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Edited Transcript of NXTD earnings conference call or presentation 21-Aug-19 8:10pm GMT

Q2 2019 NXT-ID Inc Earnings Call

MELBOURNE Sep 7, 2019 (Thomson StreetEvents) -- Edited Transcript of NXT-ID Inc earnings conference call or presentation Wednesday, August 21, 2019 at 8:10:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Gino Miguel Pereira

Nxt-ID, Inc. - Chairman, CEO & President

* Kevin O’Connor

Nxt-ID, Inc. - President of Logicmark

* Michael J. Orlando

Nxt-ID, Inc. - COO & Director

* Vincent S. Miceli

Nxt-ID, Inc. - VP & CFO

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Conference Call Participants

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* Brian David Kinstlinger

Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst

* Kris Tuttle

SoundView Research - Director of Research

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the webcast to discuss the results for 6 and 3 months ended June 30 and to provide a general corporate update. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to introduce your host for today's conference, Gino Pereira, you may begin.

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Gino Miguel Pereira, Nxt-ID, Inc. - Chairman, CEO & President [2]

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Thank you very much. Good afternoon. Thank you, everyone, for joining our call today to discuss Nxt-ID's unaudited financial and operating results for the 6 months and quarter ended June 30, 2019 and a general update on the business.

During this afternoon's 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 underlying assumptions of such statements.

Please note, there are a number of factors that will cause actual results to differ materially from our forward-looking statements, including the factors identified and discussed in our SEC filings. Please recognize that, except as required by law, we undertake no duty to update any forward-looking statements, and you should not place any undue reliance on such statements.

With me on the call today is Vin Miceli, our Chief Financial Officer; Michael Orlando, our Chief Operating Officer and President of Fit Pay; and Kevin O'Connor, President of LogicMark. I'll begin the call with a general update then turn the call over to Vin for a review of our financial results, then to Mike and Kevin for an update on the payments and health care business, respectively. We'll then take questions from the analysts on the call.

So our revenues for the 6 months ended June 30 were on a par with last year, mostly from LogicMark sales, with the second quarter catching up on the deficit from the first quarter. But our gross margin improved significantly over the same period. Overhead expenses were about even with the corresponding period in the previous year despite significant R&D spending on new product development for LogicMark.

Our operating income from continuing operations for the 6 months ended June 30 increased by about 67% over the same period in the previous year. And cash provided by continuing operations for the 6 months ended June 30 was approximately $670,000 versus a deficit of $1.1 million for the same period last year.

Our core business at LogicMark continues to perform well with increased contribution, and we look forward to new innovative product introductions at the end of 2019 and early 2020.

We also announced that we've withdrawn the planned spin-off of our fintech division. The credit agreement with our primary lender had required that we spin off this division by July 2, 2019. And although they've given us a further extension as we continue to pursue certain opportunities, ultimately, we're unable to raise sufficient funding for PartX on acceptable terms within the prescribed time period, and now we're obliged under credit agreement to seek other strategic opportunities.

We also announced that we entered into a nonbinding letter of intent with the prospective purchaser of Fit Pay, excluding certain assets. Due to confidentiality, we're unable to disclose any further information at this time, but note that the disposition of Fit Pay would save the company approximately $4 million in cash a year.

So that's a general update for me, and I turn the call over to Vin Miceli to review the financial operations.

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [3]

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Thank you, Gino. Good afternoon, everybody. So I'm going to summarize briefly the operating results for the third quarter -- I'm sorry, for the second quarter and 6 months ended June 30, 2019 versus 2018.

So revenues from continuing operations for the 3 and 6 months ended June 30, '19, were about $4.5 million and $8.7 million, respectively. And those revenues were compared to for the 2018 periods $4.4 million and $8.7 million. On a sequential basis, revenues for the second quarter '19 increased by approximately $300,000 over the first quarter of 2019.

Revenues were essentially flat in both the 3 and 6 months of '19 versus the 3 and 6 months of '18. However, we did experience some decreased sales volume in LogicMark's commercial sales, which were partially offset by a favorable shift in product sales mix from land-based products to mobile products, which typically have a higher sales price on a per-unit basis.

The company's gross profit margin from continuing operations continues to be very strong and was approximately 76% in the 3 and 6 months ended June 30 of '19, as compared to approximately 72% for the same 2018 periods. And the favorable gross margin increase in both periods was primarily due to the favorable shift in product sales mix.

Our operating expenses for the second quarter '19 were up roughly $100,000 over the 2018 level for the quarter, and the increase is primarily attributable to higher R&D expenses that were a direct result of the new product development efforts at LogicMark.

Operating expenses for the 6 months 2019 were down approximately $173,000 to $5.5 million as compared to $5.7 million in the 6 months ended June 30, 2018.

Our selling and G&A expenses were down approximately $450,000 in the first half of '19 versus 2018. However, as I pointed out earlier, R&D expenses are up about $280,000, and again, a direct result of the new product development efforts at LogicMark.

Interest expense for both the 3 and 6 months ended June 30 of '19, was lower by approximately $350,000 in the second quarter and $521,000 in the 6 months as compared to the same 2018 periods. The decrease in interest expense in both periods resulted primarily from lower interest expense incurred on the refinanced term loan versus the interest expense incurred on the revolving credit facility in '18.

The net loss from continuing operations for the 3 and 6 months ended June 30, 2019, was approximately $2.2 million and $2.5 million, respectively, compared to a net loss of $150,000 and a loss of $742,000 for the comparable '18 periods. Excluding the 2019 loss on extinguishment of debt of $2.3 million, the company would have been slightly profitable in the second quarter of '19 and have -- would have had a minimal loss for the 6 months ended June 30, 2019, reflecting significant process -- progress over the comparable 2018 periods.

Moving over to the company's balance sheet. I'll go through some of the key balance sheet items here. We closed the quarter at June 30 with cash of about $1.3 million. Our inventory was -- oh, and the cash, I should point out that the cash was generated -- we had about $700,000, roughly speaking, of cash generated from operations. And the rest of the cash was generated from stock sales under the company's ATM program.

Inventory was up. We had a large inventory received towards the end of the quarter, which you can see is offset in the company's accounts payable balance, which was also up about $300,000.

Also new to the company's balance sheet with the newly created refinancing, we have about $2.1 million of current loan amortization up in current debt, that's the $2.1 million. And then we have equity. We closed the quarter with equity of about just under $14 million.

So with that, I'll turn it back over to Gino.

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Gino Miguel Pereira, Nxt-ID, Inc. - Chairman, CEO & President [4]

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Thanks very much, Vin. And now I'd like to hand the call over to Mike Orlando to talk about Fit Pay.

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Michael J. Orlando, Nxt-ID, Inc. - COO & Director [5]

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Thanks, Gino. Good afternoon, everyone. So our Q2 revenues for the team's division were $232,000 for the first 3 months of the year compared to $805,000 in 2018 and for the 6-month period is $454,000 compared to $1.4 million. The difference in those 2 numbers is all related to final shipments of the flye card to WorldVentures during the first half of 2018, and we finished shipping off all of that inventory. And so if you look at the 2019 results, it is purely the Fit Pay, the platform generation revenue, implementation fees and our core platform from our customers today.

During the quarter, we grew our bank implementations to just over 425 banks and expanded into 26 countries. We continue to see increased activity with Garmin and Swatch as they continue to have more devices and support for those products on our platform.

In addition, from a product development perspective, we've completed the implementation effort to launch the e-commerce initiative as an extension of our tokenization service with 2 of the networks and are continuing that development to bring that product to market later this year and have continued on additional platform development for these services that would benefit the company in Q4 and into 2020.

And with that, I'll leave it back to you, Gino.

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Gino Miguel Pereira, Nxt-ID, Inc. - Chairman, CEO & President [6]

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Thanks, Mike. And then now, Kevin O'Connor with LogicMark.

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Kevin O’Connor, Nxt-ID, Inc. - President of Logicmark [7]

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Thanks, Gino. Good afternoon, everybody. I won't go through the financial details, as Vin had covered them specific to the LogicMark business, but just kind of an overview as we talk about the core business that LogicMark has continued to perform very well primarily in our government and specifically in the VA channel.

As Vin mentioned, we did have a slow start to the year in Q1 that ramped up in Q2. So we've got to the first half at about a flat year-over-year. We anticipate a strong second half as we're gaining momentum.

Our focus really was in kind of shifting the product mix within our core channels, so we did help drive an improvement in the gross margin that Vin addressed. There's also a strong focus on operations and managing to maintaining our costs, so the team at Louisville has been doing a great job with that. Part of that and one of the variables that kind of gets thrown into that is the uncertainty of tariffs from China. So as we bring some products in from China, there's been an increase in tariffs and there's been put on hold. So we're managing through that, trying to stay ahead of that as much as possible, and again, keeping an eye on our gross margins throughout that process.

The core business, as it continues to grow, we've also looked at expanding into the retail and commercial channels, and it's been slower than we had hoped. As Stan had mentioned earlier this year, we had launched partnerships with both Best Buy and Walmart on their e-commerce platforms, so both on the dot-com. And that's been slower than we had anticipated. We did do some test marketing in both Q1 and Q2 to try and increase the exposure and really compete. It's a really competitive space with a lot of the monitored products. So one of the challenges was presenting our value proposition in the best light with a no monthly fee.

And as I mentioned, some of the test marketing we did was really expensive to try and get any exposure, and we had a limited return on investments. So right now, we're really kind of looking at additional ways to market and advertise, both in the dot-com channel but also looking at additional partnerships in retail and commercial with lower-cost opportunities. Part of that includes exploring some potential branding opportunities. There is some strong brands in the space for PERS, primarily at the monitored channel, so we are looking at trying to elevate our position overall in that category.

We're continuing to look for impactful and cost-effective ways to promote the strong value proposition, and we'll look for more to happen on that in the second half.

The other thing that we've really focused on, and Vin again mentioned it with product development costs in the second quarter increasing. We talked previously about releasing new products midyear, and those have been delayed. Again, some of what drove that was some of the product development was initially going to be done through some Chinese manufacturing partners, and our concern with potential tariffs and trade issues really forced us to drive more product development in-house so that we control all of the IP and can move manufacturing as needed.

So as we look to the second half of the year, we're -- we anticipate that we'll have products released by the end of this year, both to enhance our core position in the government and VA channels, but also to release some new products in the commercial channels and look at some new expanding markets that we think we've got opportunities for as well.

And with that, Gino, I'll turn it back over to you.

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Gino Miguel Pereira, Nxt-ID, Inc. - Chairman, CEO & President [8]

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Thanks very much, Kevin. And we can take questions from analysts now, please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question is from Brian Kinstlinger from Alliance.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [2]

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Maybe, Gino, you could start. There's a lot of things going on obviously in your company right now. Can you list your top 3 priorities at this stage of your company?

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Gino Miguel Pereira, Nxt-ID, Inc. - Chairman, CEO & President [3]

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Certainly. So the main priority has always been, and remains, focus on health care and LogicMark and growth, which is why we are focusing on expanded opportunities and new product introductions. That's essential to our future.

Second priority for us is to continue to reduce our spend so that we can move into profitability. And so obviously, as part of that, was the rationale for the spin-off, and then now, potentially other strategic opportunities. The objective is to have fintech go where it has a good home and can continue to do well and for us to relieve the significant amount of cash flow that will help us as a continuing operation.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [4]

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And then, can't say much about the Fit Pay transaction or the LOI, but it looks like from the Q, the prospective purchaser is revaluing or evaluating the goodwill attached to that, and that is expected to happen at the end of the third quarter. So should investors take that to assume that a transaction is likely more than 2 months away when the third quarter closes and the next Q comes out? Is that how we should think about that?

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Gino Miguel Pereira, Nxt-ID, Inc. - Chairman, CEO & President [5]

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Not necessarily at all. The goodwill valuation is actually -- or a potential goodwill -- yes, goodwill evaluation is something the company does on a triggering event. And should this happen, it would potentially be a triggering event. So there is -- it is currently a nonbinding letter of intent, and we're going through the normal process. And as I say, due to confidentiality agreements, we can't say any more than that. But I wouldn't try to infer anything more than that.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [6]

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I'm going to try to ask one more question without getting too much information about that. Some companies, when they sell a loss-producing company like this, they are looking to generate obviously as much cash as they can. And some are getting very minimal cash just trying to get rid of the -- reduce the cash burn. Should investors be expecting material amount of cash? Or just strictly trying to get rid of that cash burn?

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Gino Miguel Pereira, Nxt-ID, Inc. - Chairman, CEO & President [7]

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Well, I can't comment on that at this point in time.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [8]

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Okay. One more question before I get into a few of the businesses. I'm getting a ton of e-mails. Maybe you can discuss the plan to get back in compliance with NASDAQ?

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Gino Miguel Pereira, Nxt-ID, Inc. - Chairman, CEO & President [9]

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So really, our plan -- all we can do is focus on the business. So we're trying to drive our revenue and our opportunities. And as we report those results to the market, hopefully, they'll be favorably viewed as they see our progress. And that will reflect in, ultimately, in the valuation of the company.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [10]

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Okay. In terms of the business, you clearly stated the 6 months, the revenues or continuing operations are fairly flat. Is that the result of slower sales like you said on Walmart and Best Buy versus what you thought? And if so, which products were these that have climbed a little bit slower than you thought?

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Gino Miguel Pereira, Nxt-ID, Inc. - Chairman, CEO & President [11]

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Well, the retail business was not in place last year, so there's no -- it doesn't really have an impact on there. The -- we're very well penetrated into the VA, and so we continue to maintain our market share despite potential increased competition. And the thing that's changed for us, as Kevin alluded to earlier, is we've been pushing more profitable products into that mix to improve the profitability. And part of the plan with -- and I think products go through life cycles as well. And so we're excited about the opportunities that we have with the new products that are in R&D right now that would be released around the end of the year, early in the following year. And we think they will give us the next step-up. But I wouldn't read more than that into the fact that we're well penetrated in the VA. What we've been doing is moving our product mix to more profitable products.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [12]

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Yes. No, I think that -- I guess my question, underlying question really is, I think, in the past, you've talked about the potential to grow annually 10%. And so far this year, you've tracked below that. You might not get there until next year, but I'm curious what has, in your view, prohibited you from getting on that path to 10% growth? Is it delays in products? Is it the retail hasn't performed like you thought initially? Just trying to understand, in the first 6 months, what has led to that performance.

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Gino Miguel Pereira, Nxt-ID, Inc. - Chairman, CEO & President [13]

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Yes. I think it's a combination of both those things. I think retail has been slower to go than we anticipated. As Kevin alluded, we have a great value proposition, we believe. And it's how we can be effective at communicating that to the public, obviously, as a small company, relatively limited budget. So that definitely had an impact. And yes, the delayed introduction of new products certainly had an impact, too, because that was part of the revenues that we had projected in our forecast.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [14]

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And what are those new products that are expected to be released that weren't released?

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Gino Miguel Pereira, Nxt-ID, Inc. - Chairman, CEO & President [15]

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Just in general terms, there's an updated 4G PERS device. And we have a new cellular device -- cellular wearable device in development and a WiFi device in development. So those are the -- those have been our primary areas of focus.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [16]

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Great. Last question I've got is on the Fit Pay business. I think if I heard you correctly, you guys said you did a couple hundred thousand dollars in revenue, I think it's below $300,000 this quarter. What's been the biggest obstacle with some of the big names of watches that you're working with? What's been the biggest obstacle to generating more material revenue in that business?

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Gino Miguel Pereira, Nxt-ID, Inc. - Chairman, CEO & President [17]

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Mike, do you want to...

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Michael J. Orlando, Nxt-ID, Inc. - COO & Director [18]

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It's Mike Orlando. Yes, yes. I heard, Gino. It's Mike Orlando. Brian, so it's really been getting these devices' device manufacturers through the certification process, the payment networks and by extension there, the banking affiliates have a pretty high bar in terms of the types of devices, user experience, branding experience that needs to takes place. And there's other types of certifications that are required. So the development and execution and approvals of those products has taken longer than we expected. And then certainly, our customers have expected, and that's caused delays there.

If you look at the market overall, you're seeing increased consumer adoption and increased penetration of acceptance in the marketplace here in the U.S., specifically, and then globally. And so -- and I think we're seeing a lot of things start to come together. But in terms of getting the devices out, that's been a pretty big -- the biggest drag in our business akin to this big approval process.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [19]

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And each product that you work on needs to be approved through regulatory separately? Is that how it is? And so by that definition...

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Michael J. Orlando, Nxt-ID, Inc. - COO & Director [20]

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Yes.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [21]

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And how long does that process generally take? A year or more?

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Michael J. Orlando, Nxt-ID, Inc. - COO & Director [22]

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Our platform's approved, but these devices need to go through an [Eco] certification, which is an independent board that looks at -- independent lab that looks at different attributes of the devices to make sure it's interoperable within every payment terminal globally. And then each of the payment networks have their own approval process. So -- and that's in addition to the hardware development that takes place. So those approvals can take anywhere from 6 to 9 months, and what we've got on average -- but we've seen some that have lasted a year-plus. And so those things are outside of our control and, to a certain extent, outside of our customers' control as well.

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Operator [23]

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(Operator Instructions) And our next question is from Kris Tuttle from SoundView.

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Kris Tuttle, SoundView Research - Director of Research [24]

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I just -- first, I wanted to just clarify on the Fit Pay side of the business. Did you say Q2 revs were $232,000 and $454,000 for the 6 months?

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [25]

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That's correct.

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Kris Tuttle, SoundView Research - Director of Research [26]

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Okay. And then -- and that's completely -- so that's x any last year -- there's no remnants of the flye kind of revenue or any of that? That's pure Fit Pay numbers?

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [27]

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Yes.

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Kris Tuttle, SoundView Research - Director of Research [28]

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Okay. And did anything happen with the Flip? Or is that kind of not a current focus of that part of the business?

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Michael J. Orlando, Nxt-ID, Inc. - COO & Director [29]

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Yes. So we began shipments of Flip in late April, early May. We had our initial pilot customers that we serve out of the first inventory that we had. We had a slight delay in getting additional inventory that arrived in the first part of June -- first, second week of June, and then we restarted shipments at that time, and we've seen adoption of those. So there's 2 components to the revenue there. The sale of the device, which is pretty nominal. We're not getting a lot of fees for the device. It's more the long-term revenue that we're going to see from the usage of the device, loading of funds and activity there. And that will build as we see more customers and more devices in market.

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Kris Tuttle, SoundView Research - Director of Research [30]

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Okay. And can you give us any numbers about number of devices, percentage of devices that were shipped that might have been activated and used? Any kind of metrics that would help us understand how these things are actually performing?

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Michael J. Orlando, Nxt-ID, Inc. - COO & Director [31]

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Yes. We're not breaking that out at this time.

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Kris Tuttle, SoundView Research - Director of Research [32]

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Okay. And then on the -- if I read the Q right, you had about $660,000, almost $670,000 of cash flow from continuing ops for the first 6 months of the year. Is that accurate?

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [33]

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Yes.

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Kris Tuttle, SoundView Research - Director of Research [34]

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And is that a number -- before we get into some of the revenues, are you guys -- are you focused on maintaining or increasing that cash flow from ops number in terms of helping to shore up the financials in the balance sheet?

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [35]

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Absolutely.

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Kris Tuttle, SoundView Research - Director of Research [36]

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Okay. What's the current fully diluted share count?

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [37]

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Just under 30 million shares.

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Kris Tuttle, SoundView Research - Director of Research [38]

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29.2 million?

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [39]

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Well, it was actually -- at the end of -- when we actually filed, it was 29.7 million shares outstanding at the time of the filing.

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Kris Tuttle, SoundView Research - Director of Research [40]

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Okay. Okay. And then looking kind of at the second half of the year, just to get a handle on your expectations for the business, $6.5 million in the first half with, I guess, about $0.5 million of that or so being Fit Pay, which might get acquired. Excluding Fit Pay, do you feel like $10 million to $12 million for the full year is a reasonable -- how does that compare to your expectations as a management team?

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [41]

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So it's -- we're really -- we can't discuss any projections, Kris. We just can't do that.

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Kris Tuttle, SoundView Research - Director of Research [42]

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Okay. I mean do you have some sort of internal -- I mean you have a plan, I guess. I was just wondering if that is consistent, higher or low. I know you can't make projections, none of us can, but just trying to get a handle on whether or not anything was unusual in the first half. That would mean that we would -- there will be an expectation that something would be radically different in the second half with respect to the core LogicMark business.

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [43]

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So I guess what I would tell you is that we're not aware of anything that would drastically alter the first 6 months results permanently.

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Kris Tuttle, SoundView Research - Director of Research [44]

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Okay. And I think one of the frustrations, I think, people has had is Nxt is kind of a [washen] opportunity, if you look at what's going on with online payments and what's going on with health tech. We follow a lot of IPOs, and a lot of companies in health tech and monitor are just seeing explosive kind of growth on the top line. And so clearly, there's a lot of opportunity out there. It sounds like -- obviously, there were some product delays and some channels that didn't work out with respect to LogicMark, but it feels like the division that has a tremendous amount of upside opportunity for growth. And I guess my base question is, should there be some incremental organizational increases in staff or partnerships or somehow, something that could unlock what looks like a tremendous opportunity for the products?

I mean I don't -- I just discovered today that a number of national parks are using the LogicMark -- one of LogicMark's products to actually implement safety programs across all of their remote locations and trails and all these kinds of things. And they kind of discovered on their own versus someone driving this kind of segment of the business. And it's just -- I don't know, I apologize for the kind of the rambling nature of the question, but it's just that it feels like something should be happening that would be unlocking a lot more value in that business, which is great margins, great products, et cetera.

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Gino Miguel Pereira, Nxt-ID, Inc. - Chairman, CEO & President [45]

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Yes. So Kris, this is Gino. So yes, we're aware of the tremendous number of opportunities. We are pursuing a very broad range of opportunities. And as usual, the larger opportunities take longer to have a longer gestation period. And they may or may not be successful. But we are -- we believe we're adequately working a range of opportunities now, but we don't have anything definitive to tell the market about them yet. And as I say, they could work out or they might not work out. But we are actively working a range of opportunities at the moment.

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Operator [46]

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(Operator Instructions) And our next question is from Brian Kinstlinger from Alliance.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [47]

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I just want to make one point of clarification as a question though. I think Kris mentioned that you have $6.5 million of revenue in the first half adjusted for Fit Pay. I thought the $8.8 million was continuing operations. So all of that revenue should be larger market. Is that right?

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [48]

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So we had $8.7 million of revenue in the first 6 months, all of which was generated by LogicMark.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [49]

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Right. The other -- the discontinued ops is not in your financials right now.

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [50]

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That's absolutely correct. It's carved out and reflected in one line item in the income statement.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [51]

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Right. I guess the other question I'd want to ask is can you remind us, although I'm sure it's in the Q and I can go through it, the current interest rates on your debt? So we can kind of think about expected interest rate -- interest expense.

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [52]

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Approximate is 13%.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [53]

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Is that a cash number?

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [54]

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I'm sorry, I thought you asked the interest rate.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [55]

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No. Yes, I did. No, 13% and then how much of that is actual cash?

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [56]

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It's all cash. On the actual P&L itself? Or is it -- that's equivalent of the 13%?

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [57]

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So 13% of the interest rate, but I know on your income statement, you've had to show much higher rates of interest. 13% what we'll see on the income statement? Or a different number kind of runs through it? Or is there is no exact (inaudible)...

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [58]

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There's a different number on the face of the income statement, because there is also included the OID amortization as well as the deferred debt issue cost amortization.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [59]

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So can you just quantify that for us? (inaudible)...

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [60]

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Approximately, you're -- probably around $300,000 of that number is noncash.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [61]

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$300,000 per quarter or per year? Sorry.

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Vincent S. Miceli, Nxt-ID, Inc. - VP & CFO [62]

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For the 6 months.

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Operator [63]

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(Operator Instructions) At this time, we're showing no further questions. I would like to turn the call back over to Gino Pereira for closing remarks.

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Gino Miguel Pereira, Nxt-ID, Inc. - Chairman, CEO & President [64]

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So thank you very much, everyone, for joining our call today. Hopefully, we've managed to provide everyone with a current update. And that will conclude the call. Thank you.

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Operator [65]

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Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect.