NXT-ID Inc.
Annual Report 2016

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549FORM 10-K(Mark One)☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2016or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ___________ to ___________Commission file number: 000-54960Nxt-ID, Inc.(Exact name of registrant as specified in its charter)Delaware 46-0678374(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.) 285 North DriveSuite DMelbourne, FL 32904(Address of principal executive offices)(Zip Code)Registrant’s telephone number, including area code: (203) 266-2103Securities registered pursuant to Section 12(b) of the Act:Title of each class: Name of each exchange on which registered:Common Stock, par value $0.0001Warrants to purchase Common Stock(expiring September 15, 2019) The Nasdaq Stock Market LLCThe Nasdaq Stock Market LLC Securities registered pursuant to Section 12(g) of the Act:None(Title of class)Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Act. Yes ☐ No ☒ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes ☒ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the bestof registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III or this Form 10-K or any amendment to thisForm 10-K. ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.Large accelerated filer ☐Accelerated filer ☐Non-accelerated filer ☐Smaller reporting company ☒ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒ The aggregate market value of the common stock held by non-affiliates of the registrant, as of June 30, 2016, the last business day of the second fiscalquarter, was approximately $11,453,722 based on a total number of shares of our common stock outstanding that day of 3,244,680 and a closing price of$3.53. Shares of common stock held by each director, each officer and each person who owns 10% or more of the outstanding common stock have beenexcluded from this calculation in that such persons may be deemed to be affiliates. The determination of affiliate status is not necessarily conclusive. The registrant had 8,543,339 shares of its common stock outstanding as of April 7, 2017.DOCUMENTS INCORPORATED BY REFERENCE None.  TABLE OF CONTENTS PagePART I Item 1.Business1Item 1A.Risk Factors14Item 1B.Unresolved Staff Comments25Item 2.Properties25Item 3.Legal Proceedings25Item 4.Mine Safety Disclosures25 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities26Item 6.Selected Financial Data27Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations27Item 7A.Quantitative and Qualitative Disclosures about Market Risk37Item 8.Financial Statements and Supplementary Data37Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure37Item 9A.Controls and Procedures37Item 9B.Other Information38 PART III Item 10.Directors, Executive Officers and Corporate Governance39Item 11.Executive Compensation43Item 12.Security Ownership Of Certain Beneficial Owners And Management and Related Stockholder Matters45Item 13.Certain Relationships and Related Transactions, and Director Independence46Item 14.Principal Accounting Fees and Services47 PART IV Item 15.Exhibits, Financial Statement Schedules48 SIGNATURES51 INDEX TO EXHIBITS52 i CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of the Section 27A of the Securities Act of1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-lookingstatements discuss matters that are not historical facts. Because they discuss future events or conditions, forward-looking statements may include words suchas “anticipate,” “believe,” “estimate,” “intend,” “could,” “should,” “would,” “may,” “seek,” “plan,” “might,” “will,” “expect,” “predict,” “project,”“forecast,” “potential,” “continue” negatives thereof or similar expressions. These forward-looking statements are found at various places throughout thisReport and include information concerning possible or assumed future results of our operations; business strategies; future cash flows; financing plans; plansand objectives of management; any other statements regarding future operations, future cash needs, business plans and future financial results, and any otherstatements that are not historical facts. From time to time, forward-looking statements also are included in our other periodic reports on Forms 10-Q and 8-K, in our press releases, in ourpresentations, on our website and in other materials released to the public. Any or all of the forward-looking statements included in this Report and in anyother reports or public statements made by us are not guarantees of future performance and may turn out to be inaccurate. These forward-looking statementsrepresent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many ofthose factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by those forward-lookingstatements. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to adifferent extent or at a different time than we have described. You are cautioned not to place undue reliance on these forward-looking statements, whichspeak only as of the date of this Report. All subsequent written and oral forward-looking statements concerning other matters addressed in this Report andattributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in thisReport. Except to the extent required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information,future events, a change in events, conditions, circumstances or assumptions underlying such statements, or otherwise. For discussion of factors that we believe could cause our actual results to differ materially from expected and historical results see “Item 1A - Risk Factors”below. ii PART I Item 1.Business Nxt-ID is an emerging technology company engaged in the development of proprietary products, solutions and solutions that serve multiple end markets,including Security, Healthcare, Finance and Internet of Things (IoT). Our innovative MobileBio® security technologies that serve these end markets includeencryption and payments, biometrics, security and privacy, sensors and miniaturization technologies. Our core competencies and intellectual property inbiometrics, security, sensors, and miniaturization – developed through intensive research and development over the past decade –enable us to target andserve multiple large and growing end markets globally. We believe that our MobileBio® products will provide distinct advantages within the m-commerce market by improving mobile security. Currently mostmobile devices are protected simply by PIN numbers which are easily duplicated on another device, and can easily be spoofed or hacked. Our securityparadigm is Dynamic Pairing Codes (“DPC”). DPC is a new, proprietary method to secure users, devices, accounts, locations and servers over anycommunication media by sharing key identifiers, including biometric-enabled identifiers, between end-points by passing dynamic pairing codes (randomnumbers) between end-points to establish sessions and/or transactions without exposing identifiers or keys. The ongoing high-level breaches of personalcredit card data demand new securities to offer higher levels of consumer protection through the use of biometrics and other proprietary solutions. Ourstrategic plan envisions using our core biometric facial and voice recognition algorithms to develop security applications (both cloud based and locallyhosted) that can be used for companies (for industrial uses, such as enterprise computer networks) as well as individuals (for consumer uses, such assmartphones, tablets or personal computers), law enforcement, the defense industry, and the U.S. Department of Defense. NXT-ID has numerous patentspending. Many of these patents pending focus on tokenization and protection, as well as payment methodology, voice biometrics, and other biometric formsof directed payment. In healthcare, our business initiatives were bolstered by the acquisition of LogicMark, which we completed in the third quarter of 2016. LogicMark serves amarket that enables two-way communication, sensors, biometrics and security to make home care for chronic medical conditions, including “aging in place,”a reality. There are three major trends driving this market: 1) an aging population, 2) a desire to “age in place” and 3) the acute need to lower cost of care.These trends together have produced a large and growing market for us to serve. LogicMark has built a business around emergency communications inhealthcare. We have a strong business with the US Department of Veterans Affairs (VA) today serving veterans who suffer from chronic conditions that oftenrequire emergency assistance. This business is steady and growing. Our strategic plan calls for expanding LogicMark’s business into other retail andenterprise channels to better serve the expanding demand for secure and remote healthcare. 1  Remote healthcare, which includes health monitoring and management using IoT and cloud-based processing, is an emerging area for LogicMark. The long-term trend toward more home-based care is a massive shift that is being driven by demographics (an aging population) and basic economics. People alsovalue autonomy and privacy which are important factors in determining which solutions will suit the market. Consumers are beginning to enjoy the benefitsof smart home technologies and online digital assistants. One of the promising applications of our VoiceMatch™ technology is enabling secure commandsfor restricted medical access. This solution, when coupled with the NXT-ID BioCloud™, combines biometrics with encryption and distributed access control. Security and privacy concerns are already central to the adoption of IoT solutions that provides a large opportunity for the Company to collaborate andlicense their technology to the consumer-facing firms that aim to address the IoT opportunity. In the finance area, the technology pioneered in the Nxt-ID “Wocket” has continued to develop in both range of capability while shrinking in size. Thisprovides a technology package that can be integrated into a “smart wallet” that has the same technology as Apple Pay or into a card that can be used for avariety of transactions including – magnetic stripe emulation (Wi-Mag), Near Field Communication (NFC), tokens, barcode/QR codes and there can also bean EMV chip and a Bluetooth Beacon for remote sensing and response applications. Versions of this technology package provide a functional and secure“vault” that allows for full consumer control and customization by OEMs and solution providers. Our finance business is being driven by the development of an innovative smartcard that leverages “Wocket” technology. The smartcard is called “Flye” andit is being developed in partnership with World Ventures Holdings, LLC. (WVH). The Flye card offers new and unique features compared to any other“smartcards” in the market. It handles the core functions like loading in multiple cards, gathering loyalty points while opening up new opportunities Flye istargeted at WorldVentures members who care about travel, food and entertainment. These concerns demand more than payments and include loyaltyprograms and security features for peace of mind when traveling. The Flye card is designed to work in synchrony with the WorldVentures smartphoneapplication. It is a “tethered” solution, albeit a wireless one. WorldVentures has a comprehensive vision for their card that includes the ability to deliveryhighly tailored membership experience. With respect to IoT, Nxt-ID has joined the Cisco Solution Partner program to provide biometric and encryption solutions in conjunction with otherecosystem partners. Cisco sees security as integral to IoT. They are integrating security directly into network infrastructure to enable companies to use theirIoT networks in a secure fashion. Our plan also anticipates that we will use our core biometric facial and voice recognition algorithms to develop security applications (both cloud based andlocally hosted) that can be used for companies (for industrial uses, such as enterprise computer networks) as well as individuals (for consumer uses, such assmart phones, tablets or personal computers), law enforcement, the defense industry, and the U.S. Department of Defense. We operate our business in one segment, Hardware and Software Security Systems and Applications. We evaluate the performance of our business on, amongother things, profit and loss from operations before interest, headquarters’ expense allocations, stock-based compensation expense, income taxes andamortization related to certain intangible assets. 2  Our Products Payments World Ventures SmartCard We have entered into a distribution agreement with WVH, an international travel company, which has committed to purchase an exclusive smartcard from theCompany for distribution to its membership which is in excess of 500,000 members. WVH also made a strategic investment in the Company. The smartcard iscustomized for WorldVentures with additional technologies and wireless features, such as the ability to seamlessly integrate with WorldVentures’DreamTrips™ App to wirelessly check in and earn loyalty points towards free DreamTrips vacations at select restaurants. DreamTrips is a travel club andentertainment community where members enjoy exciting excursions year-round to extraordinary destinations. The prototype was completed in 2016 with deliveries commencing in December 2016. We have an initial purchase order for $15 million. We have non-cancellable delivery orders of just over $9 million to date, for delivery by the end of the second quarter of 2017. Subsequent deliveries may be modified orcancelled subject to 90 days advance notice. During the twelve months ended December 31, 2016, we recorded revenue of $1,357,413 from WVH a relatedparty. For additional information on the transaction with WVH, see “Management Discussion and Analysis of Financial Condition and Results of Operations”. Nxt-ID SmartPay™ We have developed a standalone capability (the “NXT SmartPay”) on various devices with the ability to make payments by dynamic magnetic stripe orthrough interacting with a terminal through EMC, NFC or barcode functionality. We are currently pursuing significant strategic partnerships for this product. Wi-Mag™ Our proprietary antenna and payment technology can be embedded in a mobile device to make wireless payments at most point-of sale (POS) terminals whichdo not require NFC or EMV allowing users to make payments at most POS terminals in the United States and abroad. According to LTP research (January 12,2016), there are about 13.9 million POS terminals in the United States of which 57% are currently Magnetic stripe only. We are currently in discussions withmobile device makers to license this technology. 3  Internet of Things Closely related to electronic payments is the ability to communicate via many linked devices in a secure fashion. In cooperation with Nordic Semiconductor,ASA, the Company demonstrated a miniature module within a wearable smart band to enable devices powering the IoT (Internet of Things). The “IoT Stamp”is an intelligently connected electronics module that is small enough and low power enough to fit within most devices, even a smart card or a watchband. Key functionality includes patent pending ultra-low power “buttonless” wake-up, motion activation, and personalized servicesincluding identification services, multi-factor biometric authentication, and payment technologies including NFC and Wi-Mag. Healthcare Personal Emergency Response Systems LogicMark is the leading provider of non-monitored Personal Emergency Response Systems (PERS) and is the industry leader in two-way voicecommunications. Product offerings include: ●Non-monitored products that only require a one-time purchase fee, without a recurring monthly contract. As a result, they are typically the most cost-effective PERS option for the end-user ●Both traditional (i.e., landline) and mPERS (i.e., cell-based) options ●Non-monitored products that are sold through VA channel, healthcare distributors and dealers, and retail ●The non-monitored product is critical to the VA channel as VA will cover cost of the PERS device, but will not cover the cost of a monthlysubscription for monitoring services 4  The Company’s monitored products are primarily sold by dealers and distributors for the monitored channel. LogicMark sells the device to thedealers/distributors who in turn offer the device to consumers as part of their product/service offering; the service providers charge consumers a monthlymonitoring fee for the associated monitoring service. Significantly, these products are: (a) monitored by a third-party central station; and (b) compatible withmost central stations. 5  Security MobileBio VoiceMatch® Voicematch® is a new method of recognizing both speakers and specific words providing innovative multi-factor recognition. Voice authentication is a morenatural biometric method of authentication than fingerprint that allows an individual access to multiple devices. Voicematch is efficient enough to run onlow-power devices and runs on mobile platforms such as Android and iOS, as well as laptops and desktops. The product helps to address the growing BYOD(Bring your own device) problem for companies by positively identifying the individual using the mobile device. Voicematch® is a potential originalequipment manufacturer (“OEM”) product for smartphone manufacturers. The product can also be sold as a standard development kit (“SDK”) to providecompanies the opportunity to add a further layer of biometric protection to their websites and smartphone applications for their customers. We currently expect commercial versions of this product to be available in the third quarter of 2017. FaceMatch® 3D FaceMatch® and 3D SketchArtist™ are facial recognition products which are available for sale. These products are primarily designed for access control,law enforcement and travel and immigration. Through our wholly owned subsidiary, 3D-ID, we are a sub-contractor to Battelle Memorial Institute on the U.S.Department of Defense Technical Information Engineering Services (“TIES”) contract with a contract ceiling of $995 million. This is an IDIQ (indefinitedelivery indefinite quantity) contract and requires approved contractors to bid on task orders. We have not bid on any task orders to date. 6  Our Industries Payments The October 2016 issue of the Nilson Report shows that on a worldwide basis, credit, debit and prepaid cards generated $31.31 trillion in purchases of goods,services and cash advances in 2015. Losses for fraud in the same period were $21.84 billion, up 20% over 2014. This translates to losses of 6.97 cents per$100. Fraud losses have increased every year since 2010. More than 70% of all breaches in 2015 occurred in the US. There continues to be a great need forsecure payment solutions. Rather than try to predict the winning technology in this fast paced evolving payment technology industry, our business plan is todevelop secure solutions that can make payments using any form of payment technology from traditional magnetic stripe to NFC, Bluetooth, EMV andbarcodes. We believe that our Wi-Mag™ technology, possibly in combination with our voice and facial recognition biometric technologies, will provide anopportunity for smartphone manufacturers who currently do not have a payment solution on their smartphones to license that capability from us. We believethat this is a large potential opportunity for us. According to statista.com, worldwide smartphone sales to end users were approximate 1.5 billion units in2016. Over 1 billion of these units had Android operating systems. Internet of Things (IoT) Markets and Markets estimates that the Internet of Things market size will grow from $157.05 Billion in 2016 to $661.74 Billion by 2021, at a CompoundAnnual Growth Rate (CAGR) of 33.3% from 2016 to 2021. BI Intelligence forecasts there will be 34 billion devices connected to the internet by 2020, up from 10 billion in 2015. IoT devices will account for 24billion, while traditional computing devices (e.g. smartphones, tablets, smartwatches, etc.) will comprise 10 billion. Significantly: ●Nearly $6 trillion will be spent on IoT solutions over the next five years. ●Businesses will be the top adopter of IoT solutions. They see three ways the IoT can improve their bottom line by 1) lowering operating costs; 2)increasing productivity; and 3) expanding to new markets or developing new product offerings. ●Governments are focused on increasing productivity, decreasing costs, and improving their citizens’ quality of life. They are forecast to be thesecond-largest adopters of IoT ecosystems. ●Consumers will lag behind businesses and governments in IoT adoption. Still, they will purchase a massive number of devices and invest asignificant amount of money in IoT ecosystems. Health Care Industry Arc reports that the Global Medical Alert Systems market is a diversified healthcare monitoring devices market which specifically caters to thepeople in time of emergency and in need of immediate medical attention. The market is segmented into PERS and Nurse Call System (NCS). The PERSdevices are used to call for help and medical care during emergency. These devices are also used by wide patient pool and people in general, to ensure safetyand security when living or travelling alone. The global medical alert systems market caters to different end-users across the healthcare industry includingindividual users, hospitals and clinics, assisted living facilities and senior living facilities. Growing demand for home healthcare devices market is mainlydriven by aging population and rising healthcare costs worldwide. This will spur the usage of medical alert systems across the globe as they promise safetyand medical security while being affordable and easily accessible. The PERS market is divided into three device segments: landline-based PERS, mobile PERS and standalone devices. The mobile PERS market is projected togrow at a CAGR of 6.38% from $1.3 billion in 2014 to reach $1.88 billion by 2020. The increased mobile penetration will be one of the driving factors forthis market segment. According to the U.S. Administration of Aging, out of the total number of the elderly people who are over the age of 65 years havingbroadband access at home, 90% of them own a cell phone. However, standalone devices will be the fastest growing segment of this market owing to theircompactness, affordability and accessibility. 7  Our Competition Finance The markets for our products are extremely competitive and are characterized by rapid technological change as a result of technical developments exploitedby our competitors, changing technical needs of customers, and frequent introductions of new features. We expect competition to increase as other companiesintroduce products that are competitively priced, that may have increased performance or functionality, or that incorporate technological advances not yetdeveloped or implemented by us. Some of our present and potential competitors may have financial, marketing, and research resources substantially greaterthan ours. Competitors in the digital wallet marketplace include: Google Wallet – A mobile payment system developed by Google that allows its users to store debit cards, credit cards, loyalty cards, and gift cards amongother things, as well as redeeming sales promotions on their mobile phone. Apple Pay – A mobile payment service that lets certain Apple mobile devices make payments at the time of retail and online checkout. Paypal – A mobile service that can send money between other PayPal users and friends, track your balances, check in to pay from ones phone, and orderahead at restaurants. Samsung/LoopPay – A mobile payment system that uses Magnetic Secure Transmission to broadcast a signal to a point of sale payment terminal. Thiscompany was acquired by Samsung Electronics Co. in February 2015. We believe that our payment products have certain competitive advantages, particularly that our products are capable of using many different methods ofpayment whereas most of our competitors rely solely on NFC which has limited penetration at POS terminals worldwide. 8  Health Care Our Business Strategy Our primary business strategy is to leverage our technology across various industries in combination with established partners that can establish meaningfuldistribution. The initial industries that we have identified are Payments, IoT, Healthcare and Security. We have established a strategic partnership with WVH an international direct selling travel company, to supply them with a custom Smartcard. WVH intendsto purchase the product from us for its membership, which is currently in excess of 500,000 members. We intend to pursue similar relationships with partnersthat have a connected customer base. More and more mobile phones are being used as a source of payment for goods and services. We believe that worldwide mobile payment volume willcontinue to grow rapidly in the upcoming years. We are actively marketing our Wi-Mag™ technology to manufacturers of smartphones to enable them tocompete with payment offerings from the two major brands: Samsung and Apple. We believe that this will result in significant licensing revenue and is a veryscalable business model. We have developed several proprietary methods of encryption and tokenization that we believe will help reduce fraud in credit card transactions. Thesetechnologies can be applied both at the point of sale and for online transactions. We intend to market our encryption capabilities to potential financialpartners which, if successful could generate a significant source of recurring revenue per transaction to us. 9  With our LogicMark subsidiary we intend to expand distribution through larger distributors leveraging the consumer value proposition of a one-time devicepurchase as opposed to a leased monthly solution. We also intend to apply our technology to the next generation of PERS devices that will have greaterfunctionality and vital sign monitoring capability. We continue to develop opportunities for our biometric and sensor capabilities with the U.S. Department of Defense. We are partnered with established primecontractors that have or are bidding for contracts through which sales may be made. Our current partners include Battelle Memorial Institute and VerizonFederal Systems. We are a sub-contractor to Battelle Memorial Institute on the U.S. Department of Defense Technical Information Engineering Services(“TIES”) contract with a contract ceiling of $995 million. This is an IDIQ (indefinite delivery indefinite quantity) contract and requires approved contractorsto bid on task orders. We have not bid on any task orders to date. Our Intellectual Property Our ability to compete effectively depends to a significant extent on our ability to protect our proprietary information. We currently rely and will continue torely primarily on patents and trade secret laws and confidentiality procedures to protect our intellectual property rights. We have filed the following 25patents, one of which has been awarded to date: METHOD FOR REPLACING TRADITIONAL PAYMENT AND IDENTITY MANAGEMENT SYSTEMS AND COMPONENTS TO PROVIDE ADDITIONALSECURITY AND A SYSTEM IMPLEMENTING SAID METHODFiled October 8, 2013Application Number 14/049175 METHOD FOR REPLACING TRADITIONAL PAYMENT AND IDENTITY MANAGEMENT SYSTEMS AND COMPONENTS TO PROVIDE ADDITIONALSECURITY AND A SYSTEM IMPLEMENTING SAID METHODContinuation application of 001 with new claimsFiled August 31, 2016Application Number 15/252468 THE UN-PASSWORD™: RISK AWARE END-TO-END MULTI-FACTOR AUTHENTICATION VIA DYNAMIC PAIRINGFiled March 17, 2014Application Number 14/217,202 Patent issued August 2, 2016 with patent number 9,407,619.Continuation application filed on March 14, 2016 and assigned file number 12188-031 UNIVERSAL AUTHENTICATION AND DATA EXCHANGE METHOD, SYSTEM AND SERVICEFiled March 17, 2014Application Number 14/217,289 METHOD TO LOCALLY VALIDATE IDENTITY WITHOUT PUTTING PRIVACY AT RISKApplication filed September 1, 2015Application Number 14/842,252 DISTRIBUTED METHOD AND SYSTEM TO IMPROVE COLLABORATIVE SERVICES ACROSS MULTIPLE DEVICESApplication filed February 8, 2016Application Number 15/018,496 10  VOICE DIRECTED PAYMENT SYSTEM AND METHODApplication filed February 10, 2016Application Number 15/040,984 SYSTEM AND METHOD FOR LOW-POWER CLOSE-PROXIMITY COMMUNICATIONS and energy transfer USING A MINIATURE MULTI-PURPOSEANTENNAApplication filed April 4, 2016Application Number 15/089,826 SYSTEM AND METHOD FOR LOW-POWER CLOSE-PROXIMITY COMMUNICATIONS and energy transfer USING A MINIATURE MULTI-PURPOSEANTENNAApplication filed November 16, 2016Application Number 15/353,018 MULTI-INSTANCE SHARED AUTHENTICATION (MISA) METHOD AND SYSTEM PRIOR TO DATA ACCESSApplication filed June 23, 2016Application Number 15/191,456 BIOMETRIC, BEHAVIORAL-METRIC, KNOWLEDGE-METRIC AND ELECTRONIC-METRIC DIRECTED AUTHENTICATION AND TRANSACTIONMETHOD AND SYSTEMApplication filed July 5, 2016Application Number 15/202,515 PERSONALIZED TOKENIZATION SYSTEM AND METHODApplication filed July 14, 2016Application Number 15/210,728 METHODS AND SYSTEMS RELATED TO MULTI-FACTOR, MULTI-DIMENSIONAL, MATHEMATICAL HIDDEN AND MOTION SECURITY PINSFiled August 1, 2016Application Number 15/224,998 ELECTRONIC CRYPTO-CURRENCY MANAGEMENT METHOD AND SYSTEMFiled August 1, 2016Application Number 15/225780 SYSTEMS AND DEVICES FOR WIRELESS CHARGING OF A POWERED TRANSACTION CARD AND EMBEDDING ELECTRONICS IN A WEARABLEACCESSORYFiled September 2, 2015Application Number 14/843,925 COMPONENTS FOR ENHANCING OR AUGMENTING WEARABLE ACCESSORIES BY ADDING ELECTRONICS THERETOFiled September 2, 2015Application Number 14/843930 LOW BANDWIDTH CRYPTO-CURRENCY TRANSACTION EXECUTION AND SYNCHRONIZATION METHOD AND SYSTEMFiled September 7, 2016Application Number 15/259023 METHOD AND SYSTEM TO ORGANIZE AND MANAGE TRANSACTIONSFiled December 2, 2016Application Number 15/368546 11  THE UN-PASSWORD™: RISK AWARE END-TO-END MULTI-FACTOR AUTHENTICATION VIA DYNAMIC PAIRINGFiled March 14, 2016Application Number 15/068834 SYSTEM AND METHOD TO PERSONALIZE PRODUCTS AND SERVICESFiled July 15, 2016Application number 15/212184 SYSTEM AND METHOD TO PERSONALIZE PRODUCTS AND SERVICESFiled September 6, 2016Application number 15/257101 ACCORDION ANTENNA STRUCTUREFiled April 4, 2016Application Number 15/089844 SYSTEM AND METHOD TO AUTHENTICATE ELECTRONICS USING ELECTRONIC-METRICSFiled July 5, 2016Application Number 15/202553 SYSTEM AND METHOD TO DETERMINE USER PREFERENCESFiled July 15, 2016Application number 15/212163 PREFERENCES DRIVEN ADVERTISING SYSTEMS AND METHODSFiled July 15, 2016Application number 15/212161 We enter into confidentiality agreements with our consultants and key employees, and maintain control over access to and distribution of our technology,software and other proprietary information. The steps we have taken to protect our technology may be inadequate to prevent others from using what weregard as our technology to compete with us. We do not generally conduct exhaustive patent searches to determine whether the technology used in our products infringes patents held by third parties. Inaddition, product development is inherently uncertain in a rapidly evolving technological environment in which there may be numerous patent applicationspending, many of which are confidential when filed, with regard to similar technologies. We may face claims by third parties that our products or technology infringe their patents or other intellectual property rights in the future. Any claim ofinfringement could cause us to incur substantial costs defending against the claim, even if the claim is invalid, and could distract the attention of ourmanagement. If any of our products are found to violate third-party proprietary rights, we may be required to pay substantial damages. In addition, we may berequired to re-engineer our products or seek to obtain licenses from third parties to continue to offer our products. Any efforts to re-engineer our products orobtain licenses on commercially reasonable terms may not be successful, which would prevent us from selling our products, and in any case, couldsubstantially increase our costs and have a material adverse effect on our business, financial condition and results of operations. 12  Corporate Information History We were incorporated in the state of Delaware on February 8, 2012. We are an emerging growth technology company that is focused on products, solutions,and services for security. Company’s core technologies are in digital payments, biometric identification; encryption; sensors and miniaturization. Ourproprietary products and solutions serve multiple end markets, including Security, Healthcare, Finance and Internet of Things (IoT). Effective June 25, 2012, the Company acquired 100% of the membership interests in 3D-ID, a limited liability company formed in Florida in February 2011and owned by the Company’s founders. Since this was a transaction between entities under common control, in accordance with Accounting StandardsCodification (“ASC”) 805, “Business Combinations”, Nxt-ID recognized the net assets of 3D-ID at their carrying amounts in the accounts of Nxt-ID on thedate that 3D-ID was organized, February 14, 2011. On July 25, 2016, we completed the acquisition of LogicMark, LLC (“LogicMark”) pursuant to an Interest Purchase Agreement by and among the Company,LogicMark and the holders of all of the membership interests of LogicMark (the “LogicMark Sellers”), dated May 17, 2016 (the “Interest PurchaseAgreement”). Pursuant to the Interest Purchase Agreement, we acquired all of the membership interests of LogicMark from the LogicMark Sellers for (i) $17.5million in cash consideration (ii) $2.5 million in a secured promissory note (the “LogicMark Note”) issued to LogicMark Investment Partners, LLC, asrepresentative of the LogicMark Sellers (the “LogicMark Representative”) (iii) 78,740 shares of common stock, which were issued upon signing of theInterest Purchase Agreement (the “LogicMark Shares”), and (iv) warrants (the “LogicMark Warrants,”) to purchase an aggregate of 157,480 shares of commonstock (the “LogicMark Warrant Shares”) for no additional consideration. In addition, we may be required to pay the LogicMark Sellers earn-out payments of(i) up to $1,500,000 for calendar year 2016 and (ii) up to $5,000,000 for calendar year 2017 if LogicMark meets certain gross profit targets set forth in theInterest Purchase Agreement. The LogicMark Note originally was to mature on September 23, 2016 but was extended to October 31, 2016. During 2016 theCompany paid down $1,726,031 of the Seller Note with cash generated from operations as well as from the net cash proceeds received of $1,400,000 from theissuance of the convertible exchange notes issued on November 29, 2016. The Note accrues interest at a rate of 15% per annum. The LogicMark Warrantswere all exercised on July 27, 2016. Other Our principal executive offices are located at 285 North Drive, Suite D, Melbourne, FL 32904, and our telephone number is (203) 266-2103. Our websiteaddress is www.nxt-id.com. The information contained therein or connected thereto shall not be deemed to be incorporated into this Report. The informationon our website is not part of this Report. We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. We will remain an emerging growthcompany for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenue exceed $1 billion, (ii) the date thatwe become a ’‘large accelerated filer’’ as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that isheld by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we haveissued more than $1 billion in non-convertible debt during the preceding three-year period. Pursuant to Section 102 of the JOBS Act, we have providedreduced executive compensation disclosure and have omitted a compensation discussion and analysis from this Report. Pursuant to Section 107 of the JOBSAct, we have elected to utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revisedaccounting standards. Employees As of December 31, 2016, we had a total of 41 full-time employees, 6 in product engineering, 3 in finance and administration, 21 in sales and customerservice and 11 in product fulfillment. None of our employees are represented by a collective bargaining agreement, nor have we experienced any workstoppage. We consider our relations with our employees to be good. Our future success depends on our continuing ability to attract and retain highlyqualified engineers, graphic designers, computer scientists, sales and marketing and senior management personnel. In addition, we have independentcontractors whose services we are using on an as-needed basis to assist with the engineering and design of our products. 13  Item 1A.Risk Factors Our business, financial condition and operating results are subject to a number of risk factors, both those that are known to us and identified below and othersthat may arise from time to time. These risk factors could cause our actual results to differ materially from those suggested by forward-looking statements inthis report and elsewhere, and may adversely affect our business, financial condition or operating results. If any of these risk factors should occur, moreover,the trading price of our securities could decline, and investors in our securities could lose all or part of their investment in our securities. These risk factorsshould be carefully considered in evaluating our prospects. Risks Relating to our Business We are uncertain of our ability to generate sufficient revenue and profitability in the future. We continue to develop and refine our business model, but we can provide no assurance that we will be able to generate a sufficient amount of revenue, fromour business in order to achieve profitability. It is not possible for us to predict at this time the potential success of our business. The revenue and incomepotential of our proposed business and operations are currently unknown. If we cannot continue as a viable entity, you may lose some or all of yourinvestment in our Company. The Company is an emerging growth company and has incurred net losses of $12,752,928 for the year ended December 31, 2016. As of December 31, 2016,the Company had cash and stockholders’ equity of $3,299,679 and $2,818,731, respectively. At December 31, 2016, the Company had a working capitaldeficiency of $2,073,523. We cannot provide any assurance that we will be able to raise additional cash from equity financings, secure debt financing, and/orgenerate revenue from the sales of our products. If we are unable to secure additional capital, we may be required to curtail our research and developmentinitiatives and take additional measures to reduce costs in order to conserve our cash in amounts sufficient to sustain operations and meet our obligations. We and the businesses we have recently acquired or propose to acquire have limited operating histories and we cannot offer any assurance as to our futurefinancial results, and you should not rely on the historical financial date included in this prospectus as an indicator of our future financial performance.You may lose your entire investment. We and the businesses we have recently acquired or propose to acquire have limited operating histories upon which to base any assumption as to thelikelihood that we will be successful in implementing our business plan, and we may not be able to generate significant revenues or achieve profitability.You should consider our business and prospects in light of the risks and difficulties we face with our limited operating history and should not rely on our pastresults or the past results of any of such businesses as an indication of our future performance. There is no assurance that the growth rate we or they haveexperienced to date will continue. Even if we generate future revenues sufficient to expand operations, increased infrastructure costs and cost of goods soldand marketing expenses could impair or prevent us from generating profitable returns. We recognize that if we are unable to generate significant revenuesfrom our business development, we will not be able to earn profits or potentially continue operations. If we are unsuccessful in addressing these risks, ourbusiness will most likely fail. 14  If we fail to keep pace with changing industry technology and consumer preferences, we will be at a competitive disadvantage. The industry segments in which we are operating are evolving rapidly. They are characterized by changing technology, budding industry standards, frequentnew and enhanced product introductions, rapidly changing end-user/consumer preferences and product obsolescence. In order to continue to competeeffectively in these markets, we need to respond quickly to technological changes and to understand their impact on our customers’ preferences. It may takesignificant time and resources to respond to these technological changes. If we fail to keep pace with these changes, our business may suffer. Moreover,developments by others may render our technologies and intended products noncompetitive or obsolete, or we may be unable to keep pace withtechnological developments or other market factors. If any of our competitors implement new technologies before we are able to implement them, thosecompetitors may be able to provide more effective products than ours. Any delay or failure in the introduction of new or enhanced products, could have amaterial adverse effect on our business, results of operations and financial condition. Furthermore, our inability to keep pace with changing industrytechnology and consumer preferences may cause our inventory to become obsolete at a rate faster than anticipated, which may result in our taking goodwillimpairment charges in past or future acquisitions that negatively impact our results of operations. We have made a significant acquisition in 2016, and we may encounter difficulties in managing our growth, which would adversely affect our results ofoperations. During 2016, we completed the acquisition of LogicMark, and are considering other acquisitions to improve our position in market segments that weconsider to be significant and strategic. This significant expansion of our operations could put significant strain on our management and our operational andfinancial resources. To manage future growth, we will need to hire, train, and manage additional employees, as well as properly integrate personnel fromacquired businesses. Concurrent with expanding our operational and marketing capabilities, we will also need to increase our product developmentactivities. We may not be able to support, financially or otherwise, future growth, or hire, train, motivate, and manage the required personnel. Our failure tomanage growth effectively could limit our ability to achieve our goals. Our success in managing our growth will depend in part on the ability of our executive officers to continue to implement and improve our operational,management, information and financial control systems and to expand, train and manage our employee base, and particularly to attract, expand, train,manage and retain a sales force to market our products on acceptable terms. Our inability to manage growth effectively could cause our operating costs togrow at a faster pace than we currently anticipate, and could have a material adverse effect on our business, financial condition, results of operations andprospects. Because we are an emerging growth company, we expect to incur significant additional operating losses. The Company is an emerging growth company. The amount of future losses and when, if ever, we will achieve profitability are uncertain. Our currentproducts have not generated significant commercial revenue for the Company and there can be no guarantee that we can generate sufficient revenues from thecommercial sale of our products in the near future to fund our ongoing capital needs. We have a limited operating history upon which you can gauge our ability to obtain profitability. We have a limited operating history and our business and prospects must be considered in light of the risks and uncertainties to which emerging growthcompanies are exposed. We cannot provide assurances that our business strategy will be successful or that we will successfully address those risks and therisks described herein. Most important, if we are unable to secure future capital, we may be unable to continue our operations. We may incur losses on aquarterly or annual basis for a number of reasons, some of which may be outside our control. If we cannot obtain additional capital required to finance our research and development efforts, our business may suffer and you may lose the value ofyour investment. We may require additional funds to further execute our business plan and expand our business. If we are unable to obtain additional capital when needed, wemay have to restructure our business or delay or abandon our development and expansion plans. If this occurs, you may lose part or all of your investment.We will have ongoing capital needs as we expand our business. If we raise additional funds through the sale of equity or convertible securities, yourownership percentage of our common stock will be reduced. In addition, these transactions may dilute the value of our common stock. We may have to issuesecurities that have rights, preferences and privileges senior to our common stock. The terms of any additional indebtedness may include restrictive financialand operating covenants that would limit our ability to compete and expand. There can be no assurance that we will be able to obtain the additionalfinancing we may need to fund our business, or that such financing will be available on terms acceptable to us. We will require additional capital in the future to develop the NFC Wocket®. If we do not obtain any such additional financing, if required, our businessprospects, financial condition and results of operations will be adversely affected. We will require additional capital in the future to develop the NFC Wocket®. We may not be able to secure adequate additional financing when needed onacceptable terms, or at all. To execute our business strategy, we may issue additional equity securities in public or private offerings, potentially at a pricelower than the market price of our common stock at the time of such issuance. If we cannot secure sufficient additional funding we may be forced to foregostrategic opportunities or delay, scale back and/or eliminate future product development. 15  We face intense competition in our market, especially from larger, well-established companies, and we may lack sufficient financial or other resources tomaintain or improve our competitive position. A number of other companies engage in the business of developing applications for facial recognition for access control. The market for biometric securityproducts is intensely competitive, and we expect competition to increase in the future from established competitors and new market entrants. Our currentcompetitors include both emerging or developmental stage companies, such as ourselves, as well as larger companies. Many of our existing competitors have,and some of our potential competitors could have, substantial competitive advantages such as: ●Greater name recognition and longer operating histories; ●Larger sales and marketing budgets and resources; ●Broader distribution and established relationships with distribution partners and end-customers; ●Greater customer support resources; ●Greater resources to make acquisitions; ●Larger and more mature intellectual property portfolios; and ●Substantially greater financial, technical, and other resources. In addition, some of our larger competitors have substantially broader product offerings and leverage their relationships based on other products orincorporate functionality into existing products to gain business in a manner that discourages users from purchasing our products, including through sellingat zero or negative margins, product bundling, or closed technology platforms. Conditions in our market could change rapidly and significantly as a result oftechnological advancements, partnering by our competitors or continuing market consolidation. New start-up companies that innovate and large competitorsthat are making significant investments in research and development may invent similar or superior products and technologies that compete with ourproducts and technology. Our current and potential competitors may also establish cooperative relationships among themselves or with third parties that mayfurther enhance their resources. Our markets are subject to technological change and our success depends on our ability to develop and introduce new products. Each of the governmental and commercial markets for our products is characterized by: ●Changing technologies; ●Changing customer needs; ●Frequent new product introductions and enhancements; ●Increased integration with other functions; and ●Product obsolescence. Our success will be dependent in part on the design and development of new products. To develop new products and designs for our target markets, we mustdevelop, gain access to and use leading technologies in a cost-effective and timely manner and continue to expand our technical and design expertise. Theproduct development process is time-consuming and costly, and there can be no assurance that product development will be successfully completed, thatnecessary regulatory clearances or approvals will be granted on a timely basis, or at all, or that the potential products will achieve market acceptance. Ourfailure to develop, obtain necessary regulatory clearances or approvals for, or successfully market potential new products could have a material adverse effecton our business, financial condition and results of operations. Claims by others that we infringe their intellectual property rights could increase our expenses and delay the development of our business. As a result, ourbusiness and financial condition could be harmed. Our industries are characterized by the existence of a large number of patents as well as frequent claims and related litigation regarding patent and otherintellectual property rights. We cannot be certain that our products do not and will not infringe issued patents, patents that may be issued in the future, orother intellectual property rights of others. We do not have the resources to conduct exhaustive patent searches to determine whether the technology used in our products infringe patents held by thirdparties. In addition, product development is inherently uncertain in a rapidly evolving technological environment in which there may be numerous patentapplications pending, many of which are confidential when filed, with regard to similar technologies. We may face claims by third parties that our products or technology infringe their patents or other intellectual property rights. Any claim of infringementcould cause us to incur substantial costs defending against the claim, even if the claim is invalid, and could distract the attention of our management. If anyof our products are found to violate third-party proprietary rights, we may be required to pay substantial damages. In addition, we may be required to re-engineer our products or obtain licenses from third parties to continue to offer our products. Any efforts to re-engineer our products or obtain licenses oncommercially reasonable terms may not be successful, which would prevent us from selling our products, and, in any case, could substantially increase ourcosts and have a material adverse effect on our business, financial condition and results of operations. Existing or pending patents could adversely affect our business. On November 12, 2015, we received a complaint that one of our technologies infringed upon one or more claims of a patent(s) issued to the claimant. Theclaimant has subsequently acknowledged that we are not currently infringing on their patent(s) as the technology in question is not commercially availableat the current time. We are in the process of negotiating a future royalty agreement with the claimant should we decide to introduce this technology in thefuture. 16  We may not be able to protect our intellectual property rights adequately. Our ability to compete for government contracts is affected, in part, by our ability to protect our intellectual property rights. We rely on a combination ofpatents, trademarks, copyrights, trade secrets, confidentiality procedures and non-disclosure and licensing arrangements to protect our intellectual propertyrights. Despite these efforts, we cannot be certain that the steps we take to protect our proprietary information will be adequate to prevent misappropriation ofour technology or protect that proprietary information. The validity and breadth of claims in technology patents involve complex legal and factual questionsand, therefore, may be highly uncertain. Nor can we assure you that, if challenged, our patents will be found to be valid or enforceable, or that the patents ofothers will not have an adverse effect on our ability to do business. In addition, the enforcement of laws protecting intellectual property may be inadequate toprotect our technology and proprietary information. We may not have the resources to assert or protect our rights to our patents and other intellectual property. Any litigation or proceedings relating to ourintellectual property, whether or not meritorious, will be costly and may divert the efforts and attention of our management and technical personnel. We also rely on other unpatented proprietary technology, trade secrets and know-how and no assurance can be given that others will not independentlydevelop substantially equivalent proprietary technology, techniques or processes, that such technology or know-how will not be disclosed or that we canmeaningfully protect our rights to such unpatented proprietary technology, trade secrets, or know-how. Although we intend to enter into non-disclosureagreements with our employees and consultants, there can be no assurance that such non-disclosure agreements will provide adequate protection for our tradesecrets or other proprietary know-how. Our success will depend, in part, on our ability to obtain new patents. To date, we have applied for (25) United States patents, one of which has been awarded and our success will depend, in part, on our ability to obtain patentand trade secret protection for proprietary technology that we currently possess or that we may develop in the future. No assurance can be given that anypending or future patent applications will issue as patents, that the scope of any patent protection obtained will be sufficient to exclude competitors orprovide competitive advantages to us, that any of our patents will be held valid if subsequently challenged or that others will not claim rights in or ownershipof the patents and other proprietary rights held by us. Furthermore, there can be no assurance that our competitors have not or will not independently develop technology, processes or products that aresubstantially similar or superior to ours, or that they will not duplicate any of our products or design around any patents issued or that may be issued in thefuture to us. In addition, whether or not patents are issued to us, others may hold or receive patents which contain claims having a scope that covers productsor processes developed by us. We may not have the resources to adequately defend any patent infringement litigation or proceedings. Any such litigation or proceedings, whether or notdetermined in our favor or settled by us, is costly and may divert the efforts and attention of our management and technical personnel. In addition, we may berequired to obtain licenses to patents or proprietary rights from third parties. There can be no assurance that such licenses will be available on acceptableterms if at all. If we do not obtain required licenses, we could encounter delays in product development or find that the development, manufacture or sale ofproducts requiring such licenses could be foreclosed. Accordingly, challenges to our intellectual property, whether or not ultimately successful, could have amaterial adverse effect on our business and results of operations. We rely on a third party for licenses relating to a critical component of our technology. The failure of such licensor would materially and adversely affectour business and product offerings. We currently license technology for a critical component of our current product offerings from a third party. The third party’s independent registered publicaccounting firm included an explanatory paragraph in its audit report as it relates to the third party’s ability to continue as a going concern in its recentfinancial statements. If our licensor were to fail, it could impact our license arrangement and impede our ability to further commercialize our technology. Inthe event we were to lose our license or our license were to be renegotiated as a result of our licensor’s failure, our ability to manage our business would sufferand it would significantly harm our business, operating results and financial condition. Our future success depends on the continued service of management, engineering and sales personnel and our ability to identify, hire and retain additionalpersonnel. Our success depends, to a significant extent, upon the efforts and abilities of members of senior management. We have entered into an employment agreementwith our Chief Executive Officer, but have not entered into an employment agreement with our Chief Financial officer or Chief Technology Officer, and wehave no current plans to use employment agreements as a tool to attract and retain new hires of key personnel that we may make in the future. The loss of theservices of one or more of our senior management or other key employees could adversely affect our business. We currently maintain a key person lifeinsurance policy on our Chief Executive Officer only. There is intense competition for qualified employees in our industry, particularly for highly skilled design, applications, engineering and sales people. Wemay not be able to continue to attract and retain developers, managers, or other qualified personnel necessary for the development of our business or toreplace qualified individuals who may leave us at any time in the future. Our anticipated growth is expected to place increased demands on our resources, andwill likely require the addition of new management and engineering staff as well as the development of additional expertise by existing managementemployees. If we lose the services of or fail to recruit engineers or other technical and management personnel, our business could be harmed. 17  The requirements of being a public company may strain our resources and divert management’s attention. As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act and otherapplicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make someactivities more difficult, time-consuming, or costly, and increase demand on our systems and resources. The Exchange Act requires, among other things, thatwe file annual and current reports with respect to our business and operating results. As a result of disclosure of information in this annual report and in filings required of a public company, our business and financial condition is more visible,which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business andoperating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resourcesnecessary to resolve them, could divert resources of our management and harm our business and operating results. Periods of rapid growth and expansion could place a significant strain on our resources, including our employee base, which could negatively impact ouroperating results. We may experience periods of rapid growth and expansion, which may place significant strain and demands on our management, our operational andfinancial resources, customer operations, research and development, marketing and sales, administrative, and other resources. To manage our possible futuregrowth effectively, we will be required to continue to improve our management, operational and financial systems. Future growth would also require us tosuccessfully hire, train, motivate and manage our employees. In addition, our continued growth and the evolution of our business plan will require significantadditional management, technical and administrative resources. If we are unable to manage our growth successfully we may not be able to effectively managethe growth and evolution of our current business and our operating results could suffer. We depend on contract manufacturers, and our production and products could be harmed if it is unable to meet our volume and quality requirements andalternative sources are not available. We rely on contract manufacturers to provide manufacturing services for our products. If these services become unavailable, we would be required to identifyand enter into an agreement with a new contract manufacturer or take the manufacturing in-house. The loss of our contract manufacturers could significantlydisrupt production as well as increase the cost of production, thereby increasing the prices of our products. These changes could have a material adverseeffect on our business and results of operations. Our insiders and affiliated parties beneficially own a significant portion of our stock. As of the date of hereof, our executive officers, directors, and affiliated parties beneficially own approximately 32.93% of our common stock. As a result, ourexecutive officers, directors and affiliated parties will have significant influence to: ●Elect or defeat the election of our directors; ●Amend or prevent amendment of our certificate of incorporation or bylaws; ●Effect or prevent a merger, sale of assets or other corporate transaction; and ●Affect the outcome of any other matter submitted to the stockholders for vote. In addition, any sale of a significant amount of our common stock held by our directors and executive officers, or the possibility of such sales, couldadversely affect the market price of our common stock. Management’s stock ownership may discourage a potential acquirer from making a tender offer orotherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing any gains from ourcommon stock. We are presently a small company with too limited resources and personnel to establish a comprehensive system of internal controls. If we fail to maintainan effective system of internal controls, we would not be able to accurately report our financial results on a timely basis or prevent fraud. As a result,current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our stock. Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financialreports or prevent fraud, our brand and operating results would be harmed. We may in the future discover areas of our internal controls that needimprovement. For example, because of size and limited resources, our external auditors may determine that we lack the personnel and infrastructure necessaryto properly carry out an independent audit function. Although we believe that we have adequate internal controls for a company with our size and resources,we are not certain that the measures that we have in place will ensure that we implement and maintain adequate controls over our financial processes andreporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, would harm ouroperating results or cause us to fail to meet our reporting obligations. Inferior internal controls would also cause investors to lose confidence in our reportedfinancial information, which would have a negative effect on our company and, if a public market develops for our securities, the trading price of our stock. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reportingis a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordancewith U.S. generally accepted accounting principles. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financialreporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detectedon a timely basis. As of December 31, 2016, we have identified certain matters that constituted a material weakness in our internal controls over financial reporting.Specifically, we have difficulty in accounting for complex accounting transactions due to an insufficient number of accounting personnel with experience inthat area and limited segregation of duties within our accounting and financial reporting functions. 18  If we do not effectively manage changes in our business, these changes could place a significant strain on our management and operations. Our ability to grow successfully requires an effective planning and management process. The expansion and growth of our business could place a significantstrain on our management systems, infrastructure and other resources. To manage our growth successfully, we must continue to improve and expand oursystems and infrastructure in a timely and efficient manner. Our controls, systems, procedures and resources may not be adequate to support a changing andgrowing company. If our management fails to respond effectively to changes and growth in our business, including acquisitions, this could have a materialadverse effect on the Company’s business, financial condition, results of operations and future prospects. We are an emerging growth company within the meaning of the Securities Act, and if we decide to take advantage of certain exemptions from variousreporting requirements applicable to emerging growth companies, our common stock could be less attractive to investors. We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be an emerginggrowth company, we may take advantage of exemptions from various reporting requirements that are not applicable to other public companies that are notemerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act,reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements ofholding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Wecould be an emerging growth company for up to five years, although we could lose that status sooner if our revenues exceed $1 billion, if we issue more than$1 billion in non-convertible debt in a three year period, or if the market value of our common stock held by non-affiliates exceeds $700 million as of the lastbusiness day of our most recently completed second fiscal quarter, in which case we would no longer be an emerging growth company as of the followingDecember 31. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find ourcommon stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. Under the JOBS Act, emerging growth companies may also delay adopting new or revised accounting standards until such time as those standards apply toprivate companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will besubject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We may not be able to access the equity or credit markets. We face the risk that we may not be able to access various capital sources including investors, lenders, or suppliers. Failure to access the equity or creditmarkets from any of these sources could have a material adverse effect on the Company’s business, financial condition, results of operations, and futureprospects. Persistent global economic trends could adversely affect our business, liquidity and financial results. Although improving, persistent global economic conditions, particularly the scarcity of capital available to smaller businesses, could adversely affect us,primarily through limiting our access to capital and disrupting our clients’ businesses. In addition, continuation or worsening of general market conditions ineconomies important to our businesses may adversely affect our clients’ level of spending and ability to obtain financing, leading to us being unable togenerate the levels of sales that we require. Current and continued disruption of financial markets could have a material adverse effect on the Company’sbusiness, financial condition, results of operations and future prospects. We may seek or need to raise additional funds. Our ability to obtain financing for general corporate and commercial purposes or acquisitions depends onoperating and financial performance, and is also subject to prevailing economic conditions and to financial, business and other factors beyond our control.The global credit markets and the financial services industry have been experiencing a period of unprecedented turmoil characterized by the bankruptcy,failure or sale of various financial institutions. An unprecedented level of intervention from the U.S. and other governments has been seen. As a result of suchdisruption, our ability to raise capital may be severely restricted and the cost of raising capital through such markets or privately may increase significantly ata time when we would like, or need, to do so. Either of these events could have an impact on our flexibility to fund our business operations, make capitalexpenditures, pursue additional expansion or acquisition opportunities, or make another discretionary use of cash and could adversely impact our financialresults. 19  Although recent trends point to continuing improvements, there is still lingering volatility and uncertainty. A change or disruption in the global financialmarkets for any reason may cause consumers, businesses and governments to defer purchases in response to tighter credit, decreased cash availability anddeclining consumer confidence. Accordingly, demand for our products could decrease and differ materially from current expectations. Further, some of ourcustomers may require substantial financing in order to fund their operations and make purchases from us. The inability of these customers to obtainsufficient credit to finance purchases of our products and meet their payment obligations to us or possible insolvencies of our customers could result indecreased customer demand, an impaired ability for us to collect on outstanding accounts receivable, significant delays in accounts receivable payments, andsignificant write-offs of accounts receivable, each of which could adversely impact our financial results. Rising interest rates could adversely impact our business. Changes in interest rates could have an adverse impact on our business by increasing our cost of capital. For example: ●rising interest rates would increase our cost of capital; and ●rising interest rates may negatively impact our ability to secure financing on favorable terms and may impact our ability to provide cost-effectivefinancing to our end-customers or end-users, where applicable. Rising interest rates could generally harm our business and financial condition. Risks Related to Our Biometric Recognition Applications and Related Products Our biometric products and technologies may not be accepted by the intended commercial consumers of our products, which could harm our futurefinancial performance. There can be no assurance that our biometric systems will achieve wide acceptance by commercial consumers of such security-based products, and/or marketacceptance generally. The degree of market acceptance for products and services based on our technology will also depend upon a number of factors,including the receipt and timing of regulatory approvals, if any, and the establishment and demonstration of the ability of our proposed device to provide thelevel of security in an efficient manner and at a reasonable cost. Our failure to develop a commercial product to compete successfully with existing securitytechnologies could delay, limit or prevent market acceptance. Moreover, the market for new biometric-based security systems is largely undeveloped, and webelieve that the overall demand for mobile biometric-based security systems technology will depend significantly upon public perception of the need forsuch a level of security. There can be no assurance that the public will believe that our level of security is necessary or that private-industry will activelypursue our technology as a means to solve their security issues. Long-term market acceptance of our products and services will depend, in part, on thecapabilities, operating features and price of our products and technologies as compared to those of other available products and services. As a result, there canbe no assurance that currently available products, or products under development for commercialization, will be able to achieve market penetration, revenuegrowth or profitability. Our biometric applications may become obsolete if we do not effectively respond to rapid technological change on a timely basis. The biometric identification and personal identification industries are characterized by rapid technological change, frequent new product innovations,changes in customer requirements and expectations and evolving industry standards. If we are unable to keep pace with these changes, our business may beharmed. Products using new technologies, or emerging industry standards, could make our technologies less attractive. In addition, we may face unforeseenproblems when developing our products, which could harm our business. Furthermore, our competitors may have access to technologies not available to us,which may enable them to produce products of greater interest to consumers or at a more competitive cost. Our biometric applications are new and our business model is evolving. Because of the new and evolving nature of biometric technology, it is difficult topredict the size of this specialized market, the rate at which the market for our biometric applications will grow or be accepted, if at all, or whether otherbiometric technologies will render our applications less competitive or obsolete. If the market for our biometric applications fails to develop or grows slowerthan anticipated, we would be significantly and materially adversely affected. 20  If our products and services do not achieve market acceptance, we may never have significant revenues or any profits. If we are unable to operate our business as contemplated by our business model or if the assumptions underlying our business model prove to be unfounded,we could fail to achieve our revenue and earnings goals within the time we have projected, or at all, which would have a detrimental effect on ourbusiness. As a result, the value of your investment could be significantly reduced or completely lost. We may in the future experience competition from other biometric application developers. Competition in the development of biometric recognition is expected to become more intense. Competitors range from university-based research anddevelopment graphics labs to development-stage companies and major domestic and international companies. Many of these entities have financial,technical, marketing, sales, distribution and other resources significantly greater than those of our company. There can be no assurance that we can continueto develop our biometric technologies or that present or future competitors will not develop technologies that render our biometric applications obsolete orless marketable or that we will be able to introduce new products and product enhancements that are competitive with other products marketed by industryparticipants. We may fail to create new applications for our products and enter new markets, which would have an adverse effect on our operations, financial conditionand prospects. Our future success depends in part on our ability to develop and market our technology for applications other than those currently intended. If we fail in thesegoals, our business strategy and ability to generate revenues and cash flow would be significantly impaired. We intend to expend significant resources todevelop new technology, but the successful development of new technology cannot be predicted and we cannot guarantee we will succeed in these goals. Our products may have defects, which could damage our reputation, decrease market acceptance of our products, cause us to lose customers and revenueand result in costly litigation or liability. Our products may contain defects for many reasons, including defective design or manufacture, defective material or software interoperability issues.Products as complex as those we offer, frequently develop or contain undetected defects or errors. Despite testing defects or errors may arise in our existing ornew products, which could result in loss of revenue, market share, failure to achieve market acceptance, diversion of development resources, injury to ourreputation, and increased service and maintenance cost. Defects or errors in our products and solutions might discourage customers from purchasing futureproducts. Often, these defects are not detected until after the products have been shipped. If any of our products contain defects or perceived defects or havereliability, quality or compatibility problems or perceived problems, our reputation might be damaged significantly, we could lose or experience a delay inmarket acceptance of the affected product or products and might be unable to retain existing customers or attract new customers. In addition, these defectscould interrupt or delay sales. In the event of an actual or perceived defect or other problem, we may need to invest significant capital, technical, managerialand other resources to investigate and correct the potential defect or problem and potentially divert these resources from other development efforts. If we areunable to provide a solution to the potential defect or problem that is acceptable to our customers, we may be required to incur substantial product recall,repair and replacement and even litigation costs. These costs could have a material adverse effect on our business and operating results. We will provide warranties on certain product sales and allowances for estimated warranty costs are recorded during the period of sale. The determination ofsuch allowances requires us to make estimates of product return rates and expected costs to repair or to replace the products under warranty. We will establishwarranty reserves based on our best estimates of warranty costs for each product line combined with liability estimates based on the prior twelve months’sales activities. If actual return rates and/or repair and replacement costs differ significantly from our estimates, adjustments to recognize additional cost ofsales may be required in future periods. In addition, because our customers rely on secure authentication and identification of cardholders to preventunauthorized access to programs, PCs, networks, or facilities, a malfunction of or design defect in its products (or even a perceived defect) could result inlegal or warranty claims against us for damages resulting from security breaches. If such claims are adversely decided against us, the potential liability couldbe substantial and have a material adverse effect on our business and operating results. Furthermore, the possible publicity associated with any such claim,whether or not decided against us, could adversely affect our reputation. In addition, a well-publicized security breach involving smart card-based or othersecurity systems could adversely affect the market’s perception of products like ours in general, or our products in particular, regardless of whether the breachis attributable to our products. Any of the foregoing events could cause demand for our products to decline, which would cause its business and operatingresults to suffer. 21  Risks Related to our Securities The market price for our common stock is particularly volatile given our status as a relatively unknown company with a small and thinly traded publicfloat, and lack of profits, which could lead to wide fluctuations in our share price. You may be unable to sell your common shares at or above yourpurchase price, which may result in substantial losses to you. The market for our common stock is characterized by significant price volatility when compared to the shares of larger, more established companies that tradeon a national securities exchange and have large public floats, and we expect that our share price will continue to be more volatile than the shares of suchlarger, more established companies for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, ourcommon stock is, compared to the shares of such larger, more established companies, sporadically and thinly traded. The price for our shares could, forexample, decline precipitously in the event that a large number of our common stock is sold on the market without commensurate demand. Secondly, we area speculative or “risky” investment due to our lack of profits to date. As a consequence of this enhanced risk, more risk-adverse investors may, under the fearof losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly andat greater discounts than would be the case with the stock of a larger, more established company that trades on a national securities exchange and has a largepublic float. Many of these factors are beyond our control and may decrease the market price of our common stock regardless of our operating performance. If we are not able to comply with the applicable continued listing requirements or standards of the NASDAQ Capital Market, NASDAQ could delist ourcommon stock. Our common stock is currently listed on the NASDAQ Capital Market (“NASDAQ”). In order to maintain that listing, we must satisfy minimum financial andother continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimumstockholders’ equity, minimum share price, and certain corporate governance requirements. There can be no assurances that we will be able to comply withthe applicable listing standards. Although we are currently in compliance with our listing standards, we have, in the past, fallen out of compliance and may inthe future fall out of compliance. If we are unable to maintain compliance with these NASDAQ requirements, our common stock will be delisted fromNASDAQ. In the event that our common stock is delisted from the NASDAQ Capital Market and is not eligible for quotation on another market or exchange, trading ofour common stock could be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the PinkSheets or the OTC Bulletin Board. In such event, it could become more difficult to dispose of, or obtain accurate price quotations for, our common stock, andthere would likely also be a reduction in our coverage by securities analysts and the news media, which could cause the price of our common stock to declinefurther. Also, it may be difficult for us to raise additional capital if we are not listed on a major exchange. 22  In the event that our common stock is delisted from NASDAQ, U.S. broker-dealers may be discouraged from effecting transactions in shares of our commonstock because they may be considered penny stocks and thus be subject to the penny stock rules. The SEC has adopted a number of rules to regulate “penny stock” that restricts transactions involving stock which is deemed to be penny stock. Such rulesinclude Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Exchange Act. These rules may have the effect of reducing theliquidity of penny stocks. “Penny stocks” generally are equity securities with a price of less than $5.00 per share (other than securities registered on certainnational securities exchanges or quoted on the NASDAQ Stock Market if current price and volume information with respect to transactions in such securitiesis provided by the exchange or system). Our shares of common stock have in the past constituted, and may again in the future constitute, “penny stock”within the meaning of the rules. The additional sales practice and disclosure requirements imposed upon U.S. broker-dealers may discourage such broker-dealers from effecting transactions in shares of our common stock, which could severely limit the market liquidity of such shares of common stock andimpede their sale in the secondary market. A U.S. broker-dealer selling penny stock to anyone other than an established customer or “accredited investor” (generally, an individual with a net worth inexcess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability determinationfor the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwiseexempt. In addition, the “penny stock” regulations require the U.S. broker-dealer to deliver, prior to any transaction involving a “penny stock”, a disclosureschedule prepared in accordance with SEC standards relating to the “penny stock” market, unless the broker-dealer or the transaction is otherwise exempt. AU.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer and the registered representative and current quotations for thesecurities. Finally, a U.S. broker-dealer is required to submit monthly statements disclosing recent price information with respect to the “penny stock” held ina customer’s account and information with respect to the limited market in “penny stocks”. Stockholders should be aware that, according to the SEC, the market for “penny stocks” has suffered in recent years from patterns of fraud and abuse. Suchpatterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation ofprices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressuresales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by sellingbroker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level,resulting in investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect tobe in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines ofpractical limitations to prevent the described patterns from being established with respect to our securities. If and when a larger trading market for our common stock develops, the market price of our common stock is still likely to be highly volatile and subjectto wide fluctuations, and you may be unable to resell your shares at or above the price at which you acquired them. The market price of our common stock may be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyondour control, including, but not limited to: ●Variations in our revenues and operating expenses; ●Actual or anticipated changes in the estimates of our operating results or changes in stock market analyst recommendations regarding our commonstock, other comparable companies or our industry generally; ●Market conditions in our industry, the industries of our customers and the economy as a whole; ●Actual or expected changes in our growth rates or our competitors’ growth rates; ●Developments in the financial markets and worldwide or regional economies; ●Announcements of innovations or new products or services by us or our competitors; ●Announcements by the government relating to regulations that govern our industry; ●Sales of our common stock or other securities by us or in the open market; and ●Changes in the market valuations of other comparable companies. In addition, if the market for technology stocks or the stock market in general experiences loss of investor confidence, the trading price of our common stockcould decline for reasons unrelated to our business, financial condition or operating results. The trading price of our shares might also decline in reaction toevents that affect other companies in our industry, even if these events do not directly affect us. Each of these factors, among others, could harm the value ofyour investment in our common stock. In the past, following periods of volatility in the market, securities class-action litigation has often been institutedagainst companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, whichcould materially and adversely affect our business, operating results and financial condition. 23  We do not anticipate paying dividends in the foreseeable future; you should not buy our stock if you expect dividends. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at suchtime as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on yourinvestment will only occur if our stock price appreciates. We currently intend to retain our future earnings to support operations and to finance expansion and, therefore, we do not anticipate paying any cashdividends on our common stock in the foreseeable future. You may experience additional dilution in the future. We may acquire other technologies or finance strategic alliances by issuing equity, which may result in additional dilution to our stockholders. We could issue “blank check” preferred stock without stockholder approval with the effect of diluting then current stockholder interests and impairingtheir voting rights; and provisions in our charter documents could discourage a takeover that stockholders may consider favorable. Our certificate of incorporation authorizes the issuance of up to 10,000,000 shares of “blank check” preferred stock with designations, rights and preferencesas may be determined from time to time by our board of directors. Our board of directors is empowered, without stockholder approval, to issue a series ofpreferred stock with dividend, liquidation, conversion, voting or other rights which could dilute the interest of, or impair the voting power of, our commonstockholders. The issuance of a series of preferred stock could be used as a method of discouraging, delaying or preventing a change in control. For example,it would be possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attemptto change control of our company. Financial Industry Regulatory Authority (“FINRA”) sales practice requirements may limit a stockholder’s ability to buy and sell our common stock. FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that theinvestment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers mustmake reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Underinterpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for certain customers.FINRA requirements will likely make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may have theeffect of reducing the level of trading activity in our common stock. As a result, fewer broker-dealers may be willing to make a market in our common stock,reducing a stockholder’s ability to resell shares of our common stock. 24  Item 1B.Unresolved Staff Comments. None. Item 2.Properties. Properties Our principal executive offices are located in Melbourne, Florida. On October 3, 2014, the Company entered into a lease agreement for this office space,which includes customer service and warehouse space. The lease term which commenced on January 1, 2015 is for three years with a current monthly rent of$6,837 which includes the base rent, an escrow for taxes and insurance, common area maintenance charges and applicable sales tax. We also retain an office in Oxford, Connecticut. On September 12, 2014, the Company entered into a lease agreement for this office space. The lease termcommenced on October 1, 2014 and the lease term was for two years. The Company is currently leasing this office space on a month-to-month basis with amonthly rent of $2,450. On October 16, 2013, the Company entered into a lease agreement for office space in Palm Bay, Florida. The term of the lease commenced on May 1, 2014and is for three years with a monthly rent of $1,250 per month in the first year, increasing 3% annually thereafter. As a result of the LogicMark acquisition on July 25, 2016, we assumed two facility leases. One of the leases is for office space located in Plymouth,Minnesota. This lease agreement expires in February 2018 and the current monthly rent is $1,170. In addition, LogicMark also subleases office andwarehouse space located in Louisville, Kentucky. The monthly rent for the space is $8,850 and this sublease agreement is due to expire in July 2017. Item 3.Legal Proceedings On November 12, 2015, we received a complaint that one of our technologies infringed upon one or more claims of a patent(s) issued to the claimant. Theclaimant has subsequently acknowledged that we are not currently infringing on their patent(s) as the technology in question is not commercially availableat the current time. We are in the process of negotiating a future royalty agreement with the claimant should we decide to introduce this technology in thefuture. From time to time we may be involved in various claims and legal actions arising in the ordinary course of our business. Other than as described above, thereis no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or bodypending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, or any of oursubsidiaries in which an adverse decision could have a material adverse effect upon our business, operating results, or financial condition. Item 4.Mine Safety Disclosures Not applicable. 25  PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information On September 11, 2014, our common stock began trading on NASDAQ under the symbol NXTD. Reverse Stock Split On September 1, 2016, our board of directors and stockholders approved a resolution to amend the Company’s Certificate of Incorporation and to authorizethe Company to effect a reverse split of the Company’s outstanding common stock at a ratio of a 1-for-10 (the “Reverse Split”). On September 9, 2016, theCompany effected the Reverse Split. Upon effectiveness of the Reverse Split, every 10 shares of outstanding common stock decreased to one share ofcommon stock. In addition, the reverse split adjusted all outstanding warrants, options, and convertible instruments but did not change the number ofauthorized shares. Throughout this report, the Reverse Split was retroactively applied to all periods presented. Price Range of Common Stock The following tables show, for the periods indicated, the high and low bid prices per share of our common stock as reported by NASDAQ for the periodJanuary 1, 2015 through December 31, 2016. These bid prices represent prices quoted by broker-dealers on the OTCBB quotation service. The quotationsreflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions. 2016 High Low 1st Quarter ended March 31, 2016 $13.50 $2.20 2nd Quarter ended June 30, 2016 $5.90 $3.20 3rd Quarter ended September 30, 2016 $6.49 $2.91 4th Quarter ended December 31, 2016 $4.38 $2.35 2015 High Low 1st Quarter ended March 31, 2015 $42.00 $21.30 2nd Quarter ended June 30, 2015 $32.00 $22.70 3rd Quarter ended September 30, 2015 $24.30 $7.90 4th Quarter ended December 31, 2015 $11.90 $1.60 Holders As of April 6, 2017, there were approximately 76 holders of record of our common stock. This number does not include shares held by brokerage clearinghouses, depositories or others in unregistered form. Dividends We have never declared or paid dividends on our common stock, and our board of directors does not intend to declare or pay any dividends on the CommonStock in the foreseeable future. Our earnings are expected to be retained for use in expanding our business. The declaration and payment in the future of anycash or stock dividends on the common stock will be at the discretion of the board of directors and will depend upon a variety of factors, including our futureearnings, capital requirements, financial condition and such other factors as our board of directors may consider to be relevant from time to time. Securities Authorized For Issuance under Equity Compensation Plans Reference is made to “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters—Securities Authorizedfor Issuance under Equity Compensation Plans” for the information required by this item. 26  Recent Sales of Unregistered SecuritiesOn July 25, 2016, the Company closed a private placement (the “July 2016 Offering”) of shares of its Series B Convertible Preferred Stock, par value $0.0001per share (the “Series B Preferred Stock”) and warrants (the “July 2016 Warrants”) to purchase 562,500 shares of the Company’s common stock. TheCompany sold 4,500,000 shares of Series B Preferred Stock at a price of $1.00 per share, and received gross proceeds from the offering, before deductingplacement agent fees and other offering expenses payable by the Company, of approximately $4,500,000. The conversion price of the Series B PreferredStock is $4.00. The July 2016 Warrants will be exercisable beginning on January 25, 2017, and will be exercisable for a period of five (5) years. The exerciseprice with respect to the July 2016 Warrants is $7.50 per share. Holders of the Series B Preferred stock shall be entitled to receive from the first date ofissuance of the Series B Preferred Stock cumulative dividends at a rate of 25% Per annum on a compounded basis, which dividend amount shall beguaranteed. Accrued and unpaid dividends shall be at the Company’s option, in cash, shares of common stock, or additional share of Series B PreferredStock. On November 29, 2016, the Company entered into a Securities Exchange Agreement (the “Exchange Agreement”) with certain holders of a portion of theOriginal LogicMark Notes (the “Holders”) pursuant to which the Company exchanged with the Holders of $1,500,000 of Original Notes held by the Holdersin exchange for: (i) an aggregate principal amount of $1,500,000 of new secured subordinated promissory notes (the “Exchange Notes”) and (ii) warrants (the“Warrants”, and together with the Exchange Notes, the “Exchange Securities”) convertible into 500,000 shares of common stock of the Company, par value$0.0001 (the “Common Stock”). The Holders purchased the $1,500,000 of Original Notes from LogicMark prior to this transaction. The Exchange Notes willmature on November 29, 2017 and accrue interest at a rate of 15.0% per annum. The Exchange Notes are convertible at any time, in whole or in part, at theoption of the Investors into shares of Common Stock at a conversion price of $3.00 per share (the “Conversion Price”). The Conversion Price is subject toadjustment for stock dividends, stock splits, combinations or similar events. The conversion option embedded in the convertible exchange notes was determined to contain beneficial conversion features, resulting in the bifurcation ofthose features as an equity instrument (resulting in a debt discount) at issuance. After allocation of the gross proceeds to the warrants and beneficialconversion feature, the total debt discount recognized was equal to the face of the convertible exchange notes, the debt discount is being amortized over theterm of the debt and the Company amortized $133,333 of such debt discount for the year ended December 31, 2016.The Company may prepay, in whole but not in part, without premium or penalty, the outstanding principal, together with accrued but unpaid interest on theoutstanding principal, if any. The Warrants will be exercisable beginning on November 29, 2016, and will be exercisable for a period of five years. Theexercise price with respect to the Warrants is $3.00 per share (the “Exercise Price”). The Exercise Price and the amount of shares of Common Stock issuableupon exercise of the Warrants are subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications,mergers or other corporate change and dilutive issuances.Item 6.Selected Financial Data.We are not required to provide the information required by this Item as we are a smaller reporting company. Item 7.Management Discussion and Analysis of Financial Condition and Results of Operations.OverviewWe were incorporated in the state of Delaware on February 8, 2012. Nxt-ID is an emerging technology company engaged in the development of proprietaryproducts, services and solutions for security that serve multiple end markets, including Security, Healthcare, Finance and Internet of Things (IoT). On June 25, 2012, the Company acquired 100% of the membership interests in 3D-ID LLC (“3D-ID”), a limited liability company formed in Florida inFebruary 2011 and owned by the Company’s founders. By acquiring 3D-ID, the Company gained the rights to a portfolio of patented technology in the fieldof three-dimensional facial recognition and imaging including 3D facial recognition products for access control, law enforcement and travel andimmigration. 3D-ID was an early stage company engaged in the design, research and development, integration, analysis, modeling, system networking, salesand support of intelligent surveillance, three-dimensional facial recognition and three-dimensional imaging devices and systems primarily for identificationand access control in the security industries. Since the Company’s acquisition of 3D-ID was a transaction between entities under common control inaccordance with Accounting Standards Codification (“ASC”) 805, “Business Combinations”, Nxt-ID recognized the net assets of 3D-ID at their carryingamounts in the accounts of Nxt-ID on the date that 3D-ID was organized, February 14, 2011. On July 25, 2016, we completed the acquisition of LogicMark, LLC (“LogicMark”) pursuant to an Interest Purchase Agreement by and among the Company,LogicMark and the holders of all of the membership interests of LogicMark (the “LogicMark Sellers”), dated May 17, 2016 (the “Interest PurchaseAgreement”). Pursuant to the Interest Purchase Agreement, we acquired all of the membership interests of LogicMark from the LogicMark Sellers for (i) $17.5million in cash consideration (ii) $2.5 million in a secured promissory note (the “LogicMark Note”) issued to LogicMark Investment Partners, LLC, asrepresentative of the LogicMark Sellers (the “LogicMark Representative”) (iii) 78,740 shares of common stock, which were issued upon signing of theInterest Purchase Agreement (the “LogicMark Shares”), and (iv) warrants (the “LogicMark Warrants,”) to purchase an aggregate of 157,480 shares of commonstock (the “LogicMark Warrant Shares”) for no additional consideration. In addition, we may be required to pay the LogicMark Sellers earn-out payments of(i) up to $1,500,000 for calendar year 2016 and (ii) up to $5,000,000 for calendar year 2017 if LogicMark meets certain gross profit targets set forth in theInterest Purchase Agreement. The LogicMark Note originally was to mature on September 23, 2016 but was extended to October 31, 2016. During 2016 theCompany paid down $1,726,031 of the Seller Note with cash generated from operations as well as from the net cash proceeds received of $1,400,000 from theissuance of the convertible exchange notes issued on November 29, 2016. The Note accrues interest at a rate of 15% per annum. The LogicMark Warrantswere all exercised on July 27, 2016. 27  Our innovative MobileBio® security technologies that serve these end markets include encryption and payments, biometrics, security and privacy, sensorsand miniaturization. Our core competencies and intellectual property in biometrics, security, sensors, and miniaturization – developed through intensiveresearch and development over the past decade –enable us to target and serve multiple large and growing end markets globally. We believe that our MobileBio® products will provide distinct advantages within m-commerce market by improving mobile security. Currently most mobiledevices continue to be protected simply by PIN numbers. This security methodology is easily duplicated on another device, and can easily be spoofed orhacked. Our security paradigm is Dynamic Pairing Codes (“DPC”). DPC is a new, proprietary method to secure users, devices, accounts, locations and serversover any communication media by sharing key identifiers, including biometric-enabled identifiers, between end-points by passing dynamic pairing codes(random numbers) between end-points to establish sessions and/or transactions without exposing identifiers or keys. The ongoing high-level breaches ofpersonal credit card data demand new securities to offer higher level of consumer protection through the use of biometrics and other proprietary solutions.Our strategic plan envisions using our core biometric facial and voice recognition algorithms to develop security applications (both cloud based and locallyhosted) that can be used for companies (for industrial uses, such as enterprise computer networks) as well as individuals (for consumer uses, such assmartphones, tablets or personal computers), law enforcement, the defense industry, and the U.S. Department of Defense. NXT-ID has numerous patentspending. Many of these patents pending focus on tokenization and protection, as well as payment methodology, voice biometrics, and other biometric formsof directed payment. In healthcare, our business initiatives were bolstered by an acquisition of LogicMark, completed in the third quarter of 2016. LogicMark serves a market thatenables two-way communication, sensors, biometrics and security to make home care for chronic medical conditions, including “aging in place,” a reality.There are three major trends driving this market: 1) an aging population, 2) desire to “age in place” and 3) the acute need to lower cost of care. These trendstogether have produced a large and growing market for us to serve. LogicMark has built a business around emergency communications in healthcare. Wehave a strong business with the US Department of Veterans Affairs (VA) today serving veterans who suffer from chronic conditions that often requireemergency assistance. This business is steady and growing. Our strategic plan calls for expanding LogicMark’s business into other retail and enterprisechannels to better serve the expanding demand for secure and remote healthcare. Remote healthcare, which includes health monitoring and management using IoT and cloud-based processing, is an emerging area for LogicMark. The long-term trend toward more home-based care is a massive shift that is being driven by demographics (an aging population) and basic economics. People alsovalue autonomy and privacy which are important factors in determining which solutions will suit the market. Consumers are beginning to enjoy the benefitsof smart home technologies and online digital assistants. One of the promising applications of our VoiceMatch™ technology is enabling secure commandsfor restricted medical access. This solution, when coupled with the NXT-ID BioCloud™, combines biometrics with encryption and distributed access control. 28  Security and privacy concerns are already central to the adoption of IoT solutions that provides a large opportunity for the Company to collaborate andlicense their technology to the consumer-facing firms that are charging after the IoT opportunity. In finance, the technology pioneered in the Nxt-ID “Wocket” has continued to develop in both range of capability while shrinking in size. This provides atechnology package that can be integrated into a “smart wallet” that has the same technology as Apple Pay or into a card that can be used for a variety oftransactions including – magnetic stripe emulation (Wi-Mag), Near Field Communication (NFC), tokens, barcode/QR codes and there can also be an EMVchip and a Bluetooth Beacon for remote sensing and response applications. Versions of this technology package provide a functional and secure “vault” thatallows for full consumer control and customization by OEMs and solution providers. Our finance business is being driven by the development of an innovative smartcard that leverages “Wocket” technology. The smartcard is called “Flye” andit is being developed in partnership with World Ventures Holdings, LLC. (WVH). Flye is poised to finally deliver on the smart card vision that appeared invideos years ago. Flye offers new and unique features compared to any other “smartcards” in the market. It handles the core functions like loading in multiplecards, gathering loyalty points while opening up new opportunities - for example the Bluetooth Beacon makes it simpler for service providers toautomatically open doors, provide access, initiate requests or any number of things – all with software. Flye is targeted at WorldVentures members who careabout travel, food and entertainment. These concerns demand more than payments and include loyalty programs and security features for peace of mind whentraveling. Flye is designed to work in synchrony with the WorldVentures smartphone application. It is a “tethered” solution, albeit a wireless one.WorldVentures has a comprehensive vision for their card that includes the ability to delivery highly tailored membership experience. With respect to IoT, Nxt-ID has joined the Cisco Solution Partner program to provide biometric and encryption solutions in conjunction with otherecosystem partners. Cisco sees security as integral to IoT. They are integrating security directly into network infrastructure to enable companies to use theirIoT networks in a secure fashion. Our plan also anticipates that we will use our core biometric facial and voice recognition algorithms to develop security applications (both cloud based andlocally hosted) that can be used for companies (for industrial uses, such as enterprise computer networks) as well as individuals (for consumer uses, such assmart phones, tablets or personal computers), law enforcement, the defense industry, and the U.S. Department of Defense. We are an emerging growth company and have incurred net losses since our inception. In order to execute our long-term strategic plan to develop andcommercialize our core products we will need to raise additional funds through public or private equity offerings, debt financings, or other means. We cangive no assurance that the cash raised subsequent to December 31, 2016 or any additional funds raised will be sufficient to execute our business plan. We cangive no assurance that additional funds will be available on reasonable terms, or available at all, or that it will generate sufficient revenue to alleviate theseconditions. We commenced shipping of the Wocket® at the end of the second quarter of 2015, primarily to tech savvy consumers. The implementation of the EMV chippoint of sale (“POS”) terminals in the United States has limited the number of POS systems that the Wocket® works at, so we have postponed the full launchof the product in the United States until we are able to implement Near Field Communication (“NFC”) technology on the Wocket® as well as our dynamicmagnetic stripe technology. NFC is a similar technology to ApplePay and GooglePay and works at many EMV enabled POS Terminals. We are also pursuingthe sale of the Wocket® in certain overseas markets that have not implemented chip cards and where the Wocket® works extremely well. We intend torelaunch Wocket® in the United States once NFC is operational. Current wocket inventory is hardware enabled for this purpose and we are finalizing thesoftware arrangements with banks and major payment companies to implement this technology. We anticipate relaunching the Wocket® in the United Stateswith NFC capability in late 2017 and will accelerate efforts to export the product to suitable overseas markets. Results of Operations Year ended December 31, 2016, compared with the year ended December 31, 2015. Revenue. Our revenues for the year ended December 31, 2016 were $7,736,320 compared to $616,854 for the year ended December 31, 2015. The increase inrevenues for the year ended December 31, 2016 as compared to the year ended December 31, 2015 is primarily attributable to the LogicMark acquisition andto a lesser extent the billing to WVH for smart cards and readers as well as engineering and customer support services. The LogicMark operating results areincluded from the acquisition date of July 25, 2016 through December 31, 2016. Our revenues for the year ended December 31, 2016 also included shipmentsof the Wocket from new customer orders received during 2016. Our revenues for the year ended December 31, 2015 were related to shipments of the Wocket®to our early access pre-order customers as well as new customer orders placed in 2015. In addition, the revenues for the year ended December 31, 2015included resale sales of the Wocket® to wholesale customers who resell the Wocket® through their respective distribution channels. The aggregate dollaramount of these resale sales was $167,466. The selling price per unit as it relates to wholesale sales was considerably lower than our direct selling price to ourindividual customers which negatively impacted our gross profit margin. The sales prices to wholesale customers were significantly discounted in order toaccelerate product awareness and adoption of the Wocket®. 29  Cost of Revenue. The increase in our gross margin for the twelve months ended December 31, 2016 was primarily attributable to the inclusion of theLogicMark operating results for the period July 25, 2016 through December 31, 2016. Our cost of revenue includes our direct product cost to both ourindividual customers as well as our wholesale customers. During 2015, our gross margin on sales to our wholesale customers was considerably lower than thegross margin resulting from sales to our individual customers as discussed above. Our cost of revenue for 2015 also included a write off of excess and obsolete inventory of $343,216 resulting from our transition to Version 2 of the Wocket®which now includes NFC technology. We also recorded an unfavorable book-to-physical inventory adjustment of $131,209 as well as scrap adjustments of$375,699 relating primarily to low early stage production yield. In addition, we recorded a lower of cost or market adjustment of $149,000 in anticipation ofour future sales to wholesale customers. We expect that our future selling price to wholesale customers will continue to be less on a per unit basis as comparedto our selling price per unit to our direct individual customers. We anticipate our 2017 revenues and gross profit margin increasing over 2016 levels as aresult of including the operating results of LogicMark for the entire year as well as increased sales volume of the smart card to WVH. Operating Expenses. Operating expenses for the year ended December 31, 2016 totaled $10,011,540 and consisted of research and development expenses of$888,187, selling and marketing expenses of $2,881,668 and general and administrative expenses of $6,241,685. The research and development expensesrelated primarily to salaries and consulting services of $392,991, as well as expenses of $226,293 primarily related to the design and development of thesmart card for WVH and manufacturing of the Wocket®. Selling and marketing expenses consisted primarily of salaries and consulting services of$1,326,220, that were paid in both cash and common stock, and advertising and promotional expenses, including trade shows of $519,397. General andadministrative expenses for the year ended December 31, 2016 consisted of salaries and consulting services of $1,113,574, accrued management andemployee incentives of $600,000, legal, audit and accounting fees of $1,602,083 and fees incurred of $605,228 related to the acquisition of LogicMark. Alsoincluded is $352,020 in non-cash stock compensation to vendors and board members. Operating expenses for the year ended December 31, 2015 totaled $9,717,327 and consisted of research and development expenses of $2,728,518, sellingand marketing expenses of $3,423,567 and general and administrative expenses of $3,565,242. The research and development expenses related primarily tosalaries and consulting services of $1,446,657, as well as test materials and prototypes of $608,768 necessary for the design, development and manufacturingof the Wocket®. Selling and marketing expenses consisted primarily of salaries of $301,585, and consulting services of $1,471,460, that were paid in bothcash and common stock and advertising and promotional expenses, including trade shows of $1,327,657. General and administrative expenses for the yearended December 31, 2015 consisted of salaries and consulting services of $1,023,843, accrued management and employee incentives of $372,000, legal,audit and accounting fees of $405,637 and consulting fees for public relations of $269,540. General and administrative expenses also include $139,921 forthe waiver of a provision to satisfy accelerated installments of the December Notes in cash. Also included is $472,590 in non-cash stock compensation tovendors and board members. Our operating expenses for the year ended December 31, 2016 were approximately $294,000 higher as compared to operating expenses for the year endedDecember 31, 2015. Our research and development expenses relating to the development of our biometric wallet, as well as our advertising and promotionalexpenses decreased for the year ended December 31, 2016 versus the comparable 2015 period resulting primarily from the completion of the productdevelopment in early 2016. These reductions in operating expenses were offset by higher legal, audit and accounting fees and expenses incurred related tothe acquisition of LogicMark, as well as research and development for the WVH smartcard and the inclusion of the operating expenses of LogicMark for theperiod July 25, 2016 through December 31, 2016.Net Loss. The net loss for the year ended December 31, 2016 was $12,815,714 and resulted in part from operational expenses of $10,011,540 incurred duringthe year ended December 31, 2016. The operational expenses were partially offset by favorable gross profit margin stemming primarily from the acquisitionof LogicMark. In addition, the net loss was attributable to interest expense incurred of $3,275,059, unfavorable changes in fair value of derivative liabilitiesof $2,299,020 and a loss on extinguishment of debt of $272,749 resulting from the accelerated installment payments made during the year ended December31, 2016. The net loss for the year ended December 31, 2015 was $13,076,854 and resulted primarily from the loss on product sales of $1,206,970 and from $9,717,327of operational expenses incurred during the year ended December 31, 2015. Also during the year ended December 31, 2015, the Company incurredinducement expense of $755,000 related to the Waiver Agreement (as defined below) that was entered into on April 23, 2015, and the change in theconversion price related to the 8% Convertible Notes (as defined below) issued on July 27, 2015, and interest expense of $1,249,961 resulting from intereston the convertible notes and the amortization of both the convertible note discount and the deferred debt issuance costs stemming from the issuances ofconvertible notes on April 24, 2015 and December 8, 2015. In addition, the Company incurred a loss on extinguishment of debt of $635,986 which resultedprimarily from the write off of the remaining unamortized note discount and deferred debt issue costs related to the convertible notes issued on April 24, 2015on December 7, 2015. Lastly, the Company recorded a realized gain of $47,242 and an unrealized gain of $444,728 resulting from a change in the fair valueof derivative liabilities. 30  Liquidity and Capital Resources We are an emerging growth company and have generated losses from operations since inception. In order to execute our long-term strategic plan to developand commercialize our core products, we may need to raise additional funds, through public or private equity offerings, debt financings, or other means. As ofDecember 31, 2016, the Company had cash of $3,299,679. In order to execute the Company’s long-term strategic plan to develop and commercialize its core products, the Company may need to raise additional funds,through public or private equity offerings, debt financings, or other means. The Company can give no assurance that the cash raised subsequent to December31, 2016 or any additional funds raised will be sufficient to execute its business plan. Additionally, the Company can give no assurance that additional fundswill be available on reasonable terms, or available at all. Cash Flows Cash and Working Capital We have incurred net losses of $12,752,928 and $13,076,854 for the years ended December 31, 2016 and 2015, respectively. As of December 31, 2016, theCompany had cash and stockholders’ equity of $3,299,679 and $2,818,731, respectively. At December 31, 2016, the Company had a working capitaldeficiency of $2,073,523. During the year ended December 31, 2016, the Company raised net proceeds of approximately $7,759,775 through the issuance ofSeries A and B preferred stock, a short-term promissory note and convertible exchange notes. Cash Used in Operating Activities Our primary ongoing uses of operating cash relate to payments to subcontractors and vendors for research and development, salaries and related expenses andprofessional fees. Our vendors and subcontractors generally provide us with normal trade payment terms. During the year ended December 31, 2016, net cashused in operating activities amounted to $950,048, which was comprised of a net loss of $12,752,928, positive adjustments to reconcile net loss to net cashused in operating activities of $5,919,499 and changes in operating assets and liabilities of positive $5,883,381 as compared to net cash used in operatingactivities of $8,620,672 for the year ended December 31, 2015, which was comprised of a net loss of $13,076,854, positive adjustments to reconcile net lossto net cash used in operating activities of $4,933,745 and changes in operating assets and liabilities of negative $477,563.Cash Used in Investing ActivitiesDuring the year ended December 31, 2016, net cash used in investing activities amounted to $15,934,781 and was related to changes in restricted cash of$1,494,582 which was primarily attributable to the cash proceeds received as a result of the transaction with WVH offset in part by purchases of tooling of$39,073. In addition, the Company used $17,390,290 in cash to acquire LogicMark net of cash acquired. During the year ended December 31, 2015, net cashused in investing activities amounted to $1,888,281 and was comprised of the purchases of equipment and production tooling and molds of $381,767 andchanges in restricted cash of $1,506,514 which was primarily attributable to the cash proceeds received as a result of the transaction with WVH (describedbelow).Cash Provided by Financing ActivitiesDuring the year ended December 31, 2016, the Company received net proceeds of $1,869,755 from the issuance of Series A Preferred Stock and $400,000from the issuance of a promissory note that was converted into Series A Preferred Stock. In addition, the Company received $4,090,000 in net proceeds fromthe issuance of Series B Preferred Stock. The Company also received net proceeds of $13,906,250 from the revolving credit facility which were used in part tofund the LogicMark acquisition. In addition, the Company also paid down $1,726,031 of the seller’s note that resulted from the LogicMark acquisition withnet cash received from the issuance of convertible exchange notes of $1,400,000 as well as cash on hand. During the year ended December 31, 2015, theCompany received net proceeds of $8,076,657 from the issuance of common stock, warrants, notes, and $650,000 from the exercise of warrants.Financings April 2015 Private PlacementOn April 24, 2015, the Company entered into a securities purchase agreement (the “April Purchase Agreement”) with a group of accredited investors (the“April Purchasers”) pursuant to which the Company sold to such purchasers an aggregate of $1,575,000 principal amount of secured convertible notes (the“April Convertible Notes”), Class A Common Stock Purchase Warrants (the “Class A Warrants”) to purchase up to 46,875 shares of the Company’s commonstock and Class B Common Stock Purchase Warrants (the “Class B Warrants,” and together with the Class A Warrants, the “April Warrants”) to purchase up to46,875 shares of the Company’s common stock. The April Convertible Notes bear interest at 6% per annum and are convertible at any time, in whole or inpart, at the option of the holders into shares of common stock at a conversion price of $25.20 per share. The April Warrants are exercisable beginning six (6)months after issuance through the fifth (5th) anniversary of such initial exercisability date. The Class A Warrants have an initial exercise price equal to $30.20per share and the Class B Warrants have an initial exercise price equal to $50.00 per share. The Company received cash proceeds of $1,481,500 from theissuance of the April Convertible Notes after deducting debt issuance costs of $93,500. 31  The Company recorded a debt discount of $1,575,000 related to the sale of the April Convertible Notes and the April Warrants. The debt discount reflects theunderlying fair value of the April Warrants of approximately $860,000 on the date of the transaction and a beneficial conversion charge of approximately$715,000. The debt discount will be amortized to interest expense over the earlier of (i) term of the April Convertible Notes or (ii) conversion of the debt. In connection with the sale of the April Convertible Notes and April Warrants, the Company entered into a registration rights agreement, dated April 24, 2015(the “April Registration Rights Agreement”), with the April Purchasers, pursuant to which the Company agreed to register the shares of common stockunderlying the April Convertible Notes and April Warrants on a Form S-3 registration statement to be filed with the SEC within ten (10) business days afterthe date of the issuance of the April Convertible Notes and April Warrants (the “April Filing Date”) and to cause the April Registration Statement to bedeclared effective under the Securities Act within ninety (90) days following the April Filing Date. If certain of its obligations under the April RegistrationRights Agreement are not met, the Company is required to pay partial liquidated damages to each April Purchaser. On May 8, 2015, the Company filed aregistration statement on Form S-3 with the SEC to register the shares issuable upon the conversion of the April Convertible Notes, the related accruedinterest and the exercise of the April Warrants. Such registration statement was declared effective with the SEC on May 14, 2015. In connection with the sale of the April Convertible Notes and the April Warrants, the Company entered into a security agreement, dated April 24, 2015 (the“April Security Agreement”), between the Company, 3D-ID and the collateral agent thereto. Pursuant to the Security Agreement, the April Purchasers weregranted a security interest in certain personal property of the Company and 3D-ID to secure the payment and performance of all obligations of the Companyand 3D-ID under the April Convertible Notes, April Warrants, April Purchase Agreement, April Registration Rights Agreement and April Security Agreement.In addition, in connection with the April Security Agreement, 3D-ID executed a subsidiary guaranty, pursuant to which it agreed to guarantee and act assurety for payment of the April Convertible Notes and other obligations of the Company under the April Warrants, April Purchase Agreement, AprilRegistration Rights Agreement and April Security Agreement. As described below, the April Purchasers exchanged the April Convertible Notes into the convertible notes that were issued on December 8, 2015. (TheDecember Notes as defined on page 27 in the December 2015 Private Placement). As a result, the Company incurred a loss on extinguishment of the AprilConvertible Notes of $635,986 which resulted primarily from the write off of the remaining unamortized note discount and deferred debt issue costs onextinguishment. In order to obtain their consent to issue the December Notes on December 8, 2015, and to effect the exchange, the Company issued to eachof the April Purchasers additional December Notes with a face value of $500,000. On December 8, 2015, the total outstanding face amount of theseconvertible notes was $2,134,850. On December 28, 2015, the note holders accelerated installment repayments in an aggregate amount of $350,000 whichthe Company satisfied by an issuance of common stock as a result of a waiver by the holders which allowed the Company to issue common stock below$2.50. As a result of this installment, the outstanding amount of the convertible notes held by the April Purchasers was $1,784,850 on December 31, 2015. July 2015 Private Placement On July 27, 2015, the Company entered into a securities purchase agreement with an accredited investor (the “July Purchaser”) pursuant to which theCompany sold an aggregate of $222,222 in principal amount of the 8% Original Issue Discount Convertible Notes (the “8% Convertible Notes”) for anaggregate purchase price of $200,000. The Company received net proceeds of $200,000 from the sale of the 8% Convertible Notes. The 8% Convertible Notes mature on September 11, 2015 (the “Maturity Date”), less any amounts converted or redeemed prior to the Maturity Date. The 8%Convertible Notes bear interest at a rate of 8% per annum, subject to increase to the lesser of 24% per annum or the maximum rate permitted under applicablelaw upon the occurrence of certain events of default. The 8% Convertible Notes are convertible at any time, in whole or in part, at the option of the holders into shares of common stock at a conversion price of$35.00 per share, which is subject to adjustment for stock dividends, stock splits, combinations or similar events. The Company agreed that if it effected a registered offering either utilizing Form S-1 or Form S-3 (a “Registered Offering”), the Holder shall have the right toconvert the entire amount of the subscription amount into such Registered Offering. The July Purchaser converted the entire subscription amount into theAugust Offering described below. The conversion price used to convert the entire purchase price into common stock was equivalent to the equity offering price of $17.50 on August 4, 2015and not the conversion price of $35.00 stipulated in the securities purchase agreement. As a result of the change in the conversion price, the Companyrecorded additional inducement expense of $100,000 at the time of conversion. August 2015 Offerings On August 4, 2015, the Company closed with certain purchasers (the “August 2015 Purchasers”) a public offering (the “August Offering”) providing for theissuance and sale by the Company of 172,143 shares of the Company’s common stock at a price to the public of $17.50 per share (the “Registered Shares”)for an aggregate purchase price of $3,012,500. 32  In connection with the sale of the Registered Shares, the Company also entered into a Warrant Purchase Agreement (the “Warrant Purchase Agreement”) withthe August 2015 Purchasers providing for the issuance and sale by the Company of warrants to purchase 86,072 shares of the Company’s common stock at apurchase price of $0.00000001 per warrant (the “August 2015 Warrants”). Each August 2015 Warrant shall be initially exercisable on the six (6) monthanniversary of the issuance date an exercise price equal to $23.50 per share and have a term of exercise equal to five (5) years from the date on which firstexercisable. The Registered Shares were offered by the Company pursuant to an effective shelf registration statement on Form S-3, which was initially filed with the SECon April 24, 2015 and declared effective on May 14, 2015 (File No. 333-203637). Pursuant to a Registration Rights Agreement, dated July 30, 2015, by and between the Company and the August 2015 Purchasers, the Company agreed to fileone or more registration statements with the SEC covering the resale of the shares of common stock issuable upon exercise of the August 2015 Warrants. The placement agent in connection with the Registered Shares was Northland Securities, Inc. October 2015 Public Offering On October 21, 2015, the Company closed on an underwritten public offering of its common stock. The Company offered 150,000 shares of common stock ata price to the public of $7.00 per share. The Company received gross proceeds from the offering, before deducting underwriting discounts and commissionand other offering expenses payable by the Company, of approximately $1,050,000. The underwriter was Aegis Capital Corp. November 2015, Term Note On November 25, 2015, the Company issued the Term Note with a principal amount of $200,000 to an accredited purchaser (the “November Purchaser”). TheTerm Note was scheduled to mature on December 15, 2015. The interest rate was 12% per annum with a minimum guaranteed interest of $10,000. TheNovember Purchaser converted the entire principal amount into the December Offering described below. December 2015 Private Placement On December 8, 2015, the Company entered into a securities purchase agreement (the “December Purchase Agreement”) with certain accredited investors (the“December Purchasers”) pursuant to which the Company sold an aggregate of $1,500,000 in principal amount of Senior Secured Convertible Notes (the“December Notes”) for an aggregate purchase price of $1,500,000 (the “December Offering”). The Notes will mature on December 8, 2016 (the “DecemberMaturity Date”), less any amounts converted or redeemed prior to the December Maturity Date. The December Notes bear interest at a rate of 8% per annum.The December Notes are convertible at any time, in whole or in part, at the option of the holders into shares of common stock at a conversion price of $5.50per share. In case of an Event of Default (as defined in the December Notes), the notes are convertible at 85% of the average of the five (5) lowest dailyWeighted Average Prices (as defined in the December Notes) in the prior fifteen (15) trading days, until such Event of Default has been cured. The conversionprice is subject to adjustment for stock dividends, stock splits, combinations or similar events. The Notes are repayable from the earlier of June 7, 2016 or theeffective date of the initial registration statement that was filed with this offering, (The Installment Trigger Date). The installment payments are to be made onthe lst and 15th calendar day of each month. The amount of each installment is the quotient of the original principal amount divided by the number ofinstallment payments after the Installment Trigger Date and the scheduled Maturity Date on December 7, 2016. The holder of the notes may opt to acceleratetwo installment amounts in an amount up to twice the regular installment amount. The installment payments may be made in cash or in common stock at85% of the average of the five (5) lowest daily Weighted Average Prices (as defined in the December Notes) in the prior fifteen (15) trading days at the optionof the Company. In connection with the sale of the December Notes, the Company also issued to the December Purchasers an aggregate of 90,000 shares of the Company’scommon stock in consideration of each Investor’s execution and delivery of the December Purchase Agreement (the “Commitment Shares”). TheCommitment Shares were offered by the Company pursuant to an effective shelf registration statement on Form S-3, which was initially filed with the SEC onApril 24, 2015 and declared effective on May 14, 2015 (File No. 333-203637). As described above, the April Purchasers exchanged the April Convertible Notes into the convertible notes that were issued on December 8, 2015. (TheDecember Notes). As a result, the Company incurred a loss on extinguishment of the April Convertible Notes of $635,986 which resulted primarily from thewrite off of the remaining unamortized note discount and deferred debt issue costs on extinguishment. In order to obtain their consent to issue the DecemberNotes on December 8, 2015, and to effect the exchange, the Company issued to each of the April Purchasers additional December Notes with a face value of$500,000. On December 8, 2015, the total outstanding principal amount of these convertible notes was $2,134,850. On December 28, 2015, the note holdersaccelerated installment repayments in an aggregate amount of $350,000 which the Company satisfied by an issuance of common stock as a result of a waiverby the holders which allowed the Company to issue common stock below $2.50. As a result of this repayment, the outstanding amount of the convertiblenotes held by the April Purchasers was $1,784,850 on December 31, 2015. 33  The total face amount of the Notes outstanding on December 8, 2015 were $3,644,850. On December 8, 2015 the Company recorded a debt discount of $1,719,700 and a derivative liability of $912,330. The debt discount is attributable to the value of the separately accounted for conversion feature and common stock issued in connection with the sale of theNotes. The embedded conversion feature derivatives relate to the conversion option, the installment payments and the accelerated installment option of theNotes. The embedded derivatives were evaluated under FASB ASC Topic 815-15, were bifurcated from the debt host, and were classified as liabilities in theconsolidated balance sheet. The debt discount is amortized using the effective interest method over the term of the Notes. For the year ended December 31,2015, the Company recorded a total of $1,093,371 of debt discount amortization, which was recorded as an interest expense in the consolidated statement ofoperations. Of this amount, $109,535 related to the December Notes. At December 31, 2015, the face amount of the Notes outstanding was $3,294,850. March 2016 Promissory Note On March 11, 2016, the Company issued a promissory note with a principal amount of $400,000 to an accredited purchaser (the “March Promissory Note”).The March Promissory Note was converted into the Series A Preferred Stock offering in April 2016. April 2016 Offering On April 11, 2016, the Company closed a registered offering (the “April 2016 Offering”) of shares of its Series A Convertible Preferred Stock, par value$0.0001 per share (the “Series A Preferred Stock”). The Company sold 2,500,000 shares of Series A Preferred Stock at a price of $1.00 per share, and receivedgross proceeds from the offering, before deducting placement agent fees and other offering expenses payable by the Company, of approximately $2,500,000.Holders of the Series A Preferred stock shall be entitled to receive from the first date of issuance of the Series A Preferred Stock cumulative dividends at a rateof 25% Per annum on a compounded basis, which dividend amount shall be guaranteed. Accrued and unpaid dividends shall be at the Company’s option, incash, shares of common stock, or additional share of Series A Preferred Stock. Interest Purchase Agreement On May 17, 2016, the Company entered into an Interest Purchase Agreement (the “Interest Purchase Agreement”) with LogicMark, LLC (“LogicMark”) andthe holders of all of the membership interests (the “Interests”) of LogicMark (the “Sellers”), pursuant to which the Company acquired all of the Interests fromthe Sellers (the “Transaction”). The Company issued the equivalent of $300,000 in shares of common stock to the Sellers of LogicMark to extend theexclusivity period to June 30, 2016. Additionally, upon signing the Interest Purchase Agreement the Company issued warrants (the “Warrants”) to the Sellers to acquire an aggregate of up to$600,000 of shares (157,480 shares) of the Company’s common stock for no additional consideration. The Warrants were originally only exercisable if theTransaction did not close by June 30, 2016. Pursuant to an amendment entered into as of July 7, 2016, the Warrants were exercisable as of July 22, 2016. On July 25, 2016, the issuances of common stock and warrants to the Sellers of LogicMark totaling $900,000 became part of the overall consideration paid tothe Sellers to acquire LogicMark. July 2016 Offering On July 25, 2016, the Company closed a private placement (the “July 2016 Offering”) of shares of its Series B Convertible Preferred Stock, par value $0.0001per share (the “Series B Preferred Stock”) and warrants (the “July 2016 Warrants”) to purchase 562,500 shares of the Company’s common stock. TheCompany sold 4,500,000 shares of Series B Preferred Stock at a price of $1.00 per share, and received gross proceeds from the offering, before deductingplacement agent fees and other offering expenses payable by the Company, of approximately $4,500,000. The conversion price of the Series B PreferredStock is $4.00. The July 2016 Warrants will be exercisable beginning on January 25, 2017, and are exercisable for a period of five (5) years. The exerciseprice with respect to the July 2016 Warrants is $7.50 per share. Holders of the Series B Preferred stock shall be entitled to receive from the first date ofissuance of the Series B Preferred Stock cumulative dividends at a rate of 25% Per annum on a compounded basis, which dividend amount shall beguaranteed. Accrued and unpaid dividends shall be at the Company’s option, in cash, shares of common stock, or additional share of Series B Preferred Stock. November 2016 Exchange On November 29, 2016, the Company entered into a Securities Exchange Agreement (the “Exchange Agreement”) with certain holders of a portion of theOriginal LogicMark Notes (the “Holders”) pursuant to which the Company exchanged with the Holders of $1,500,000 of Original Notes held by the Holdersin exchange for: (i) an aggregate principal amount of $1,500,000 of new secured subordinated promissory notes (the “Exchange Notes”) and (ii) warrants (the“Warrants”, and together with the Exchange Notes, the “Exchange Securities”) convertible into 500,000 shares of common stock of the Company, par value$0.0001 (the “Common Stock”). The Holders purchased the $1,500,000 of Original Notes from the LogicMark Sellers prior to this transaction. The ExchangeNotes will mature on November 29, 2017 and accrue interest at a rate of 15.0% per annum. The Exchange Notes are convertible at any time, in whole or inpart, at the option of the Investors into shares of Common Stock at a conversion price of $3.00 per share (the “Conversion Price”). The Conversion Price issubject to adjustment for stock dividends, stock splits, combinations or similar events. The conversion option embedded in the convertible exchange notes was determined to contain beneficial conversion features, resulting in the bifurcation ofthose features as an equity instrument (resulting in a debt discount) At issuance. After allocation of the gross proceeds to the warrants and beneficialconversion feature, the total debt discount recognized was equal to the face of the convertible exchange notes, The debt discount is being amortized over theterm of the debt and the Company Amortized $133,333 of the debt discount for the year ended December 31, 2016. 34  The Company may prepay, in whole but not in part, without premium or penalty, the outstanding principal, together with accrued but unpaid interest on theoutstanding principal, if any. The Warrants will be exercisable beginning on November 29, 2016, and will be exercisable for a period of five years. Theexercise price with respect to the Warrants is $3.00 per share (the “Exercise Price”). The Exercise Price and the amount of shares of Common Stock issuableupon exercise of the Warrants are subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications,mergers or other corporate change and dilutive issuances. December 2015 Strategic Agreements On December 31, 2015, the Company entered into a Master Product Development Agreement (the “Development Agreement”) with WVH. The DevelopmentAgreement commenced on December 31, 2015, and has an initial term of two (2) years (the “Initial Term”). Thereafter, the Development Agreement willautomatically renew for additional successive one (1) year terms (each a “Renewal Term”) unless and until WVH provides written notice of non-renewal atleast thirty (30) days prior to the end of the Initial Term or then-current Renewal Term. Each Renewal Term will commence immediately on expiration of theInitial Term or preceding Renewal Term. The Development Agreement may also be terminated earlier pursuant to certain conditions. In connection with the Development Agreement, on December 31, 2015, the Company entered into a securities purchase agreement (the “WVH PurchaseAgreement”) with WVH providing for the issuance and sale by us of 1,050,000 shares (the “WVH Shares”) of Common Stock and a common stock purchasewarrant (the “WVH Warrant”) to purchase 251,250 shares (the “WVH Warrant Shares”) of Common Stock, for an aggregate purchase price of $2,000,000. TheWVH Warrant is initially exercisable on the five (5) month anniversary of the issuance date at an exercise price equal to $7.50 per share and has a term ofexercise equal to two (2) years and seven (7) months from the date on which first exercisable. In connection with the sale of the WVH Shares and the WVH Warrant, the Company entered into a registration rights agreement, dated December 31, 2015(the “WVH Registration Rights Agreement”), with WVH, pursuant to which the Company agreed to register the WVH Shares and the WVH Warrant Shares ona Form S-1 or Form S-3 registration statement (the “WVH Registration Statement”) to be filed with the SEC within ninety (90) days after the date of theissuance of the WVH Shares and the WVH Warrants (the “WVH Filing Date”) and to cause the WVH Registration Statement to be declared effective under theSecurities Act within one hundred eight (180) days following the WVH Filing Date. Pursuant to the Development Agreement, WVH retained the Company to design, develop and manufacture a series of Proprietary Products (as defined in theDevelopment Agreement) for distribution through WVH’s network of sales representatives, members, consumers, employees, contractors or affiliates. Inconjunction with the Development Agreement, the Company and WVH contractually agreed to dedicate $1,500,000 of the $2,000,000 in total proceedsreceived by the Company to the development and manufacture of the product for WVH. In addition, any expenditure of the $1,500,000 in proceeds isrestricted in that the Company will need prior approval from WVH on a monthly basis in order to fund the estimated expenditures needed for thedevelopment of the product for WVH from the $1,500,000. In the event that the WVH Registration Statement is filed with the SEC untimely, WVH may be, in addition to being entitled to exercise all rights granted bylaw and under the WVH Registration Rights Agreement, including recovery of damages, shall be entitled to specific performance of its rights under the WVHRegistration Rights Agreement. Pursuant to the WVH Registration Rights Agreement, each of the Company and WVH and agreed that monetary damageswould not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of the WVH Registration RightsAgreement and that, in the event of any action for specific performance in respect of such breach, it shall not assert or shall waive the defense that a remedy atlaw would be adequate. We filed the registration statement on a timely basis; however the filing was subsequently withdrawn. There were no penaltiesassociated with this action. Off Balance Sheet Arrangements We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or specialpurpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limitedpurposes. In addition, we do not have any undisclosed borrowings or debt, and we have not entered into any synthetic leases. We are, therefore, not materiallyexposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships. Critical Accounting Policies The following discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have beenprepared in conformity with accounting principles generally accepted in the United States of America. Certain accounting policies and estimates areparticularly important to the understanding of our financial position and results of operations and require the application of significant judgment by ourmanagement or can be materially affected by changes from period to period in economic factors or conditions that are outside of our control. As a result, theyare subject to an inherent degree of uncertainty. In applying these policies, our management uses their judgment to determine the appropriate assumptions tobe used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financialresults, our observance of trends in the industry and information available from other outside sources, as appropriate. Please see Note 3 to our consolidatedfinancial statements for a more complete description of our significant accounting policies. 35  We intend to utilize the extended transition period provided in Securities Act Section 7(a)(2)(B) as allowed by Section 107(b)(1) of the JOBS Act for theadoption of new or revised accounting standards as applicable to emerging growth companies. As part of the election, we will not be required to comply withany new or revised financial accounting standard until such time that a company that does not qualify as an “issuer” (as defined under Section 2(a) of theSarbanes-Oxley Act of 2002) is required to comply with such new or revised accounting standards. As an emerging growth company within the meaning of the rules under the Securities Act, and we intend to utilize certain exemptions from various reportingrequirements that are applicable to public companies that are not emerging growth companies. For example, we will not have to provide an auditor’sattestation report on our internal controls in future annual reports on Form 10-K as otherwise required by Section 404(b) of the Sarbanes-Oxley Act. Inaddition, Section 107 of the JOBS Act provides that an emerging growth company can utilize the extended transition period provided in Section 7(a)(2)(B) ofthe Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accountingstandards until those standards would otherwise apply to private companies. We have elected to utilize this extended transition period. Our financialstatements may therefore not be comparable to those of companies that comply with such new or revised accounting standards as they become applicable topublic companies. Basis of Presentation. The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted inthe United States. Revenue Recognition. The Company recognizes revenue when persuasive evidence of an arrangement exists, the service has been rendered or productdelivery has occurred, the price is fixed or readily determinable and collectability of the sale is reasonably assured. The wocket® smart wallet sales comprisemultiple element arrangements including both the wocket® smart wallet device itself as well as unspecified future upgrades. The Company offers to all of itsend-consumer customers a period of fourteen days post the actual receipt date in which to return their wocket® smart wallet. The Company was unable toreliably estimate returns at the time shipments were made during the twelve months ended December 31, 2016 and 2015, due to lack of return history.Accordingly, the Company has recognized revenue only on those shipments whose fourteen day return period had lapsed by December 31, 2016 or 2015.The Company accrues for the estimated costs associated with the one-year Wocket® warranty at the time revenue associated with the sale is recorded, andperiodically updates its estimated warranty cost based on actual experience. At December 31, 2016 and 2015, such amounts were not material. Warranty Costs. The Company’s product is sold with a one-year warranty against defects in materials and workmanship under normal use. The Companyaccrues for the estimated costs associated with the one-year Wocket® warranty at the time revenue associated with the sale is recorded, and periodicallyupdates its estimated warranty cost based on actual experience. Estimating warranty costs requires significant judgment. To date, warranty claims have beeninconsequential and the Company estimates any such claims against sales made to date will be immaterial. Accordingly, no accrual for warranty costs hasbeen recorded at December 31, 2016 and 2015. Inventory. The Company performs regular reviews of inventory quantities on hand and evaluates the realizable value of its inventories. The Company willadjust the carrying value of the inventory as necessary with the estimated valuation reserves for excess, obsolete, and slow-moving inventory by comparingthe individual inventory parts to forecasted product demand or production requirements. The inventory is valued at the lower of cost or net realizable valuewith cost determined using the first-in, first-out method. Convertible Instruments. The Company applies the accounting standards for derivatives and hedging and for distinguishing liabilities from equity whenaccounting for hybrid contracts that feature conversion options. The accounting standards require companies to bifurcate conversion options from their hostinstruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria includes circumstances in which(i) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risksof the host contract, (ii) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair valueunder otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (iii) a separateinstrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. The derivative is subsequently markedto market at each reporting date based on current fair value, with the changes in fair value reported in the results of operations. Conversion options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent issuances of equity or equitylinked securities at exercise prices more favorable than that featured in the hybrid contract generally result in their bifurcation from the host instrument. The Company accounts for convertible debt instruments when the Company has determined that the embedded conversion options should not be bifurcatedfrom their host instruments in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company records, when necessary, discounts toconvertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of theunderlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts underthese arrangements are amortized over the term of the related debt. 36  Derivative Financial Instruments. The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. TheCompany evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued atthe reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, theCompany uses the Black-Scholes option valuation model to value the derivative instruments at inception and on subsequent valuation dates. The conversionfeature embedded within Company’s convertible note payable does not have fixed settlement provisions as the conversion price varies based on the tradingprice of the Company’s common stock and the potential number of common shares to be issued upon conversion is indeterminable up to a maximum of120,000 shares of common stock. In addition, the January Warrants issued in connection with the January Offering do not have fixed settlement as theirexercise prices and may be lowered if the Company conducts an offering in the future at a price per share below the exercise price of the warrants.Accordingly, the conversion feature and warrants have been recognized as derivative instruments. The classification of derivative instruments, includingwhether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities areclassified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required withintwelve (12) months of the balance sheet date. Item 7A.Quantitative and Qualitative Disclosures about Market Risk. We are not required to provide the information required by this Item as we are a smaller reporting company. Item 8.Financial Statements and Supplementary Data. The financial statements, notes to the financial statements and the respective reports of the Company’s independent registered accountants required to befiled in response to this Item 8 begin on page F-1. Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Item 9A.Controls and Procedures Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conductedan evaluation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Exchange Act, as of December 31, 2016. Asdiscussed below, based on this evaluation, our management concluded that our disclosure controls and procedures were not effective to provide reasonableassurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reportedwithin the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executiveofficer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures. As a result of the material weakness in internalcontrols over financial reporting described below, we concluded that our disclosure controls and procedures as of December 31, 2016 were not effective. Management’s Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange ActRule 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer,we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2016, based on the criteria set forth in thereport entitled Internal Control-Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission (2013), knownas COSO. Based on our evaluation under the criteria set forth in Internal Control-Integrated Framework, our management concluded that our internal controlover financial reporting was not effective as of December 31, 2016. As of December 31, 2016, we have identified certain matters that constituted a material weakness in our internal controls over financial reporting.Specifically, we have difficulty in accounting for complex accounting transactions due to an insufficient number of accounting personnel with experience inthat area and limited segregation of duties within our accounting and financial reporting functions. As of December 31, 2016, management has not completed an effective assessment of the Company’s internal controls over financial reporting based on the2013 Committee of Sponsoring Organizations (COSO) framework. Management has concluded that, during the period covered by this report, our internalcontrols and procedures were not effective to detect the inappropriate application of U.S. GAAP. 37  This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financialreporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm as we are a smaller reporting company andnot required to provide the report. Limitations of the Effectiveness of Internal Control A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systemare met. Further, the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation ofcontrols can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include therealities that judgments in decision making can be faulty, and that breakdowns can occur because of simple errors. Additionally, controls can becircumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of anysystem of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design willsucceed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system,misstatements due to error or fraud may occur and not be detected. Changes in Internal Control over Financial Reporting There were no changes in the Company’s internal control over financial reporting in the Company’s fourth quarter of the fiscal year ended December 31,2016 covered by this Annual Report on Form 10-K, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controlover financial reporting. This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financialreporting. Management’s was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit theCompany to provide only the management’s report in this annual report. Item 9B.Other Information None. 38  PART III Item 10.Directors, Executive Officers and Corporate Governance Our executive officers and directors and their ages and positions are as follows: Name Age Position Date First Elected orAppointedGino M. Pereira 59 Chief Executive Officer and Director February 8, 2012Vincent S. Miceli 59 Vice President and Chief Financial Officer September 29, 2014David Tunnell 51 Vice President and Chief Technology Officer June 25, 2012Major General David R. Gust, USA, Ret 72 Director June 25, 2012Michael J. D’Almada-Remedios, PhD 54 Director September 26, 2013Daniel P. Sharkey 60 Director June 23, 2014Stanley E. Washington 52 Director October 8, 2015 Gino M. Pereira, one of our co-founders, has served as the Chief Executive Officer, Chief Financial Officer and director of the Company since its inception.Mr. Pereira has over 30 years of executive, operational and financial experience with technology companies in the United States, Europe and the Far East. Hehas also helped to develop several technology start-ups as well as served in an executive capacity in a large multinational public company. Mr. Pereira wasChief Financial Officer and later Chief Executive Officer of Technest Holdings Inc., a publicly quoted defense contracting company, from 2004 to 2011.Technest Holdings operated subsidiaries EOIR Technologies, Inc. and Genex Technologies, Inc. Mr. Pereira is a Fellow of the Chartered Association ofCertified Accountants (UK) and has an MBA, with a specialty in finance, from the Manchester Business School in England. Mr. Pereira brings to the Board significant expertise in the biometric and software recognition industries, as well as experience in international businesstechnology and extensive management and operating experience. Having founded and/or operated companies in similar or related industries during the past15 years, provides the board with unparalleled knowledge of the Company and its operations and an understanding of the markets the Company plans tooperate in. Vincent S. Miceli, has served as a Vice-President and Chief Financial Officer of the Company since September 29, 2014. Mr. Miceli has over 30 years ofexperience in executive, financial and operational management for companies based primarily in the United States. Prior to joining the Company, Mr. Miceliwas Vice-President and Chief Financial Officer/Treasurer of Panolam Industries International, Inc., a privately held company which primarily designs,manufactures, and distributes decorative and industrial laminates from May 2006 to mid-December 2013. Prior to that, Mr. Miceli was the Chief FinancialOfficer and Corporate Controller of Opticare Health Systems, Inc., a company that provides integrated eye care services from 2004 to 2006. Prior to 2004, Mr.Miceli held senior accounting positions at Amphenol Corporation and United Technologies, Inc. Mr. Miceli holds a BS degree in accounting fromQuinnipiac College, an MBA, with a concentration in Finance, from the University of Hartford and he is an affiliate member of both the AICPA andConnecticut Society of Certified Public Accountants. David Tunnell, one of our co-founders, has served as the Chief Technology Officer of the Company from the date of its inception. Mr. Tunnell is an expert inbiometrics and is the inventor of a variety of miniature technologies for remote distributed sensors. Mr. Tunnell has over 23 years of experience indeveloping high-technology solutions for the US Government. He was the divisional director of 3D identification products at Technest Holdings Inc., from2003 to 2011. Prior to that he was at the National Security Agency (NSA) serving in operations, support, and development and later at L3 Communicationswhere he served as Director of Engineering, overseeing the development of SIGINT solutions and serving as the primary interface with customers, bridgingthe gap between customer requirements and system design and engineering. He also managed technical personnel, budgets, schedules, and technicaldirection. Mr. Tunnell earned a Masters in Technical Management (MSTM) from Johns Hopkins University and a BSEE from the University of Tennessee. Major General David R. Gust, USA, Ret. has served as a director of the Company from the date of its inception. General Gust presently does consulting workfor his own company, David R. Gust & Associates, LLC. Between April 2007 and May 2009, General Gust was the President of USfalcon, a privately-heldcompany working with the U.S. Defense sector, primarily in information technology. Previously, General Gust had served as the Manager for FederalTelecommunications for Bechtel National, Inc. from November 2004 to March 2007. Prior to that, he was the President and Chief Executive Officer ofTechnical and Management Services Corporation from 2000 to 2004. General Gust retired from the United States Army in 2000 after completing a career of34 years of service. His General Officer assignments included the Program Executive Officer, Communications Systems (PEO-Comm Systems), Program Executive Officer,Intelligence, Electronic Warfare and Sensors (PEO-IEW&S) and at Army Materiel Command, as Deputy Chief of Staff for Research, Development andAcquisition (DCSRDA). His final assignment at the Army Materiel Command included serving as the Chairman of the Source Selection Advisory Council for the Tactical UnmannedAerial Vehicle procurement and supervising preparation of the acquisition procurement package for the Stryker combat vehicle. General Gust received hisB.S. in Electrical Engineering from the University of Denver and Master’s Degrees in Systems Management and National Security and Strategy from theUniversity of Southern California and the United States Naval War College, respectively. General Gust brings to the Board valuable business expertise, particularly expertise in defense and homeland security market segments due to his significantexperience as a director of a publicly held companies and his substantial experience gained as a member of the US Armed Services. 39  Michael J. D’Almada-Remedios, PhD had served as a director of the Company since September 26, 2013. Dr. Remedios’ background includes a successfultrack record of product innovation and development, outsourcing, global platform integration, massive-scale/hyper-growth operations, andbuilding/developing teams from 50 to over 500 people. His key accomplishments at each company consistently show impressive gains in sales, profitabilityand global expansion into new markets. Between January 2011 and September 2013 he was Chief Information Officer for Arbonne International, a billion dollar global cosmetics company. FromFebruary 2009 to December 2010 he was a Vice-President at Expedia, Inc. and was responsible for all technologies, product development and technicaloperations for hotels.com and Venere brands, including “One H”, the global integration of business and technology for hotels.com and Expedia, Inc. Prior to February 2009 Dr. Remedios was Chief Technology Officer for Realtor.com and Shopping.com, a subsidiary of eBay, Inc. At Shopping.com he was amember of the eBay Inc. Technology Board for eBay, PayPal and Skype. He was also a key member of the eBay Inc. workgroups for defining and driving thenext-generation consumer experience “Finding 2.0”, “on-eBay” and the Advertising and Distributed Commerce Network offering “off-eBay”. Earlier in his career, he was Global Chief Information Officer for the Travelocity group of companies and President and Chief Operating Officer ofBluelight.com, a subsidiary of Kmart. Dr. Remedios began his career as Vice President and Manager, Systems Integration & Development at Wells FargoBank, in the Consumer Banking Group. Dr. Remedios recently joined WorldVentures Holdings, LLC, an international travel company, as Chief Technology Officer. He has a PhD in ComputerControl and Fluid Dynamics from the University of Nottingham in England and a B.Sc. in Physics and Computer Science from Kings College, University ofLondon in England. Dr. Remedios brings to the Board valuable business experience, particularly expertise in eCommerce and hyper growth companies. Daniel P. Sharkey, has served as a director of the Company since June 23, 2014. Mr. Sharkey’s background includes 36 years of broad experience withfinance and business development for technology companies. His key accomplishments in his prior engagements focused on expanding technologycompanies into new marketplaces and plotting and implementing successful, long-term growth strategies. Between 2007 and 2014, Mr. Sharkey wasExecutive Vice President of Business Development for ATMI, a publicly traded semi-conductor company. Mr. Sharkey originally joined ATMI as ChiefFinancial Officer in 1990. ATMI was sold to Entegris in 2014 for $1.15 billion. From 1987 to 1990, before joining ATMI, Mr. Sharkey was Vice President of Finance for Adage, a publicly traded computer graphics manufacturer. From1983 to 1987, Mr. Sharkey served as Corporate Controller for CGX Corporation, a venture capital backed, privately held, computer graphics manufacturerthat merged with Adage in 1987. Mr. Sharkey was a Certified Public Accountant for KPMG from 1978 to 1983. Mr. Sharkey earned a Bachelor of Arts degree in Economics and Accounting from the College of the Holy Cross in Worcester, Massachusetts. Mr. Sharkeybrings valuable experience in finance and administration to the Board and serves as our financial expert. Stanley E. Washington, has been a business leader in the financial services industry for over 25 years. Currently, as Founder and Chief Executive Officer ofPantheon Business Consulting (“PBC”) he manages a strategic business development firm which focuses on partnering fast growing small and mid-sizedcompanies in emerging categories with large strategic partners and providing senior leadership teams with innovative thought leadership concepts aimed atincreased revenue generation, consumer program activation and diverse strategic supplier partnership development for the building of long-term shareholdergrowth and profitability. Prior to PBC, Mr. Washington spent 17 years as an executive at American Express and was Regional Vice President and General Manager of the WesternUnited States operating as the region’s senior business leader where he managed American Express’ U.S. Commercial Card Division overseeing the AccountDevelopment Organization, including sales and operational support across multiple industries, to more than 260 U.S. based companies, representing over$300 billion in annual corporate revenue. Mr. Washington held numerous positions within the company, including Regional Vice President and GeneralManager of the American Express Establishment Services Division where he was responsible for over $50 billion in annual charge volume, managing allmerchant account relationships, card member marketing, sponsorships and advertising to more than one million American Express merchant businesslocations throughout the Western States and Micronesia. During his tenure he was also responsible for American Express’ penetration into several keyindustries, including entertainment, gaming, restaurant, wine, ski and luxury hotels. Mr. Washington’s extensive experience in advising companies and years of executive management give him the qualifications and skills to serve as adirector of our Company. 40  Board Committees Our Board of Directors currently has the following committees: Audit – Daniel Sharkey*(1), David R. Gust, Michael J. D’Almada-Remedios, PhDCompensation – David R. Gust*, Daniel Sharkey, Michael J. D’Almada-Remedios, PhDNominating and Governance – David R. Gust*, Daniel Sharkey, Michael J. D’Almada-Remedios, PhD * — Indicates Committee Chair(1) — Indicates Committee Financial Expert Audit Committee Our Audit Committee oversees our corporate accounting and financial reporting process. Among other matters, the audit committee: ●evaluates the independent registered public accounting firm’s qualifications, independence and performance; ●determines the engagement of the independent registered public accounting firm; ●reviews and approves the scope of the annual audit and the audit fee; ●discusses with management and the independent registered public accounting firm the results of the annual audit and the review of our quarterlyfinancial statements; ●approves the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services; ●reviews our critical accounting policies and estimates; and ●reviews the audit committee charter and the committee’s performance on an annual basis. The audit committee operates under a written charter adopted by the Board of Directors that satisfies the applicable standards of NASDAQ. Our board has determined that Mr. Daniel Sharkey is an Audit Committee Financial Expert as defined by the SEC rules and has the requisite financialsophistication as defined by The NASDAQ Stock Market rules and regulations. Compensation Committee Our Compensation Committee reviews and recommends policies relating to the compensation and benefits of our officers and employees. The compensationcommittee reviews and approves corporate goals and objectives relevant to the compensation of our chief executive officer and other executive officers,evaluates the performance of these officers in light of those goals and objectives, and makes recommendations to the board of directors regardingcompensation of these officers based on such evaluations. The Compensation Committee administers the issuance of stock options and other awards underour stock plans. The Compensation Committee reviews and evaluates, at least annually, the performance of the compensation committee. The CompensationCommittee operates under a written charter adopted by the board of directors that satisfies the applicable standards of NASDAQ. Corporate Governance and Nomination Committee Our Corporate Governance and Nomination committee is responsible for, among other objectives, making recommendations to the Board regardingcandidates for directorships; overseeing the evaluation of the board of directors; reviewing developments in corporate governance practices; developing a setof corporate governance guidelines, and reviewing and recommending changes to the charters of other board committees. In addition, the CorporateGovernance and Nomination committee is responsible for overseeing our corporate governance guidelines and reporting and making recommendations to theboard concerning corporate governance matters. Involvement in Certain Legal Proceedings Except as described below, to the best of our knowledge, none of our directors or executive officers has, during the past ten years: ●been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); ●had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association ofwhich he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; ●been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal orstate authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities,futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; 41  ●been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures TradingCommission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; ●been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed,suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal orstate securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but notlimited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity;or ●been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (asdefined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or anyequivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” none of our directors or executive officers has been involvedin any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules andregulations of the Commission. Family Relationships There are no relationships between any of the officers or directors of the Company. Director Nomination Procedures There have been no material changes to the procedures by which security holders may recommend nominees to our Board of Directors. Code of Ethics Our board of directors has adopted a Code of Ethical Conduct (the “Code of Conduct”) which constitutes a “code of ethics” as defined by applicable SECrules. We require all employees, directors and officers, including our principal executive officer and principal financial officer to adhere to the Code ofConduct in addressing legal and ethical issues encountered in conducting their work. The Code of Conduct requires that these individuals avoid conflicts ofinterest, comply with all laws and other legal requirements, conduct business in an honest and ethical manner and otherwise act with integrity and in our bestinterest. The Code of Conduct contains additional provisions that apply specifically to our Chief Executive Officer, Chief Financial Officer and other financedepartment personnel with respect to full and accurate reporting. The Code of Conduct is available on our website at www.nxt-id.com. The Company willpost any amendments to the Code of Conduct, as well as any waivers that are required to be disclosed by the rules of the SEC on such website. Theinformation contained on or that may be obtained from our website is not, and shall not be deemed to be a part of this Annual Report. Section 16(a) Beneficial Ownership Reporting Compliance Under the securities laws of the United States, our directors, executive (and certain other) officers, and any persons holding ten percent or more of ourCommon Stock must report on their ownership of the Common Stock and any changes in that ownership to the Securities and Exchange Commission.Specific due dates for these reports have been established. During the fiscal year ended December 31, 2016, we believe that all reports required to be filed bysuch persons pursuant to Section 16(a) were filed on a timely basis, with the exception of our officers, directors and greater than 10 percent beneficial ownerslisted in the table below: Name Form DescriptionGino M. Pereira 4 1 transaction was not reported on a timely basis (upon the disposal of shares) 42  Item 11.Executive Compensation. Summary Compensation Table for Fiscal Years 2016 and 2015 The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during theyears ended December 31, 2016 and 2015 in all capacities for the accounts of our executives, including the Chief Executive Officer and Chief FinancialOfficer. Name and Principal Position Year Salary($) Bonus($) Stock Awards($) OptionAwards($) NonEquity Incentive Plan Compensation($) Nonqualified Deferred CompensationEarnings($) All OtherCompensation($) Total($) Gino M. Pereira, 2016 346,500 - 124,000 - - - 19,517 490,017 Chief Executive Officer 2015 330,000 - - - - - 18,252 348,252 David Tunnell, 2016 277,200 - 62,000 - - - 14,400 353,600 Chief Technology Officer 2015 260,000 - - - - - 14,400 274,400 Vincent S. Miceli, 2016 241,500 - 62,000 - - - 14,400 317,900 Chief Financial Officer 2015 200,000 - - - - - 14,400 214,400 Employment Agreements Effective October 1, 2015, we extended the employment agreement with Gino M. Pereira, our Chief Executive Officer. The term of the employmentagreement is for 3 years and the term began on October 1, 2015. Effective January 1, 2017, Mr. Pereira’s base salary increased to $381,150 from $346,500.The employment agreement also provides for: ●Payment of all necessary and reasonable out-of-pocket expenses incurred by the executive in the performance of his duties under the agreement. ●Eligibility to participate in bonus or incentive compensation plans that may be established by the board of directors from time to time applicable tothe executive’s services. ●Eligibility to receive equity awards as determined by the board of directors, or a committee of the board of directors, composed in compliance withthe corporate governance standards of any applicable listing exchange. We do not have employment agreements with Vincent S. Miceli, our Chief Financial Officer or David Tunnell, our Chief Technology Officer. 43  Outstanding Equity Awards at 2016 Fiscal Year End The following table provides information relating to the vested and unvested option and stock awards held by the named executives as of December 31,2016. Each award to each named executive is shown separately, with a footnote describing the award’s vesting schedule. The presentation of the grants onthe following table reflect the reverse stock split that was effected on September 9, 2016. Option Awards Stock AwardsName Number of SecuritiesUnderlyingUnexercisedOptions (# Exercisable) Number of SecuritiesUnderlying UnexercisedOption (# Unexercisable) Equity Incentive PlanAwards: Number ofSecurities UnderlyingUnexercisedUnearned Options (#) OptionExercisePrice ($) OptionExpiration Date Number ofShares orUnits ofStock ThatHave NotVested (#) MarketValue ofShares orUnits ofStock ThatHave NotVested ($) EquityIncentivePlanAwards:Number ofUnearnedShares,Units orOtherRights ThatHave NotVested (#) EquityIncentivePlanAwards:Market orPayoutValue ofUnearnedShares,Units OrOtherRights ThatHave NotVested ($) Gino Pereira - - - - - - $ 20,000 $124,000 David Tunnell - - - - - - $ 10,000 $ 62,000 Vincent S. Miceli - - - - - - $ 10,000 $62,000 Director Compensation for Fiscal 2016 Our non-employee directors receive $60,000 annually for serving on our Board, which is paid quarterly in stock. The following table reflects allcompensation awarded to, earned by or paid to the Company’s directors for the fiscal year ended December 31, 2016. Fees Earned or Paid in Cash ($) Stock Awards ($)(1)(2)(3) Options Awards ($) Non-Equity Incentive PlanCompensation($) Nonqualified Deferred CompensationEarnings ($) All Other Compen- sation ($) Total ($) Major General David R.Gust, USA, Ret. - 60,000 - - - 612 60,612 Michael J. D’Almada-Remedios, PhD - 60,000 - - - 604 60,604 Daniel P. Sharkey - 60,000 - - - 1,055 61,055 (1)Major General David R. Gust, received 17,235 shares of common stock at an average price of approximately $3.48 per share.(2)Michael J. D’Almada-Remedios received 17,235 shares of common stock at an average price of approximately $3.48 per share.(3)Daniel P. Sharkey received 17,235 shares of common stock at an average price of approximately $3.48 per share. 44  Item 12.Security Ownership Of Certain Beneficial Owners And Management and Related Stockholder Matters The following table sets forth certain information regarding the beneficial ownership of our Common Stock as of April 7, 2017 by (a) each stockholder who isknown to us to own beneficially 5% or more of our outstanding Common Stock; (b) all directors; (c) our executive officers, and (d) all executive officers anddirectors as a group. Except as otherwise indicated, all persons listed below have (i) sole voting power and investment power with respect to their shares ofCommon Stock, except to the extent that authority is shared by spouses under applicable law, and (ii) record and beneficial ownership with respect to theirshares of Common Stock. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has theright to acquire within 60 days of April 7, 2017. For purposes of computing the percentage of outstanding shares of our common stock held by each person orgroup of persons named above, any shares that such person or persons has the right to acquire within 60 days of April 7, 2017 is deemed to be outstanding,but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed asbeneficially owned does not constitute an admission of beneficial ownership. Unless otherwise identified, the address of our directors and executive officersis c/o Nxt-ID, Inc. 285 North Drive, Suite D, Melbourne, FL 32904. Name and address of beneficial owner Amount andNature ofBeneficialOwnership Percent of class ofCommon Stock (1) 5% Shareholders: WorldVentures Holdings, LLC 1,005,000 11.76% Directors and Officers: Gino M. PereiraChief Executive Officer and Director 916,875 10.73% David TunnellChief Technology Officer 769,421 9.01% Vincent S. MiceliVice-President and Chief Financial Officer 17,825 * Major General David R. Gust, USA, Ret.Director 32,114 * Michael J. D’Almada-Remedios, PhD Director 37,482 * Daniel P. Sharkey Director 27,102 * Stanley E. Washington Director 8,000 * Directors and Officers as a group (7 persons) 1,808,819 21.17% *Less than 1% (1)Based on 8,543,339 shares of common stock issued and outstanding as of April 7, 2017. Shares of common stock subject to options or warrants currentlyexercisable or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options orwarrants, but are not deemed outstanding for purposes of computing the percentage of any other person. 45  Equity Compensation Plan Information as of December 31, 2016 Plan Category Number of Securities to BeIssued uponExercise ofOutstanding Options Weighted AverageExercise Price of OutstandingOptions Number of SecuritiesRemaining Available forFuture Issuance under the Plan(2) (a) (b) (c) Equity compensation plans approved by security holders (1) - $ - 554,045 Equity compensation plans not approved by security holders - - - Total - $- 554,045 (1)Represents the shares authorized for issuance under the Nxt-ID, Inc. 2013 Long-Term Stock Incentive Plan, which was approved by the Company’sshareholders on January 3, 2013. The maximum aggregate number of shares of Common Stock that may be issued under the Plan, including StockOptions, Stock Awards, including stock issued to the Board of Directors for serving on the Company’s Board, and Stock Appreciation Rights is limitedto 10% of the shares of Common Stock outstanding on the first trading day of any fiscal year, or 737,992 for fiscal 2017.(2)As of January 1, 2017. Item 13.Certain Relationships and Related Transactions, and Director Independence Transactions with Related Parties Except as described below, during the past three years, there have been no transactions, whether directly or indirectly, between our company and any of ourofficers, directors, beneficial owners of more than 5% of our outstanding common stock or their family members, that exceeded $120,000. Dr. Michael Remedios is a director of the Company and the Chief Technical Officer of WVH with whom we completed a strategic transaction on December31, 2015 (see note 7). We do not consider Dr. Remedios to be a related party as he is not an executive officer or a member of WVH and is employed in atechnical role. In addition, Dr. Remedios recused himself from any involvement or voting in the transaction between World Ventures and the Company otherthan to provide input at a technical level. During the year ended December 31, 2016, we recognized revenue of $1,357,413 from WVH a related party. In addition, our accounts receivable balanceincluded $621,724 due from WVH. 46  Director Independence As we are listed on NASDAQ, our determination of independence of directors is made using the definition of “independent director” contained in Rule5605(a)(2) of the Marketplace Rules of the NASDAQ Stock Market. Our board affirmatively determined that Major General David R. Gust, Michael J.D’Almada-Remedios, PhD, and Daniel P. Sharkey, are “independent” directors, as that term is defined in the Nasdaq Stock Market Rules. Item 14.Principal Accounting Fees and Services. Audit Fees The Company engaged Marcum LLP effective April 2016 as the Company’s independent registered public accounting firm. The aggregate fees billed forprofessional services rendered for the review of our condensed consolidated financial statements for the first, second and third quarters ended March 31,2016, June 30, 2016 and September 30, 2016, as well as the fees to be billed for the audit of our annual consolidated financial statements for the year endedDecember 31, 2016 are expected to be $133,000. In addition, Marcum LLP billed $23,408 during 2016 for professional services related to registrationstatements and proposed financing arrangements. The aggregate fees billed by KPMG LLP for 2015 audit services rendered, including the audit of our annualconsolidated financial statements for the year ended December 31, 2015, the review of our 2015 interim condensed consolidated financial statements andinvolvement with registration statements including the issuances of comfort letters and consents, were $639,400. Audit Related Fees There were no fees for audit related services for the years ended December 31, 2016 and 2015. Tax Fees For the Company’s fiscal year ended December 31, 2016, Marcum LLP did not provide any professional services for tax compliance, tax advice, and taxplanning. For the Company’s fiscal year ended December 31, 2015, no tax services were rendered by KPMG LLP. All Other Fees The Company did not incur any other fees related to services rendered by our principal accountants for the fiscal years ended December 31, 2016 and 2015. Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors The Audit Committee pre-approves all audit and non-audit services provided by the independent auditors prior to the engagement of the independentauditors with respect to such services. The Chairman of the Audit Committee has been delegated the authority by the Committee to pre-approve interimservices by the independent auditors other than the annual audit. The Chairman must report all such pre-approvals to the entire Audit Committee at the nextCommittee meeting. 47  PART IV Item 15.Exhibits, Financial Statement Schedules. (a) The following documents are filed as part of this report: (1)Financial Statements: The audited consolidated balance sheets of the Company as of December 31, 2016 and, 2015, the related consolidated statements of operations, changes instockholders’ equity (deficiency) and cash flows for the years then ended, the footnotes thereto, and the respective reports of Marcum LLP and KPMG LLP,both independent registered public accounting firms, are filed herewith. (2)Financial Schedules: None Financial statement schedules have been omitted because they are either not applicable or the required information is included in the consolidated financialstatements or notes hereto. (3)Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Report. (b) The following are exhibits to this Report and, if incorporated by reference, we have indicated the document previously filed with the SEC in which theexhibit was included. Certain of the agreements filed as exhibits to this Report contain representations and warranties by the parties to the agreements that have been made solelyfor the benefit of the parties to the agreement. These representations and warranties: ●May have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosuresare not necessarily reflected in the agreements; ●May apply standards of materiality that differ from those of a reasonable investor; and ●Were made only as of specified dates contained in the agreements and are subject to subsequent developments and changed circumstances. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date that these representations and warranties weremade or at any other time. Investors should not rely on them as statements of fact. 48  Exhibit No. Description of Exhibit3.1(i) Certificate of Incorporation (1)3.(i)(a) Certificate of Amendment to Certificate of Incorporation (16)3.1(i)(b) Certificate of Designations of Series A Convertible Preferred Stock (12)3.1 (i)(c) Amendment of Certificate of Designations of Series A Convertible Preferred Stock (14)3.1(i)(d) Second Certificate of Amendment of Designations of Series A Convertible Preferred Stock (15)3.1(i)(e) Certificate of Designations for Series B Convertible Preferred Stock (15)3.1(ii) Bylaws (1)4.1 Form of Warrant Agreement and Form of Warrant (1)4.2 Form of Warrant for January 2014 Offering (2)4.3 Form of Agent Warrant for January 2014 Offering (2)4.4 Form of Warrant for June 2014 and August 2014 Offerings (5)4.5 Form of Warrant for September 2014 Offering (6)4.6 Form of Underwriter Warrant for September 2014 Offering (6)4.7 Form of Class A Warrant (7)4.8 Form of Class B Warrant (7)4.9 Form of Warrant for August 2015 Public Offering (8)4.10 Form of Warrant for December 2015 Agreement with WorldVentures Holdings, LLC (10)4.11 Form of Warrant for May 2016 Interest Purchase Agreement with LogicMark, LLC (13)4.12 Form of Warrant for November 2016 Agreement with LogicMark, LLC (18)4.13 Form of 8% Original Issue Discount Convertible Note for August 2015 Private Placement (8)10.1 † 2013 Long Term Incentive Plan (1)10.2 † Forms of Agreement Under 2013 Long Term Incentive Plan (1)10.3 † Employment Agreement Between Nxt-ID and Gino Pereira (3)10.4 License Agreement between 3D-ID, LLC and Genex Technologies (1)10.5 Purchase Agreement between 3D-ID, LLC and Nxt-ID, Inc. (1)10.6 †† Manufacturing agreement with Identita Technologies, Inc., dated January 18, 2013 (4)10.7 Form of Registration Rights Agreement for June 2014 and August 2014 Offerings (5)10.8 Form of Registration Rights Agreement for April 2015 Offering (7)10.9* Form of Placement Agency Agreement for August 2015 Public Offering10.10 Form of Securities Purchase Agreement for August 2015 Public Offering (8)10.11 Form of Registration Rights Agreement for August 2015 Public Offering (8)10.12 Form of Securities Purchase Agreement for August 2015 Private Placement (8)10.13 Form of Warrant Purchase Agreement for August 2015 Private Placement (8)10.14 Form of Securities Purchase Agreement for December 2015 Private Placement (9)10.15 Form of Registration Rights Agreement for December 2015 Private Placement (9)10.16 Form of Securities Purchase Agreement for December 2015 Agreement with WorldVentures Holdings, LLC (10)10.17 Form of Registration Rights Agreement for December 2015 Agreement with WorldVentures Holdings, LLC (10)10.18 Form of Securities Purchase Agreement for April 2016 Registered Direct Offering (11)10.19 Form of Interest Purchase Agreement for May 2016 Agreement with LogicMark, LLC (13)10.20 Form of First Amendment to Interest Purchase Agreement for May 2016 Agreement with LogicMark, LLC (14)10.21 Form of Secured Subordinated Promissory Note for July 2016 Agreement with LogicMark, LLC (15)10.22 Form of Security Agreement for July 2016 Agreement with LogicMark, LLC (15)10.23 Form of Loan Agreement for July 2016 Agreement with LogicMark, LLC (15)10.24 Form of Subordination Agreement for July 2016 Agreement with LogicMark, LLC (15)10.25 Form of Securities Purchase Agreement for July 2016 Agreement with LogicMark, LLC (15)10.26 Form of Registration Rights Agreement for July 2016 Agreement with LogicMark, LLC (15)10.27 Form of Forbearance Agreement between Nxt-ID and LogicMark Investment Partners, LLC (17)10.28 Form of Exchange Note for November 2016 Agreement with LogicMark, LLC (18)10.29 Form of Exchange Agreement for November 2016 Agreement with LogicMark, LLC (18)10.30 Form of Intercreditor Agreement for November 2016 Agreement with LogicMark, LLC (18)10.31 First Amendment to Forbearance Agreement for November 2016 Agreement with LogicMark, LLC (18)14.1 Code of Ethics (3)21.1* List of Subsidiaries23.1* Consent of Marcum LLP23.2* Consent of KPMG LLP31.1* Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-OxleyAct of 2002.31.2* Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-OxleyAct of 2002.32.1* Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002.32.2* Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002.101.INS* XBRL Instance Document101.SCH* XBRL Taxonomy Schema101.CAL* XBRL Taxonomy Calculation Linkbase101.DEF* XBRL Taxonomy Definition Linkbase101.LAB* XBRL Taxonomy Label Linkbase101.PRE* XBRL Taxonomy Presentation Linkbase  49  In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed. * Filed herewith.† Management contract or compensatory plan or arrangement.†† Confidential treatment has been received for schedules A, C, and D to the agreement (1)Filed as an Exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-184673) with the SEC on January 31, 2013. (2)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on January 17, 2014. (3)Filed as an Exhibit to the Company’s Annual Report on Form 10-K with the SEC on February 25, 2014. (4)Filed as an Exhibit to the Company’s Registration Statement on Form S-1/A (File No. 333-184673) with the SEC on March 25, 2013. (5)Filed as an Exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-197845) with the SEC on August 5, 2014. (6)Filed as Exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-197845) with the SEC on August 14, 2014. (7)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on April 24, 2015. (8)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on July 30, 2015. (9)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on December 9, 2015. (10)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on January 4, 2016. (11)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on April 4, 2016. (12)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on April 12, 2016. (13)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on May 20, 2016. (14)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on July 7, 2016. (15)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on July 27, 2016. (16)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on September 12, 2016. (17)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on September 26, 2016. (18)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on November 30, 2016. 50  SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. Nxt-ID, Inc. Date: April 13, 2017By:/s/ Gino M. Pereira Gino M. Pereira Chief Executive Officer(Principal Executive Officer) Date: April 13, 2017By:/s/ Vincent S. Miceli Vincent S. MiceliChief Financial Officer(Principal Financial Officer and Principal AccountingOfficer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrantand in the capacities and on the dates indicated. Date: April 13, 2017By:/s/ Gino M. Pereira Gino M. Pereira Chief Executive Officer and Director(Principal Executive Officer) Date: April 13, 2017By:/s/ Vincent S. Miceli Vincent S. Miceli Chief Financial Officer(Principal Financial Officer and Accounting Officer) Date: April 13, 2017By:/s/ Major General David R. Gust, USA, Ret. Major General David R. Gust, USA, Ret.Director Date: April 13, 2017By:/s/ Michael J. D’Almada-Remedios, PhD Michael J. D’Almada-Remedios, PhD Director Date: April 13, 2017By:/s/ Daniel P. Sharkey Daniel P. Sharkey Director Date: April 13, 2017By:/s/ Stanley E. Washington Stanley E. Washington Director 51  Nxt-ID, Inc. and Subsidiaries CONTENTS Report of Independent Registered Public Accounting FirmsF-2 Consolidated Financial Statements Consolidated Balance SheetsF-4Consolidated Statements of OperationsF-5Consolidated Statements of Changes in Stockholders’ EquityF-6Consolidated Statements of Cash FlowsF-7 Notes to Consolidated Financial StatementsF-8 - F-27 F-1  Report of Independent Registered Public Accounting Firm To the Audit Committee of theBoard of Directors and Shareholdersof Nxt-ID, Inc. We have audited the accompanying consolidated balance sheet of Nxt-ID, Inc. and Subsidiaries (the “Company”) as of December 31, 2016, and the relatedconsolidated statements of operations, changes in stockholders’ equity and cash flows for the year then ended. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is notrequired to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal controlover financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinionon the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis forour opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nxt-ID, Inc., as ofDecember 31, 2016, and the consolidated results of its operations and its cash flows for the year then ended in conformity with accounting principlesgenerally accepted in the United States of America. The consolidated financial statements of Nxt-ID, Inc. as of and for the year ended December 31, 2015, were audited by other auditors, whose report, datedApril 14, 2016, expressed an unmodified opinion on those consolidated financial statements, which contained an explanatory paragraph as to the Company’sability to continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has adjusted its 2015 consolidatedfinancial statements to retrospectively apply the reverse stock split to its common stock that occurred subsequent to the year ended December 31, 2015. Alsoas discussed in Note 2 to the consolidated financial statements, the Company reclassified deferred financing costs from other current assets to convertiblenotes payable on its balance sheet at December 31, 2015. The other auditors reported on the consolidated financial statements before these retrospectiveadjustments. As part of our audit of the 2016 consolidated financial statements, we also audited the adjustments to the 2015 consolidated financial statements toretroactively apply the effects of the reverse stock split that occurred subsequent to the year ended December 31, 2015 and the reclassification of deferredfinancing costs from other current assets to convertible notes payable on its balance sheet, as described in Note 2. In our opinion, such adjustments areappropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to Nxt-ID Inc.’s 2015 consolidated financialstatements other than with respect to these adjustments and, accordingly, we do not express an opinion, or any other form of assurance, on the 2015consolidated financial statements as whole. Marcum llpNew York, NYApril 13, 2017 F-2  Report of Independent Registered Public Accounting Firm The Board of Directors and StockholdersNxt-ID, Inc.: We have audited, before the effects of the adjustments to retrospectively apply the changes in the presentation of deferred debt issuance costs and in shareand per-share data as described in note 2, the accompanying consolidated balance sheet of Nxt-ID, Inc. and subsidiary as of December 31, 2015, and therelated consolidated statements of operations, changes in stockholders’ equity and cash flows for the year then ended. The 2015 consolidated financialstatements before the effects of the adjustments discussed in note 2 are not presented herein. The 2015 consolidated financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion. In our opinion, the 2015 consolidated financial statements, before the effects of the adjustments to retrospectively apply the changes in the presentation ofdeferred debt issuance costs and in share and per-share data as described in note 2, present fairly, in all material respects, the financial position of Nxt-ID, Inc.and subsidiary as of December 31, 2015, and the results of their operations and their cash flows for the year then ended in conformity with U.S. generallyaccepted accounting principles. We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the changes in the presentation of deferred debtissuance costs and in share and per-share data as described in note 2 and, accordingly, we do not express an opinion or any other form of assurance aboutwhether such adjustments are appropriate and have been properly applied. Those adjustments were audited by a successor auditor. The accompanying consolidated financial statements as of December 31, 2015 and for the year then ended have been prepared assuming that the Companywill continue as a going concern. As discussed in note 3 to the consolidated financial statements, the Company has incurred recurring losses from operationsthat raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in note 3. Theconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ KPMG LLP Stamford, ConnecticutApril 14, 2016 F-3  Nxt-ID, Inc. and SubsidiariesCONSOLIDATED BALANCE SHEETS December 31, December 31, 2016 2015 AssetsCurrent Assets Cash $3,299,679 $418,991 Restricted cash 40,371 1,534,953 Accounts receivable 1,218,705 - Inventory, net 5,341,500 1,767,942 Prepaid expenses and other current assets 1,347,627 986,595 Total Current Assets 11,247,882 4,708,481 Property and equipment: Equipment 175,537 105,902 Furniture and fixtures 79,062 72,713 Tooling and molds 581,881 390,952 836,480 569,567 Accumulated depreciation (456,752) (196,353)Property and equipment, net 379,728 373,214 Goodwill 15,479,662 - Other intangible assets, net of amortization of $318,842 and $0, respectively 8,285,725 - Total Assets $35,392,997 $5,081,695 Liabilities and Stockholders’ Equity Current Liabilities Accounts payable $2,070,658 $1,333,137 Accrued expenses 2,901,672 641,438 Customer deposits 6,068,894 8,729 Short-term debt 773,969 - Convertible notes payable, net of discount of $1,366,667 and $1,445,342, respectively, and net of deferred debtissuance costs of $123,563 and $52,810, respectively 9,770 1,796,698 Derivative liability conversion feature - 420,360 Other current liabilities – contingent consideration 1,496,442 - Total Current Liabilities 13,321,405 4,200,362 Other long-term liabilities – contingent consideration 4,832,028 - Revolving loan facility, net of deferred debt issuance costs of $769,453 14,230,547 - Deferred tax liability 190,286 - Total Liabilities 32,574,266 4,200,362 Commitments and Contingencies Stockholders’ Equity Preferred stock, $0.0001 par value: 10,000,000 shares authorized Series A preferred stock, $0.0001 par value: 3,125,000 shares designated; 310,268 issued and outstanding (aggregateliquidation preferences of $440,594) as of December 31, 2016 182,851 - Series B preferred stock, $0.0001 par value: 4,500,000 shares designated; 4,500,000 issued and outstanding (aggregateliquidation preferences of $5,625,000) as of December 31, 2016 4,090,000 - Common stock, $0.0001 par value: 10,000,000 shares authorized; 7,379,924 and 4,442,528 issued and outstanding,respectively 738 444 Additional paid-in capital 33,204,943 22,787,762 Accumulated deficit (34,659,801) (21,906,873) Total Stockholders’ Equity 2,818,731 881,333 Total Liabilities and Stockholders’ Equity $35,392,997 $5,081,695 The accompanying notes are an integral part of these consolidated financial statements. F-4  Nxt-ID, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF OPERATIONS For the Year EndedDecember 31, 2016 2015 Revenues $7,736,320 $616,854 Costs of goods sold 4,434,868 1,823,824 Gross Profit (Loss) 3,301,452 (1,206,970) Operating Expenses General and administrative 6,241,685 3,565,242 Selling and marketing 2,881,668 3,423,567 Research and development 888,187 2,728,518 Total Operating Expenses 10,011,540 9,717,327 Operating Loss (6,710,088) (10,924,297) Other Income and (Expense) Interest income 23 727 Interest expense (3,275,059) (1,249,961)Inducement expense - (755,000)Loss on extinguishment of debt (272,749) (635,986)Realized gain on change in fair value of derivative liabilities - 47,242 Change in fair value of derivative liabilities (2,299,020) 444,728 Total Other Expense, Net (5,846,805) (2,148,250) Loss before Income Taxes (12,556,893) (13,072,547)Provision for Income Taxes (196,035) (4,307) Net Loss (12,752,928) (13,076,854)Preferred stock dividend (1,080,741) - Net Loss applicable to Common Stockholders $(13,833,669) $(13,076,854) Net Loss Per Share - Basic and Diluted $(2.24) $(4.82) Weighted Average Number of Common Shares Outstanding - Basic and Diluted 6,172,272 2,711,198 The accompanying notes are an integral part of these consolidated financial statements. F-5  Nxt-ID, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 Preferred Stock Common Stock Additional Paid-in Accumulated Shares Amount Shares Amount Capital Deficit Total Balance - January 1, 2015 - $ - 2,477,605 $248 $11,565,115 $(8,830,019) $2,735,344 Exercise of common stock purchase warrants, net of fees 32,500 3 649,997 - 650,000 Issuance of common stock and warrants for cash, net of fees 332,143 33 2,917,345 - 2,917,378 Stock issued related to waiver of installment provisions 58,300 6 139,915 - 139,921 Issuance of common stock for services 254,147 25 2,381,936 - 2,381,961 Issuance of restricted stock to employees 16,000 2 373,832 - 373,834 Release of escrowed common stock to officers 11,833 1 (1) - - Issuance of common stock and warrants in connection with theWorld Ventures Holding Transaction 1,005,000 100 1,974,422 - 1,974,522 Shares issued in connection with the issuance of convertible noteson December 8, 2015 90,000 9 332,991 - 333,000 Conversion of convertible notes to common stock 140,000 14 183,779 - 183,793 Warrants issued in connection with the issuance of convertiblenotes on April 23, 2015, net of deferred financing costs - - 1,513,434 - 1,513,434 Inducement fees 25,000 3 754,997 - 755,000 Net loss - - - (13,076,854) (13,076,854)Balance - December 31, 2015 - - 4,442,528 444 22,787,762 (21,906,873) 881,333 Issuance of common stock for services 204,553 21 619,233 - 619,254 Reclassification of remaining conversion feature liability - - 1,702,400 - 1,702,400 Issuance of common stock and warrants in connection with theacquisition of Logicmark 78,740 8 899,992 - 900,000 Exercise of common stock purchase warrants in connection withthe acquisition of Logicmark 157,480 16 (16) - - Conversion of convertible notes and interest to common stock 1,601,905 160 3,943,261 - 3,943,421 Issuance of Series A preferred stock, net 2,500,000 2,269,775 2,269,775 Conversion of Series A preferred stock and dividends to commonstock (2,189,732) (2,086,924) 834,718 83 2,461,058 - 374,217 Shares issued in connection with the management incentive planfor 2015 60,000 6 371,994 - 372,000 Issuance of Series B preferred stock, net 4,500,000 4,090,000 4,090,000 Note discount recorded in connection with the issuance ofConvertible Exchange notes on November 29, 2016 1,500,000 1,500,000 Net loss - - - (12,752,928) (12,752,928) Preferred stock dividend (1,080,741) (1,080,741)Balance - December 31, 2016 4,810,268 $4,272,851 7,379,924 $738 $33,204,943 $(34,659,801) $2,818,731 The accompanying notes are an integral part of these consolidated financial statements. F-6  Nxt-ID, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2016 2015 Cash Flows from Operating Activities Net loss $(12,752,928) $(13,076,854)Adjustment to reconcile net loss to net cash used in operating activities: Depreciation 260,399 183,196 Stock based compensation 1,113,129 1,513,584 Amortization of debt discount 648,365 1,093,371 Amortization of intangible assets 318,842 - Amortization of discount on contingent consideration 91,682 - Loss on extinguishment of debt 272,749 635,986 Inducement fees - 755,000 Non - cash inventory charges 48,405 999,124 Amortization of deferred debt issuance costs 631,994 35,683 Unrealized (loss) gain on change in fair value of derivative liabilities 2,299,020 (444,728)Realized gain on change in fair value of derivative liabilities - (47,242)Stock issued related to waiver of installment provisions - 139,921 Deferred taxes 190,286 - Other 44,628 69,850 Changes in operating assets and liabilities: Accounts receivable (721,230) - Inventory (1,055,846) (2,407,522)Prepaid expenses and other current assets (362,399) 400,497 Accounts payable 120,008 1,352,881 Accrued expenses 1,842,683 306,451 Customer deposits 6,060,165 (129,870)Total Adjustments 11,865,666 4,456,182 Net Cash Used in Operating Activities (950,048) (8,620,672) Cash flows from Investing Activities Restricted cash 1,494,582 (1,506,514)Acquisition, net of cash acquired (17,390,290) - Purchase of equipment (39,073) (381,767)Net Cash Used in Investing Activities (15,934,781) (1,888,281) Cash flows from Financing Activities Proceeds received from issuance of Series A preferred stock, net 1,869,775 - Proceeds received from issuance of Series B preferred stock, net 4,090,000 - Proceeds received from short-term promissory note 400,000 - Pay down of short-term debt (1,726,031) - Proceeds received in connection with issuance of common stock and warrants, net - 5,114,353 Proceeds received from issuance of convertible exchange notes, net 1,400,000 - Revolver borrowings, net 13,906,250 - Payment of Series A preferred stock dividends (123,457) - Proceeds from convertible notes payable - 2,962,304 Proceeds received in connection with exercise of warrants - 650,000 Fees paid in connection with equity offerings (51,020) - Net Cash Provided by Financing Activities 19,765,517 8,726,657 Net Increase (Decrease) in Cash 2,880,688 (1,782,296)Cash - Beginning of Year 418,991 2,201,287 Cash - End of Year $3,299,679 $418,991 Supplemental Disclosures of Cash Flow Information: Cash paid during the periods for: Interest $930,219 $- Taxes $8,764 $1,000 Non-cash financing activities: Equipment purchases on payment terms $- $18,420 Fees incurred in connection with equity offerings $- $222,453 Issuance of common stock in connection with accelerated installments of note payable $3,294,850 350,000 Reclassification of conversion feature liability in connection with note modification $1,702,400 $- Commitment shares issued in connection with December 8, 2015 notes $- $333,000 Additional convertible notes issued in connection with exchange of April 24, 2015 notes for December 8, 2015 notes $- $500,000 Fees incurred in connection with revolving credit facility $256,250 $- Issuance of common stock in connection with conversion of interest on convertible notes $291,588 $- Issuance of common stock in connection with conversion of Series A preferred stock $2,189,732 $- Accrued Series A preferred dividends $92,442 $- Accrued Series B preferred dividends $490,625 $- Exchange of short-term promissory note for Series A preferred stock $400,000 $- Issuance of common stock in connection with conversion of dividends on Series A preferred stock $374,217 $- LogicMark Acquisition: Assets acquired and liabilities assumed: Current assets, including cash acquired of $109,710 $3,541,323 $- Property and equipment 227,840 - Goodwill and other intangible assets 24,084,229 - Accounts payable and accrued liabilities (716,604) - Net Assets Acquired 27,136,788 - Less: cash paid to acquire LogicMark (17,500,000) - Non cash consideration $9,636,788 $- Non-cash consideration consisted of: Note payable issued to sellers $2,500,000 $- Common stock and warrants issued to sellers 900,000 - Earn-out provision 6,236,788 - Non-cash consideration $9,636,788 $- The accompanying notes are an integral part of these consolidated financial statements. F-7  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND PRINCIPAL BUSINESS ACTIVITY Nxt-ID, Inc. (“Nxt-ID” or the “Company”) was incorporated in the State of Delaware on February 8, 2012. Nxt-ID is a security technology company providingsecurity for finance, assets and healthcare. The Company’s innovative MobileBio solution mitigates risks associated with mobile computing, m-commerceand smart OS-enabled devices. With extensive experience in biometric identity verification, security, privacy, encryption and data protection, payments,miniaturization and sensor technologies, the Company partners with industry leading companies to provide solutions for modern payment and the Internet ofThings applications. The Company’s wholly-owned subsidiary, LogicMark, LLC (“LogicMark”), manufactures and distributes non-monitored and monitoredpersonal emergency response systems sold through the United States Department of Veterans Affairs, healthcare durable medical equipment dealers anddistributors and monitored security dealers and distributors. The Company operates its business in one segment, Hardware and Software Security Systems and Applications. The Company evaluates the performance ofits business on, among other things, profit and loss from operations before interest, headquarters’ expense allocations, stock-based compensation expense,income taxes and amortization related to certain intangible assets. On June 25, 2012, Nxt-ID, a company having similar ownership as 3D-ID, acquired 100% of the membership interests in 3D-ID (the “Acquisition”) inexchange for 20,000,000 shares of Nxt-ID common stock. Since this was a transaction between entities under common control, in accordance withAccounting Standards Codification (“ASC”) 805, “Business Combinations”, Nxt-ID recognized the net assets of 3D-ID at their carrying amounts in theaccounts of Nxt-ID on the date that 3D-ID was organized. 3D-ID, LLC (“3D-ID”) was organized and registered in the State of Florida on February 14, 2011. On July 25, 2016, the Company completed the acquisition of LogicMark, LLC (“LogicMark”) pursuant to an Interest Purchase Agreement by and among theCompany, LogicMark and the holders of all of the membership interests of LogicMark (the “Logicmark Sellers”), dated May 17, 2016 (the “Interest PurchaseAgreement”). Pursuant to the Interest Purchase Agreement, the Company acquired all of the membership interests of Logicmark from the Logicmark Sellersfor (i) $17.5 million in cash consideration (ii) $2.5 million in a secured promissory note (the “Logicmark Note”) issued to Logicmark Investment Partners,LLC, as representative of the Logicmark Sellers (the “Logicmark Representative”) (iii) 78,740 shares of common stock, which were issued upon signing ofthe Interest Purchase Agreement (the “Logicmark Shares”), and (iv) warrants (the “Logicmark Warrants,”) to purchase an aggregate of 157,480 shares ofcommon stock (the “Logicmark Warrant Shares”) for no additional consideration. In addition, the Company may be required to pay the Logicmark Sellersearn-out payments of (i) up to $1,500,000 for calendar year 2016 and (ii) up to $5,000,000 for calendar year 2017 if LogicMark meets certain gross profittargets set forth in the Interest Purchase Agreement. The Logicmark Note originally was to mature on September 23, 2016 but was extended to April 15, 2017.During 2016 the Company paid down $1,726,031 of the Seller Note with cash generated from operations as well as from the net cash proceeds received of$1,400,000 from the issuance of the convertible exchange notes issued on November 29, 2016. The Note accrues interest at a rate of 15% per annum. TheLogicmark Warrants were all exercised on July 27, 2016. NOTE 2 - RECLASSIFICATION OF DEFERRED DEBT ISSUANCE COSTS AND REVERSE STOCK SPLIT On September 1, 2016, the Company’s board of directors and stockholders approved a resolution to amend the Company’s Certificate of Incorporation and toauthorize the Company to effect a reverse split of the Company’s outstanding common stock at a ratio of 1-for-10 (the “Reverse Split”). On September 9,2016, the Company effected the Reverse Split. Upon effectiveness of the Reverse Split, every 10 shares of outstanding common stock decreased to one shareof common stock. Throughout this report, the Reverse Split was retroactively applied to all periods presented. In April 2015, the FASB issued Accounting Standards Update 2015-03, Interest - Imputation of Interest (Subtopic 835-30), Simplifying the Presentation ofDebt Issuance Costs (“ASU 2015-03”), which provides guidance for simplifying the presentation of debt issuance costs. ASU 2015-03 requires that debtissuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums.This guidance will be effective for fiscal years beginning after December 15, 2015, and early adoption is permitted for financial statements that have not beenpreviously issued. The standard requires application on a retrospective basis and represents a change in accounting principle. In addition, in August 2015,Accounting Standards Update 2015-15, Interest - Imputation of Interest (“ASU 2015-15”), was released, which codified guidance pursuant to the SEC StaffAnnouncement at the June 18, 2015 Emerging Issues Task Force (EITF) meeting about the presentation and subsequent measurement of debt issuance costsassociated with line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-creditarrangements, ASU 2015-15 states the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequentlyamortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowingson the line-of-credit arrangement. In accordance with the 2016 adoption of Accounting Standards Update 2015-03, the Company revised the presentation ofits previously reported December 31, 2015 Consolidated Balance Sheet to reflect a deduction of $52,810 of deferred debt issuance costs from the amount ofconvertible notes payable previously presented. F-8  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 - LIQUIDITY AND MANAGEMENT PLANS The Company is an emerging growth entity and incurred net losses of $12,752,928 during the year ended December 31, 2016. As of December 31, 2016 theCompany had a working capital deficiency of $2,073,523 and stockholders’ equity of $2,818,731. As of December 31, 2015, the Company had substantialdoubt about its ability to continue as a going concern as it had no revenues and required additional cash to execute its business plan. The accompanying2015 financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. As ofDecember 31, 2016, the Company had alleviated this concern as it had raised additional capital and acquired a profitable revenue generating subsidiary,LogicMark LLC. In addition the Company began to recognize revenues from its contract with World Ventures Holdings Inc. In order to execute theCompany’s long-term strategic plan to develop and commercialize its core products, fulfill its product development commitments and fund its obligations asthey come due, the Company may need to raise additional funds, through public or private equity offerings, debt financings, or other means. During the twelve months ended December 31, 2016, the Company raised $1,869,775 in net proceeds from the issuance of the Company’s Series AConvertible Preferred Stock, $0.0001 par value (the “Series A Preferred Stock”) and $400,000 from the issuance of a promissory note that was converted intoSeries A Preferred Stock. In addition, the Company received $4,090,000 in net proceeds from the issuance of the Company’s Series B Convertible PreferredStock, $0.0001 par value (the “Series B Preferred Stock”). However, the Company can give no assurance that any cash raised subsequent to December 31,2016 will be sufficient to execute its business plan or meet its obligations. The Company can give no assurance that additional funds will be available onreasonable terms, or available at all, or that it will generate sufficient revenue to alleviate these conditions. The Company’s ability to execute its business plan is dependent upon its ability to raise additional equity, secure debt financing, and/or generate revenue.Should the Company not be successful in obtaining the necessary financing, or generate sufficient revenue to fund its operations, the Company would needto curtail certain of its operational activities. NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of theconsolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company’s management evaluatesthese significant estimates and assumptions included those related to the fair value of acquired assets and liabilities, stock based compensation, derivativeinstruments, income taxes and inventories, and other matters that affect the consolidated financial statements and disclosures. Actual results could differ fromthose estimates. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Nxt-ID and its wholly-owned subsidiaries, 3D-ID and LogicMark. Intercompany balances andtransactions have been eliminated in consolidation. CASH The Company considers all highly liquid securities with an original maturity date of three months or less when purchased to be cash equivalents. Due to theirshort-term nature, cash equivalents are carried at cost, which approximates fair value. At December 31, 2016 and 2015, the Company had no cash equivalents. RESTRICTED CASH At December 31, 2016 and 2015, the Company had restricted cash of $40,371 and $1,534,953, respectively. The restricted cash balance at December 31,2015 included $1,500,000 received on December 31, 2015 as a result of the World Ventures Holdings transaction, described elsewhere in the notes to theseconsolidated financial statements. Restricted cash also includes amounts held back by the Company’s third party credit card processor for potential customerrefunds, claims and disputes. CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains its cashbalances in large well-established financial institutions located in the United States. At times, the Company’s cash balances may be uninsured or in depositaccounts that exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. During the year ended December 31, 2016, the Company recognized revenue of $1,357,413 from WVH a related party. At December 31, 2016, theCompany’s accounts receivable balance included $621,724 due from WVH. F-9  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) REVENUE RECOGNITION The Company recognizes revenue when persuasive evidence of an arrangement exists, the service has been rendered or product delivery has occurred, theprice is fixed or readily determinable and collectability of the sale is reasonably assured. The Company’s wocket® smart wallet sales comprise multipleelement arrangements including both the wocket® smart wallet device itself as well as unspecified future upgrades. The Company offers to all of its end-consumer customers a period of fourteen days post the actual receipt date in which to return their wocket® smart wallet. The Company was unable to reliablyestimate returns at the time shipments were made during the year’s ended December 31, 2016 and 2015 due to lack of return history. Accordingly, theCompany has recognized revenue only on those shipments whose fourteen day return period had lapsed by December 31, 2016 or 2015. Such sales duringthe fourteen day period ending December 31, 2016 or 2015 were not material. The Company accrues for the estimated costs associated with the one yearwocket® smart wallet warranty at the time revenue associated with the sale is recorded, and periodically updates its estimated warranty cost based on actualexperience. At December 31, 2016 and 2015, such amounts were not material. SHIPPING AND HANDLING Amounts billed to customers for shipping and handling are included in revenues. The related freight charges incurred by the Company are included in cost ofgoods and were not material for either the years ended December 31, 2016 or 2015. ACCOUNTS RECEIVABLE For the year ended December 31, 2016, the Company’s revenues included shipments of the wocket® smart wallet to customers who placed orders in 2016.For the year ended December 31, 2015, the Company’s revenues related to shipments of the wocket® smart wallet to customers who pre-ordered the productin 2014 as well as to those customers who ordered the product in 2015. In addition, the revenues for the year ended December 31, 2016 and 2015 includedresale sales of the wocket® smart wallet to retail customers who resell the wocket® smart wallet through their respective distribution channels. The aggregateamount of these resale sales was $33,540 and $167,164 for the years ended December 31, 2016 and 2015, respectively. The terms and conditions of thesesales provide the retail customers with trade credit terms. In addition, these sales were made to the retailers with no rights of return and are subject to thenormal warranties offered to the ultimate consumer for product defects. Accounts receivable is stated at net realizable value. The Company regularly reviews accounts receivable balances and adjusts the receivable reserves asnecessary whenever events or circumstances indicate the carrying value may not be recoverable. At December 31, 2016, the Company had no allowance fordoubtful accounts. INVENTORY Effective October 1, 2015 for application prospectively, the Company adopted FASB Accounting Standards Update No. 2015-11, simplifying theMeasurement of Inventory (“ASU 2015-11”). ASU 2015-11 requires that inventory is measured at the lower of cost or net realizable value, defined asestimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Previously, inventorywas measured at the lower of cost or market. The Company adopted ASU 2015-11 in connection with its fourth quarter 2015 inventory valuation review, andprompted by the impact of EMV chip point of sale and Nearfield Communication technologies on our business. As a result, the Company’s fourth quarter2015 inventory valuation charges were determined based upon our inventory’s net realizable value. The Company performs regular reviews of inventory quantities on hand and evaluates the realizable value of its inventories. The Company adjusts thecarrying value of the inventory as necessary with estimated valuation reserves for excess, obsolete, and slow-moving inventory by comparing the individualinventory parts to forecasted product demand or production requirements. The inventory is valued at the lower of cost or net realizable value with costdetermined using the first-in, first-out method. As of December 31, 2016 inventory was comprised of $3,797,499 in raw materials and $1,544,001 in finishedgoods on hand. As of December 31, 2015 inventory was comprised of $1,587,653 in raw materials and $180,289 in finished goods on hand. As an emerginggrowth company, the Company is required to prepay for raw materials with certain vendors until credit terms can be established. As of December 31, 2016and 2015, $1,089,770 and $49,103, respectively of prepayments made primarily for raw materials inventory is included in prepaid expenses and other currentassets on the consolidated balance sheet. LONG-LIVED ASSETS Long-lived assets, such as property and equipment, goodwill and other intangibles are evaluated for impairment whenever events or changes incircumstances indicate the carrying value of an asset may not be recoverable in accordance with ASC 360-10-35-17 through 35-35 “Measurement of anImpairment Loss.” The Company assesses the impairment of the assets based on the undiscounted future cash flow the assets are expected to generatecompared to the carrying value of the assets. If the carrying amount of the assets is determined not to be recoverable, a write-down to fair value is recorded.Management estimates future cash flows using assumptions about expected future operating performance. Management’s estimates of future cash flows maydiffer from actual cash flow due to, among other things, technological changes, economic conditions or changes to the Company’s business operations. F-10  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) PROPERTY AND EQUIPMENT Property and equipment consisting of furniture, fixtures and tooling is stated at cost. The costs of additions and improvements are generally capitalized andexpenditures for repairs and maintenance are expensed in the period incurred. When items of property and equipment are sold or retired, the related costs andaccumulated depreciation are removed from the accounts and any gain or loss is included in income. Depreciation of property and equipment is providedutilizing the straight-line method over the estimated useful life of the respective asset as follows: Equipment 5 years Furniture and fixtures 3 to 5 years Tooling and molds 2 to 3 years GoodwillOn July 25, 2016, the Company recorded goodwill of $15,479,662 as a result of the LogicMark acquisition. The Company will begin testing goodwill forimpairment annually in the third quarter of each year using data as of August 1 of that year. Authoritative accounting guidance allows the Company to firstassess qualitative factors to determine whether it is necessary to perform the more detailed two-step quantitative goodwill impairment test. The Companyperforms the quantitative test if its qualitative assessment determined it is more likely than not that a reporting unit’s fair value is less than its carryingamount. The Company may elect to bypass the qualitative assessment and proceed directly to the quantitative test for any reporting units or assets. Thequantitative goodwill impairment test, if necessary, is a two-step process. The first step is to identify the existence of a potential impairment by comparing thefair value of a reporting unit (the estimated fair value of a reporting unit is calculated using a discounted cash flow model) with its carrying amount,including goodwill. If the fair value of a reporting unit exceeds its carrying amount, the reporting unit’s goodwill is considered not to be impaired andperformance of the second step of the quantitative goodwill impairment test is unnecessary. However, if the carrying amount of a reporting unit exceeds itsfair value, the second step of the quantitative goodwill impairment test is performed to measure the amount of impairment loss to be recorded, if any. Thesecond step of the quantitative goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of thatgoodwill. If the carrying amount of the reporting unit’s goodwill exceeds its implied fair value, an impairment loss is recognized in an amount equal to thatexcess. The implied fair value of goodwill is determined using the same approach as employed when determining the amount of goodwill that would berecognized in a business combination. That is, the fair value of the reporting unit is allocated to all of its assets and liabilities as if the reporting unit had beenacquired in a business combination and the fair value was the purchase price paid to acquire the reporting unit.Other Intangible AssetsThe Company’s intangible assets are all related to the LogicMark acquisition and are included in other intangible assets in the Company’s consolidatedbalance sheet at December 31, 2016. The Company had no intangible assets at December 31, 2015.At December 31, 2016, the other intangible assets are comprised of patents with a fair value of $3,936,612; trademarks with a fair value of $1,230,002; andcustomer relationships with a fair value of $3,119,111. The Company will amortize these intangible assets using the straight line method over their estimateduseful lives which for the patents, trademarks and customer relationships are 11 years; 20 years; and 10 years, respectively. During the twelve months endedDecember 31, 2016, the Company had amortization expense of $318,842 related to the intangible assets.Amortization expense estimated for each of the next five fiscal years, 2017 through 2021 will be approximately $764,000 per year.CONVERTIBLE INSTRUMENTS The Company applies the accounting standards for derivatives and hedging and for distinguishing liabilities from equity when accounting for hybridcontracts that feature conversion options. The accounting standards require companies to bifurcate conversion options from their host instruments andaccount for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (i) the economiccharacteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the hostcontract, (ii) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value underotherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (iii) a separate instrumentwith the same terms as the embedded derivative instrument would be considered a derivative instrument. The derivative is subsequently marked to market at each reporting date based on current fair value, with the changes in fair value reported in the results ofoperations. Conversion options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent issuances of equity or equitylinked securities at exercise prices more favorable than that featured in the hybrid contract generally result in their bifurcation from the host instrument. The Company accounts for convertible debt instruments when the Company has determined that the embedded conversion options should not be bifurcatedfrom their host instruments in accordance with ASC 470-20 “Debt with Conversion and Other Options”. The Company records, when necessary, discounts toconvertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of theunderlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts underthese arrangements are amortized over the term of the related debt using the straight line method which approximates the interest rate method. See Note 7. F-11  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) DERIVATIVE FINANCIAL INSTRUMENTS The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of itsfinancial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financialinstruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date,with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, the Company uses theBlack-Scholes option valuation model to value the derivative instruments at inception and on subsequent valuation dates. The conversion feature embeddedwithin Company’s convertible note payable does not have fixed settlement provisions as the conversion price varies based on the trading price of theCompany’s common stock and the potential number of common shares to be issued upon conversion is indeterminable up to a maximum of 120,000 shares ofcommon stock. In addition, the warrants issued in connection with the Offering (as defined in Note 8) do not have fixed settlement provisions as theirexercise prices may be lowered if the Company conducts an offering in the future at a price per share below the exercise price of the warrants. Accordingly,the conversion feature and warrants have been recognized as derivative instruments. The classification of derivative instruments, including whether suchinstruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in thebalance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of thebalance sheet date. (See Note 8.) DEBT DISCOUNT AND AMORTIZATION OF DEBT DISCOUNT Debt discount represents the fair value of embedded conversion options of various convertible debt instruments and attached convertible equity instrumentsissued in connection with debt instruments. The debt discount is amortized over the earlier of (i) the term of the debt or (ii) conversion of the debt. Theamortization of debt discount is included as a component of interest expense included in other income and expenses in the accompanying statements ofoperations. INCOME TAXES The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method,income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporarydifferences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measuredusing enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. Theeffect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. Avaluation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is morelikely than not some portion or all of the deferred tax assets will not be realized. ASC Topic 740-10-30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognitionthreshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.ASC Topic 740-10-40 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.The Company will classify as income tax expense any interest and penalties. The Company has no material uncertain tax positions for any of the reportingperiods presented. Generally, the tax authorities may examine the partnership/corporate tax returns for three years from the date of filing. The Company hasfiled all of its tax returns for all prior periods through December 31, 2015. STOCK-BASED COMPENSATION The Company accounts for share-based awards exchanged for employee services at the estimated grant date fair value of the award. The Company accountsfor equity instruments issued to non-employees at their fair value on the measurement date. The measurement of stock-based compensation is subject toperiodic adjustment as the underlying equity instrument vests or becomes non-forfeitable. Non-employee stock-based compensation charges are amortizedover the vesting period or as earned. The Company generally issues new shares of common stock to satisfy conversion and warrant exercises. NET LOSS PER SHARE Basic loss per share was computed using the weighted average number of common shares outstanding. Diluted loss per share includes the effect of dilutedcommon stock equivalents. Potentially dilutive securities of 2,581,104 realizable from the convertible Series A and Series B Preferred Stock (defined below),575,000 from the convertible exchange notes and from the exercise of 1,829,049 warrants as of December 31, 2016 were excluded from the computation ofdiluted net loss per share because the effect of their inclusion would have been anti-dilutive. As of December 31, 2015, potentially dilutive securitiesrealizable from the conversion of convertible notes and related accrued interest and from the exercise of 761,549 warrants were excluded from thecomputation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. RESEARCH AND DEVELOPMENT Research and development costs consist of expenditures incurred during the course of planned research and investigation aimed at the discovery of newknowledge, which will be useful in developing new products or processes. The Company expenses all research and development costs as incurred. F-12  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) RECENT ACCOUNTING PRONOUNCEMENTS In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments”(“ASU 2016-15”). ASU 2016-15 is intended to address how certain cash receipts and cash payments are presented and classified in the statement of cashflows. This update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments are effective forpublic business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currentlyevaluating the ASU 2016-15 and does not believe this ASU will have a material impact on its condensed consolidated financial statements. In May 2016, the FASB issued ASU No. 2016-12 (“ASU 2016-12”), “Revenue from Contracts with Customers (Topic 606): Narrow- Scope Improvements andPractical Expedients.” ASU 2016-12 will affect all entities that enter into contracts with customers to transfer goods or services (that are an output of theentity’s ordinary activities) in exchange for consideration. The amendments in this update affect the guidance in ASU 2014-09 which is not yet effective, theamendments in this update affect narrow aspects of Topic 606 including among others: assessing collectability criterion, noncash consideration, andpresentation of sales taxes and other similar taxes collected from customers. The effective date and transition requirements for the amendments in this updateare the same as the effective date and transition requirements for ASU 2014-09. The Company is currently evaluating the effect that ASU 2016-12 will haveon the Company’s financial position and results of operations. In March 2016, the FASB issued ASU No. 2016-09 (“ASU 2016-09”), “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 will affect all entities that issue share-based payment awards to their employees and is effective for annualperiods beginning after December 15, 2016 for public entities. The areas for simplification in ASU 2016-09 involve several aspects of the accounting forshare-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on thestatement of cash flows. The Company is currently evaluating the effect that ASU 2016-09 will have on the Company’s financial position and results ofoperations. In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 establishes a right-of-use(“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leaseswill be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard iseffective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approachis required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in thefinancial statements, with certain practical expedients available. The Company is currently assessing the potential impact of ASU 2016-02 on the auditedfinancial statements and related disclosures. In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a GoingConcern (“ASU 2014-15”), amending FASB Accounting Standards Subtopic 205-40 to provide guidance about management’s responsibility to evaluatewhether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Specifically, theamendments (1) provide a definition of the term “substantial doubt,” (2) require an evaluation every reporting period, (3) provide principles for consideringthe mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’splans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one yearafter the date that financial statements are issued. ASU 2014-15 is effective for fiscal years ending after December 15, 2016, and for annual periods andinterim periods thereafter. The adoption of this standard did not have a material impact on its consolidated financial statements. F-13  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) RECENT ACCOUNTING PRONOUNCEMENTS, CONTINUED In May 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update No. 2014-09, Revenue from Contracts withCustomers ("ASU 2014-09"), which stipulates that an entity should recognize revenue to depict the transfer of promised goods or services to customers in anamount that reflects the consideration to which the entity expects to be entitled in exchange for such goods or services. To achieve this core principle, anentity should apply the following steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract(s); (3) determinethe transaction price(s); (4) allocate the transaction price(s) to the performance obligations in the contract(s); and (5) recognize revenue when (or as) the entitysatisfies a performance obligation. The guidance also requires advanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cashflows arising from an entity's contracts with customers. In August 2015, the FASB issued Accounting Standards Update No. 2015-14, Revenue from Contractswith Customers (Topic 606): Deferral of the Effective Date ("ASU 2015-14"), which defers the effective date of FASB's revenue standard under ASU 2014-09by one year for all entities and permits early adoption on a limited basis. As a result of ASU 2015-14, the guidance under ASU 2014-09 shall apply for annualreporting periods beginning after December 15, 2017, including interim reporting periods within that period. Early adoption is permitted as of annualreporting periods beginning after December 15, 2016, including interim reporting periods within those annual periods. In March 2016, the FASB issuedAccounting Standards Update No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (ReportingRevenue Gross versus Net), which clarified the implementation guidance on principal versus agent considerations. In April 2016, the FASB issuedAccounting Standards Update No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, whichclarified the implementation guidance regarding performance obligations and licensing arrangements. As permitted under the standard, the Company plansto adopt ASU 2014-09 in the first quarter of 2018 using the modified retrospective approach and recognize the cumulative effect to existing contracts inopening retained earnings on the effective date. The Company is currently reviewing and evaluating this guidance and its impact on its consolidatedfinancial statements. NOTE 5 – ACQUISITION OF LOGICMARK LLC On July 25, 2016, the Company completed the acquisition of LogicMark. The Company determined that as of July 25, 2016, it was more likely than not thatthese gross profit targets as it relates to the contingent considerations would be achieved and any fair value adjustment of the earnout was due to time valueof the payout. On July 25, 2016, and in order to fund part of the proceeds of the LogicMark acquisition, the Company and a group of lenders, including ExWorks CapitalFund I, L.P. as agent for the lenders (collectively, the “Lenders”), entered into a Loan and Security Agreement (the “Loan Agreement”), whereby the Lendersextended a revolving loan (the “Revolving Loan”) to the Company in the principal amount of $15,000,000 (the “Debt Financing”). The Company incurred$1,357,356 in deferred debt issue costs related to the revolving loan. At December 31, 2016 the unamortized balance of those deferred debt issue costs was$769,453. The maturity date of the Revolving Loan is July 25, 2017, and the Revolving Loan bears interest at a rate of 15% per annum. The Loan Agreement contains customary covenants, including an EBITDA requirement and a fixed change ratio, as defined in the agreement. As ofDecember 31, 2016, the Company was in compliance with such covenants. The Company has the ability to extend the Revolver for two additional years at its sole discretion with no subjective acceleration by the lender, provided theCompany is not in default on the loan. The Company intends to exercise the option to extend the maturity date and accordingly, the Company has classifiedthe Revolver as a non-current liability as of December 31, 2016. On September 23, 2016, the Company entered into a forbearance agreement with LogicMark Investment Partners, LLC (the “Lender”) in connection with aSecured Subordinated Promissory Note originally issued on July 22, 2016 in the amount of $2,500,000 which expired on September 22, 2016 (the “Note”).The Company formally requested that the Lender extend the Note on September 20, 2016, and finalized the amendment on September 23, 2016. Under the terms of the forbearance agreement, the Lender agreed to extend the Note and the Company agreed to pay to the Lender in immediately availablefunds: (i) $250,000 on September 23, 2016; (ii) $100,000 on October 24, 2016; and (iii) $1,150,000, plus all accrued and unpaid interest due under the Noteon October 31, 2016. The Company also agreed to reduce the Escrow Amount (as defined in the Purchase Agreement) by a total of $500,000, and to makecertain other changes to the definition of “Escrow Amount” in the Purchase Agreement. The Company also agreed to make certain representations andwarranties in respect of the Lender’s forbearance. The Logic Note originally was to mature on September 23, 2016 but was extended to April 15, 2017. F-14  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 – ACQUISITION OF LOGICMARK LLC (CONTINUED) Allocation of Purchase Price The purchase price to acquire Logicmark was $27,136,788 of which $17,500,000 was paid by the Company in cash and $9,636,788 in non-cashconsideration. The non-cash consideration was comprised of a $2,500,000 seller note, $900,000 of common stock and warrants issued to the sellers and $6,236,788 in earn-out provisions. At the date of acquisition, the earn-out provisions were discounted using a prime borrowing rate of 3.5%. The purchase price was allocated to the tangible and identifiable assets acquired and liabilities assumed of LogicMark based upon their estimated fair values.The excess purchase price over the fair value of the underlying net assets acquired was allocated to goodwill. The Company completed its analysis of the fairvalue of the net assets acquired through the use of an independent valuation firm and management’s estimates. The following table summarizes the finalassessment of the estimated fair values of the identifiable assets acquired and liabilities assumed net of cash acquired, as of the date of acquisition of July 25,2016. Cash $109,710 Accounts receivable 494,591 Inventories 2,566,117 Other current assets 370,905 Property and equipment 227,840 Goodwill 15,479,662 Intangible assets 8,604,567 Assets acquired 27,853,392 Accounts payable 507,857 Accrued liabilities 208,747 Liabilities assumed 716,604 Net assets acquired $27,136,788 Pro Forma Financial Information The following table summarizes the unaudited pro forma financial information assuming that the LogicMark acquisition occurred on January 1, 2015, and itsresults had been included in the Company’s financial results for the twelve months ended December 31, 2016 and 2015. The pro forma combined amountsare based upon available information and reflect a reasonable estimate of the effects of the LogicMark acquisition for the periods presented on the basis setforth herein. The following unaudited pro forma combined financial information is presented for informational purposes only and does not purport torepresent what the financial position or results of operations would have been had the LogicMark acquisition in fact occurred on the date assumed, nor is itnecessarily indicative of the results that may be expected in future periods. Twelve months ended December 31, 2016 2015 (unaudited) Pro forma: Net Sales $15,673,801 $11,702,194 Net Loss applicable to Common Stockholders $(13,671,124) $(16,394,632)Net Loss Per Share - Basic and Diluted applicable to Common Stockholders $(2.22) $(6.05) The unaudited pro forma net loss attributable to Nxt-ID, Inc. has been calculated using actual historical information and is adjusted for certain pro formaadjustments based on the assumption that the LogicMark acquisition and the application of fair value adjustments to intangible assets occurred on January 1,2015. For the twelve months ended December 31, 2016, the pro forma financial information excluded the acquisition-related expenses of $605,228, whichare included in the actual reported results, but excluded from the pro forma amounts above due to their nonrecurring nature. In addition, the pro formaadjustments for the twelve months ended December 31, 2016 include the following adjustments, (a) amortization expense related to the acquired intangibleassets of $731,242; (b) interest expense including the amortization of deferred debt issue costs of $2,851,185; (c) reduction in depreciation expense of$35,543; and (d) amortization of the inventory fair value adjustment of $945,212. For the twelve months ended December 31, 2015, the pro forma financial information reflects the following adjustments; (a) amortization expense related tothe acquired intangible assets of $731,242; (b) interest expense including the amortization of deferred debt issue costs of $4,735,767; (c) reduction indepreciation expense of $29,948; and (d) amortization of the inventory fair value adjustment of $945,212. F-15  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6 - ACCRUED EXPENSES Accrued expenses consist of the following: December 31, 2016 2015 Salaries and payroll taxes $77,037 $18,380 Reimbursable expenses 5,000 5,000 Consulting fees 25,547 32,173 Audit fees - 35,000 Merchant bank fees 31,124 - Rent 1,147 3,077 State income taxes 1,135 4,150 Legal fees 7,568 81,281 Management incentives 604,125 372,000 Interest expense 691,684 45,100 Dividends – Series A & B preferred stock 583,067 - Liquidated damages – Series B preferred stock 360,000 - Finder’s fees 256,250 - Other 257,988 45,277 Totals $2,901,672 $641,438 NOTE 7 - CONVERTIBLE NOTES PAYABLE November 2016 Exchange On November 29, 2016, the Company entered into a Securities Exchange Agreement (the “Exchange Agreement”) with certain holders of a portion of theOriginal LogicMark Notes (the “Holders”) pursuant to which the Company exchanged with the Holders of $1,500,000 of Original Notes held by the Holdersin exchange for: (i) an aggregate principal amount of $1,500,000 of new secured subordinated promissory notes (the “Exchange Notes”) and (ii) warrants (the“Warrants”, and together with the Exchange Notes, the “Exchange Securities”) convertible into 500,000 shares of common stock of the Company, par value$0.0001 (the “Common Stock”). The Holders purchased the $1,500,000 of Original Notes from LogicMark Investment prior to this transaction. TheExchange Notes will mature on November 29, 2017 and accrue interest at a rate of 15.0% per annum. The Exchange Notes are convertible at any time, inwhole or in part, at the option of the Investors into shares of Common Stock at a conversion price of $3.00 per share (the “Conversion Price”). TheConversion Price is subject to adjustment for stock dividends, stock splits, combinations or similar events. The conversion option embedded in the convertible exchange notes was determined to contain beneficial conversion features, resulting in the bifurcation ofthose features as an equity instrument (resulting in a debt discount) At issuance. After allocation of the gross proceeds to the warrants (discussed below) andbeneficial conversion feature, the total debt discount recognized was equal to the face of the convertible exchange notes, The debt discount is beingamortized over the term of the debt and the Company Amortized $133,333 of the debt discount for the year ended December 31, 2016. The Company may prepay, in whole but not in part, without premium or penalty, the outstanding principal, together with accrued but unpaid interest on theoutstanding principal, if any. The Warrants will be exercisable beginning on November 29, 2016, and will be exercisable for a period of five years. Theexercise price with respect to the Warrants is $3.00 per share (the “Exercise Price”). The Exercise Price and the amount of shares of Common Stock issuableupon exercise of the Warrants are subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications,mergers or other corporate changes.December 2015 Private Placement On December 8, 2015, the Company entered into a securities purchase agreement (the “December Purchase Agreement”) with certain accredited investors (the“December Purchasers”) pursuant to which the Company sold an aggregate of $1,500,000 in principal amount of Senior Secured Convertible Notes (the“December Notes”) for an aggregate purchase price of $1,500,000 (the “December Offering”). The Notes matured on December 8, 2016 (the “DecemberMaturity Date”), less any amounts converted or redeemed prior to the December Maturity Date. The December Notes bear interest at a rate of 8% per annum.The December Notes were convertible at any time, in whole or in part, at the option of the holders into shares of common stock at a conversion price of $2.35per share, as modified. In case of an Event of Default (as defined in the December Notes), the notes are convertible at 85% of the average of the five (5) lowestdaily Weighted Average Prices (as defined in the December Notes) in the prior fifteen (15) trading days, until such Event of Default has been cured. Theconversion price is subject to adjustment for stock dividends, stock splits, combinations or similar events. The Notes are repayable from the earlier of June 7,2016 or the effective date of the initial registration statement that was filed with this offering, (The Installment Trigger Date). The installment payments are tobe made on the lst and 15th calendar day of each month. The amount of each installment is the quotient of the original principal amount divided by thenumber of installment payments after the Installment Trigger Date and the scheduled Maturity Date on December 7, 2016. The holder of the notes may opt toaccelerate two installment amounts in an amount up to twice the regular installment amount. The installment payments may be made in cash or in commonstock at 85% of the average of the five (5) lowest daily Weighted Average Prices (as defined in the December Notes) in the prior fifteen (15) trading days atthe option of the Company. F-16  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7 - CONVERTIBLE NOTES PAYABLE (CONTINUED) In connection with the sale of the December Notes, the Company also issued to the December Purchasers an aggregate of 90,000 shares of the Company’scommon stock in consideration of each Investor’s execution and delivery of the December Purchase Agreement (the “Commitment Shares”). TheCommitment Shares were offered by the Company pursuant to an effective shelf registration statement on Form S-3, which was initially filed with the SEC onApril 24, 2015 and declared effective on May 14, 2015 (File No. 333-203637). As described above, the April Purchasers exchanged the April Convertible Notes plus accrued but unpaid interest into the convertible notes that were issuedon December 8, 2015. (The December Notes). As a result, the Company incurred a loss on extinguishment of the April Convertible Notes of $635,986 whichresulted primarily from the write off of the remaining unamortized note discount and deferred debt issue costs on extinguishment. In order to obtain theirconsent to issue the December Notes on December 8, 2015, and to effect the exchange, the Company issued to each of the April Purchasers additionalDecember Notes with a face value of $500,000. On December 8, 2015, the total outstanding principal amount of these convertible notes was $2,134,850. OnDecember 28, 2015, the note holders accelerated installment repayments in an aggregate amount of $350,000 which the Company satisfied by an issuance ofcommon stock as a result of a waiver by the holders which allowed the Company to issue common stock below $2.50. As a result of this repayment, theoutstanding amount of the convertible notes held by the April Purchasers was $1,784,850 on December 31, 2015. The total face amount of the Notes outstanding on December 8, 2015 were $3,644,850. On December 8, 2015 the Company recorded a debt discount of $1,719,700 and a derivative liability of $912,330. During December 2015, the holders of the Notes accelerated $350,000 in installments in exchange for common stock as a result of a waiver by the holderswhich allowed the Company to issue common stock below $2.50. At December 31, 2015, the balance on the Notes outstanding was $3,294,850. The debt discount is attributable to the value of the separately accounted for conversion feature and common stock issued in connection with the sale of theDecember Notes. The embedded conversion feature derivatives relate to the conversion option, the installment payments and the accelerated installmentoption of the December Notes. The embedded derivatives were evaluated under FASB ASC Topic 815-15, were bifurcated from the debt host, and wereclassified as liabilities in the consolidated balance sheet. The debt discount was amortized using the effective interest method over the term of the DecemberNotes. During the year ended December 31, 2016, the Company recorded $515,032 of debt discount amortization all of which related to the December Notes.For the year ended December 31, 2015, the Company recorded a total of $1,093,371 of debt discount amortization, which was recorded as an interest expensein the consolidated statement of operations. Of this amount, $109,535 related to the December Notes. On February 12, 2016, in exchange for the consents given to the Company by the December Purchasers and the April Purchasers to allow for the issuance ofshares in connection with the WVH Transaction (described below), the December Notes were amended to a fixed conversion price of $2.35. As a result of themodification, the Company fair valued the conversion option up to the date of modification and re-classified the remaining conversion feature liability of$1,702,400 as of the date of modification to additional paid-in-capital. During the year ended December 31, 2016, the holders of the December Notes accelerated $2,456,679 in installments and $253,028 of interest in exchangefor 1,228,828 shares of common stock. During the twelve months ended December 31, 2016, the holders of the December Notes also converted $838,171 ofthe convertible notes and $38,560 of interest in exchange for 373,077 shares of common stock. At December 31, 2016, the outstanding balance on theDecember Notes was $0. As it relates to the accelerated installments, the Company incurred a loss on extinguishment of debt of $272,749. The loss onextinguishment of debt was equivalent to the excess fair value of the common stock issued to the holders of the December Notes as compared to the netcarrying value of the convertible debt. The fair value of the common stock issued in payment of interest exceeded the amount of interest owed by $34,628.This amount is included as part of interest expense on the consolidated statement of operations. November 2015, Term Note On November 25, 2015, the Company issued the Term Note with a principal amount of $200,000 to an accredited purchaser (the “November Purchaser”). TheTerm Note was scheduled to mature on December 15, 2015. The interest rate was 12% per annum with a minimum guaranteed interest of $10,000. TheNovember Purchaser converted the entire principal amount into the December Offering described above. F-17  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7 - CONVERTIBLE NOTES PAYABLE (CONTINUED) July 2015 Convertible Note On July 27, 2015, the Company entered into a securities purchase agreement with an accredited investor pursuant to which the Company sold an aggregate of$222,222 in principal amount of the 8% Convertible Notes for an aggregate purchase price of $200,000. The Company received net proceeds of $200,000from the sale of the 8% Convertible Notes. The 8% Convertible Notes matured on September 11, 2015 (the “Maturity Date”), less any amounts converted orredeemed prior to the Maturity Date. The 8% Convertible Notes bear interest at a rate of 8% per annum, subject to increase to the lesser of 24% per annum orthe maximum rate permitted under applicable law upon the occurrence of certain events of default. The 8% Convertible Notes were convertible at any time,in whole or in part, at the option of the holders into shares of common stock at a conversion price of $35.00 per share, which was subject to adjustment forstock dividends, stock splits, combinations or similar events. The Company was able to prepay in cash any portion of the principal amount of the 8%Convertible Notes and any accrued and unpaid interest. If such prepayment was made within sixty (60) days after the issuance date of the 8% Convertible Notes, the Company would pay an amount in cash equal to109% of the sum of the then outstanding principal amount of the note and interest; thereafter, if such prepayment was made, the Company would pay anamount in cash equal to 114% of the sum of the then outstanding principal amount of the note and interest. In the event the Company effects a registeredoffering either utilizing Form S-1 or Form S-3 (a “Registered Offering”), the Holder would have the right to convert the entire amount of the purchase priceinto such Registered Offering. On August 4, 2015, the Company closed a Registered Offering and the holder of the 8% Convertible Notes elected to convertthe entire purchase price amount into common shares. The conversion price used to convert the entire purchase price into common stock was equivalent tothe equity offering price of $17.50 on August 4, 2015 and not the conversion price of $35.00 stipulated in the securities purchase agreement. As a result ofthe change in the conversion price, the Company recorded additional inducement expense of $100,000 in three months ended September 30, 2015. April 2015 Private Placement On April 24, 2015, the Company entered into a securities purchase agreement (the “April Purchase Agreement”) with a group of accredited investors (the“April Purchasers”) pursuant to which the Company sold to such purchasers an aggregate of $1,575,000 principal amount of secured convertible notes (the“Convertible Notes”), a Class A Common Stock Purchase Warrant (the “Class A Warrant”) to purchase up to 46,875 shares of the Company’s common stockand a Class B Common Stock Purchase Warrant (the “Class B Warrant,” and together with the Class A Warrant, the “April Warrants”) to purchase up to46,875 shares of the Company’s common stock. The Convertible Notes bear interest at 6% per annum and are convertible at any time, in whole or in part, atthe option of the holders into shares of common stock at a conversion price of $25.20 per share. The April Warrants are exercisable beginning six (6) monthsafter issuance through the fifth (5th) anniversary of such initial exercisability date. The Class A Warrant has an initial exercise price equal to $30.20 per shareand the Class B Warrant has an initial exercise price equal to $50.00 per share. The Company received cash proceeds of $1,481,500 from the issuance of theConvertible Notes after deducting debt issuance costs of $93,500. The Company recorded a debt discount of $1,575,000 related to the sale of the Convertible Notes and the April Warrants. The debt discount reflects theunderlying fair value of the April Warrants of approximately $860,000 on the date of the transaction and a beneficial conversion charge of approximately$715,000. During the period April 23, 2015 through December 8, 2015, the Company amortized $983,836 of the debt discount as a component of interestexpense in the accompanying statements of operations. In connection with the sale of the Convertible Notes and April Warrants, the Company entered into a registration rights agreement, dated April 24, 2015 (the“April Registration Rights Agreement”), with the April Purchasers, pursuant to which the Company agreed to register the shares of common stock underlyingthe Convertible Notes and Warrants on a Form S-3 registration statement to be filed with the Securities and Exchange Commission within ten (10) businessdays after the date of the issuance of the Convertible Notes and April Warrants (the “April Filing Date”) and to cause the April Registration Statement to bedeclared effective under the Securities Act of 1933, as amended (the “Securities Act”) within ninety (90) days following the April Filing Date. If certain of itsobligations under the April Registration Rights Agreement are not met, the Company is required to pay partial liquidated damages to each April Purchaser.On May 8, 2015, the Company filed a registration statement on Form S-3 with the SEC to register the shares issuable upon the conversion of the ConvertibleNotes, the related accrued interest and the exercise of the April Warrants. Such registration statement was declared effective with the SEC on May 14, 2015. F-18  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7 - CONVERTIBLE NOTES PAYABLE (CONTINUED) In connection with the sale of the Convertible Notes and the April Warrants, the Company entered into a security agreement, dated April 24, 2015 (the “AprilSecurity Agreement”), between the Company, 3D-ID and the collateral agent thereto. Pursuant to the Security Agreement, the April Purchasers were granted asecurity interest in certain personal property of the Company and 3D-ID to secure the payment and performance of all obligations of the Company and 3D-IDunder the Convertible Notes, April Warrants, April Purchase Agreement, April Registration Rights Agreement and April Security Agreement. In addition, inconnection with the Security Agreement, 3D-ID executed a subsidiary guaranty, pursuant to which it agreed to guarantee and act as surety for payment of theConvertible Notes and other obligations of the Company under the April Warrants, April Purchase Agreement, April Registration Rights Agreement and AprilSecurity Agreement. As described above, the April Purchasers exchanged the April Convertible Notes into the convertible notes that were issued on December 8, 2015. (TheDecember Notes). As a result, the Company incurred a loss on extinguishment of the April Convertible Notes of $635,986 which resulted primarily from thewrite off of the remaining unamortized note discount and deferred debt issue costs on extinguishment. In order to obtain their consent to issue the DecemberNotes on December 8, 2015, and to effect the exchange, the Company issued to each of the April Purchasers additional December Notes with a face value of$500,000. On December 8, 2015, the total outstanding principal amount of these convertible notes was $2,134,850. On December 28, 2015, the note holdersaccelerated installment repayments in an aggregate amount of $350,000 which the Company satisfied by an issuance of common stock as a result of a waiverby the holders which allowed the Company to issue common stock below $2.50. As a result of this repayment, the outstanding amount of the convertiblenotes held by the April Purchasers was $1,784,850 on December 31, 2015. In exchange for the consents given to the Company by the December Purchasers and the April Purchasers in connection with the consent to the WVHtransaction (described below), the December Notes as defined on page F-12 under December 15 Private Placement, the Exchange Notes, and the AdditionalDecember Notes were amended. One of the significant amendments was as follows: the notes are convertible at any time, in whole or in part, at the option ofthe holders into shares of common stock at a conversion price the lesser of (a) $5.50 per share and (b) from and after an Event of Default (as defined in theDecember Notes), 85% of the average of the five (5) lowest daily Weighted Average Prices (as defined in the December Notes) in the prior thirty (30) tradingdays, until such Event of Default has been cured. NOTE 8 - DERIVATIVE LIABILITIES Fair value of financial instruments is defined as an exit price, which is the price that would be received upon sale of an asset or paid upon transfer of aliability in an orderly transaction between market participants at the measurement date. The degree of judgment utilized in measuring the fair value of assetsand liabilities generally correlates to the level of pricing observability. Financial assets and liabilities with readily available, actively quoted prices or forwhich fair value can be measured from actively quoted prices in active markets generally have more pricing observability and require less judgment inmeasuring fair value. Conversely, financial assets and liabilities that are rarely traded or not quoted have less price observability and are generally measuredat fair value using valuation models that require more judgment. These valuation techniques involve some level of management estimation and judgment,the degree of which is dependent on the price transparency of the asset, liability or market and the nature of the asset or liability. The Company hascategorized its financial assets and liabilities measured at fair value into a three-level hierarchy. The conversion features embedded within the Company’s convertible notes payable issued in connection with December 8, 2015 private placement (asdefined in Note 7) did not have fixed settlement provisions on the date they were initially issued because the conversion price could be lowered if certainprovisions included in the note agreement occurred before conversion. This liability was included in the Company’s level 3 liabilities. During 2015, the derivative liabilities were valued using the Monte Carlo simulation model and the following weighted average assumptions on December 8,2015 and December 31, 2015. During the twelve months ended December 31, 2016, the Company had five separate valuations performed using the MonteCarlo simulation model. The valuations coincided with the number of accelerated installments occurring during the twelve months ended December 31,2016. All of the 2016 valuations occurred during the first quarter of 2016. The table for 2016 reflects the range of weighted average assumptions used for the2016 valuations. January 12, - March 29, December 31, 2016 2015 Embedded Conversion Feature Liability: Risk-free interest rate 0.46%-0.59% 0.62%Expected volatility 100.00% 100.00%Expected life (in years) 0.91-0.70 0.92 Expected dividend yield - - Face Value of convertible notes $3,209,850 - $1,208,850 3,294,850 Fair value $ - $420,360 F-19  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 - DERIVATIVE LIABILITIES (CONTINUED) Fair Value Measurement Valuation Hierarchy ASC 820, “Fair Value Measurements and Disclosures,” establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value.This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets orliabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, eitherdirectly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs basedon the Company’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy isdetermined based on the lowest level input that is significant to the fair value measurement. The Company did not have any liabilities carried at fair value measured as a recurring basis as of December 31, 2016. The following table provides theliabilities carried at fair value measured on a recurring basis as of December 31, 2015: Fair Value Measurements at December 31, 2015 Total Carrying Value at December 31,2015 Quoted prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Derivative liabilities $420,360 $- $- $420,360 The carrying amounts of cash, inventory, prepaid expenses, accounts payable and accrued liabilities approximate their fair value due to their short maturities.The Company’s other financial instruments include its convertible notes payable obligations. The carrying value of these instruments approximate fair value,as they bear terms and conditions comparable to market, for obligations with similar terms and maturities. The Company measures the fair value of financialassets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or mostadvantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximizes theuse of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Level 3 liabilities are valued using unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of thederivative liabilities. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s accounting department, who reportsto the Principal Financial Officer, determines its valuation policies and procedures. The development and determination of the unobservable inputs for Level3 fair value measurements and fair value calculations are the responsibility of the Company’s accounting department and are approved by the PrincipalFinancial Officer. Level 3 Valuation Techniques Level 3 financial liabilities consist of the conversion feature liability and common stock purchase warrants for which there are no current market for thesesecurities such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. A significant decrease in thevolatility or a significant decrease in the Company’s stock price, in isolation, would result in a significantly lower fair value measurement. During December 31, 2016 and 2015, there were no transfers in or out of level 3 from other levels in the fair value hierarchy. The following table sets forth a summary of the changes in the fair value of our Level 3 financial liabilities that are measured at fair value on a recurring basis: For the yearendedDecember 31,2016 For the yearended December 31,2015 Beginning liability balance $420,360 $- Loss on change in fair value of derivative liabilities 2,299,020 - Recognition of conversion feature liability - 912,330 Gain on derivative liabilities resulting from accelerated amortizations (1,016,980) - Net realized gain on conversion feature liabilities - (47,242)Net unrealized gain on conversion feature liabilities - (444,728)Adjustment to additional paid-in capital upon conversion and modification (1,702,400) - Ending balance $- $420,360 Other Fair Value Measurements During the year ended December 31, 2016, the Company recorded $91,682 of interest expense related to the amortization of the discount of the contingentconsideration. The fair value measurements were based on significant inputs not observed in the market and thus represented a level 3 measurement. F-20  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9 – STRATEGIC AGREEMENTS WITH WORLD VENTURES HOLDINGS On December 31, 2015, we entered into a Master Product Development Agreement (the “Development Agreement”) with World Ventures Holdings, LLC(“WVH”). The Development Agreement commenced on December 31, 2015, and has an initial term of two (2) years (the “Initial Term”). Thereafter, theDevelopment Agreement will automatically renew for additional successive one (1) year terms (each a “Renewal Term”) unless and until WVH provideswritten notice of non-renewal at least thirty (30) days prior to the end of the Initial Term or then-current Renewal Term. Each Renewal Term will commenceimmediately on expiration of the Initial Term or preceding Renewal Term. The Development Agreement may also be terminated earlier pursuant to certainconditions. In connection with the Development Agreement, on December 31, 2015, the Company entered into a securities purchase agreement (the “WVH PurchaseAgreement”) with WVH providing for the issuance and sale by the Company of 1,005,000 shares (the “WVH Shares”) of Common Stock and a common stockpurchase warrant (the “WVH Warrant”) to purchase 251,250 shares (the “WVH Warrant Shares”) of Common Stock, for an aggregate purchase price of$2,000,000. The WVH Warrant is initially exercisable on the five (5) month anniversary of the issuance date at an exercise price equal to $7.50 per share andhas a term of exercise equal to two (2) years and seven (7) months from the date on which first exercisable. On April 28, 2016, the exercise price of the WVHWarrant was modified to $4.00. Pursuant to the Development Agreement, WVH retained the Company to design, develop and manufacture a series of Proprietary Products (as defined in theDevelopment Agreement) for distribution through WVH’s network of sales representatives, members, consumers, employees, contractors or affiliates. Inconjunction with the Development Agreement, the Company and WVH contractually agreed to dedicate $1,500,000 of the $2,000,000 in total proceedsreceived by the Company to the development and manufacture of the product for WVH. In addition, any expenditure of the $1,500,000 in proceeds isrestricted in that the Company will need prior approval from WVH on a monthly basis in order to fund the estimated expenditures needed for thedevelopment of the product for WVH from the $1,500,000. Accordingly, the $1,500,000 is included in the restricted cash balance on the accompanyingBalance Sheet at December 31, 2015. During the twelve months ended December 31, 2016, the Company used the entire $1,500,000 in restricted cashreceived from WVH on December 31, 2015 for the design and development of products specifically for WVH. The expenses related to the design anddevelopment of products for WVH during the twelve months ended December 31, 2016 are included in research and development expenses. During thetwelve months ended December 31, 2016, the Company received deposits totaling $6,068,894 from WVH against initial purchase orders received from WVH.The deposits received from WVH are included in the consolidated balance sheet line item labeled customer deposits as of December 31, 2016. During theyear ended December 31, 2016, the Company recorded revenue of $1,357,413 related to WVH. At December 31, 2016, the Company’s accounts receivablebalance included $621,724 due from WVH. F-21  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 - STOCKHOLDERS’ EQUITY April 2015 Private Placement On April 24, 2015, the Company entered into a securities purchase agreement (the “April Purchase Agreement”) with a group of accredited investors (the“April Purchasers”) pursuant to which the Company sold to such purchasers an aggregate of $1,575,000 principal amount of secured convertible notes (the“April Convertible Notes”), a Class A Common Stock Purchase Warrant (the “Class A Warrant”) to purchase up to 46,875 shares of the Company’s commonstock and a Class B Common Stock Purchase Warrant (the “Class B Warrant,” and together with the Class A Warrant, the “April Warrants”) to purchase up to46,875 shares of the Company’s common stock. The April Convertible Notes bear interest at 6% per annum and are convertible at any time, in whole or inpart, at the option of the holders into shares of common stock at a conversion price of $25.20 per share. The April Warrants are exercisable beginning six (6)months after issuance through the fifth (5th) anniversary of such initial exercisability date. The Class A Warrant has an initial exercise price equal to $30.20per share and the Class B Warrant has an initial exercise price equal to $50.00 per share. The Company received cash proceeds of $1,481,500 from theissuance of the Convertible Notes after deducting debt issuance costs of $93,500. The Company recorded a debt discount of $1,575,000 related to the sale of the April Convertible Notes and the April Warrants. The debt discount reflects theunderlying fair value of the April Warrants of approximately $860,000 on the date of the transaction and a beneficial conversion charge of approximately$715,000. The debt discount will be amortized to interest expense over the earlier of (i) term of the April Convertible Notes or (ii) conversion of the debt. In connection with the sale of the April Convertible Notes and April Warrants, the Company entered into a registration rights agreement, dated April 24, 2015(the “April Registration Rights Agreement”), with the April Purchasers, pursuant to which the Company agreed to register the shares of common stockunderlying the April Convertible Notes and April Warrants on a Form S-3 registration statement to be filed with the Securities and Exchange Commission(the “SEC”) within ten (10) business days after the date of the issuance of the April Convertible Notes and April Warrants (the “April Filing Date”) and tocause the April Registration Statement to be declared effective under the Securities Act within ninety (90) days following the April Filing Date. If certain ofits obligations under the April Registration Rights Agreement are not met, the Company is required to pay partial liquidated damages to each AprilPurchaser. On May 8, 2015, the Company filed a registration statement on Form S-3 with the SEC to register the shares issuable upon the conversion of theApril Convertible Notes, the related accrued interest and the exercise of the April Warrants. Such registration statement was declared effective with the SECon May 14, 2015. In connection with the sale of the April Convertible Notes and the April Warrants, the Company entered into a security agreement, dated April 24, 2015 (the“April Security Agreement”), between the Company, 3D-ID and the collateral agent thereto. Pursuant to the Security Agreement, the April Purchasers weregranted a security interest in certain personal property of the Company and 3D-ID to secure the payment and performance of all obligations of the Companyand 3D-ID under the April Convertible Notes, April Warrants, April Purchase Agreement, April Registration Rights Agreement and April Security Agreement.In addition, in connection with the April Security Agreement, 3D-ID executed a subsidiary guaranty, pursuant to which it agreed to guarantee and act assurety for payment of the April Convertible Notes and other obligations of the Company under the April Warrants, April Purchase Agreement, AprilRegistration Rights Agreement and April Security Agreement. As described below, the April purchaser exchanged the April Convertible Notes into convertible notes that were identical to the convertible notes that wereissued on December 8, 2015. F-22  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 - STOCKHOLDERS’ EQUITY (CONTINUED) July 2015 Private Placement On July 27, 2015, the Company entered into a securities purchase agreement with an accredited investors (the “July Purchaser”) pursuant to which theCompany sold an aggregate of $222,222 in principal amount of the 8% Original Issue Discount Convertible Notes (the “8% Convertible Notes”) for anaggregate purchase price of $200,000. The Company received net proceeds of $200,000 from the sale of the 8% Convertible Notes. The 8% Convertible Notes will mature on September 11, 2015 (the “Maturity Date”), less any amounts converted or redeemed prior to the Maturity Date. The8% Convertible Notes bear interest at a rate of 8% per annum, subject to increase to the lesser of 24% per annum or the maximum rate permitted underapplicable law upon the occurrence of certain events of default. The 8% Convertible Notes are convertible at any time, in whole or in part, at the option of the holders into shares of common stock at a conversion price of$35.00 per share, which is subject to adjustment for stock dividends, stock splits, combinations or similar events. The Company agreed that if it effected a registered offering either utilizing Form S-1 or Form S-3 (a “Registered Offering”), the Holder shall have the right toconvert the entire amount of the subscription amount into such Registered Offering. The July Purchaser converted the entire amount of the subscriptionamount into the August Offering described below. The conversion price used to convert the entire purchase price into common stock was equivalent to the equity offering price of $17.50 on August 4, 2015and not the conversion price of $35.00 stipulated in the securities purchase agreement. As a result of the change in the conversion price, the Companyrecorded additional inducement expense of $100,000 at the time of conversion. August 2015 Offerings On August 4, 2015, the Company closed with certain purchasers (the “August 2015 Purchasers”) a public offering (the “August Offering”) providing for theissuance and sale by the Company of 172,143 shares of the Company’s common stock at a price to the public of $17.50 per share (the “Registered Shares”)for an aggregate purchase price of $3,012,500. In connection with the sale of the Registered Shares, the Company also entered into a Warrant Purchase Agreement (the “Warrant Purchase Agreement”) withthe August 2015 Purchasers providing for the issuance and sale by the Company of warrants to purchase 86,072 shares of the Company’s common stock at apurchase price of $0.0000001 per warrant (the “August 2015 Warrants”). Each August 2015 Warrant shall be initially exercisable on the six (6) monthanniversary of the issuance date an exercise price equal to $23.50 per share and have a term of exercise equal to five (5) years from the date on which firstexercisable. The Registered Shares were offered by the Company pursuant to an effective shelf registration statement on Form S-3, which was initially filed with theSecurities and Exchange Commission (the “SEC”) on April 24, 2015 and declared effective on May 14, 2015 (File No. 333-203637) (the “RegistrationStatement”). Pursuant to a Registration Rights Agreement, dated July 30, 2015, by and between the Company and the August 2015 Purchasers, the Company agreed to fileone or more registration statements with the SEC covering the resale of the shares of common stock issuable upon exercise of the August 2015 Warrants. The placement agent in connection with the Registered Shares was Northland Securities, Inc. October 2015 Public Offering On October 21, 2015, the Company closed on an underwritten public offering of its common stock. The Company offered 150,000 shares of common stock ata price to the public of $7.00 per share. The Company received gross proceeds from the offering, before deducting underwriting discounts and commissionand other estimated offering expenses payable by the Company, of approximately $1,050,000. The underwriter was Aegis Capital Corp. F-23  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 - STOCKHOLDERS’ EQUITY (CONTINUED) December 2015 Private Placement In connection with the sale of the December Notes, the Company also issued to the December Purchasers an aggregate of 90,000 shares of the Company’scommon stock in consideration of each Investor’s execution and delivery of the December Purchase Agreement (the “Commitment Shares”). TheCommitment Shares were offered by the Company pursuant to an effective shelf registration statement on Form S-3, which was initially filed with the SEC onApril 24, 2015 and declared effective on May 14, 2015 (File No. 333-203637). April 2016 Offering On April 11, 2016, the Company closed a registered offering (the “April 2016 Offering”) of shares of its Series A Convertible Preferred Stock, par value$0.0001 per share (the “Series A Preferred Stock”). The Company sold 2,500,000 shares of Series A Preferred Stock at a price of $1.00 per share, and receivedgross proceeds from the offering, before deducting placement agent fees and other estimated offering expenses payable by the Company, of $2,500,000. TheCompany incurred approximately $230,225 of costs associated with the issuance of the Series A Preferred Stock. Holders of the Series A Preferred stock shallbe entitled to receive from the first date of issuance of the Series A Preferred Stock cumulative dividends at a rate of 25% Per annum on a compounded basis,which dividend amount shall be guaranteed. Accrued and unpaid dividends shall be at the Company’s option, in cash, shares of common stock, or additionalshare of Series A Preferred Stock. For the year ended December 31, 2016, the Company recorded Series A Preferred Stock dividends of $590,116. During theyear ended December 31, 2016 holders of the Series A Preferred Stock converted $2,662,794 of Preferred Stock and dividends into 834,718 shares of commonstock.July 2016 Offering On July 25, 2016, the Company closed a private placement (the “July 2016 Offering”) of shares of its Series B Convertible Preferred Stock, par value $0.0001per share (the “Series B Preferred Stock”) and warrants (the “July 2016 Warrants”) to purchase 562,500 shares of the Company’s common stock. TheCompany sold 4,500,000 shares of Series B Preferred Stock at a price of $1.00 per share, and received gross proceeds from the offering, before deductingplacement agent fees and other estimated offering expenses payable by the Company, of $4,500,000. The Company incurred approximately $410,000 ofcosts associated with the issuance of the Series B Preferred Stock. The conversion price of the Series B Preferred Stock is $4.00. The July 2016 Warrants willbe exercisable beginning on January 25, 2017, and will be exercisable for a period of five (5) years. The exercise price with respect to the July 2016 Warrantsis $7.50 per share. Holders of the Series B Preferred stock shall be entitled to receive from the first date of issuance of the Series B Preferred Stock cumulativedividends at a rate of 25% Per annum on a compounded basis, which dividend amount shall be guaranteed. Accrued and unpaid dividends shall be at theCompany’s option, in cash, shares of common stock, or additional share of Series B Preferred Stock. For the year ended December 31, the Company recordedSeries B Preferred Stock dividends of $490,625. Warrants The following table summarizes the Company’s warrants outstanding and exercisable at December 31, 2015 and 2016: Weighted Weighted Average Average Remaining Number of Exercise Life Intrinsic Warrants Price In Years Value Outstanding at January 1, 2015 362,978 $28.00 4.51 $283,828 Issued 431,071 17.80 4.04 - Exercised (32,500) 20.00 - - Cancelled - - - - Outstanding and Exercisable at December 31, 2015 761,549 $22.60 3.83 $- Issued 1,224,980 4.69 4.13 - Exercised (157,480) - - - Cancelled - - - - Outstanding and Exercisable at December 31, 2016 1,829,049 $12.00 3.92 $- Long-Term Stock Incentive Plan On January 4, 2013, a majority of the Company’s stockholders approved by written consent the Company’s 2013 Long-Term Stock Incentive Plan (“LTIP”).The maximum aggregate number of shares of common stock that may be issued under the LTIP, including stock awards, stock issued to directors for servingon the Company’s board, and stock appreciation rights, is limited to 10% of the shares of common stock outstanding on the first business or trading day ofany fiscal year, which is 554,054 at December 31, 2016. During the year ended December 31, 2016, the Company issued 51,705 shares under the plan to threenon-executive directors for serving on the Company’s board. The aggregate fair value of the shares issued to the directors was $180,000. Also during the yearended December 31, 2016, the Company issued 60,000 shares with an aggregate fair value of $372,000 to executive and certain non-executive employeesrelated to the Company’s 2015 management incentive plan. The aggregate fair value of $372,000 was expensed entirely in 2015. During the year endedDecember 31, 2015, the Company issued 26,961 shares under the plan to three non-executive directors for serving on the Company’s board. The aggregatefair value of the shares issued to the directors was $180,000. Also during the year ended December 31, 2015, the Company issued 5,000 shares with anaggregate fair value of $147,500 to one non-executive employee. These shares were issued with no Company imposed restrictions and as a result, theaggregate fair value of $147,500 was expensed entirely in 2015. F-24  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11 - INCOME TAXES As of December 31, 2016, the Company had US federal and state net operating loss (“NOLs”) carryovers of $24,152,902 and $12,469,752, respectively,available to offset future taxable income, which expire beginning in 2033. In addition, the Company had tax credit carryforwards of $187,856 atDecember 31, 2016 that will be available to reduce future tax liabilities. The tax credit carryforwards will begin to expire beginning in 2033. In accordance with Section 382 of the Internal Revenue Code, deductibility of the Company’s NOLs may be subject to an annual limitation in the event of achange of control. The Company has determined that a change of control has not occurred as of December 31, 2016 and therefore none of the NOLs arelimited under Section 382. The Company has no material uncertain tax positions for any of the reporting periods presented. The Company has filed all of itstax returns for all prior periods through December 31, 2015. As a result, the Company’s net operating loss carryovers will now be available to offset any futuretaxable income. The Company is subject to taxation in the United States and various states. As of December 31, 2016 the Company’s tax years post 2012 are subject toexamination by the tax authorities. With few exceptions, as of December 31, 2016 the Company is no longer subject to U.S. federal or state examinations bytax authorities for years before December 31, 2013. The income tax provision consists of the following: December 31, 2016 2015 Current Federal $- $- State 5,749 4,307 5,749 4,307 Deferred Federal (2,843,866) (3,543,673)State (281,625) (362,722) (3,125,491) (3,906,395)Change in valuation allowance 3,315,776 3,906,395 Total income tax provision $196,035 $4,307 A reconciliation of the effective income tax rate and the statutory federal income tax rate is as follows: December 31, 2016 2015 U.S. federal statutory rate 34.00% 34.00%State income tax rate, net of federal benefit 1.45 1.81 Inducement expenses - (2.33)Other permanent differences (10.60) (3.63)Less: valuation allowance (26.41) (29.88)Provision for income taxes (1.56)% (.03)% In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assetswill not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in whichtemporary differences representing net future deductible amounts became deductible. Management considers the scheduled reversal of deferred tax liabilities,projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, Managementbelieves that significant uncertainties exists with respect to future realization of the deferred tax assets and has therefore established a full valuationallowance. For the year ended December 31, 2016 and 2015, the change in valuation allowance was $3,315,776 and $3,906,395. F-25  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11 - INCOME TAXES (CONTINUED) The tax effects of temporary differences that give rise to deferred tax assets and liabilities are presented below: December 31, 2016 2015 Deferred tax assets: Net operating loss carryforward $8,887,756 $6,109,750 Tax credits 187,856 177,909 Accruals and reserves 546,286 315,580 Restricted stock 42,140 4,238 Tangible and intangible assets 62,352 - Charitable donations 3,738 3,759 Total deferred tax assets before valuation allowance: $9,730,128 $6,611,236 Valuation allowance (9,920,414) (6,604,638)Deferred tax assets, net of valuation allowance (190,286) 6,598 Deferred tax liabilities: Fixed assets $- $(6,598)Convertible debt - Total deferred tax liabilities - (6,598) Net deferred tax asset (liability) $(190,286) $- NOTE 12 - COMMITMENTS AND CONTINGENCIES LEGAL MATTERS On November 12, 2015, the Company received a complaint that one of its technologies infringed upon one or more claims of a patent(s) issued to theclaimant. The claimant has subsequently acknowledged that the Company is not currently infringing on their patent(s) as the technology in question is notcommercially available at the current time. The Company is in the process of negotiating a future royalty agreement with the claimant should it decide tointroduce this technology in the future. From time to time the Company may be involved in various claims and legal actions arising in the ordinary course of its business. Other than as describedabove, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization orbody pending or, to the knowledge of the executive officers of the company or any of its subsidiaries, threatened against or affecting the company, or any ofits subsidiaries in which an adverse decision could have a material adverse effect upon its business, operating results, or financial condition. F-26  Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 12 - COMMITMENTS AND CONTINGENCIES (CONTINUED) COMMITMENTS On September 12, 2014, the Company entered into a lease agreement for office space in Oxford, Connecticut. The term of the lease was for two (2) years witha monthly rent of $2,300 in the first year, increasing to $2,450 per month in the second year. On October 10, 2016, the Company extended the lease term forthe office space in Oxford, Connecticut for six additional months with a monthly rent of $2,450. On October 3, 2014, the Company entered into a leaseagreement for customer service and warehouse space in Melbourne, Florida. The lease term commenced on January 1, 2015. The term of the lease is for three(3) years with a current monthly rent amount of $6,837 which includes the base rent, an escrow for taxes and insurance, common area maintenance chargesand applicable sale tax. As a result of the LogicMark acquisition on July 25, 2016, we assumed two facility leases. One of the leases is for office space locatedin Plymouth, Minnesota. This lease agreement expires in February 2018 and the current monthly rent is $1,170. In addition, LogicMark also subleases officeand warehouse space located in Louisville, Kentucky. The monthly rent for the space is $8,850 and this sublease agreement is due to expire in July 2017. TheCompany incurred rent expense of $154,194 and $124,698 for the years ended December 31, 2016 and December 31, 2015, respectively. Minimum leasepayments for non-cancelable operating leases are as follows: Future Lease Obligations 2017 $172,586 2018 2,340 Total future lease obligations $174,926 Effective October 1, 2015, we extended the employment agreement with Gino M. Pereira, our Chief Executive Officer. The term of the employmentagreement is for 3 years and the term began on October 1, 2015. Effective January 1, 2017, Mr. Pereira’s base salary increased to $381,150 from $346,500.The employment agreement also provides for: ●Payment of all necessary and reasonable out-of-pocket expenses incurred by the executive in the performance of his duties under the agreement. ●Eligibility to participate in bonus or incentive compensation plans that may be established by the board of directors from time to time applicable tothe executive’s services. ●Eligibility to receive equity awards as determined by the board of directors, or a committee of the board of directors, composed in compliance withthe corporate governance standards of any applicable listing exchange. NOTE 13 - SUBSEQUENT EVENTS The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. On January 3, 2017, the Company issued 6,000 shares of its common stock for the payment of services with a grant date fair market value of $16,680. On various dates during the first quarter of 2017, purchasers of the Series A Preferred Stock converted in aggregate $306,109 of Series A Preferred Stock anddividends into 130,259 shares of common stock. On various dates during the first quarter of 2017, purchasers of the Series B Preferred Stock converted in aggregate $1,682,031 of Series B Preferred Stock,dividends and liquidated damages into 762,097 shares of common stock. On March 28, 2017, the Company issued 27,500 shares of its common stock for the payment of services with a grant date fair market value of $52,250. On March 28, 2017, the Company issued 237,559 shares of its common stock to certain employees under the 2016 bonus plan. On March 26, 2017, the Company signed a binding Letter of Intent (“LOI”) with Fit Pay, Inc., a Delaware corporation (“Fit Pay”), regarding the acquisitionby the Company of all of the equity of Fit Pay (the “Transaction”). Following the Transaction, Fit Pay will become a wholly owned subsidiary of theCompany. The purchase price of the Transaction will consist of: (i) the issuance of 19.99% of the outstanding shares of the capital stock of the Company tothe shareholders of Fit Pay; (ii) the issuance by the Company of $2,000,000 worth of non-voting, non-convertible, shares of junior preferred stock to (the“Junior Preferred Stock”) to certain holders of preferred shares of Fit Pay, which Junior Preferred Stock shall earn a cumulative dividend of 5% per annum,which will increase to a dividend of 10% per annum after the Company’s market capitalization is $75,000,000 for greater than thirty (30) consecutive days;and (iii) an earn-out payment to the then former shareholders of Fit Pay of 12.5% of the gross revenue derived from the Seller’s technology by the Company,for the sixteen (16) quarter period beginning on October 1, 2017. The parties intend to negotiate and execute a definitive agreement for the Transaction inaccordance with the terms of the LOI. The definitive agreements will include customary closing conditions including necessary approvals. The Company and Fit Pay have agreed not to initiate orenter into any discussion with any other prospective purchaser of the assets and/or liabilities, or of the stock or business of Fit Pay prior to May 26, 2017. F-27  INDEX TO EXHIBITS Exhibit No. Description of Exhibit3.1(i) Certificate of Incorporation (1)3.(i)(a) Certificate of Amendment to Certificate of Incorporation (16)3.1(i)(b) Certificate of Designations of Series A Convertible Preferred Stock (12)3.1 (i)(c) Amendment of Certificate of Designations of Series A Convertible Preferred Stock (14)3.1(i)(d) Second Certificate of Amendment of Designations of Series A Convertible Preferred Stock (15)3.1(i)(e) Certificate of Designations for Series B Convertible Preferred Stock (15)3.1(ii) Bylaws (1)4.1 Form of Warrant Agreement and Form of Warrant (1)4.2 Form of Warrant for January 2014 Offering (2)4.3 Form of Agent Warrant for January 2014 Offering (2)4.4 Form of Warrant for June 2014 and August 2014 Offerings (5)4.5 Form of Warrant for September 2014 Offering (6)4.6 Form of Underwriter Warrant for September 2014 Offering (6)4.7 Form of Class A Warrant (7)4.8 Form of Class B Warrant (7)4.9 Form of Warrant for August 2015 Public Offering (8)4.10 Form of Warrant for December 2015 Agreement with WorldVentures Holdings, LLC (10)4.11 Form of Warrant for May 2016 Interest Purchase Agreement with LogicMark, LLC (13)4.12 Form of Warrant for November 2016 Agreement with LogicMark, LLC (18)4.13 Form of 8% Original Issue Discount Convertible Note for August 2015 Private Placement (8)10.1 † 2013 Long Term Incentive Plan (1)10.2 † Forms of Agreement Under 2013 Long Term Incentive Plan (1)10.3 † Employment Agreement Between Nxt-ID and Gino Pereira (3)10.4 License Agreement between 3D-ID, LLC and Genex Technologies (1)10.5 Purchase Agreement between 3D-ID, LLC and Nxt-ID, Inc. (1)10.6 †† Manufacturing agreement with Identita Technologies, Inc., dated January 18, 2013 (4)10.7 Form of Registration Rights Agreement for June 2014 and August 2014 Offerings (5)10.8 Form of Registration Rights Agreement for April 2015 Offering (7)10.9* Form of Placement Agency Agreement for August 2015 Public Offering10.10 Form of Securities Purchase Agreement for August 2015 Public Offering (8)10.11 Form of Registration Rights Agreement for August 2015 Public Offering (8)10.12 Form of Securities Purchase Agreement for August 2015 Private Placement (8)10.13 Form of Warrant Purchase Agreement for August 2015 Private Placement (8)10.14 Form of Securities Purchase Agreement for December 2015 Private Placement (9)10.15 Form of Registration Rights Agreement for December 2015 Private Placement (9)10.16 Form of Securities Purchase Agreement for December 2015 Agreement with WorldVentures Holdings, LLC (10)10.17 Form of Registration Rights Agreement for December 2015 Agreement with WorldVentures Holdings, LLC (10)10.18 Form of Securities Purchase Agreement for April 2016 Registered Direct Offering (11)10.19 Form of Interest Purchase Agreement for May 2016 Agreement with LogicMark, LLC (13)10.20 Form of First Amendment to Interest Purchase Agreement for May 2016 Agreement with LogicMark, LLC (14)10.21 Form of Secured Subordinated Promissory Note for July 2016 Agreement with LogicMark, LLC (15)10.22 Form of Security Agreement for July 2016 Agreement with LogicMark, LLC (15)10.23 Form of Loan Agreement for July 2016 Agreement with LogicMark, LLC (15)10.24 Form of Subordination Agreement for July 2016 Agreement with LogicMark, LLC (15)10.25 Form of Securities Purchase Agreement for July 2016 Agreement with LogicMark, LLC (15)10.26 Form of Registration Rights Agreement for July 2016 Agreement with LogicMark, LLC (15)10.27 Form of Forbearance Agreement between Nxt-ID and LogicMark Investment Partners, LLC (17)10.28 Form of Exchange Note for November 2016 Agreement with LogicMark, LLC (18)10.29 Form of Exchange Agreement for November 2016 Agreement with LogicMark, LLC (18)10.30 Form of Intercreditor Agreement for November 2016 Agreement with LogicMark, LLC (18)10.31 First Amendment to Forbearance Agreement for November 2016 Agreement with LogicMark, LLC (18)14.1 Code of Ethics (3)21.1* List of Subsidiaries23.1* Consent of Marcum LLP23.2* Consent of KPMG LLP31.1* Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-OxleyAct of 2002.31.2* Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-OxleyAct of 2002.32.1* Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002.32.2* Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002.101.INS* XBRL Instance Document101.SCH* XBRL Taxonomy Schema101.CAL* XBRL Taxonomy Calculation Linkbase101.DEF* XBRL Taxonomy Definition Linkbase101.LAB* XBRL Taxonomy Label Linkbase101.PRE* XBRL Taxonomy Presentation Linkbase 52  In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed. * Filed herewith.† Management contract or compensatory plan or arrangement.†† Confidential treatment has been received for schedules A, C, and D to the agreement (1)Filed as an Exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-184673) with the SEC on January 31, 2013. (2)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on January 17, 2014. (3)Filed as an Exhibit to the Company’s Annual Report on Form 10-K with the SEC on February 25, 2014. (4)Filed as an Exhibit to the Company’s Registration Statement on Form S-1/A (File No. 333-184673) with the SEC on March 25, 2013. (5)Filed as an Exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-197845) with the SEC on August 5, 2014. (6)Filed as Exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-197845) with the SEC on August 14, 2014. (7)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on April 24, 2015. (8)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on July 30, 2015. (9)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on December 9, 2015. (10)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on January 4, 2016. (11)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on April 4, 2016. (12)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on April 12, 2016. (13)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on May 20, 2016. (14)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on July 7, 2016. (15)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on July 27, 2016. (16)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on September 12, 2016. (17)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on September 26, 2016. (18)Filed as an Exhibit to the Company’s Current Report on Form 8-K with the SEC on November 30, 2016. 53Exhibit 10.9 NXT-ID, INC.Placement Agency AgreementCommon Stock and Warrants July 30, 2015 Northland Securities, Inc.45 South Seventh Street, Suite 2000 Minneapolis, Minnesota 55402 Ladies and Gentlemen: Nxt-ID, Inc., a Delaware corporation (the “Company”), proposes, subject to the terms and conditions stated in this Placement Agency Agreement(this “Agreement”), the Securities Purchase Agreement (the “Securities Purchase Agreement”), dated July 30, 2015, between the Company and the investorsidentified therein (each, an “Investor” and collectively, the “Investors”), and the Warrant Purchase Agreement (the “Warrant Purchase Agreement” andtogether with the Securities Purchase Agreement, the “Purchase Agreements”), dated July 30, 2015, between the Company and the Investors, to (i) issue andsell up to an aggregate of 1,721,429 of shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) in a publicoffering and (ii) issue and sell warrants (the “Warrants”), which are exercisable for shares of Common Stock (the “Warrant Shares” and together with theShares and the Warrants, the “Securities”) in a private placement. The Company hereby confirms its several agreements with Northland Securities, Inc.(“Northland” or the “Placement Agent”) as set forth below. The Shares are more fully described in the Prospectus (as defined below). 1. Agreement to Act as Placement Agent; Delivery and Payment. On the basis of the representations, warranties and agreements of theCompany herein contained, and subject to the terms and conditions set forth in this Agreement: (a) The Company hereby engages the Placement Agent, as the exclusive agent of the Company, to, on a commercially reasonableefforts basis, solicit offers to purchase the Securities from the Company on the terms and subject to the conditions set forth in the Purchase Agreements andProspectus (as defined below). The Placement Agent shall use commercially reasonable efforts to assist the Company in obtaining performance by eachInvestor whose offer to purchase the Securities was solicited by the Placement Agent and accepted by the Company, but the Placement Agent shall not,except as otherwise provided in this Agreement, have any liability to the Company in the event any such purchase is not consummated for any reason. Inconnection with its commercially reasonable efforts to solicit offers to purchase the Securities, the Placement Agent shall only communicate informationregarding the Company to potential purchasers of the Securities that is consistent with the information contained in the Prospectus. Under no circumstanceswill the Placement Agent or any of its affiliates be obligated to underwrite or purchase any of the Securities for its own account or otherwise provide anyfinancing. The Placement Agent shall act solely as the Company’s agent and not as principal. No Placement Agent shall have any authority to bind theCompany with respect to any prospective offer to purchase Securities , and the Company shall have the sole right to accept offers to purchase Securities andmay reject any such offer, in whole or in part. The Placement Agent has the right, in its discretion, without notice to the Company, to reject any offer topurchase Securities received by it, in whole or in part, and any such rejection shall not be deemed a breach of this Agreement.  (b) As compensation for services rendered by the Placement Agent hereunder, on the Closing Date (as defined below), the Companyshall pay or cause to be paid to the Placement Agent by wire transfer of immediately available funds to an account or accounts designated by the PlacementAgent, an aggregate amount equal to 6% of the gross proceeds received by the Company from the sale of the Securities to Investors (the “Agency Fee”). Suchamounts may be deducted from the payment made by the Investor(s) to the Company and paid directly to the Placement Agent on the Closing Date. Ascompensation for services rendered by the Placement Agent hereunder, on the Closing Date, the Company shall sell to the Placement Agent, for an aggregatepurchase price of $50, warrants (the “Agent’s Warrants”) to purchase 86,071.45 shares of Common Stock in substantially the form attached hereto as ExhibitA. The Agent’s Warrants and the shares acquirable upon exercise thereof will be subject to the restrictions provided for under FINRA Rule 5110(g)(1). ThePlacement Agent may allow concessions, or pay commissions, to other dealers participating in the offering of the Securities. (c) The Shares are being sold to the Investors at a price of $1.75 per share as set forth on the cover page of the Prospectus (asdefined below) and the Warrants are being sold to the Investors at a price of $0.0000001 per warrant. The purchases of Shares and Warrants by the Investorsshall be evidenced by the execution of the Purchase Agreements by each of the parties thereto in the form attached hereto as Exhibit B. (d) Prior to the earlier of (i) the date on which this Agreement is terminated and (ii) the Closing Date, the Company shall not,without the prior written consent of the Placement Agent, solicit or accept offers to purchase shares of the Common Stock (other than pursuant to the exerciseof options or warrants to purchase shares of Common Stock that are outstanding at the date hereof or are granted in the ordinary course to directors, officers oremployees of the Company under the Company’s equity incentive plans) otherwise than through the Placement Agent in accordance herewith. (e) No Securities which the Company has agreed to sell pursuant to this Agreement and the Purchase Agreements shall be deemedto have been purchased and paid for, or sold by the Company, until such Securities shall have been delivered to the Investor purchasing such Securitiesagainst payment therefor by such Investor. If the Company shall default in its obligations to deliver Securities to an Investor whose offer it has accepted, theCompany shall indemnify and hold the Placement Agent harmless against any loss, claim, damage or liability directly or indirectly arising from or as a resultof the default by the Company in accordance with the procedures set forth in Section 6(c) hereof. 2  (f) Payment of the purchase price for, and delivery of the Securities shall be made at a closing (the “Closing”) at a time and date asthe Placement Agent and the Company determine pursuant to Rule 15c6-1(a) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)(such date of payment and delivery being herein referred to as the “Closing Date”). Unless otherwise specified in the Purchase Agreements, the Securities willbe settled through the facilities of The Depository Trust Company’s DWAC system. Subject to the terms hereof, payment of the purchase price for theSecurities shall be made to the Company in the manner set forth below by Federal Funds wire transfer, against delivery of the Securities to such persons andshall be registered in the name or names and shall be in such denominations as the Placement Agent may request at least one business day before the ClosingDate. Payment of the purchase price for the Securities to be purchased by Investors shall be made by such Investors directly to the Company. Subject to theterms and conditions hereof, on the Closing Date, the Company shall pay to the Placement Agent the amount of expenses for which each such PlacementAgent is entitled to reimbursement pursuant hereto. At least one day prior to the Closing Date, the Placement Agent shall submit to the Company its bonafide estimate of the amount of expenses for which it is entitled to reimbursement pursuant hereto. As soon as reasonably practicable after the Closing Date,the Placement Agent shall submit to the Company its expense reimbursement invoice and the Company or such Placement Agent, as applicable, shall makeany necessary reconciling payment(s) within thirty days of receipt of such invoices. The Warrants will be physically delivered to the Investors. 2. Representations and Warranties of the Company. The Company represents and warrants to the Placement Agent as of the date hereofand as of the Closing Date, and agrees with the Placement Agent, as follows: (a) Filing of Registration Statement. The Company has prepared and filed, in conformity with the requirements of the SecuritiesAct of 1933, as amended (the “Securities Act”), and the published rules and regulations thereunder (the “Rules and Regulations”) adopted by the Securitiesand Exchange Commission (the “Commission”), a registration statement, including a prospectus, on Form S-3 (File No. 333-203637), which became effectiveas of May 14, 2015, relating to the Shares and the offering thereof (the “Offering”) from time to time in accordance with Rule 415(a)(1)(x) of the Rules andRegulations, and such amendments thereof as may have been required to the date of this Agreement. The term “Registration Statement” as used in thisAgreement means the aforementioned registration statement, as amended at the time of such registration statement’s effectiveness for purposes of Section 11of the Securities Act, (the “Effective Time”), including (i) all documents filed as a part thereof or incorporated or deemed to be incorporated by referencetherein and (ii) any information in the corresponding Base Prospectus (as defined below) or a prospectus supplement filed with the Commission pursuant toRule 424(b) under the Securities Act, to the extent such information is deemed pursuant to Rule 430A (“Rule 430A”), 430B (“Rule 430B”) or 430C(“Rule 430C”) under the Securities Act to be a part thereof at the Effective Time. If the Company has filed an abbreviated registration statement to registeradditional shares of Common Stock pursuant to Rule 462(b) under the Rules and Regulations (the “Rule 462(b) Registration Statement”), then any referenceherein to the term “Registration Statement” shall also be deemed to include such Rule 462(b) Registration Statement. For purposes of this Agreement, allreferences to the Registration Statement, the Base Prospectus, any Preliminary Prospectus (as defined below), the Prospectus (as defined in below) or anyamendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering,Analysis and Retrieval System (“EDGAR”). All references in this Agreement to amendments or supplements to the Registration Statement, the BaseProspectus, any Preliminary Prospectus or the Prospectus shall be deemed to mean and include the subsequent filing of any document under the ExchangeAct prior to completion of distribution of the Shares and which is deemed to be incorporated therein by reference therein or otherwise deemed to be a partthereof. 3  (b) Effectiveness of Registration Statement; Certain Defined Terms. The Company and the transactions contemplated by thisAgreement meet the requirements and comply with the conditions for the use of Form S-3 under the Securities Act. The Registration Statement meets, and theoffering and sale of the Shares as contemplated hereby complies with, the requirements of Rule 415 under the Securities Act (including, without limitation,Rule 415(a)(5) of the Rules and Regulations). The Company has complied, to the Commission’s satisfaction, with all requests of the Commission foradditional or supplemental information. No stop order preventing or suspending use of the Registration Statement, any Preliminary Prospectus or theProspectus or the effectiveness of the Registration Statement has been issued by the Commission, and no proceedings for such purpose pursuant to Section8A of the Securities Act against the Company or related to the Offering have been instituted or are pending or, to the Company’s knowledge, arecontemplated or threatened by the Commission, and any request received by the Company on the part of the Commission for additional information has beencomplied with. As used in this Agreement: (1)“Base Prospectus” means the prospectus included in the Registration Statement at the Effective Time. (2)“Disclosure Package” means (i) the Statutory Prospectus, (ii) each Issuer Free Writing Prospectus, if any, filed or used by theCompany on or before the Time of Sale and listed on Schedule II hereto (other than a roadshow that is an Issuer Free WritingProspectus but is not required to be filed under Rule 433 of the Rules and Regulations) and (iii) the pricing and other informationas set forth on Exhibit B hereto, all considered together. (3)“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the Rules and Regulationsrelating to the Shares in the form filed or required to be filed with the Commission or, if not required to be filed, in the formretained in the Company’s records pursuant to Rule 433(g) of the Rules and Regulations. (4)“Preliminary Prospectus” means any preliminary prospectus supplement, subject to completion, relating to the Shares, filed bythe Company with the Commission pursuant to Rule 424(b) under the Securities Act for use in connection with the offering andsale of the Shares, together with the Base Prospectus attached to or used with such preliminary prospectus supplement. (5)“Prospectus” means the final prospectus supplement, relating to the Shares, filed by the Company with the Commission pursuantto Rule 424(b) under the Securities Act on or before the second business day after the date hereof (or such earlier time as may berequired under the Securities Act), in the form furnished by the Company to the Placement Agent, for use in connection with theoffering and sale of the Shares that discloses the public offering price and other final terms of the Shares, together with the BaseProspectus attached to or used with such final prospectus supplement. 4  (6)“Statutory Prospectus” means the Preliminary Prospectus, if any, and the Base Prospectus, each as amended and supplementedimmediately prior to the Time of Sale, including any document incorporated by reference therein and any prospectus supplement. (7)“Time of Sale” means 4:30 p.m., New York City time, on the date of this Agreement. (c) Contents of Registration Statement. The Registration Statement complied when it became effective, complies, as amended orsupplemented, at the Time of Sale and at all times during which a prospectus is required by the Securities Act to be delivered (whether physically or throughcompliance with Rule 172 under the Securities Act or any similar rule) in connection with any sale of Shares (the “Prospectus Delivery Period”), will comply,in all material respects, with the requirements of the Securities Act and the Rules and Regulations; the Registration Statement did not, as of the EffectiveTime, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statementstherein not misleading; provided that the Company makes no representation or warranty in this subsection (c) with respect to statements in or omissions fromthe Registration Statement in reliance upon, and in conformity with, written information furnished to the Company by the Placement Agent specifically forinclusion therein, which information the parties hereto agree is limited to the Placement Agent’s Information (as defined in Section 7 hereof). (d) Contents of Prospectus. The Prospectus will comply, as of the date that it is filed with the Commission, the date of its deliveryto Investors and at all times during the Prospectus Delivery Period, in all material respects, with the requirements of the Securities Act; at no time during theperiod that begins on the date the Prospectus is filed with the Commission and ends at the end of the Prospectus Delivery Period will the Prospectus, as thenamended or supplemented, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, inthe light of the circumstances under which they were made, not misleading, provided that the Company makes no representation or warranty with respect tostatements in or omissions from the Prospectus in reliance upon, and in conformity with, written information furnished to the Company by the PlacementAgent specifically for inclusion therein, which information the parties hereto agree is limited to the Placement Agent’s Information. The Prospectus containsall required information under the Securities Act with respect to the Shares and the distribution of the Shares. (e) Incorporated Documents. Each of the documents incorporated or deemed to be incorporated by reference in the RegistrationStatement, at the time such document was filed with the Commission or at the time such document became effective, as applicable, complied, in all materialrespects, with the requirements of the Exchange Act, was filed on a timely basis with the Commission and did not include an untrue statement of a materialfact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, notmisleading. 5  (f) Disclosure Package. The Disclosure Package, as of the Time of Sale, did not, and at the Closing Date will not, contain anyuntrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in thelight of the circumstances under which they were made, not misleading; provided that the Company makes no representations or warranties in this subsection(f) with respect to statements in or omissions from the Disclosure Package in reliance upon, and in conformity with, written information furnished to theCompany by the Placement Agent specifically for inclusion therein, which information the parties hereto agree is limited to the Placement Agent’sInformation. (g) Distributed Materials. Other than the Base Prospectus, any Preliminary Prospectus and the Prospectus, the Company has notmade, used, prepared, authorized, approved or referred to and will not make, use, prepare, authorize, approve or refer to any “written communication” (asdefined in Rule 405 under the Securities Act) that constitutes an offer to sell or a solicitation of an offer to buy the Securities other than (i) any document notconstituting a prospectus pursuant to Section 2(a)(10)(a) of the Securities Act or Rule 134 under the Securities Act or (ii) the documents listed on Schedule IIhereto and other written communications approved in advance by the Placement Agent. (h) Issuer Free Writing Prospectuses. Each Issuer Free Writing Prospectus, if any, conformed or will conform in all material respectsto the requirements of the Securities Act and the Rules and Regulations on the date of first use, and the Company has complied or will comply with any filingrequirements applicable to such Issuer Free Writing Prospectus pursuant to the Rules and Regulations. Each Issuer Free Writing Prospectus, if any, whenconsidered together with the Disclosure Package, as of its issue date and at all subsequent times through the completion of the Prospectus Delivery Period didnot, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement, theStatutory Prospectus or the Prospectus, including any document incorporated by reference therein and any prospectus supplement deemed to be a part thereofthat has not been superseded or modified, or includes an untrue statement of a material fact or omitted or would omit to state a material fact required to bestated therein or necessary in order to make the statements therein, in the light of the circumstances prevailing at the subsequent time, not misleading;provided that the Company makes no representation or warranty with respect to statements in or omissions from any Issuer Free Writing Prospectus inreliance upon, and in conformity with, written information furnished to the Company by the Placement Agent specifically for inclusion therein, whichinformation the parties hereto agree is limited to the Placement Agent’s Information. (i) Not an Ineligible Issuer. (i) At the earliest time after the filing of the Registration Statement that the Company or anotheroffering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the Securities Act) of the Shares and (ii) at the date hereof, theCompany was not and is not an “ineligible issuer,” as defined in Rule 405 under the Securities Act (“Rule 405”). 6  (j) Due Organization; Good Standing. The Company has been duly organized and is validly existing as a corporation in goodstanding under the laws of the State of Delaware, with the corporate power and authority to own its properties and to conduct its business as it is currentlybeing conducted and as described in the Registration Statement, the Prospectus and the Disclosure Package. The Company is duly qualified to transactbusiness and is in good standing as a foreign corporation or other legal entity in each other jurisdiction in which its ownership or leasing of property or theconduct of its business requires such qualification, except where the failure to be so qualified or in good standing or have such power or authority (i) wouldnot reasonably be expected to have, individually or in the aggregate, a material adverse effect upon, the business, operations, properties, financial condition,results of operations or prospects of the Company and its subsidiaries, taken as a whole, or (ii) impair in any material respect the power or ability of theCompany to perform its obligations under this Agreement or to consummate any transactions contemplated by the Agreement and the Purchase Agreements,including the issuance and sale of the Securities (any such effect as described in clauses (i) or (ii), a “Material Adverse Effect”). Each subsidiary of theCompany (each, a “Subsidiary” and, collectively, the “Subsidiaries”) is duly incorporated or organized, validly existing and in good standing under the lawsof their jurisdiction of incorporation or organization, with the requisite power and authority to own, lease and operate its properties, except where the failureto qualify or be in good standing would not reasonably be expected to have a Material Adverse Effect. On a consolidated basis, the Company and itsSubsidiaries conduct their business as described in the Disclosure Package and the Prospectus and each Subsidiary is duly qualified to transact business andis in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct ofbusiness, except where the failure to qualify or to be in good standing would not reasonably be expected to have a Material Adverse Effect. (k) Due Authorization and Enforceability. The Company has the full right, power and authority to enter into this Agreement and thePurchase Agreements, and to perform and discharge its obligations hereunder and thereunder; and each of this Agreement and the Purchase Agreements hasbeen duly authorized, executed and delivered by the Company, and constitutes a valid, legal and binding obligation of the Company, enforceable againstthe Company in accordance with its terms, except as rights to indemnity hereunder may be limited by federal or state securities laws and except as suchenforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject togeneral principles of equity and limitations on the granting of equitable remedies. (l) The Securities. The issuance of the Shares, the Warrants, the Warrant Shares, the Agent’s Warrant and the shares of Commonstock underlying the Agent’s Warrants (the “Agent’s Warrants Shares”) has been duly and validly authorized by the Company and, when issued, deliveredand paid for in accordance with the terms of this Agreement and the Purchase Agreements, will have been duly and validly issued and will be fully paid andnonassessable, will not be subject to any statutory or contractual preemptive rights or other rights to subscribe for or purchase or acquire any shares ofCommon Stock of the Company that have not been waived or complied with, and will conform in all material respects to the description thereof contained inthe Disclosure Package and the Prospectus and such description conforms in all material respects to the rights set forth in the instruments defining the same. 7  (m) The Warrants. The issuance of the Warrants and the Warrant Shares upon exercise of the Warrants (assuming no change inapplicable law prior to the date the Agent’s Warrant Shares are issued), are and will be exempt from the registration and prospectus delivery requirements ofthe Securities Act and have been or will be registered or qualified (or are or will be exempt from registration and qualification) under the registration, permitor qualification requirements of all applicable state securities laws. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf,has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would requireregistration under the Securities Act of the issuance of the Warrants. Upon the exercise of the Warrants pursuant to their terms, the Warrant Shares will bequoted on the Principal Market. The Agent may rely on any representations and warranties made by the Company to the purchasers of the Warrants. (n) Capitalization. The authorized capital stock of the Company consists of (i) 100,000,000 shares of Common Stock, of which (A)25,714,545 shares were issued and outstanding as of the date of this Agreement, and (B) 4,904,774 were reserved for issuance upon the exercise orconversion, as the case may be, of outstanding options, warrants or other convertible securities as of the date of this Agreement; and (ii) 10,000,000 shares ofpreferred stock, none of which were issued and outstanding as of the date of this Agreement, and none are outstanding or reserved for issuance upon theexercise or conversion, as the case may be, of outstanding options, warrants or other convertible securities. All issued and outstanding shares of CommonStock have been duly authorized and validly issued, are fully paid and nonassessable, were not issued in violation of any preemptive rights or similar rightsto subscribe for or purchase securities, and, except as disclosed in the Company SEC Documents, have been issued and sold in compliance with theregistration requirements of federal and state securities laws or the applicable statutes of limitation have expired. Except as set forth in the Disclosure Packageand the Prospectus, there are no (i) outstanding rights (including, without limitation, preemptive rights), warrants or options to acquire, or instrumentsconvertible into or exchangeable for, any issued and unissued shares of capital stock or other equity interest in the Company, or any contract, commitment,agreement, understanding or arrangement of any kind to which the Company or its subsidiaries is a party and relating to the issuance or sale of any capitalstock or convertible or exchangeable security of the Company or its subsidiaries; or (ii) obligations of the Company to purchase redeem or otherwise acquireany of its outstanding capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof or other ownershipinterests of each Subsidiary of the Company (i) have been duly authorized and validly issued, (ii) are fully paid and non-assessable and (iii) are owned by theCompany directly or through Subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity except as described inthe Disclosure Package and the Prospectus and except for such security interests, mortgages, pledges, liens, encumbrances, claims or equities that would not,individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. There are no anti-dilution or price adjustment provisions, co-salerights, registration rights, rights of first refusal or other similar rights contained in the terms governing any outstanding security of the Company that will betriggered by the issuance of the Securities, the Agent’s Warrants or the Agent’s Warrant Shares. 8  (o) No Conflict. The execution, delivery and performance by the Company of this Agreement and the Purchase Agreements, and theconsummation of the transactions contemplated hereby and thereby, including the issuance and sale of the Securities, the Agent’s Warrants and the Agent’sWarrant Shares by the Company, will not conflict with or result in a breach or violation of, or constitute a default under (nor constitute any event which withor without notice, lapse of time or both would result in any breach or violation of or constitute a default under), give rise to any right of termination or otherright or the cancellation or acceleration of any right or obligation or loss of a benefit under, or give rise to the creation or imposition of any lien,encumbrance, security interest, claim or charge upon any property or assets of the Company pursuant to (i) any indenture, mortgage, deed of trust, loanagreement or other agreement or instrument to which the Company is a party or by which the Company or any of its properties may be bound or to which anyof its property or assets is subject, (ii) result in any violation of the provisions of the charter or bylaws of the Company, or (iii) result in any violation of anylaw, statute, rule, regulation, judgment, order or decree of any court or governmental agency or body, domestic or foreign, having jurisdiction over theCompany or any of its properties or assets, except in the case of clauses (i) and (iii) as would not, individually or in the aggregate, reasonably be expected tohave a Material Adverse Effect. (p) No Consents Required. No approval, authorization, consent or order of or filing, qualification or registration with, any court orgovernmental agency or body, foreign or domestic, which has not been made, obtained or taken and is not in full force and effect, is required in connectionwith the Company’s execution, delivery and performance of this Agreement, the Warrants, the Agent’s Warrants or the Purchase Agreements, theconsummation by the Company of the transactions contemplated hereby or thereby or the issuance and sale of the Securities, the Agent’s Warrants and theAgent’s Warrant Shares other than (i) as may be required under the Securities Act (including the filing with the Commission of a prospectus supplement), (ii)the filing of a Form 8-K disclosing the transaction contemplated hereby, (iii) any necessary qualification of the Securities, the Agent’s Warrants and theAgent’s Warrant Shares under the securities or blue sky laws of the various jurisdictions in which the Securities, the Agent’s Warrants and the Agent’sWarrant Shares are being offered by the Placement Agent, or (iv) under the rules and regulations of the Financial Industry Regulatory Authority (“FINRA”). (q) Preemptive Rights. There are no preemptive rights or other rights (other than rights which have been waived in writing inconnection with the transactions contemplated by this Agreement or otherwise satisfied) to subscribe for or to purchase any shares of Common Stock orshares of any other capital stock or other equity interests of the Company, or any agreement or arrangement between the Company and any of the Company’sstockholders, or to the Company’s knowledge, between or among any of the Company’s stockholders, which grant special rights with respect to any shares ofthe Company’s capital stock or which in any way affect any stockholder’s ability or right to alienate freely or vote such shares. (r) Registration Rights. There are no contracts, agreements or understandings between the Company and any person granting suchperson the right (other than rights which have been waived in writing in connection with the transactions contemplated by this Agreement or otherwisesatisfied) to require the Company to register any securities with the Commission. 9  (s) Independent Accountants. KPMG, LLP and Marcum LLC, whose reports on the consolidated financial statements of theCompany are incorporated by reference in the Registration Statement, the Prospectus and the Disclosure Package, is (i) an independent public accountingfirm within the meaning of the Securities Act, (ii) a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002 (the“Sarbanes-Oxley Act”)), and (iii) to the Company’s knowledge, not in violation of the auditor independence requirements of the Sarbanes-Oxley Act. Exceptas disclosed in the Registration Statement and as pre-approved in accordance with the requirements set forth in Section 10A of the Exchange Act, KPMG,LLP and Marcum LLC have not been engaged by the Company to perform any “prohibited activities” (as defined in Section 10A of the Exchange Act). (t) Financial Statements. The consolidated financial statements of the Company, together with the related schedules and notes thereto,set forth or incorporated by reference in the Registration Statement, the Prospectus and the Disclosure Package comply in all material respects with theapplicable requirements of the Securities Act and the Exchange Act, as applicable, and present fairly in all material respects (i) the financial condition of theCompany as of the dates indicated and (ii) the consolidated results of operations, stockholders’ equity and changes in cash flows of the Company for theperiods therein specified; and such financial statements and related schedules and notes thereto have been prepared in conformity with United Statesgenerally accepted accounting principles, consistently applied throughout the periods involved (except as otherwise stated therein and subject, in the case ofunaudited financial statements, to the absence of footnotes and normal year-end adjustments). There are no other financial statements (historical or pro forma)that are required to be included or incorporated by reference in the Registration Statement, the Prospectus or the Disclosure Package; and the Company doesnot have any material liabilities or obligations, direct or contingent (including any off-balance sheet obligations), not disclosed in the RegistrationStatement, the Disclosure Package and the Prospectus; and all disclosures contained in the Registration Statement, the Disclosure Package and the Prospectusregarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply with Regulation G of theExchange Act and Item 10(e) of Regulation S-K under the Securities Act, to the extent applicable, and present fairly the information shown therein and theCompany’s basis for using such measures. (u) Absence of Material Changes. Subsequent to the respective dates as of which information is given in the Registration Statement,the Statutory Prospectus and the Disclosure Package, and except as may be otherwise stated or incorporated by reference in the Registration Statement, theStatutory Prospectus and the Disclosure Package, there has not been (i) any Material Adverse Effect, (ii) any transaction which is material to the Companyand out of the ordinary course of business, (iii) any obligation, direct or contingent (including any off-balance sheet obligations), incurred by the Company,which is material to the Company, (iv) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company, (v) any changein the capital stock (other than a change in the number of outstanding shares of Common Stock due to the issuance of shares upon the exercise of outstandingoptions or warrants or the conversion of convertible indebtedness), or material change in the short-term debt or long-term debt of the Company (other thanupon conversion of convertible indebtedness) or any issuance of options, warrants, convertible securities or other rights to purchase the capital stock (otherthan grants of stock options under the Company’s stock option plans existing on the date hereof and consistent with past practice) of the Company. 10  (v) Legal Proceedings. There are no legal or governmental actions, suits, claims or proceedings pending or, to the Company’sknowledge, threatened or contemplated to which the Company or any Subsidiary is or would be a party or of which any of their respective properties is orwould be subject at law or in equity, before or by any federal, state, local or foreign governmental or regulatory commission, board, body, authority oragency, or before or by any self-regulatory organization or other non-governmental regulatory authority which are required to be described in theRegistration Statement, the Disclosure Package or the Prospectus or a document incorporated by reference therein and are not so described therein, or which,singularly or in the aggregate, if resolved adversely to the Company or any Subsidiary, would reasonably be likely to have a Material Adverse Effect orprevent or materially and adversely affect the ability of the Company to consummate the transactions contemplated hereby. To the Company’s knowledge,no such proceedings are threatened or contemplated by governmental authorities or threatened by other third parties. (w) No Violation. Neither the Company nor any Subsidiary is in breach or violation of or in default (nor has any event occurredwhich with notice, lapse of time or both would result in any breach or violation of, or constitute a default) (i) under the provisions of its respective charter orbylaws (or analogous governing instrument, as applicable), (ii) in the performance or observance of any term, covenant, obligation, agreement or conditioncontained in any indenture, mortgage, deed of trust, bank loan or credit agreement or other evidence of indebtedness, or any license, lease, contract or otheragreement or instrument to which the Company or any Subsidiary is a party or by which any of their respective properties may be bound or affected, or (iii) inthe performance or observance of any statute, law, rule, regulation, ordinance, judgment, order or decree of any court, regulatory body, administrative agency,governmental body, arbitrator or other authority having jurisdiction over the Company or any Subsidiary or any of their respective properties, as applicable,except with respect to clauses (ii) and (iii) to the extent any such breach, violation or default has been waived or would not reasonably be expected to have aMaterial Adverse Effect. (x) Permits. The Company and its Subsidiaries have made all material filings, applications and submissions required by, and ownsor possesses all material approvals, licenses, certificates, certifications, clearances, consents, exemptions, marks, notifications, orders, permits and otherauthorizations issued by, the appropriate federal, state or foreign regulatory authorities, necessary to conduct their business as described in the DisclosurePackage (collectively, “Permits”), and is in compliance in all material respects with the terms and conditions of all such Permits. All such Permits are validand in full force and effect. Neither the Company nor any Subsidiary has received any notice of any proceedings relating to revocation or modification of,any such Permit, which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would have a Material Adverse Effect.Except as may be required under the Securities Act and state and foreign Blue Sky laws and the rules and regulations of FINRA, no other Permits are requiredfor the Company to enter into, deliver and perform this Agreement and to issue and sell the Securities, the Agent’s Warrants and the Agent’s Warrant Shares tobe issued and sold by the Company. (y) Not an Investment Company. Neither the Company nor any Subsidiary is or, after giving effect to the offering and sale of theSecurities and the Agent’s Warrant Shares and the application of the proceeds thereof as described in the Disclosure Package and the Prospectus, will be (i)required to register as an “investment company” as defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”), and therules and regulations of the Commission thereunder or (ii) a “business development company” (as defined in Section 2(a)(48) of the Investment CompanyAct). 11  (z) No Price Stabilization. Neither the Company or any of the Company’s officers or directors, has taken or will take, directly orindirectly, any action designed to or that might be reasonably expected to cause or result in, or which has constituted or which might reasonably be expectedto constitute the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities, the Agent’sWarrants and the Agent’s Warrant Shares. (aa) Good Title to Property. The Company and its Subsidiaries have good and valid title to all property (whether real or personal)described in the Registration Statement, the Disclosure Package and the Prospectus as being owned by the Company or any Subsidiary, in each case free andclear of all liens, claims, security interests, other encumbrances or defects (collectively, “Liens”), except such as are described in the Registration Statement,the Disclosure Package and the Prospectus and those that would not, individually or in the aggregate materially affect the value of such property and do notmaterially interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries. All of the property described in theRegistration Statement, Disclosure Package and the Prospectus as being held under lease by the Company or any Subsidiary is held thereby under valid,subsisting and enforceable leases, without any liens, restrictions, encumbrances or claims, except those that, individually or in the aggregate, are not materialand do not materially interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries. (bb) Intellectual Property Rights. The Company and its Subsidiaries own or possess the right to use all patents, trademarks, trademarkregistrations, service marks, service mark registrations, trade names, copyrights, licenses, inventions, software, databases, know-how, Internet domain names,trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures, and other intellectual property(collectively, “Intellectual Property”) necessary to carry on their businesses as currently conducted, and as proposed to be conducted as described in theDisclosure Package and the Prospectus, and the Company is not aware of any claim to the contrary or any challenge by any other person to the rights of theCompany or any Subsidiary with respect to the foregoing except for those that could not have a Material Adverse Effect. The Intellectual Property licensesdescribed in the Disclosure Package and the Prospectus are, to the knowledge of the Company, valid, binding upon, and enforceable by or against the partiesthereto in accordance with their terms. The Company and its Subsidiaries have complied in all material respects with, and are not in breach nor have theyreceived any asserted or threatened claim of breach of, any Intellectual Property license, and the Company has no knowledge of any breach or anticipatedbreach by any other person of any Intellectual Property license. The business of the Company and its Subsidiaries as now conducted and as proposed to beconducted, to the knowledge of the Company, does not and will not infringe or conflict with any patents, trademarks, service marks, trade names, copyrights,trade secrets, licenses or other Intellectual Property or franchise right of any person. Neither the Company nor any Subsidiary has received notice of any claimagainst the Company or any Subsidiary alleging the infringement by the Company or any Subsidiary of any patent, trademark, service mark, trade name,copyright, trade secret, license in or other intellectual property right or franchise right of any person. The Company and its Subsidiaries have taken allreasonable steps to protect, maintain and safeguard their rights in all Intellectual Property, including the execution of appropriate nondisclosure andconfidentiality agreements. The consummation of the transactions contemplated by this Agreement will not result in the loss or impairment of or payment ofany additional amounts with respect to, nor require the consent of any other person in respect of, the right of the Company or any Subsidiary to own, use, orhold for use any of the Intellectual Property as owned, used or held for use in the conduct of the businesses as currently conducted. To the Company’sknowledge, no employee of the Company or any Subsidiary is the subject of any claim or proceeding involving a violation of any term of any employmentcontract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement orany restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company or anySubsidiary or actions undertaken by the employee while employed with the Company or any Subsidiary. All patent applications owned by the Company andfiled with the U.S. Patent and Trademark Office (the “PTO”) or any foreign or international patent authority that have resulted in patents or currently pendingapplications that describe inventions necessary to conduct the business of the Company in the manner described in the Disclosure Package (collectively, the“Company Patent Applications”) have been or were duly and properly filed. The Company has complied with its duty of candor and disclosure to the PTOfor the Company Patent Applications. The Company is not aware of any facts required to be disclosed to the PTO that were not disclosed to the PTO andwhich would preclude the grant of a patent for the Company Patent Applications. The Company has no knowledge of any facts which would preclude it fromhaving clear title to the Company Patent Applications that have been identified by the Company as being exclusively owned by the Company. 12  (cc) No Labor Disputes. No labor problem or dispute with the employees of the Company or any Subsidiary exists, or, to theCompany’s knowledge, is threatened or imminent, which would reasonably be expected to result in a Material Adverse Effect. The Company is not aware thatany key employee or significant group of employees of the Company or any Subsidiary plans to terminate employment with the Company or suchSubsidiary. The Company and its Subsidiaries have not engaged in any unfair labor practice that, individually or in the aggregate, reasonably be expected tohave a Material Adverse Effect; except for matters which would not, individually or in the aggregate, reasonably be expected to have a Material AdverseEffect, (i) there is (A) no unfair labor practice complaint pending or, to the Company’s knowledge, threatened against the Company or any Subsidiary beforethe National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under collective bargaining agreements is pending or to theCompany’s knowledge, threatened, (B) no strike, labor dispute, slowdown or stoppage pending or, to the Company’s knowledge, threatened against theCompany or any Subsidiary and (C) no union representation dispute currently existing concerning the employees of the Company or any Subsidiary and (ii)to the Company’s knowledge, (A) no union organizing activities are currently taking place concerning the employees of the Company or any Subsidiary and(B) there has been no violation of any federal, state, local or foreign law relating to discrimination in the hiring, promotion or pay of employees, anyapplicable wage or hour laws or any provision of the Employee Retirement Income Security Act of 1974 (“ERISA”) or the rules and regulations promulgatedthereunder concerning the employees of the Company or any Subsidiary. (dd) Taxes. Each of the Company and its Subsidiaries (i) has timely filed all necessary federal, state, local and foreign income andfranchise tax returns (or timely filed applicable extensions therefor) that have been required to be filed and (ii) is not in default in the payment of any taxeswhich were payable pursuant to such returns or any assessments with respect thereto, other than any which the Company or such Subsidiary is contesting ingood faith and for which adequate reserves have been provided and reflected in the Company’s financial statements included in the Registration Statement,the Disclosure Package and the Prospectus. Neither the Company nor any Subsidiary has any tax deficiency that has been or, to the knowledge of theCompany, is reasonably likely to be asserted or threatened against it that would result in a Material Adverse Effect. Neither the Company nor any Subsidiaryhas engaged in any transaction which is a corporate tax shelter or which could be characterized as such by the Internal Revenue Service or any other taxingauthority. 13  (ee) ERISA. The Company and its Subsidiaries are in compliance in all material respects with all presently applicable provisions ofERISA; no “reportable event” (as defined in ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for which the Company or anySubsidiary would have any liability; the Company and its Subsidiaries have not incurred and do not expect to incur liability under (i) Title IV of ERISA withrespect to termination of, or withdrawal from, any “pension plan” or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, includingthe regulations and published interpretations thereunder (the “Code”); and each “pension plan” for which the Company or any Subsidiary would have anyliability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by actionor by failure to act, which would cause the loss of such qualification. (ff) Compliance with Environmental Laws. Each of the Company and its Subsidiaries (i) is in compliance with any and allapplicable foreign, federal, state and local laws, orders, rules, regulations, directives, decrees and judgments relating to the use, treatment, storage anddisposal of hazardous or toxic substances or waste and protection of human health and safety or the environment which are applicable to its business(“Environmental Laws”); (ii) has received and is in compliance with all permits, licenses or other approvals required of it under applicable EnvironmentalLaws to conduct its business; and (iii) is in compliance with all terms and conditions of any such permit, license or approval, except where suchnoncompliance with Environmental Laws, failure to receive required permits, licenses or other approvals or failure to comply with the terms and conditionsof such permits, licenses or approvals would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. There are nocosts or liabilities associated with Environmental Laws (including, without limitation, any capital or operating expenditures required for clean-up, closure ofproperties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potentialliabilities to third parties) which would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (gg) Insurance. Each of the Company and its Subsidiaries maintains or is covered by insurance provided by recognized, financiallysound and reputable institutions with insurance policies in such amounts and covering such risks as is adequate for the conduct of its business and the valueof its properties and as is customary for companies engaged in similar businesses in similar industries. All such insurance is fully in force on the date hereofand will be fully in force as of the Closing Date. The Company has no reason to believe that each of it and its Subsidiaries will not be able to renew itsexisting insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue itsbusiness at a cost that would not reasonably be expected to have a Material Adverse Effect. The Company does not insure risk of loss of the Company or anyof its Subsidiaries through any captive insurance, risk retention group, reciprocal group or by means of any fund or pool of assets specifically set aside forcontingent liabilities other than as described in the Disclosure Package. 14  (hh) Accounting Controls. The Company maintains a system of internal accounting controls for the Company and its Subsidiariessufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorization;(ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and tomaintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) therecorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (ii) Disclosure Controls. The Company has established, maintains and evaluates “disclosure controls and procedures” (as such termis defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act), which (i) are designed to ensure that material information relating to the Company andits Subsidiaries is made known to the Company’s principal executive officer and its principal financial officer by others within those entities, particularlyduring the periods in which the periodic reports required under the Exchange Act are being prepared, (ii) have been evaluated for effectiveness as of the endof the last fiscal period covered by the Registration Statement; and (iii) such disclosure controls and procedures are effective to perform the functions forwhich they were established. There are no significant deficiencies or material weaknesses in the design or operation of internal controls which couldadversely affect the Company’s ability to record, process, summarize, or report financial data to management and the Board of Directors of the Company. TheCompany is not aware of any fraud, whether or not material, that involves management or other employees who have a role in the Company’s internalcontrols; and since the date of the most recent evaluation of such disclosure controls and procedures, there have been no significant changes in internalcontrols or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies andmaterial weaknesses. Except as set forth in the Disclosure Package, the Audit Committee of the Board of Directors of the Company (the “Audit Committee”) isnot reviewing or investigating, and neither the Company’s independent auditors nor its internal auditors have recommended that the Audit Committeereview or investigate, (i) adding to, deleting, changing the application of or changing the Company’s disclosure with respect to, any of the Company’smaterial accounting policies, (ii) any manner which could result in a restatement of the Company’s financial statements for any annual or interim periodduring the current or prior three fiscal years, or (iii) a significant deficiency, material weakness, change in internal control over financial reporting or fraudinvolving management or other employees who have a significant role in the internal control over financial reporting. (jj) Minute Books. The minute books of the Company and each Subsidiary have been made available upon request to thePlacement Agent and counsel for the Placement Agent, and such books (i) contain a complete summary of all meetings and actions of the board of directors(including each board committee) and stockholders of the Company and its Subsidiaries (or analogous governing bodies and interest holders, as applicable),and (ii) accurately in all material respects reflect all transactions referred to in such minutes. 15  (kk) Contracts; Off-Balance Sheet Interests. There is no document, contract, permit or instrument, or off-balance sheet transaction(including without limitation, any “variable interests” in “variable interest entities,” as such terms are defined in Financial Accounting Standards BoardInterpretation No. 46) of a character required by the Securities Act or the Rules and Regulations to be described in the Registration Statement or theDisclosure Package or to be filed as an exhibit to the Registration Statement or document incorporated by reference therein, which is not described or filed asrequired. Each description of a document, contract, permit or instrument in the Registration Statement or the Disclosure Package accurately reflects in allmaterial respects the terms of the underlying document, contract, permit or instrument. The documents, contracts, permits and instruments described in theimmediately preceding sentence to which the Company or any Subsidiary is a party have been duly authorized, executed and delivered by the Company orsuch Subsidiary, constitute valid and binding agreements of the Company or such Subsidiary, are enforceable against and by the Company or suchSubsidiary in accordance with the terms thereof, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similarlaws affecting the rights of creditors generally and subject to general principles of equity, and are in full force and effect on the date hereof. None of theCompany, any Subsidiary, or to the Company’s knowledge, any other party is in default in the observance or performance of any term or obligation to beperformed by it under any such agreement, and no event has occurred which with notice or lapse of time or both would constitute such a default, in any casewhich default or event, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. No default exists, and no event hasoccurred which with notice or lapse of time or both would constitute a default, in the due performance and observance of any term, covenant or condition, bythe Company or any Subsidiary of any agreement or instrument to which the Company or any Subsidiary is a party or by which the Company, any Subsidiaryor their respective properties or business may be bound or affected which default or event, individually or in the aggregate, would have a Material AdverseEffect. (ll) No Undisclosed Relationships. No relationship, direct or indirect, exists between or among the Company or any Subsidiary, onthe one hand, and the directors, officers, stockholders, customers or suppliers of the Company, any Subsidiary or any of their affiliates, on the other hand,which is required to be described in the Registration Statement, the Disclosure Package or the Prospectus or a document incorporated by reference therein andwhich has not been so described. (mm) Brokers Fees. Except as disclosed in the Disclosure Package, there are no contracts, agreements or understandings between theCompany and any person (other than this Agreement) that would give rise to a claim against the Company or the Placement Agent for a brokeragecommission, finder’s fee or other like payment in connection with the offering and sale of the Securities, the Agent’s Warrants and the Agent’s WarrantShares. (nn) Forward-Looking Statements. No forward-looking statements (within the meaning of Section 27A of the Securities Act andSection 21E of the Exchange Act) contained in either the Disclosure Package or the Prospectus have been made or reaffirmed without a reasonable basistherefor or have been disclosed other than in good faith. 16  (oo) Exchange Act Registration. The Common Stock is registered pursuant to Section 12(g) of the Exchange Act, and the Companyhas taken no action designed to, or reasonably likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act, nor hasthe Company received any notification that the Commission is contemplating terminating such registration or listing. (pp) Sarbanes-Oxley Act. The Company, and to its knowledge, each of the Company’s directors or officers, in their capacities as such,is in compliance in all material respects with all applicable effective provisions of the Sarbanes-Oxley Act and any related rules and regulations promulgatedby the Commission. Each of the principal executive officer and the principal financial officer of the Company (and each former principal executive officer ofthe Company and each former principal financial officer of the Company as applicable) has made all certifications required by Sections 302 and 906 of theSarbanes-Oxley Act with respect to all reports, schedules, forms, statements and other documents required to be filed by him or her with the Commission. Forpurposes of the preceding sentence, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in theSarbanes-Oxley Act. (qq) Foreign Corrupt Practices. None of the Company, any Subsidiary nor, to the Company’s knowledge, any other person associatedwith or acting on behalf of the Company or any Subsidiary, including without limitation any director, officer, agent or employee of the Company or anySubsidiary has, directly or indirectly, while acting on behalf of the Company or any Subsidiary (i) used any corporate funds for unlawful contributions, gifts,entertainment or other unlawful expenses relating to political activity or failed to disclose fully any contribution in violation of law, (ii) made any paymentto any federal or state governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required orpermitted by the laws of the United States or any jurisdiction thereof, (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Actof 1977, as amended or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. (rr) Affiliate Transactions. There are no transactions, arrangements or other relationships between and/or among the Company, anyof its affiliates (as such term is defined in Rule 405) and any unconsolidated entity, including, but not limited to, any structured finance, special purpose orlimited purpose entity that could reasonably be expected to materially affect the Company’s liquidity or the availability of or requirements for its capitalresources required to be described in the Disclosure Package and the Prospectus or a document incorporated by reference therein which have not beendescribed as required. The Company does not, directly or indirectly, have any outstanding personal loans or other credit extended to or for any of its directorsor executive officers. (ss) Statistical or Market-Related Data. Any statistical, industry-related or market-related data included or incorporated by referencein the Registration Statement, the Prospectus or the Disclosure Package, are based on or derived from sources that the Company reasonably and in good faithbelieves to be reliable and accurate, and such data agree with the sources from which they are derived. 17  (tt) Money Laundering Laws. The operations of the Company and its Subsidiaries are and have been conducted at all times incompliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions ReportingAct of 1970, as amended, the USA PATRIOT Act, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related orsimilar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and noaction, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any Subsidiary withrespect to the Money Laundering Laws is pending, or to the knowledge of the Company, threatened against the Company or any Subsidiary. (uu) OFAC. Neither the Company nor any Subsidiary nor, to the knowledge of the Company, any director, officer, agent, employee oraffiliate of the Company or any Subsidiary is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. TreasuryDepartment (“OFAC”); and the Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available suchproceeds to any affiliate, joint venture partner or other person or entity, which, to the Company’s knowledge, will use such proceeds for the purpose offinancing the activities of any person currently subject to any U.S. sanctions administered by OFAC. (vv) Margin Securities. None of the proceeds of the sale of the Securities, the Agent’s Warrants and the Agent’s Warrant Shares willbe used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness whichwas originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Securities, the Agent’s Warrants or theAgent’s Warrant Shares to be considered a “purpose credit” within the meanings of Regulation T, U or X of the Board of Governors of the Federal ReserveSystem. (ww) FINRA Affiliations. There are no affiliations or associations between (i) any member of the FINRA and (ii) the Company, anySubsidiary or any officers or directors of the Company or any Subsidiary, except as set forth in the Registration Statement, the Disclosure Package and theProspectus. (xx) Exchange Act Requirements. The Company has filed in a timely manner all reports required to be filed pursuant to Sections13(a), 13(e), 14 and 15(d) of the Exchange Act during the preceding 12 months. (yy) Criminal Proceedings. To the best of the Company’s knowledge, information and belief, none of the current directors or officersof the Company (or such stockholders’ respective principals) is or has ever been subject to prior regulatory, criminal or bankruptcy proceedings in the U.S. orelsewhere. (zz) Non-public Information. The Company has not provided and has not authorized any other person to act on its behalf to provideany Investor or its respective agents or counsel with any information about the Company that constitutes or might constitute material, non-publicinformation which is not otherwise disclosed in the Prospectus. 18  Any certificate signed by any officer of the Company or any Subsidiary and delivered to the Placement Agent or to counsel for the Placement Agentin connection with the offering of the Securities shall be deemed a representation and warranty by the Company to the Placement Agent and the Investors asto the matters covered thereby. 3. Covenants. The Company covenants and agrees with the Placement Agent as follows: (a) Reporting Obligations; Exchange Act Compliance. The Company will: (i) file each Preliminary Prospectus and the Prospectuswith the Commission within the time periods specified by Rule 424(b) and Rules 430A, 430B or 430C under the Securities Act, as applicable, (ii) file anyIssuer Free Writing Prospectus to the extent required by Rule 433 under the Securities Act, if applicable, (iii) file all reports and any definitive proxy orinformation statements required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Actsubsequent to the date of the Prospectus during the Prospectus Delivery Period, and (iv) furnish copies of each Issuer Free Writing Prospectus, if any, (to theextent not previously delivered) to the Placement Agent prior to 10:00 a.m. Eastern time, on the second business day next succeeding the date of thisAgreement in such quantities as the Placement Agent shall reasonably request. (b) Continued Compliance with Securities Law. If, at any time prior to the filing of the Prospectus pursuant to Rule 424(b), anyevent occurs as a result of which the Disclosure Package as then amended or supplemented would include an untrue statement of a material fact or omit tostate any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Companywill (i) promptly notify the Placement Agent so that any use of the Disclosure Package may cease until it is amended or supplemented and (ii) amend orsupplement the Disclosure Package to correct such statements or omission. If, during the Prospectus Delivery Period, any event occurs as a result of which theProspectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary to make thestatements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the RegistrationStatement or supplement the Prospectus to comply with the Securities Act, the Company will (A) promptly notify the Placement Agent of such event and (B)promptly prepare and file with the Commission and furnish, at its own expense, to the Placement Agent and, to the extent applicable, the dealers and anyother dealers upon request of the Placement Agent, an amendment or supplement which will correct such statement or omission or an amendment which willeffect such compliance. The Company will deliver promptly to the Placement Agent such number of the following documents as the Placement Agent shallreasonably request: (i) conformed copies of the Registration Statement as originally filed with the Commission (in each case excluding exhibits), (ii) eachPreliminary Prospectus, (iii) any Issuer Free Writing Prospectus, (iv) the Prospectus (the delivery of the documents referred to in clauses (i), (ii), (iii) and(iv) of this subsection (b) to be made not later than 10:00 a.m., New York time, on the business day following the execution and delivery of this Agreement),(v) conformed copies of any amendment to the Registration Statement (excluding exhibits), (vi) any amendment or supplement to the Disclosure Package orthe Prospectus (the delivery of the documents referred to in clauses (v) and (vi) of this subsection (b) to be made not later than 10:00 a.m., New York Citytime, on the business day following the date of such amendment or supplement), and (vii) any document incorporated by reference in the Disclosure Packageor the Prospectus (excluding exhibits thereto) (the delivery of the documents referred to in clause (vi) of this subsection (b) to be made not later than10:00 a.m., New York City time, on the business day following the date of such document). 19  (c) Issuer Free Writing Prospectuses. The Company will (i) not make any offer relating to the Securities, the Agent’s Warrants andthe Agent’s Warrant Shares that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus” (as definedin Rule 405 under the Securities Act) required to be filed by the Company with the Commission under Rule 433 under the Securities Act unless thePlacement Agent approve its use in writing prior to first use (each, a “Permitted Free Writing Prospectus”); provided that the prior written consent of thePlacement Agent shall be deemed to have been given in respect of any electronic road show; (ii) treat each Permitted Free Writing Prospectus as an Issuer FreeWriting Prospectus; (iii) comply with the requirements of Rules 164 and 433 under the Securities Act applicable to any Issuer Free Writing Prospectus,including the requirements relating to filing timely with the Commission, legending and record keeping; and (iv) not take any action that would result in thePlacement Agent or the Company being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectusprepared by or on behalf of such Placement Agent that such Placement Agent otherwise would not have been required to file thereunder. The Company willsatisfy the conditions in Rule 433 under the Securities Act to avoid a requirement to file with the Commission any electronic road show. (d) Conflicting Issuer Free Writing Prospectus. If at any time following the issuance of an Issuer Free Writing Prospectus thereoccurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the informationcontained in the Registration Statement, the Disclosure Package or the Prospectus or included or would include an untrue statement of a material fact oromitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequenttime, not misleading, the Company promptly will notify the Placement Agent and will promptly amend or supplement, at its own expense, such Issuer FreeWriting Prospectus to eliminate or correct such conflict, untrue statement or omission. The foregoing sentence does not apply to statements in or omissionsfrom any Issuer Free Writing Prospectus in reliance upon, and in conformity with, written information furnished to the Company by the Placement Agentspecifically for inclusion therein, which information the parties hereto agree is limited to the Placement Agent’s Information. (e) Blue Sky Laws. The Company will promptly take or cause to be taken, from time to time, such actions as the Placement Agentmay reasonably request to qualify the Securities, the Agent’s Warrants and the Agent’s Warrant Shares for offering and sale under the state securities, or bluesky, laws of such states or other jurisdictions as the Placement Agent may reasonably request and to maintain such qualifications in effect so long as thePlacement Agent may request for the distribution of the Securities, the Agent’s Warrants and the Agent’s Warrant Shares, provided that in no event shall theCompany be obligated to qualify as a foreign corporation in any jurisdiction in which it is not so qualified or to file a general consent to service of process inany jurisdiction or subject itself to taxation as doing business in any jurisdiction. The Company will advise the Placement Agent promptly of the suspensionof the qualification or registration of (or any exemption relating to) the Securities, the Agent’s Warrants and the Agent’s Warrant Shares for offering, sale ortrading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending suchqualification, registration or exemption, the Company shall use its best efforts to obtain the withdrawal thereof at the earliest possible moment. 20  (f) Earnings Statement. As soon as practicable, the Company will make generally available to holders of its securities and deliver tothe Placement Agent, an earnings statement of the Company (which need not be audited) covering a period of at least 12 months beginning after the date ofthis Agreement that will satisfy the provisions of Section 11(a) of the Securities Act and the Rules and Regulations (including, at the option of the Company,Rule 158). For the purpose of the preceding sentence, “as soon as practicable” means the 45th day after the end of the fourth fiscal quarter following the fiscalquarter that includes the date of this Agreement, except that if such fourth fiscal quarter is the last quarter of the Company’s fiscal year, “as soon aspracticable” means the 90th day after the end of such fourth fiscal quarter. (g) Use of Proceeds. The Company will apply the net proceeds from the sale of the Securities in the manner set forth in theRegistration Statement, the Disclosure Package and the Prospectus under the heading “Use of Proceeds.” (h) Public Communications. Prior to 9:00 a.m. New York City time on the business day immediately subsequent to the date hereof,the Company shall issue a press release (the “Press Release”) reasonably acceptable to the Placement Agent disclosing the execution of this Agreement, thePurchase Agreements and the transactions contemplated hereby and thereby. Prior to the Closing Date, the Company covenants not to issue any press release(other than the Press Release) or other communication directly or indirectly or hold any press conference with respect to the Company, its condition, financialor otherwise, or earnings, business affairs or business prospects (except for routine oral marketing communications in the ordinary course of business andconsistent with the past practices of the Company and of which the Placement Agent are notified), without the prior written consent of the Placement Agent,unless in the judgment of the Company and its counsel, and after notification to the Placement Agent, such press release or communication is required bylaw. (i) Stabilization. The Company will not take directly or indirectly any action designed, or that would reasonably be expected tocause or result in, or that will constitute, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of theSecurities, the Agent’s Warrants and the Agent’s Warrant Shares. (j) Transfer Agent. The Company shall engage and maintain, at its expense, a transfer agent and, if necessary under the jurisdictionof incorporation of the Company, a registrar for the Securities and the Agent’s Warrant Shares. 21  (k) Investment Company Act. The Company shall not invest or otherwise use the proceeds received by the Company from its sale ofthe Securities in such a manner as would require the Company or any Subsidiary to register as an investment company under the Investment Company Act. (l) Sarbanes-Oxley Act. During the Prospectus Delivery Period, the Company will comply with all effective applicable provisionsof the Sarbanes Oxley Act. (m) Periodic Reports. During the Prospectus Delivery Period, the Company will file with the Commission such periodic and specialreports as required by the Securities Act. (n) Lock-Up Period. That the Company will not, for a period of 90 days from the date of this Agreement, (the “Lock-Up Period”)without the prior written consent of the Placement Agent, directly or indirectly offer, sell, assign, transfer, pledge, contract to sell, grant any option topurchase, make any short sale or otherwise dispose of, any shares of Common Stock or any securities convertible into or exercisable or exchangeable forCommon Stock, other than (i) the Company’s sale of the Securities, the Agent’s Warrants and the Agent’s Warrant Shares hereunder, (ii) the issuance ofCommon Stock or options to acquire Common Stock pursuant to the Company’s employee benefit plans, qualified stock option plans or other director oremployee compensation plans as such plans are in existence on the date hereof and described in the Prospectus and consistent with past practice, and (iii) theissuance of Common Stock pursuant to the valid exercises of options, warrants or rights outstanding on the date hereof and the Agent’s Warrants. TheCompany will cause each executive officer and director listed in Schedule III to furnish to the Placement Agent, prior to the date of this Agreement, a letter,substantially in the form of Exhibit hereto. The Company also agrees that during the Lock-Up Period, without prior written consent of the Placement Agent,the Company will not file any registration statement, preliminary prospectus or prospectus, or any amendment or supplement thereto (collectively, “Filings”),under the Securities Act for any such transaction or which registers, or offers for sale, Common Stock or any securities convertible into or exercisable orexchangeable for Common Stock, except for (i) registration statements on Form S-8 relating to employee benefit plans and (ii) any amendments orprospectuses or supplements relating to previously filed registration statements (provided that no additional shares of common stock are issued pursuant tosuch amendments, prospectuses or supplements). 4. Costs and Expenses. In addition to the Agency Fee, the Company, whether or not the transactions contemplated hereunder areconsummated or this Agreement is terminated, will reimburse the Placement Agent for (a) all reasonable fees and disbursements of counsel retained by thePlacement Agent with the Company’s consent, (b) all of the Placement Agent’s reasonable travel and related expenses, and (c) any other reasonable out-of-pocket expenses incurred by the Placement Agent in connection with the performance of their services hereunder; provided that, in any event, reimbursementof expenses pursuant to this Section 4 will not exceed $100,000 in the aggregate without the Company’s approval. 22  5. Conditions of Placement Agent’s Obligations. The obligations of the Placement Agent hereunder and the Investors under the PurchaseAgreements are subject to the following conditions: (a) Filings with the Commission. Each Issuer Free Writing Prospectus, if any, and the Prospectus shall have been filed with theCommission within the applicable time period prescribed for such filing by, and in compliance with, the Rules and Regulations and in accordance withSection 3(a) hereof. (b) No Stop Orders. Prior to the Closing: (i) no stop order suspending the effectiveness of the Registration Statement or any partthereof, preventing or suspending the use of the Prospectus or any Issuer Free Writing Prospectus or any part thereof shall have been issued under theSecurities Act and no proceedings for that purpose or pursuant to Section 8A under the Securities Act shall have been initiated or threatened by theCommission, (ii) no order suspending the qualification or registration of the Securities under the securities or blue sky laws of any jurisdiction shall be ineffect, and (iii) all requests for additional information on the part of the Commission (to be included or incorporated by reference in the RegistrationStatement, the Disclosure Package, the Prospectus or any Issuer Free Writing Prospectus or otherwise) shall have been complied with to the reasonablesatisfaction of the Placement Agent. On or prior to the Closing Date, the Registration Statement or any amendment thereof or supplement thereto shall notcontain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein notmisleading, and neither the Disclosure Package, nor any Issuer Free Writing Prospectus nor the Prospectus nor any amendment thereof or supplement theretoshall contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, inlight of the circumstances in which they were made, not misleading. (c) Action Preventing Issuance. No action shall have been taken and no law, statute, rule, regulation or order shall have beenenacted, adopted or issued by any governmental agency or body which would prevent the issuance or sale of the Securities, the Agent’s Warrants and theAgent’s Warrant Shares or materially and adversely affect or potentially materially and adversely affect the business or operations of the Company; and noinjunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued which would preventthe issuance or sale of the Securities, the Warrant Shares, the Agent’s Warrants and the Agent’s Warrant Shares or materially and adversely affect orpotentially materially and adversely affect the business or operations of the Company. (d) Material Adverse Change. Subsequent to the date of the latest audited financial statements included or incorporated byreference in the Disclosure Package, (i) the Company has not sustained any material loss or interference with its business from fire, explosion, flood or othercalamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth in theDisclosure Package, or (ii) there has not been any change in the capital stock (other than a change in the number of outstanding shares of Common Stock dueto the issuance of shares upon the exercise of outstanding options or warrants or the conversion of convertible indebtedness), or material change in the short-term debt or long-term debt of the Company (other than upon conversion of convertible indebtedness) or any material adverse change, in or affecting thebusiness, assets, general affairs, management, financial position, prospects, stockholders’ equity or results of operations of the Company, otherwise than as setforth in the Disclosure Package, the effect of which, in any such case described in clause (i) or (ii) of this subsection (d), is, in the reasonable judgment of thePlacement Agent, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Securities on the terms and inthe manner contemplated in the Disclosure Package. 23  (e) Representations and Warranties. Each of the representations and warranties of the Company contained herein shall be true andcorrect in all material respects when made and on and as of the Closing Date, as if made on such date (except that those representations and warranties thataddress matters only as of a particular date shall remain true and correct as of such date), and all covenants and agreements herein contained to be performedon the part of the Company and all conditions herein contained to be fulfilled or complied with by the Company at or prior to the Closing Date shall havebeen duly performed, fulfilled or complied with. (f) Opinions of Counsel to the Company. The Placement Agent shall have received from Robinson Brog, counsel to the Company,such counsels’ written opinions, addressed to the Placement Agent and the Investors and dated the Closing Date, in form and substance reasonablysatisfactory to the Placement Agent and their counsel. Such counsel to the Company shall also have furnished to the Placement Agent a written statement(“Negative Assurances”), addressed to the Placement Agent and dated the Closing Date, in form and substance satisfactory to the Placement Agent and theircounsel. (g) Opinion of IP Counsel to the Company. The Placement Agent shall have received from Beusse Wolter Sanks Mora & Maire,P.A., IP counsel for the Company, such opinion or opinions, dated the Closing Date, with respect to such matters as the Placement Agent may reasonablyrequire, and the Company shall have furnished to such counsel such documents as it requests to enable it to pass upon such matters. (h) Opinion of Counsel to the Placement Agent. The Placement Agent shall have received from Faegre Baker Daniels LLP, counselfor the Placement Agent, such opinion or opinions, dated the Closing Date, with respect to such matters as the Placement Agent may reasonably require, andthe Company shall have furnished to such counsel such documents as it requests to enable it to pass upon such matters. (i) Accountant’s Comfort Letters. On the date hereof, the Placement Agent shall have received a letter dated the date hereof (the“Comfort Letters”), addressed to the Placement Agent and in form and substance reasonably satisfactory to the Placement Agent and their counsel, fromKPMG, LLP and Marcum LLC, (i) confirming that they are independent public accountants with respect to the Company within the meaning of the SecuritiesAct and the Rules and Regulations and (ii) stating, as of the date hereof (or, with respect to matters involving changes or developments since the respectivedates as of which specified financial information is given in the Disclosure Package, as of a date not more than three days prior to the date hereof), theconclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants’ “comfort letters” tounderwriters, delivered according to Statement of Auditing Standards No. 72, Statement of Auditing Standard No. 100 (or successor bulletins) and AUSection 634, in connection with registered public offerings. 24  (j) CFO Certificate. On the date hereof, the Company shall have furnished to the Placement Agent a certificate, dated as of suchdate, signed on behalf of the Company by its Chief Financial Officer, regarding certain financial information in the Disclosure Package respectively, in formand substance satisfactory to the Placement Agent. (k) Bring-Down Letters. On the Closing Date, the Placement Agent shall have received from KPMG, LLP and Marcum LLC a letter(the “Bring-Down Letter”), dated the Closing Date, addressed to the Placement Agent and in form and substance reasonably satisfactory to the PlacementAgent and their counsel, (i) confirming that they are or were, as applicable, independent public accountants with respect to the Company within the meaningof the Securities Act and the Rules and Regulations, and (ii) confirming in all material respects the conclusions and findings set forth in the Comfort Letter. (l) Officer’s Certificate. The Placement Agent shall have received on the Closing Date a certificate, addressed to the PlacementAgent and dated the Closing Date, of the Chief Executive Officer or Chief Operating Officer and the Chief Financial Officer of the Company to the effect that: (i) each of the representations, warranties and agreements of the Company contained in this Agreement were true and correctwhen originally made and are true and correct in all material respects as of the Time of Sale and the Closing Date as if made on each such date (except thatthose representations and warranties that address matters only as of a particular date remain true and correct as of each such date); and the Company hascomplied with all agreements and satisfied all the conditions on its part required under this Agreement to be performed or satisfied at or prior to the ClosingDate; (ii) there has not been, subsequent to the date of the most recent audited financial statements included or incorporated byreference in the Disclosure Package, any material adverse change in the financial position or results of operations of the Company, or any change ordevelopment that, singularly or in the aggregate, would involve a material adverse change or a prospective material adverse change, in or affecting thecondition (financial or otherwise), results of operations, business, assets or prospects of the Company except as set forth in the Prospectus; (iii) no stop order suspending the effectiveness of the Registration Statement or any part thereof or any amendment thereof orthe qualification of the Securities for offering or sale, nor suspending or preventing the use of the Disclosure Package, the Prospectus or any Issuer FreeWriting Prospectus shall have been issued, and no proceedings for that purpose or pursuant to Section 8A under the Securities Act shall be pending or to itsknowledge, threatened by the Commission or any state or regulatory body; (iv) the Registration Statement and each amendment thereto, at the Time of Sale and as of the date of this Agreement and as ofthe Closing Date did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary tomake the statements therein not misleading, and the Disclosure Package, as of the Time of Sale and as of the Closing Date, any Issuer Free Writing Prospectusas of its date and as of the Closing Date, the Prospectus and each amendment or supplement thereto, as of the respective date thereof and as of the ClosingDate, did not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in thelight of the circumstances in which they were made, not misleading; and 25  (v) no event has occurred as a result of which it is necessary to amend or supplement the Registration Statement, the Prospectusor the Disclosure Package in order to make the statements therein not untrue or misleading in any material respect. (m) No FINRA Objection. The Placement Agent shall not have received any unresolved objection from the FINRA as to the fairnessand reasonableness of the amount of compensation allowable or payable to the Placement Agent in connection with the issuance and sale of the Securities,the Agent’s Warrants and the Agent’s Warrant Shares. (n) Purchase Agreements. The Company shall have entered into the Security Purchase Agreement and Warrant Purchase Agreementwith each of the Investors, and such agreement shall be in full force and effect on the Closing Date. (o) Lock-Up Letters. The Placement Agent shall have received the written agreements, substantially in the form of Exhibit C hereto,of all of the executive officers and directors of the Company set forth on Schedule III. (p) Additional Documents. Prior to the Closing Date, the Company shall have furnished to the Placement Agent such furtherinformation, certificates or documents as the Placement Agent shall have reasonably requested. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with theprovisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Placement Agent. If any condition specified in this Section 5 is not satisfied when and as required to be satisfied, this Agreement may be terminated by the Placement Agent bynotice to the Company at any time prior to the Closing Date, which termination shall be without liability on the part of any party to any other party, exceptthat Section 4, Section 6 and Section 8 hereof shall at all times be effective and shall survive such termination. 26  6. Indemnification and Contribution. (a) Indemnification of the Placement Agent. The Company agrees to indemnify, defend and hold harmless the Placement Agent, itsaffiliates and each of its and their respective directors, officers, members, employees, representatives and agents and its affiliates, and each of its and theirrespective directors, officers, members, employees, representatives and agents and each person who controls such Placement Agent within the meaning ofSection 15 of the Securities Act or Section 20 of the Exchange Act, and the successors and assigns of all of the foregoing persons, from and against any losses,claims, damages, expenses or liabilities, joint or several, to which such person may become subject, under the Securities Act, the Exchange Act, or otherfederal or state statutory law or regulation, the common law or otherwise (including in settlement of any litigation if such settlement is effected with thewritten consent of the Company), insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) anyuntrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Disclosure Package,the Prospectus, or any amendment or supplement thereto, any Issuer Free Writing Prospectus or in any materials or information provided to Investors by, orwith the approval of, the Company in connection with the marketing of the offering of the Common Stock (“Marketing Materials”), including any roadshowor investor presentations made to Investors by the Company (whether in person or electronically) or arise out of or are based upon the omission or allegedomission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse suchPlacement Agent for any legal or other expenses reasonably incurred by it in connection with investigating or defending against such loss, claim, damage,liability, expense or action; or (ii) in whole or in part upon any inaccuracy in the representations and warranties of the Company contained herein; or (iii) inwhole or in part upon any failure of the Company to perform its obligations hereunder, under the Warrants, the Agent’s Warrants or under law; provided,however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, expense, liability or action arises out of or isbased upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus,the Disclosure Package, the Prospectus, or any such amendment or supplement, any Issuer Free Writing Prospectus or in any Marketing Materials, in relianceupon and in conformity with written information furnished to the Company by the Placement Agent, specifically for use in the preparation thereof, whichinformation the parties hereto agree is limited to the Placement Agent’s Information. (b) Indemnification of the Company. The Placement Agent agrees, severally, but not jointly, to indemnify, defend and holdharmless the Company, its affiliates and each of its and their respective directors, officers, members, employees, representatives and agents and its affiliates,and each of its and their respective directors, officers, members, employees, representatives and agents and each person who controls the Company within themeaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and the successors and assigns of all of the foregoing persons against anylosses, claims, damages, expenses or liabilities to which the Company may become subject, under the Securities Act, the Exchange Act, or other federal orstate statutory law or regulation, the common law or otherwise (including in settlement of any litigation, if such settlement is effected with the writtenconsent of the Placement Agent), insofar as such losses, claims, damages, expenses or liabilities (or actions in respect thereof) arise out of or are based uponany untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the DisclosurePackage, the Prospectus, or any amendment or supplement thereto or any Issuer Free Writing Prospectus, or arise out of or are based upon the omission oralleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to theextent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement,any Preliminary Prospectus, the Disclosure Package, the Prospectus, or any such amendment or supplement thereto, or any Issuer Free Writing Prospectus inreliance upon and in conformity with written information furnished to the Company by such Placement Agent (whether directly or through the PlacementAgent), specifically for use in the preparation thereof, which information the parties hereto agree is limited to the Placement Agent’s Information, and willreimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending against any suchloss, claim, damage, liability or action. Notwithstanding the provisions of this Section 6(b), in no event shall any indemnity by the Placement Agent underthis Section 6(b) exceed the total compensation received by such Placement Agent in accordance with Section 1(b) hereof. 27  (c) Notice and Procedures. If any action, suit or proceeding (each, a “Proceeding”) is brought against a person (an “IndemnifiedParty”) in respect of which indemnity may be sought against the Company or the Placement Agent (as applicable, the “Indemnifying Party”) pursuant tosubsections (a) or (b) above, respectively, of this Section 6, such Indemnified Party shall promptly notify such Indemnifying Party in writing of the institutionof such Proceeding and such Indemnifying Party shall assume the defense of such Proceeding, including the employment of counsel reasonably satisfactoryto such Indemnified Party and payment of all fees and expenses; provided, however, that the omission to so notify such Indemnifying Party shall not relievesuch Indemnifying Party from any liability which such Indemnifying Party may have to any Indemnified Party or otherwise, except to the extent theIndemnifying Party has been materially prejudiced by such failure; and provided, further, that the failure to notify the Indemnifying Party shall not relieve itfrom any liability that it may have to an Indemnified Party otherwise than under subsection (a) or (b) above. The Indemnified Party or parties shall have theright to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party orparties unless (i) the employment of such counsel shall have been authorized in writing by the Indemnifying Party in connection with the defense of suchProceeding, (ii) the Indemnifying Party shall not have, within a reasonable period of time in light of the circumstances, employed counsel to defend suchProceeding or (iii) such Indemnified Party or parties shall have reasonably concluded upon written advice of counsel that there may be one or more legaldefenses available to it or them which are different from, additional to or in conflict with those available to such Indemnifying Party (in which case suchIndemnifying Party shall not have the right to direct that portion of the defense of such Proceeding on behalf of the Indemnified Party or parties, but suchIndemnifying Party or parties may employ counsel and participate in the defense thereof but the fees and expenses of such counsel shall be at the expense ofthe Indemnifying Party), in any of which events such reasonable fees and expenses shall be borne by such Indemnifying Party and paid as incurred (it beingunderstood, however, that such Indemnifying Party shall not be liable for the expenses of more than one separate counsel (in addition to any local counsel) inany one Proceeding or series of related Proceedings in the same jurisdiction representing the Indemnified Parties who are parties to such Proceeding). AnIndemnifying Party shall not be liable for any settlement of any Proceeding effected without its written consent but, if settled with its written consent, suchIndemnifying Party agrees to indemnify and hold harmless the Indemnified Party or parties from and against any loss or liability by reason of such settlement.Notwithstanding the foregoing sentence, if at any time an Indemnified Party shall have requested an Indemnifying Party to reimburse the Indemnified Partyfor fees and expenses of counsel as contemplated by the second sentence of this Section 6(c), then the Indemnifying Party agrees that it shall be liable for anysettlement of any Proceeding effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such IndemnifyingParty of the aforesaid request, (ii) such Indemnifying Party shall not have fully reimbursed the Indemnified Party in accordance with such request prior to thedate of such settlement and (iii) such Indemnified Party shall have given the Indemnifying Party at least 30 days’ prior notice of its intention to settle. NoIndemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement, compromise or consent to the entry of judgment inany pending or threatened Proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been soughthereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that arethe subject matter of such Proceeding and does not include an admission of fault or culpability or a failure to act by or on behalf of such Indemnified Party. 28  (d) Contribution. If the indemnification provided for in this Section 6 is unavailable to an Indemnified Party under subsections(a) or (b) of this Section 6 or insufficient to hold an Indemnified Party harmless in respect of any losses, claims, damages, liabilities or expenses referred totherein, then each applicable Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by suchIndemnified Party as a result of the losses, claims, damages, liabilities or expenses referred to in subsections (a) or (b) above, (i) in such proportion as isappropriate to reflect the relative benefits received by the Indemnifying Party or parties on the one hand and the Indemnified Party or parties on the otherhand from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as isappropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Indemnifying Party or parties on the onehand and the Indemnified Party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages,liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and thePlacement Agent on the other hand shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities(before deducting expenses) received by the Company bear to the Agency Fee received by the Placement Agent. The relative fault of the Company on theone hand and the Placement Agent on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statementof a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, on the one hand, or by thePlacement Agent, on the other hand, and the parties’ relevant intent, knowledge, access to information and opportunity to correct or prevent such untruestatement, omission, act or failure to act; provided that the parties hereto agree that the written information furnished to the Company by the Placement Agentfor use in the Registration Statement or the Prospectus, or in any amendment or supplement thereto, consists solely of the Placement Agent’s Informationrelating to the Placement Agent. (e) Allocation. The Company and the Placement Agent agree that it would not be just and equitable if contribution pursuant tosubsection (d) above were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitableconsiderations referred to in the first sentence of subsection (d) above. Notwithstanding the provisions of this Section 6(e), no Placement Agent shall berequired to contribute any amount in excess of the total Agency Fee received by such Placement Agent in accordance with Section 1(b) less the amount ofany damages which such Placement Agent has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement, omission oralleged omission, act or alleged act or failure to act or alleged failure to act. No person guilty of fraudulent misrepresentation (within the meaning of Section11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies providedfor in this Section 6 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnified Party at law or inequity. 29  (f) Representations and Agreements to Survive Delivery. The obligations of the Company and the Placement Agent under thisSection 6 shall be in addition to any liability which the Company and the Placement Agent may otherwise have. The indemnity and contribution agreementscontained in this Section 6 and the covenants, agreements, warranties and representations of the Company contained in this Agreement shall remainoperative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Placement Agent,any person who controls such Placement Agent within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act or anyaffiliate of such Placement Agent, or by or on behalf of the Company, its directors or officers or any person who controls the Company within the meaning ofeither Section 15 of the Securities Act or Section 20 of the Exchange Act, and (iii) the issuance and delivery of the Securities. The Company and thePlacement Agent agree promptly to notify each other of the commencement of any Proceeding against it and, in the case of the Company, against any of theCompany’s officers or directors in connection with the issuance and sale of the Securities, or in connection with the Registration Statement, the DisclosurePackage or the Prospectus. 7. Information Furnished by the Placement Agent. The Company acknowledges that the statements set forth under the heading “Plan ofDistribution” in the Statutory Prospectus and the Prospectus (the “Placement Agent’s Information”) constitute the only information relating to the PlacementAgent furnished in writing to the Company by the Placement Agent as such information is referred to in Sections 2 and 6 hereof. 8. Termination. The Placement Agent shall have the right to terminate this Agreement by giving notice as hereinafter specified at any timeat or prior to the Closing Date, without liability on the part of the Placement Agent to the Company, if (i) prior to delivery and payment for the Securities (A)trading in securities generally shall have been suspended on or by the New York Stock Exchange, the NYSE MKT, the NASDAQ Global Market, theNASDAQ Capital Market or in the over-the-counter markets, (B) trading in the Common Stock of the Company shall have been suspended on any exchangeor in the over-the-counter market or by the Commission, or (C) a general moratorium on commercial banking activities shall have been declared by federal orNew York state authorities or a material disruption shall have occurred in commercial banking or securities settlement or clearance services in the UnitedStates, (D) there shall have occurred any outbreak or material escalation of hostilities or acts of terrorism involving the United States or there shall have beena declaration by the United States of a national emergency or war, or (E) there shall have occurred any other calamity or crisis or any material change ingeneral economic, political or financial conditions in the United States or elsewhere, if the effect of any such event specified in clause (D) or (E), in thereasonable judgment of the Placement Agent, is material and adverse and makes it impractical or inadvisable to proceed with the completion of the sale ofand payment for the Securities on the Closing Date on the terms and in the manner contemplated by this Agreement, the Disclosure Package and theProspectus, (ii) since the time of execution of this Agreement or the earlier respective dates as of which information is given in the Disclosure Package orincorporated by reference therein, there has been any Material Adverse Effect, (iii) the Company shall have failed, refused or been unable to comply with thematerial terms or perform any material agreement or obligation of this Agreement or the Purchase Agreements, other than by reason of a default by thePlacement Agent, or (iv) any condition of the Placement Agent’s obligations hereunder is not fulfilled. This Agreement may be terminated by any party if theClosing does not occur on or before September 31, 2015. Any such termination shall be without liability of any party to any other party except that theprovisions of Section 4, Section 6, and Section 12 hereof shall at all times be effective notwithstanding such termination. 30  9. Notices. All statements, requests, notices and agreements hereunder shall be in writing or by facsimile, and: (a) if to the Placement Agent, shall be delivered or sent by mail, telex or facsimile transmission as follows: Northland Securities, Inc.45 South 7th Street, Suite 2000Minneapolis, MN 55402Attention: Jeff PetersonFacsimile No.: (612) 395-5216 with a copy (which shall not constitute notice) to: Faegre Baker Daniels, LLP90 S 7th Street, Suite 2200Minneapolis, MN 55402Attention: Jonathan ZimmermanFacsimile No.: (612) 766-1600 (b) if to the Company shall be delivered or sent by mail, telex or facsimile transmission to: Nxt-ID, Inc.288 Christian StreetHC 2nd FloorOxford, CT 06478 with a copy (which shall not constitute notice) to: Robinson Brog875 Third Avenue, 9th FloorNew York, NY 10022Attention: David DanovitchFacsimile No.: (212) 603-6391 Any such statements, requests, notices or agreements shall be effective only upon receipt. Any party to this Agreement may change such address fornotices by sending to the parties to this Agreement written notice of a new address for such purpose. 31  10. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and shall be binding upon the Placement Agent,the Company, and their respective successors and assigns. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give anyperson other than the persons mentioned in the preceding sentence any legal or equitable right, remedy or claim under or in respect of this Agreement, or anyprovisions herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit ofsuch persons and for the benefit of no other person, except that (i) the representations, warranties, covenants, agreements and indemnities of the Companycontained in this Agreement shall also be for the benefit of the controlling persons, officers and directors referred to in Section 6(a) hereof and the indemnitiesof the Placement Agent shall also be for the benefit of the controlling persons, officers and directors referred to in Section 6(b) hereof; and (ii) the Investorsare relying on the representations, warranties, covenants and agreements made by the Company under, and are intended third party beneficiaries of, thisAgreement. The term “successors and assigns” as herein used shall not include any purchaser of the Securities by reason merely of such purchase. 11. Governing Law; Submission to Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of theState of New York, without giving effect to the conflicts of laws provisions thereof. Except as set forth below, no Proceeding may be commenced, prosecutedor continued in any court other than the courts of State of New York located in the City and County of New York or the United States District Court for theSouthern District of New York, which courts shall have jurisdiction over the adjudication of such matters, and the parties hereby consent to the jurisdiction ofsuch courts and personal service with respect thereto. The Company hereby consents to personal jurisdiction, service and venue in any court in which anyProceeding arising out of or in any way relating to this Agreement is brought by any third party against the Placement Agent. All parties hereby waive allright to trial by jury in any Proceeding (whether based upon contract, tort or otherwise) in any way arising out of or relating to this Agreement. All partiesagree that a final judgment in any such Proceeding brought in any such court shall be conclusive and binding upon each party and may be enforced in anyother courts in the jurisdiction of which a party is or may be subject, by suit upon such judgment. 12. No Fiduciary Relationship. The Company hereby acknowledges and agrees that: (a) No Other Relationship. The Placement Agent have been retained solely to act as the exclusive placement agent in connectionwith the offering of the Company’s securities. The Company further acknowledges that the Placement Agent are acting pursuant to a contractual relationshipcreated solely by this Agreement entered into on an arm’s-length basis and in no event do the parties intend that the Placement Agent act or be responsible asa fiduciary to the Company, its management, stockholders, creditors or any other person in connection with any activity that such Placement Agent mayundertake or has undertaken in furtherance of the offering of the Company’s securities, either before or after the date hereof, irrespective of whether thePlacement Agent has advised or is advising the Company on other matters. The Placement Agent hereby expressly disclaims any fiduciary or similarobligations to the Company, either in connection with the transactions contemplated by this Agreement or any matters leading up to such transactions, andthe Company hereby confirms its understanding and agreement to that effect. 32  (b) Arm’s-Length Negotiations. The price of the Securities set forth in this Agreement was established by the Company followingdiscussions and arm’s-length negotiations with the Investors and the Placement Agent, and the Company is capable of evaluating and understanding, andunderstands and accepts, the terms, risks and conditions of the transactions contemplated by this Agreement. (c) Absence of Obligation to Disclose. The Company has been advised that the Placement Agent and their affiliates are engaged ina broad range of transactions which may involve interests that differ from those of the Company and that no Placement Agent has any obligation to disclosesuch interests or transactions to the Company by virtue of any fiduciary, advisory or agency relationship. (d) Waiver. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may haveagainst the Placement Agent with respect to any breach or alleged breach of any fiduciary or similar duty to the Company in connection with the transactionscontemplated by this Agreement or any matters leading up to such transactions and agrees that the Placement Agent shall have no liability (whether direct orindirect) to the Company in respect of such a fiduciary duty claim to any person asserting a fiduciary duty claim on behalf of the Company, includingstockholders, employees or creditors of the Company. 13. Headings. The Section headings in this Agreement have been inserted as a matter of convenience of reference and are not a part of thisAgreement. 14. Amendments and Waivers. No supplement, modification or waiver of this Agreement shall be binding unless executed in writing by theparty to be bound thereby. The failure of a party to exercise any right or remedy shall not be deemed or constitute a waiver of such right or remedy in thefuture. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (regardless of whethersimilar), nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided. 15. Counterparts. This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executedcounterparts shall each be deemed to be an original and all such counterparts shall together constitute one and the same instrument. Delivery of an executedcounterpart by facsimile or portable document format (.pdf) shall be effective as delivery of a manually executed counterpart thereof. 33  16. Research Analyst Independence. The Company acknowledges that the Placement Agent’s research analysts and research departments arerequired to be independent from its investment banking division and are subject to certain regulations and internal policies, and that such Placement Agent’sresearch analysts may hold views and make statements or investment recommendations and/or publish research reports with respect to the Company and/orthe offering that differ from the views of their investment banking division. The Company hereby waives and releases, to the fullest extent permitted by law,any claims that the Company may have against each of the Placement Agent with respect to any conflict of interest that may arise from the fact that the viewsexpressed by its independent research analysts and research department may be different from or inconsistent with the views or advice communicated to theCompany by such Placement Agent’s investment banking division. The Company acknowledges that the Placement Agent is a full service securities firm andas such from time to time, subject to applicable securities laws, rules and regulations, may effect transactions for its own account or the account of itscustomers and hold long or short positions in debt or equity securities of the Company; provided, however, that nothing in this Section 16 shall relieve thePlacement Agent of any responsibility or liability it may otherwise bear in connection with activities in violation of applicable securities laws, rules orregulations. 17. Entire Agreement. This Agreement constitutes the entire agreement of the parties to this Agreement with respect to the Company’soffering, issuance and sale of the Securities and the Agent’s Warrants and supersedes all prior written or oral and all contemporaneous oral agreements,understandings and negotiations with respect to the subject matter hereof. 18. Partial Unenforceability. The invalidity or unenforceability of any section, paragraph, clause or provision of this Agreement shall notaffect the validity or enforceability of any other section, paragraph, clause or provision hereof. If any section, paragraph, clause or provision of thisAgreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes)as are necessary to make it valid and enforceable. 19. Effectiveness. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto. [Signature page follows.] 34  If the foregoing is in accordance with your understanding of the agreement between the Company and the Placement Agent, kindly indicate youracceptance in the space provided for that purpose below. Very truly yours, NXT-ID, INC. By: Name: Title: Accepted as of the date first above written: NORTHLAND SECURITIES, INC. By: Name: Title: Signature Page toPlacement Agency Agreement  Schedules and Exhibits Schedule I Issuer Free Writing Prospectus Schedule III List of Directors and Officers For Lock-Up Letter Exhibit A: Form of Warrant Exhibit B: Pricing Information Exhibit C: Form of Lock-Up Letter  Schedule I Issuer Free Writing Prospectus None.  Schedule III List of Directors and Officers For Lock-Up Gino PereiraVincent MiceliDavid TunnellMajor General David GustMichael D’Almada-RemediosDaniel Sharkey  Exhibit A Form of Warrant [attached]  NXT-ID, INC. FORM OF WARRANT Warrant No.: ___Original Issue:Date: ________, 2015________, 2015 NXT-ID, INC. a Delaware corporation (the “Company”), hereby certifies that, for value received, ______________ or its registered assigns (the“Holder”), is entitled to purchase from the Company up to a total of 86,071.45 shares of Common Stock (each such share, a “Warrant Share” and all suchshares, the “Warrant Shares”), at any time and from time to time from and after the Original Issue Date and through and including _________, 2020 (the“Expiration Date”) relating to an offering of Common Stock by the Company, and subject to the following terms and conditions: This Warrant is granted in connection with that certain Placement Agency Agreement, dated July 30, 2015 between the Company and NorthlandSecurities, Inc. (the “Placement Agency Agreement”) and the offering of 1,721,429 Shares of the Common Stock and warrants, which are exercisable for sharesof the Common Stock, registered on the Company’s Registration Statement on Form S-3 (the “Registration Statement”) filed with the U.S. Securities andExchange Commission (the “SEC”) and declared effective on May 14, 2015, as amended (the “Offering”). 1. Definitions. As used in this Warrant, the following terms shall have the respective definitions set forth in this Section 1. Capitalized terms thatare used and not defined in this Warrant that are defined in the Placement Agency Agreement shall have the respective definitions set forth in the PlacementAgency Agreement. “Closing Price” means, for any date of determination, the price determined by the first of the following clauses that applies: (i) if the Common Stockis then listed or quoted on a Trading Market, the closing bid price per share of the Common Stock for such date (or the nearest preceding date) on suchmarket; (ii) if prices for the Common Stock are then quoted on the OTC Bulletin Board or OTC Quotation Board, the closing bid price per share of theCommon Stock for such date (or the nearest preceding date) so quoted; (iii) if prices for the Common Stock are then reported in the “Pink Sheets” publishedby the National Quotation Bureau Incorporated (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid priceper share of the Common Stock so reported; or (iv) in all other cases, the fair market value of a share of Common Stock as determined by an independentqualified appraiser selected in good faith and paid for by the Company. “Common Stock” means the common stock of the Company, par value $0.0001 per share, and any securities into which such common stock mayhereafter be reclassified. “Exercise Price” means $_______, subject to adjustment in accordance with Section 9. “Fundamental Transaction” means any of the following: (i) the Company effects any merger or consolidation of the Company with or into anotherperson, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer(whether by the Company or another person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares forother securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to whichthe Common Stock is effectively converted into or exchanged for other securities, cash or property.  “Original Issue Date” means the Original Issue Date first set forth on the first page of this Warrant or its predecessor instrument. “Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market (other than the OTC Bulletin Board or OTC QuotationBoard), or (ii) if the Common Stock is not listed on a Trading Market (other than the OTC Bulletin Board or OTC Quotation Board), a day on which theCommon Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board or OTC Quotation Board, or (iii) if the Common Stock is notquoted on any Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation BureauIncorporated (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is notlisted or quoted as set forth in clauses (i), (ii) and (iii) hereof, then Trading Day shall mean any day, other than a Saturday or Sunday and other than a day thatbanks in the State of New York are generally authorized or required by applicable law to be closed. “Trading Market” means whichever of the New York Stock Exchange, NYSE AMEX, the NASDAQ Global Select Market, the NASDAQ GlobalMarket, the NASDAQ Capital Market or the OTC Bulletin Board or OTC Quotation Board on which the Common Stock is listed or quoted for trading on thedate in question. 2. Registration of Warrant. The Company shall register this Warrant upon records to be maintained by the Company for that purpose (the“Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as theabsolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. 3. Registration of Transfers. The Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender ofthis Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Company at its address specified herein. Upon any suchregistration or transfer, a new Warrant to purchase Common Stock, in substantially the form of this Warrant (any such new Warrant, a “New Warrant”),evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant notso transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptanceby such transferee of all of the rights and obligations of a holder of a Warrant. 4. Exercise and Duration of Warrants. (a) This Warrant shall be exercisable by the registered Holder in whole at any time and in part from time to time from the Original IssueDate through and including the Expiration Date. At 5:00 p.m., Eastern time on the Expiration Date, the portion of this Warrant not exercised prior theretoshall be and become void and of no value. The Company may not call or redeem any portion of this Warrant without the prior written consent of the affectedHolder. In no event will the Company be required to net cash settle the Warrant exercise. (b) Notwithstanding anything to the contrary contained herein, the number of Warrant Shares that may be acquired by the Holder upon anyexercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that, following such exercise (or other issuance), thetotal number of shares of Common Stock then beneficially owned by such Holder and its affiliates (as defined under Rule 144, “Affiliates”) and any otherpersons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act, does notexceed 4.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuableupon such exercise). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules andregulations promulgated thereunder. This provision shall not restrict the number of shares of Common Stock which a Holder may receive or beneficially ownin order to determine the amount of securities or other consideration that such Holder may receive in the event of a Fundamental Transaction as contemplatedin Section 9 of this Warrant. By written notice to the Company, the Holder may waive the provisions of this Section 4(b) but any such waiver will not beeffective until the 61st day after delivery of such notice, nor will any such waiver effect any other Holder. A-2  Notwithstanding anything to the contrary contained herein, the number of Warrant Shares that may be acquired by the Holder upon any exercise ofthis Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the totalnumber of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any other persons whose beneficial ownership of CommonStock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act, does not exceed 9.999% of the total number of issued andoutstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise). For such purposes, beneficialownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. This provisionshall not restrict the number of shares of Common Stock which a Holder may receive or beneficially own in order to determine the amount of securities orother consideration that such Holder may receive in the event of a Fundamental Transaction as contemplated in Section 9 of this Warrant. This restrictionmay not be waived. 5. Delivery of Warrant Shares. (a) To effect exercises hereunder, the Holder shall not be required to physically surrender this Warrant unless the aggregate Warrant Sharesrepresented by this Warrant are being exercised. Upon delivery of the Exercise Notice (in the form attached hereto) to the Company (with the attachedWarrant Shares Exercise Log) at its address for notice set forth herein and upon payment of the Exercise Price multiplied by the number of Warrant Shares thatthe Holder intends to purchase hereunder and the Company shall promptly (but in no event later than three Trading Days after the Date of Exercise (asdefined herein)) issue and deliver to the Holder, a certificate for the Warrant Shares issuable upon such exercise, which, unless otherwise required byapplicable law, shall be free of restrictive legends. A “Date of Exercise” means the date on which the Holder shall have delivered to the Company: (i) theExercise Notice (with the Warrant Exercise Log attached to it), appropriately completed and duly signed and (ii) if such Holder is not utilizing the cashlessexercise provisions set forth in this Warrant, payment of the Exercise Price for the number of Warrant Shares so indicated by the Holder to be purchased. (b) If by the third Trading Day after a Date of Exercise the Company fails to deliver the required number of Warrant Shares in the mannerrequired pursuant to Section 5(a), then the Holder will have the right to rescind such exercise. (c) If by the third Trading Day after a Date of Exercise the Company fails to deliver the required number of Warrant Shares in the mannerrequired pursuant to Section 5(a), and if after such third Trading Day and prior to the receipt of such Warrant Shares, the Holder purchases (in an open markettransaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipatedreceiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder’s total purchase price(including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number ofWarrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue by (B) the closing bid price of the CommonStock at the time of the obligation giving rise to such purchase obligation and (2) at the option of the Holder, either reinstate the portion of the Warrant andequivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that wouldhave been issued had the Company timely complied with its exercise and delivery obligations hereunder. The Holder shall provide the Company writtennotice indicating the amounts payable to the Holder in respect of the Buy-In. A-3  (d) The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional,irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of anyjudgment against any person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or allegedbreach by the Holder or any other person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other person,and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance ofWarrant Shares. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, withoutlimitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing WarrantShares upon exercise of the Warrant as required pursuant to the terms hereof. 6. Charges, Taxes and Expenses. Issuance and delivery of Warrant Shares upon exercise of this Warrant shall be made without charge to theHolder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all ofwhich taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable inrespect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shallbe responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange andsubstitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonablysatisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity (which shall not include a surety bond), if requested.Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such otherreasonable third-party costs as the Company may prescribe. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder shalldeliver such mutilated Warrant to the Company as a condition precedent to the Company’s obligation to issue the New Warrant. 8. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of itsauthorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrantas herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rightsor any other contingent purchase rights of Persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Companycovenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with theterms hereof, be duly and validly authorized, issued and fully paid and nonassessable. 9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment fromtime to time as set forth in this Section 9. (a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its CommonStock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares ofCommon Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such casethe Exercise Price shall be adjusted to equal the product obtained by multiplying the then-current Exercise Price by a fraction of which the numerator shall bethe number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of CommonStock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after therecord date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of thisparagraph shall become effective immediately after the effective date of such subdivision or combination. A-4  (b) Fundamental Transactions. If, at any time while this Warrant is outstanding there is a Fundamental Transaction, then the Holder shallhave the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled toreceive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number ofWarrant Shares then issuable upon exercise in full of this Warrant (the “Alternate Consideration”). For purposes of any such exercise, the determination ofthe Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable inrespect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the AlternateConsideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stockare given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as tothe Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. At the Holder’s option and request, anysuccessor to the Company or surviving entity in such Fundamental Transaction shall, either (1) issue to the Holder a new warrant substantially in the form ofthis Warrant and consistent with the foregoing provisions and evidencing the Holder’s right to purchase the Alternate Consideration for the aggregateExercise Price upon exercise thereof, or (2) purchase the Warrant from the Holder for a purchase price, payable in cash within five Trading Days after suchrequest (or, if later, on the effective date of the Fundamental Transaction), equal to the Black Scholes value of the remaining unexercised portion of thisWarrant on the date of such request. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring anysuch successor or surviving entity to comply with the provisions of this paragraph (b) and insuring that the Warrant (or any such replacement security) will besimilarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. (c) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to this Section 9, the number ofWarrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment theaggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediatelyprior to such adjustment. (d) Calculations. All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. Thenumber of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and thedisposition of any such shares shall be considered an issue or sale of Common Stock. (e) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will promptlycompute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of theadjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describingthe transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company willpromptly deliver a copy of each such certificate to the Holder and to the Company’s transfer agent. A-5  10. Payment of Exercise Price. The Holder may pay the Exercise Price in one of the following manners: (a) Cash Exercise. The Holder may deliver immediately available funds; or (b) Cashless Exercise. The Holder may notify the Company in an Exercise Notice of its election to utilize a cashless exercise, in whichevent the Company shall issue to the Holder the number of Warrant Shares determined as follows: X = Y [(A-B)/A] where: X = the number of Warrant Shares to be issued to the Holder.Y = the number of Warrant Shares with respect to which this Warrant is being exercised.A = the average of the Closing Prices for the five Trading Days immediately prior to (but not including) the Exercise Date.B = the Exercise Price. For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashlessexercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to havecommenced, on the date this Warrant was originally issued. 11. No Fractional Shares. No fractional shares of Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of anyfractional shares which would, otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the Closing Price of oneWarrant Share on the date of exercise. 12. Notices. Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall be inwriting and shall be deemed given and effective if provided pursuant to the Placement Agency Agreement. In case any time: (1) the Company shall declareany cash dividend on its capital stock; (2) the Company shall pay any dividend payable in stock upon its capital stock or make any distribution to theholders of its capital stock; (3) the Company shall offer for subscription pro rata to the holders of its capital stock any additional shares of stock of any classor other rights; (4) there shall be any capital reorganization, or reclassification of the capital stock of the Company, or consolidation or merger of theCompany with, or sale of all or substantially all of its assets to, another corporation; or (5) there shall be a voluntary or involuntary dissolution, liquidation orwinding up of the Company; then, in any one or more of said cases, the Company shall give prompt written notice to the Holder. Such notice shall alsospecify the date as of which the holders of capital stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled toexchange their capital stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution,liquidation or winding up, or conversion or redemption, as the case may be. Such written notice shall be given at least 20 days prior to the action in questionand not less than 20 days prior to the record date or the date on which the Company’s transfer books are closed in respect thereto. 13. Lock Up. Notwithstanding any other provision of this Warrant, in accordance with FINRA Rule 5110(g), this Warrant shall not be sold duringthe Offering, or sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction thatwould result in the effective economic disposition of this Warrant or the Warrant Shares, by any person for a period of 180 days immediately following thedate of effectiveness or commencement of sales of the Offering, except as provided in paragraph (g)(2) of FINRA Rule 5110. 14. Transfer; Assignment. Subject to compliance with any applicable securities laws, this Warrant may be transferred or assigned by the Holderwithout the consent of the Company (including, without limitation, transfers or assignments to the Holder’s employees and affiliates). This Warrant may notbe assigned by the Company without the written consent of the Holder. A-6  15. Miscellaneous. (a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to thepreceding sentence, nothing in this Warrant shall be construed to give to any person other than the Company and the Holder any legal or equitable right,remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder and their successors andassigns. (b) All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construedand enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. (c) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any ofthe provisions hereof. (d) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity andenforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in goodfaith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporatesuch substitute provision in this Warrant. (e) Prior to exercise of this Warrant, the Holder hereof shall not, by reason of by being a Holder, be entitled to any rights of a stockholderwith respect to the Warrant Shares. [Remainder of page intentionally left blank, signature page follows] A-7  In witness whereof, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above. nxt-id, inc. By: Name: Its: Accepted and agreed: NORTHLAND SECURITIES, INC. By: Name: Its: A-8  EXERCISE NOTICE The undersigned Holder hereby irrevocably elects to purchase shares of Common Stock pursuant to the attached Warrant. Capitalizedterms used herein and not otherwise defined have the respective meanings set forth in the Warrant. (1) The undersigned Holder hereby exercises its right to purchase Warrant Shares pursuant to the Warrant. (2) The Holder intends that payment of the Exercise Price shall be made as (check one): ☐ “Cash Exercise” under Section 10 ☐ “Cashless Exercise” under Section 10 (3) If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $____________ to the Company in accordance with the terms of the Warrant. (4) Pursuant to this Exercise Notice, the Company shall deliver to the Holder Warrant Shares in accordance with the terms of the Warrant. Dated ______________ __, _____Name of Holder: (Print) By: Its: (Signature must conform in all respects to name of holder asspecified on the face of the Warrant) A-9  Warrant Shares Exercise Log Date Number of WarrantShares Availableto be Exercised Number of WarrantShares Exercised Number of WarrantShares Remainingto be Exercised A-10  FORM OF ASSIGNMENT [To be completed and signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto the right represented by the attached Warrant topurchase shares of Common Stock to which such Warrant relates and appoints attorney to transfer said right on the books of theCompany with full power of substitution in the premises. Dated: __________ __, _______ (Signature must conform in all respects to name of holder asspecified on the face of the Warrant) Address of Transferee Note: Address for Delivery may not be a P.O. box and must bea physical address where stock certificates may be deliveredin connection with this purchase or any future stock issuedthrough splits, warrant conversions or other circumstances.The delivery address may be a personal residence, or a brokerdealer where the certificate would be deposited A-11  Exhibit B Pricing Information Number of Shares of Common Stock: 1,721,429 Price Per Share: $1.75  EXHIBIT C Form of Lock Up Agreement [attached]  Form of Lock-Up Agreement July __, 2015 Northland Securities, Inc.As representatives of the underwriters namedin Schedule I to the Purchase Agreementreferred to belowc/o Northland Securities, Inc.45 South 7th Street, Suite 2000Minneapolis, MN 55402 Ladies and Gentlemen: As an inducement to the underwriters (the “Underwriters”) to execute a purchase agreement (the “Purchase Agreement”) providing for a public offering (the“Offering”) of securities of Nxt-ID, Inc. and any successor (by merger or otherwise) thereto (the “Company”), the undersigned hereby agrees that without, ineach case, the prior written consent of Northland Securities, Inc. (the “Representative”) during the period specified in the second succeeding paragraph (the“Lock-Up Period”), the undersigned will not: (1) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase,purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of, directly orindirectly, any shares of the Company’s common stock (the “Common Stock”) or any securities convertible into, exercisable or exchangeable for or thatrepresent the right to receive Common Stock (including without limitation, Common Stock which may be deemed to be beneficially owned by theundersigned in accordance with the rules and regulations of the Securities and Exchange Commission and securities which may be issued upon exercise of astock option or warrant) whether now owned or hereafter acquired (the “Undersigned’s Securities”); (2) enter into any swap or other agreement that transfers,in whole or in part, any of the economic consequences of ownership of the Undersigned’s Securities, whether any such transaction described in clause (1) or(2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise; (3) make any demand for or exercise any right withrespect to, the registration of any Common Stock or any security convertible into or exercisable or exchangeable for Common Stock; or (4) publicly disclosethe intention to do any of the foregoing. The undersigned agrees that the foregoing restrictions preclude the undersigned from engaging in any hedging or other transaction which is designed to orwhich reasonably could be expected to lead to or result in a sale or disposition of the Undersigned’s Securities even if such Securities would be disposed ofby someone other than the undersigned. Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, saleor grant of any right (including without limitation any put or call option) with respect to any of the Undersigned’s Securities or with respect to any securitythat includes, relates to, or derives any significant part of its value from such Securities. The initial Lock-Up Period will commence on the date of this Agreement and continue and include the date 90 days after the date of the final prospectus usedto sell Common Stock in the Offering pursuant to the Purchase Agreement; provided, however, that if (1) during the last 17 days of the initial Lock-UpPeriod, the Company releases earnings results or material news or a material event relating to the Company occurs or (2) prior to the expiration of the initialLock-Up Period, the Company announces that it will release earnings results during the 16-day period beginning on the last day of the initial Lock-UpPeriod, then in each case the initial Lock-Up Period will be extended until the expiration of the 18-day period beginning on the date of release of suchearnings results or material news, or the occurrence of such material event, as applicable, unless the Representative, waives, in writing, such extension. The undersigned hereby acknowledges that the Company will be requested to agree in the Purchase Agreement to provide written notice to the undersignedof any event that would result in an extension of the Lock-Up Period pursuant to the previous paragraph and agrees that any such notice properly deliveredwill be deemed to have been given to, and received by, the undersigned. The undersigned further agrees that, prior to engaging in any transaction or takingany other action that is subject to the terms of this Agreement during the period from the date of this Agreement to and including the 34th day following theexpiration of the initial Lock-Up Period, it will give notice thereof to the Company and will not consummate such transaction or take any such action unlessit has received written confirmation from the Company that the Lock-Up Period (as may have been extended pursuant to the previous paragraph) has expired.  Notwithstanding the foregoing provisions of this agreement: 1.The undersigned may transfer the Undersigned’s Securities (i) as a bona fide gift or gifts and (ii) to any trust for the direct or indirect benefit ofthe undersigned or the immediate family of the undersigned; provided, in each case, that (x) such transfer shall not involve a disposition forvalue, (y) the transferee agrees in writing with the Underwriters to be bound by the terms of this Lock-Up Agreement, and (z) no filing by anyparty under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), shall be required or shall be madevoluntarily in connection with such transfer.. For purposes of this Agreement, “immediate family” shall mean any relationship by blood,marriage or adoption, nor more remote than first cousin. 2.In addition, the foregoing restrictions shall not apply to (i) the exercise of stock options granted pursuant to the Company’s equity incentiveplans; provided that it shall apply to any of the Undersigned’s Securities issued upon such exercise, or (ii) the establishment of any contract,instruction or plan (a “Plan”) that satisfies all of the requirements of Rule 10b5-1(c)(1)(i)(B) under the Exchange Act; provided that no sales ofthe Undersigned’s Securities shall be made pursuant to such a Plan prior to the expiration of the Lock-Up Period (as such may have beenextended pursuant to the provisions hereof), and such a Plan may only be established if no public announcement of the establishment orexistence thereof and no filing with the Securities and Exchange Commission or other regulatory authority in respect thereof or transactionsthereunder or contemplated thereby, by the undersigned, the Company or any other person, shall be required, and no such announcement orfiling is made voluntarily, by the undersigned, the Company or any other person, prior to the expiration of the Lock-Up Period (as such mayhave been extended pursuant to the provisions hereof). In furtherance of the foregoing, the Company and its transfer agent and registrar are hereby authorized to decline to make any transfer of shares of CommonStock if such transfer would constitute a violation or breach of this Agreement. The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Agreement and that upon request, theundersigned will execute and additional documents necessary to ensure the validity or enforcement of this Agreement. All authority herein conferred oragreed to be conferred and any obligations of the undersigned shall be binding upon the successors, assigns, heirs or personal representatives of theundersigned. The undersigned understands that the undersigned shall be released from all obligations under this Agreement if (i) the Company notifies the Underwritersthat it does not intend to proceed with the Offering, (ii) the Purchase Agreement does not become effective, or if the Purchase Agreement (other than theprovisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Common Stock to be sold thereunder,or (iii) the Offering is not completed by October 31, 2015. The undersigned understands that the Underwriters are entering into the Purchase Agreement and proceeding with the Offering in reliance upon thisAgreement. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. Very truly yours, Printed Name of Holder Signature Printed Name & Title of Person Signing (if signing ascustodian, trustee, or on behalf of an entity) Exhibit 21.1 Company Subsidiaries 3D-ID, LLC, a Florida limited liability Company.LogicMark, LLC, a Delaware limited liability Company. Exhibit 23.1 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT We consent to the inclusion in this Registration Statement of Nxt-ID, Inc. on Form S-3, File No. 333-209001, Form S-3, File No. 333-206955 and Form S-3,File No. 333-204026 of our report dated April 13, 2017, which includes an explanatory paragraph as to our audit of adjustments to retroactively apply thereverse stock split of the Company’s common stock and to reclassify deferred financing costs from other current assets to convertible notes payable on itsbalance sheet at December 31, 2015 which occurred subsequent to the year ended December 31, 2015, to the 2015 consolidated financial statements whichwere audited by other auditors, and, with respect to our audit of the consolidated financial statements of NXT-ID, Inc. and Subsidiaries as of December 31,2016, which report appears in the Form 10-K, which is part of this Registration Statement. We also consent to the reference to our Firm under the heading“Experts” in such Prospectus. /s/ Marcum llp Marcum llpNew York, NYApril 13, 2017Exhibit 23.2 Consent of Independent Registered Public Accounting Firm The Board of Directors and Stockholders Nxt-ID, Inc.: We consent to the incorporation by reference in the Registration Statements No. 333-209001, 333-206955 and 333-204026 on Form S-3 of Nxt-ID, Inc. andsubsidiary (the Company) of our report dated April 14, 2016, with respect to the consolidated balance sheet of Nxt-ID, Inc. and subsidiary as of December 31,2015 and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for the year then ended, before the effects of theadjustments to retrospectively apply the changes in the presentation of deferred debt issuance costs and in share and per-share data, which report appears inthe December 31, 2016 annual report on Form 10-K of Nxt-ID, Inc. and subsidiary. Our report dated April 14, 2016 contains an explanatory paragraph that states the Company has incurred recurring losses from operations that raisesubstantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might resultfrom the outcome of that uncertainty. /s/ KPMG LLP Stamford, ConnecticutApril 13, 2017Exhibit 31.1 CERTIFICATIONOF PRINCIPAL EXECUTIVE OFFICERPURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 302 OFTHE SARBANES-OXLEY ACT OF 2002 I, Gino M. Pereira, certify that: 1. I have reviewed this annual report on Form 10-K of Nxt-ID, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant‘s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: April 13, 2017By:/s/ Gino M. Pereira Gino M. Pereira Chief Executive Officer(Principal Executive Officer)Exhibit 31.2 CERTIFICATIONOF PRINCIPAL FINANCIAL OFFICERPURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 302 OFTHE SARBANES-OXLEY ACT OF 2002 I, Vincent S. Miceli, certify that: 1. I have reviewed this annual report on Form 10-K of Nxt-ID, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrantand have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant‘s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting. Date: April 13, 2017By:/s/ Vincent S. Miceli Vincent S. Miceli Chief Financial Officer(Principal Financial Officer) Exhibit 32.1 CERTIFICATIONOF PRINCIPAL EXECUTIVE OFFICERPURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OFTHE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Nxt-ID, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2016, as filed with the Securities andExchange Commission on the date hereof (the “Report”), I, Gino M. Pereira, Chief Executive Officer of Nxt-ID, Inc., certify, pursuant to 18 U.S.C. §1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: April 13, 2017By:/s/ Gino M. Pereira Gino M. Pereira Chief Executive Officer (Principal Executive Officer) Exhibit 32.2 CERTIFICATIONOF PRINCIPAL FINANCIAL OFFICERPURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OFTHE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Nxt-ID, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2016, as filed with the Securities andExchange Commission on the date hereof (the “Report”), I, Vincent S. Miceli, Chief Financial Officer of Nxt-ID, Inc., certify, pursuant to 18 U.S.C. §1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: (1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: April 13, 2017By:/s/ Vincent S. Miceli Vincent S. Miceli Chief Financial Officer (Principal Financial Officer) 

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