a listen only mode. Later we'll conduct a question-and-answer session and instructions will follow at that time [Operator Instructions].

As a reminder, this conference maybe recorded. I would now like to turn the conference over to your host, Mr. Gino Pereira, the CEO. Sir, you may begin..

Thanks very much. Good afternoon. Thank you, everyone, for joining our call today.

During this afternoon in this call, we'll be making forward-looking statements, which consist of statements that cannot be confirmed by reference to existing information, including statements regarding our beliefs, goals, expectations, forecasts, projections and future performance and the assumptions underlying such statements.

Please note that there are number of factors that will cause actual results that differ materially from our forward-looking statements, including the factors identified and discussed in our earnings release today and in other SEC filings.

Please recognize that except as required by applicable law, we take no duty to update any forward-looking statements, and you should not place any undue reliance on such statements.

And so following our usual protocol with me on the call today is Vin Miceli, our Chief Financial Officer; Mike Orlando, Chief Operating Officer and President of Fit Pay; and Stanley Washington, Chief Revenue Officer and Head of our Health Care Division.

So I'll begin the call and turn it over to Vin Miceli for a review of our financial results, and to Mike Orlando and Stan Washington for an update on payments and healthcare respectively. And we'll take a few questions from the analysts on the call. And so as we published in our results, we had a steady year of growth.

Our revenues were up about 7% from continuing operations. Gross profit was up higher than that at about 12%. And we managed to reduce our operating expenses from continuing operations by about $1.4 million for the year.

Operating income from continuing operations was about $600,000 compared to a loss of about $2.2 million for the same period in the previous year. So, overall, steady growth year for us. The spin-off, to give you an update on the spin-off, we are making progress on that. It will be slower than ideally we would like.

We previously announced that we had a term sheet for a refinancing of the company's current term loan, which would allow us to proceed with the spin off. We expect that transaction to close in about within the next two weeks, so it's moving forward.

The next step for us is to file the registration statement with the SEC to register the shares for the spinoff company. We anticipate filing that in the next week. And we are dependent on the SEC review of that filing.

So once the SEC has completed their review, we will be able to announce more details in terms of the date of the spinoff and the record date in terms of the receiving the dividend from the spinoff. So we expect to have more definitive news very shortly.

So I'm going to turn the call over now to Vin Miceli, to talk a bit more detail about financial operations..

Thank you, Gino. Again, Vin Miceli, CFO for Nxt-ID going to provide a summary of the full year results for 2018 as compared to the full year results of 2017 and focus on the continuing operations of the company.

So to get started, revenues from our continuing operations for the 12 months ended December 31, 2018 came in at about $17.1 million, and that was compared to $16 million for 2017, representing an increase in our revenues of just under 7%.

And the increase is primarily attributable to LogicMark's increased sales volume to the VA, as well as to a favorable shift in product sales mix from land based products to cellular mobile type products, which typically have a higher selling price associated with them on a per unit basis.

The company's gross profit margin continues to be very healthy and for the full year 2018, it was approximately 72%. In the comparable 2017 period, the same gross profit margin percentage was 68%.

And again, the increase primarily due to the increased sales volume, the favorable shift in products sales mix and also in 2017, the company recorded a $300,000 in excess in obsolete inventory reserves for some of our LogicMark inventory.

In terms of our operating expenses from our continuing operations, as Gino pointed out, they were down about $1.4 million. They came in at $11.7 million compared to $13.1 million in 2017. The decrease in the SG&A is primarily attributable to lower stock comp expense and bad debt reserves that were recorded in 2017.

Operating income from our continuing operations for the 12 months ended December 31, 2018 was just under $600,000 compared to an operating loss of $2.2 million for the comparable '17 period.

The increase in gross profit again is attributable to the strong sales volume and our favorable margin mix, and coupled with the lower operating expenses experienced in '18. Interest expense for the 12 months ended December 31, 2018, was about $3 million lower and came in at $4.7 million compared to $7.7 million for the 2017 period.

The decrease in interest expense, as everyone knows, was primarily attributable to the lower interest expense incurred on the refinance term loan versus the interest expense incurred on both the revolving credit facility that we had in the past and the convertible exchange notes.

In summary, the net loss from continuing operations for the 12 months ended December 31, 2018 was approximately $1.3 million compared to a net loss from continuing operations in 2017 of $8.5 million. So with that, I'm going to go over and hit some of the highlights on our balance sheet.

At 12/31/2018, our cash and restricted cash came in at about $1.6 million. We had some relatively flat other working capital line items, like AR, inventory, prepays, are all pretty much flat year-over-year. No real flux in our intangibles in our goodwill other than regular amortization expense.

In terms of the liabilities, not a whole lot of movement year-over-year on a continuing ops basis. And the debt was still at the same $16 million, we're hoping to look at getting that refinanced soon as well. Equity was just under -- stockholders' equity was just under $15 million for the year.

And one other additional comment I'd like to make is on a continuing ops basis, the company's operating cash flow for the full year 2018 was a use of cash of about $50,000. So we're on a continuing ops basis very encouraged by the operating cash flow of the company.

And I think once the spin-off comes to fruition, I think that the company will be much better aligned and positioned to generate and use the sources of cash that it has. So with that, I'll turn it back over to Gino Pereira..

Thanks very much Vin. Mike Orlando is going to give us an update on the FinTech side of the business..

Thanks, Gino, and good afternoon, everyone. So, the Payments Division, we continue to make strides in expanding our platform and capabilities and partnerships throughout the latter part of 2018 and in the beginning of 2019. First and foremost Garmin continues to add new devices to their portfolio.

And we continue to expand on the network banks that in countries that support the capability of Garmin Pay. So right now we are in 15 devices or as Garmin announced, support for 15 devices of Garmin Pay. And we’ll be in 300 banks for credit and debit. And that represents 44 different countries and virtually every continent on the globe now.

We announced in late January support for South America. So that part of portfolio continues to grow and expand, and is really the strength behind driving now Garmin Pay, but other partnerships as we bring them to market. We also expanded company networks that we support.

So Maestro and Discover are both on board, and that allows to drive new growth, particularly in Europe with regard to the Maestro network and high use of debit cards and the facilitation of debit cards to wearables that were lost devices in that region. So that was a big milestone for us.

We've also been spending quite a bit of time bringing new customers to market. We announced in early January, SwatchPAY. So that project was a lot of work went into that project during all of 2018, and that launch is another big milestone for us.

It's early yet in that relationship and that we are only in one country today, but we expect them to continue to grow their footprint throughout Europe and US, and other parts of Asia over the course of 2019 and into 2020. We also have been working on expanding new commercial opportunities and revenue streams using our tokenization platform.

If you recall, we announced in October as a launch partner with Visa with their card on file program and credential on file program, which essentially allow ecommerce and merchants that have large portfolios of credit cards we're billing ongoing purposes to use our tokenization services as part of their transaction.

That will expand the capabilities beyond and physical wearable devices and to a whole new breadth of merchants and business opportunities as we bring on Visa and the other networks the same capabilities. And then on the device side, we spend a lot of time bringing flip to market.

And it much more difficult project than we had anticipated when we first enhanced it, but we are pleased that we have finally been able to begin the shipments on that and proving out not only our capabilities on the wallet side, crypto to USD conversion solution that we have, and are looking to continue to grow that product throughout this year.

I would say that as we look at all of 2018, for us, it was continuing to build on the foundation that we've had with the company, both on the platform and partnerships; increasing our influence within the card networks and banks; which for us is a real key capability as we bring new devices and new partners to market to leverage that network to quickly bring those devices and users on board to our platform and to the other payment wallets that we'll deliver; and then lastly, around the expanding the capabilities in revenue shoots that we have had.

So, excited about what we've done and really bullish about what we see coming down the pipe for 2019 and into 2020. And Gino, I'll turn it back to you..

Thank you very much Mike. And finally, over to Stan Washington to give us an update on what's been going on in our business..

Thank you, Gino.

As a quick recap, going into 2018, we had three primary objectives; one was to drive deeper penetration into the government and VA channels; the second, was to expand our direct-to-consumer platform and to drive more coverage into retail; and thirdly, we wanted to build revenue through new products and our strategic, widening our strategic partners within the B2B and key vertical categories, as well as some really key emerging markets.

I think for 2018, we performed really well among those three priorities. Overall, revenue for 2018 was up to 6.7%. We had a strong performance on our gross margin, which increased by just shy of 4% at 3.8% year-over-year. And we've been able to continue to maintain a strong gross margin at 73%.

Overall, the government channel performed well with continued expected growth into 2019 through deeper penetration and expansion, not just within the VA, but additional verticals within the government channel itself other departments.

We launched our retail partnerships with Walmart.com, and are looking forward to effective launch of Best Buy, which will be happening shortly this year. We've continued to drive much more efficiency on our use of resources and managing costs across LogicMark. And they know to do that overall while still driving and increasing our volume.

Looking forward, we have been able to develop new products for 2019, which we hope to launch into the government channel in some of these other key market segments that we have been targeting. We've expanded our business model to create new partnerships and retail as well, and key verticals.

And really are looking to drive this with some we think robust products that will really hit the market in sometime this year. The key verticals that we've been targeting are hospitality and real estate along with other loan worker channels, which we believe will provide very key growth opportunities as we get further into 2019.

And in terms of mobile PERS, in PERS, we've expanded our features and design and are looking to introduce new products through key partnerships that we have put in place and are working to close as we get into the rest of this year as well.

Finally, we've been really working to design new products overall that will serve, I think the growing needs of veterans as a key pillar of our growth strategy moving forward, and much deeper penetration into the veteran marketplace overall and looking, again to continue our position as the leading provider of emergency communication devices to the VA.

Thank you, Gino..

Thanks very much Stan. So in summary, I think solid year for us to continue to build on our foundation, while also working on new products for the future. I think both sides, both healthcare and fintech, have exciting new products in the pipeline that we think could substantially contribute to continued growth of the company.

So we're enthusiastic about everything that we have going on, focus on getting the spin-off considered as quickly as possible. And whilst we're focused on increasing revenue, we also focused on reducing our costs and improving our bottom-line. And I think the 2019 is looking strong for us and I think we have a bright future going forward.

So thank you very much everyone and we can take the questions from analysts..

Thank you [Operator Instructions]. Our first question is from Michael Staiger of Odeon Capital. Your line is open..

Just want to ask a high level question.

To what extent can you guys give us an idea of what the spin-co will look like into 2019 and in 2020 so we potentially can model it and put a value on it, I will start with that?.

So I think that that is a little tricky at the moment. Essentially, the spin-co consists of Fit Pay as an organization plus financial assets that are contributed from Nxt-ID, as well as some intellectual properties that was developed by Nxt-ID earlier that's going to be a key in some new product launches coming up.

The company is still in early stage but has tremendous advantage as far as the relationships with banks and credit card companies. And so, I think that, in general, I think 2019 is going to be a continued year of development while increasing revenues. And I think in 2020 and beyond, we’ll start to see some of the multiplier effects come into play.

So, Mike, do you want add anymore to that?.

No, I'd agree with you, Gino. As we continue to evolve the customers and partnership, we're strengthening our foothold in the device market, expanding into other revenue streams as I mentioned [indiscernible] e-commerce.

And so we're getting to that point towards the end of this year early 2020 at that inflection point where all the catalysts will start to kick off for us. And as we get more toward sharing the information publically about the spin-off of the separate company, I think we will be able to get more visibility into what’s that going to look like..

And then a follow up on the LogicMark side, looks like they've done really well with this government channels. Is there more opportunities across other government agencies to facilitate growth? And would you anticipate with some of the announcements with respect to I guess the retail channel.

What uptake are you expecting in '19 from that side moving forward and margin opportunity as well? Thanks..

Specific to the government channel, yes. In addition to the VA specifically as a standalone channel, we see other opportunities in other key agencies, and have already aggressively been working down that path.

So we do feel very confident that we will be able to drive more opportunities as we get further into this year and those opportunities will help us drive strong incremental revenue. That is again a core aspect I think of our growth strategy.

There is a higher degree of or rather more penetration opportunities specifically within veterans and the VA, but we also see that opportunity in other agencies from a federal government standpoint. So that's a key area of growth. On the retail side, we are really looking to accelerate the retail partnership that we've put in place.

Walmart.com is live and up and running, and we are looking to continue to ramp it up. We've got digital advertising and programs already in place to drive that revenue. Best Buy should be coming online officially soon, and we're looking also at other potential opportunities that we think will continue to help and expand the business.

This does, I think as we think about how we're going to introduce new products and we talk more about direct to consumer versus a B2B, it really I think does help us as we think about how we're going to grow revenue and have that mix of revenue I think continue.

And that should continue I believe to have a strong positive effect on our margin but ultimately, the expansion of further growth..

And to just add to that, the development of direct to consumer business we foresee as doing through partnership with very established companies. We're not attempting to go direct to consumers on any wide scale basis on our own, but leveraging relationships that we're developing..

And then one quick housekeeping question. When can we expect to hear about Q1 results in the future? I assume we're talking about 2018 results right now the March quarter.

When do you expect to give us some clarity on what's happening there?.

I think we generally -- the March quarters was hard on the heels to year end, so it's always [indiscernible] also to get that done following the audited results. So we could expect that around about the filing deadline, which I believe is probably mid May ,right, about May 15..

Thank you. Our next question comes from Kris Tuttle of SoundView. Your line is now open.

So we spend a lot of time on year, which is great. And I was just curious if you think about LogicMark for a second as a standalone business, and how it's been running. And if you look at Q4 and Q1, absent discontinued ops and sort of stuff.

What's the reasonable ballpark top line growth rate to think about for that business right now?.

I think there are two. You got to have to separate them into two things. I think that the traditional VA business, I think we can expect continued growth in line with the percentage growth that we have experienced before, so 7% last year, 7% to 10% in the coming year.

Where I think that there is a lot of potential of some of the new channels that we're introducing that’s too early to forecast. So we're optimistic that they will contribute very significantly to overall growth. The timing of some of those products introductions are probably, well, they're certainly in the second half of the year.

And one of the major products that we're working on is with the large partners probably the fourth quarter introduction. But I do think that they have the potential to contribute substantially to the business, it's a little too early for us to be able to say quite how much..

And do you have any anecdotal feedback on how the Wal-Mart relationship has -- you guys launched there.

Have you seen traffic, the results, have there been feedback about how it could be done differently? Or just what kind of observations do you have now that you guys are [indiscernible] with real customers?.

So we're introducing that on -- it's like a slow burn to gather information, and then reinvest them based on the information and the feedback that we get back. So we're launching the Web site. We've experimented with a couple of things like a landing page now that we've attached to some of the advertising.

The click through rate on the advertising is pretty encouraging, and the sales have slowly started to grow. But at this stage for us, it's still -- it is still a learning process. So as we try different digital strategies and get results, we'll obviously focus on the ones more successful.

It's still a bit of a learning process for us but we're approaching it in a prudent manner..

And I had a couple of questions on the Fit Pay side of things. So you're now shipping the Flip, and I guess Apple has made some noise with this whole Apple Bank and cardless and signature less payments. And I'm curious to know if you look at the Flip or other things that -- you guys are in the tokenization obviously.

What are your expectations for the Flip and things like it as a -- how much can they contribute to the Fit Pay business in the next year or two?.

So I think that Flip is an interesting introduction. We launched the form factor but certainly the capabilities that sit behind it are our ability to load devices and use those devices in a contacts list environment.

And whether we load those devices with a cryptocurrency, which is intended for Flip or [indiscernible] currencies or other type of funding models. We believe that the growth of contactless acceptance will continue to drive these different devices and various types of form factors.

So our goal for Flip is really twofold, to get our foot in the water in terms of having a crypto conversion product and being able to use that in a contactless providing utility to Bitcoin users to be able to spend their cryptocurrencies with everyday purchases but moreover was really establishing the technology components to our platform, to allow us to expand, to different types of devices, different types of partnerships that may want to utilize these devices, so different distribution models and continue to grow that.

So as much as was the device, it is really about getting the platform and all the partnerships that we needed in place to make that happen..

And you mentioned SwatchPAY is launched and you said they are in one country. And I know, of course probably the pace of how they rollout is up to them. But are they talking about rolling this out. Is it one country a month, one country a quarter? I mean how long do you think it'll be before they're in, let's say, most of the developed countries, U.S.

and Europe?.

So I can't share the expansion plans directly. But I can speak to the model in SwatchPAY is being deployed, and it's through their retail channels. And so they're selling SwatchPAY watches through -- right now it a set of four variants of a payment watch through their retail channels in Switzerland.

Those are their consumer direct stores, so wherever they have their own Swatch footprint. And so their goal is then to continue to do that wherever they have Swatch stores. Their strength continues to be Europe and Asia, along with U.S. And so as they add -- they continue to roll out, they'll expand the places where they have these retail footprints..

And then the last question I got on my list here is just, you talked about the spin-off and it sounds like we'll have more information about that soon. So I guess what I'm curious about is the time.

Is there a way minimize the time between the record date and the actualization of this spin-off, and its ability to trade in the market? If you guys have thought about that like how short could that be.

I don't know, I'm trying to understand what that -- it's a little bit of an awkward period where the record date is passed but the spun off PartX part is not yet trading in the market..

Well, the time between the record date and -- first of all, we need to wait for the registration statement to be cleared by the SEC. Same time we have we have an application into the OTC market for PartX where and that applications is being processed.

They won't process it further -- it's being processed as far as we can go and it means perhaps once the registration statement is effective then it can be accelerated. So we don't -- we've obviously thought about it and focused on it, and trying to minimize the time between the two. So, I understand that.

Unfortunately, sometimes it's hard for us to give very tight dates on the intimation just because there are so many moving pieces. But the objective is to try and minimize the time between.

And I don’t think that that really -- I think as long as shareholders have -- and yes, the record day will reflect that, but the record date has to be done part of the spin-off itself.

And we're trying to minimize the time, but I don’t think that it matters as much in terms of individual shareholders if they have shares immediately, whether they can trade them immediately or whether they can trade them in 30 days or sixty days.

I think the important feature is that it is going to be traded and therefore the distribution will have value to share holders. I think that PartX is going to be a growing business for a number of years to come. And I don’t think the extra few weeks that it's going to take would impact the value to shareholders at all..

[Operator instructions] We have another question from Michael Staiger. Your line is open..

Just a quick follow up as well. On the Fit Pay PartX, your take on activations, I don't know if there anything you have with respect to, at least that seem which we have with respect to activations with Garmin and any other pending activations and where you guys mostly expect them. If there's any color you can provide that might be helpful. Thanks..

Michael, you broke up a little bit. I think your question was any insight we could give into number of activations with Garmin or other partners. Is that -- did I get your question correctly….

Yes..

So we can't share the specific numbers, mostly because Garmin and so they don't share the number of devices sold publicly. And so they've asked us not to share activation numbers on our public calls, simply because they don't want to people to be able to extract out of our numbers what their device sales have been.

So we've been asked not to share those with them. I can say that in terms of relative to other pays in the market, our information is that we seem to be outpacing the other pays in terms of percentage of activations to numbers of devices sold.

And we believe that that's specifically related to the user experience that Garmin Pay has created in the way that you onboard your new watch to the Garmin Connect feature and how that connects to Garmin Pay, and also the affinity that they have, Garmin users have to the specific features in the Garmin watches.

And so we're, we're pleased with the activations, the card networks seem to be pleased with the activation rates, and we can't give specific numbers unfortunately..

Thank you [Operator instructions]. I'm showing no further questions at this time. I'd like to turn the call back over to Mr. Pereira for any closing remarks..

So thank you very much for being on the call. I think that's all for now. And we will of course get you updated information on the spin-off as soon as we have it. So thank you very much. Have a good afternoon..

Thank you. Ladies and gentlemen, this does conclude today’s conference. Thank you for your participation and have a wonderful day. You may all disconnect..