NXT-ID Inc.
Annual Report 2017

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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549 FORM 10-K (Mark One)☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2017or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission file number: 000-54960 Nxt-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 32934(Address of principal executive offices)(Zip Code) Registrant’s telephone number, including area code: (203) 266-2103 Securities 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☒ Emerging growth company☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 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, 2017, the last business day of the second fiscalquarter, was approximately $15,500,905 based on a total number of shares of our common stock outstanding that day of 8,289,254 and a closing price of$1.87. 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 24,347,482 shares of its common stock outstanding as of March 29, 2018. DOCUMENTS INCORPORATED BY REFERENCE None. TABLE OF CONTENTS PagePART I Item 1.Business1Item 1A.Risk Factors13Item 1B.Unresolved Staff Comments24Item 2.Properties24Item 3.Legal Proceedings24Item 4.Mine Safety Disclosures24 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities25Item 6.Selected Financial Data26Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations26Item 7A.Quantitative and Qualitative Disclosures about Market Risk32Item 8.Financial Statements and Supplementary Data32Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure32Item 9A.Controls and Procedures32Item 9B.Other Information33 PART III Item 10.Directors, Executive Officers and Corporate Governance34Item 11.Executive Compensation38Item 12.Security Ownership Of Certain Beneficial Owners And Management and Related Stockholder Matters40Item 13.Certain Relationships and Related Transactions, and Director Independence41Item 14.Principal Accounting Fees and Services42 PART IV Item 15.Exhibits, Financial Statement Schedules43 SIGNATURES46 INDEX TO EXHIBITS47 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 Nxt-ID, Inc.’s (“Nxt-ID”, the “Company”, “our”, “us” or “we”) operations;business strategies; future cash flows; financing plans; plans and objectives of management; any other statements regarding future operations, future cashneeds, business plans and future financial results, and any other statements 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 and solutions that serve multiple end markets, including thesecurity, healthcare, financial technology (“FinTech”) and the Internet of Things (“IoT”) markets. With extensive experience in access control, biometric andbehavior-metric identity verification, security and privacy, encryption and data protection, payments, miniaturization, and sensor technologies, we developand market groundbreaking solutions for payment, IoT, and healthcare applications. Two of Nxt-ID’s subsidiaries operate in the mobile and IoT-related markets: LogicMark, LLC (“LogicMark”), a manufacturer and distributor of non-monitored and monitored personal emergency response systems (“PERS”) that are sold through dealers, distributors and the United States Department ofVeterans Affairs (the “VA”), and Fit Pay, Inc. (“Fit Pay”), a proprietary technology platform that delivers end-to-end solutions to device manufacturers forcontactless payment capabilities, credential management, authentication and other secure services within the IoT ecosystem, which we acquired on May 23,2017. Through these lines of business, Nxt-ID creates and markets technologies that are at the center of the rapidly expanding IoT space. Our corecompetencies leverage emerging business opportunities with significant high-growth potential, as well as revenue-producing lines of business with clearpaths to expansion. With technologies that validate and connect users to devices, and devices to ecosystems, we are playing a central role in the expansion of IoT ecosystems,focusing on the areas of healthcare and payments. Our strategic initiatives include: (1) monetizing our core technologies; (2) focusing on key addressablemarket segments and verticals; and (3) executing clear go-market strategies for our products and services. This strategy allows us to take advantage of multilayered and recurring revenue opportunities within the healthcare and payment market segments. Inhealthcare, LogicMark produced consistent revenue growth, while positioning itself as the VA’s leading provider of non-monitored PERS devices and furtherexpanding into the domestic retail market with its disruptive value proposition. With respect to our payments business, Fit Pay became one of the first successful third-party payment network token service provider with thecommercialization of its platform and the launch of the Garmin Pay™ feature for one of its customers, Garmin International, Inc. Fit Pay also announced keyecosystem partnerships with Visa International, Mastercard, Bank of America, and Australia and New Zealand Banking Group Limited (ANZ). We arecontinuing to integrate our initial 15 device manufactures onto the core Fit Pay Trusted Payment Manager™ platform (“TPMP”) with the product launches ofthe Token ring by Tokenize Inc. and the Bee payment device by Radiius. We are also working to expand the capabilities of the platform in order to integrateit with additional payment networks and issuing banks, and to offer new products, such as cryptocurrency, to emerging markets. 1 Healthcare Overview With respect to the healthcare market, our business initiatives are driven by LogicMark, which serves a market that enables two-way communication, medicaldevice connectivity and patient data tracking of key vitals through sensors, biometrics, and security to make home health care a reality. There are three majortrends driving this market: (1) an increased desire for connectivity; specifically, a greater desire for connected devices by people over 60 years of age whonow represent the fastest growing demographic for social media; (2) the growth of “TeleHealth”, which is the means by which telecommunicationstechnologies are meeting the increased need for health systems to better distribute doctor care across a wider range of health facilities, making it easier to treatand diagnose patients, and (3) rising healthcare costs – as health spending continues to outpace the economy, representing between 6% and 7% of the overalleconomy, the need to reduce hospital readmissions, increase staffing efficiency and improve patient engagement remain the highest priorities. Together,these trends have produced a large and growing market for us to serve. LogicMark has built a successful business on emergency communications inhealthcare. We have a strong business relationship with the VA today, serving veterans who suffer from chronic conditions that often require emergencyassistance. This business is steady and growing, producing record revenue in 2017. Our strategic plan calls for expanding LogicMark’s business into otherhealthcare verticals as well as retail and enterprise channels in order to better serve the expanding demand for connected and remote healthcare solutions. Home 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 healthcare is a massive shift that is being driven by demographics (an aging population) and basic economics. Peoplealso value autonomy and privacy which are important factors in determining which solutions will suit the market. Consumers are beginning to enjoy thebenefits of smart home technologies and online digital assistants. One of the promising applications of our VoiceMatch™ technology is enabling securecommands for restricted medical access. This solution, when coupled with Nxt-ID BioCloud™, combines biometrics with encryption and distributed accesscontrol. Our Healthcare Monitoring Market Opportunity PERS devices are used to call for help and medical care during an emergency. These devices are also used by a wide patient pool, as well as the generalpopulation, to ensure safety and security when living or traveling alone. The global medical alert systems market caters to different end-users across thehealthcare industry, including individual users, hospitals and clinics, assisted living facilities and senior living facilities. The growing demand for homehealthcare devices is mainly driven by an aging population and rising healthcare costs worldwide. We believe that this will spur the usage of medical alertsystems across the globe, as they offer safety and medical security while being affordable and accessible. The PERS market is divided into three device segments: landline-based PERS, mobile PERS, and standalone devices. The global PERS market is projected togrow at a CAGR of 5.83% to $8.4 billion in 2020, benefiting from strong demographic tailwinds. North America and Europe are the largest markets for PERS,accounting for approximately 40% and 37% of total sales, respectively in 2020. According to IndustryARC, improvements in healthcare infrastructure andemerging economies will fuel growth and significantly improve the relative market share of the Asia Pacific and the rest of world regions. 2 Our Health Care Products LogicMark produces a range of products within the PERS market and has differentiated itself by offering non-monitored products, which only require a one-time purchase fee, instead of a recurring monthly contract. As a result, LogicMark’s products are typically the most cost-effective PERS option. LogicMark’snon-monitored solution offers a significant value proposition over monitored solutions. The cost of ownership of a monitored solution, which includes a monthly service fee, can be as much as $1,500 – $3,000 over a five-year period. Thiscompares to a one-time purchase of a LogicMark non-monitored device, which provides a similar level of security for a purchase price as low as one tenth ofthat amount. LogicMark offers both traditional (i.e., landline) and mPERS (i.e., cell-based) options. Our non-monitored products are sold primarily through the VA andhealthcare distributors. 3 LogicMark offers monitored products that are primarily sold by dealers and distributors for the monitored product channel. LogicMark sells its devices to thedealers and distributors, who in turn offer the devices to consumers as part of their product/service offering. The service providers charge consumers amonthly monitoring fee for the associated monitoring service. These products are monitored by a third-party central station Our Health Care Competition LogicMark offers a wide variety of products, enabling it to cater to users with different levels of health and safety needs. Compared to its competitors,LogicMark’s PERS products offer enhanced functionality at the best value. The chart below summarizes LogicMark’s product offering versus those of its competitors: Our Health Care Business Strategy Through LogicMark, we intend to expand distribution by using larger distributors who can leverage the consumer value proposition of offering a one-timedevice purchase as opposed to a leased monthly solution. We also intend to apply our technology to the next generation of PERS devices that will havegreater functionality, innovative design and clinical monitoring capability. We believe that there is further potential for expansion in the domestic andinternational retail and international markets, and we intend to take advantage of this through a new product offering, Notify911, which is a non-monitoreddevice developed for direct-to-consumer sales through retail channels and direct marketing initiatives. We are also seeking to leverage our PERS experienceto develop new offerings in the home healthcare monitoring market. Overall, our healthcare division, through LogicMark, is positioned to take advantage of favorable market dynamics, a stable revenue-producing customerbase, a differentiated product line, a robust new product development pipeline and compelling growth opportunities. 4 Payments and Financial Technology Overview We conduct our payments business through Fit Pay, which was acquired by Nxt-ID in May 2017. Fit Pay’s core technology is a proprietary platform thatenables contactless payment capabilities, allowing manufacturers of “smart devices” to add payment capabilities to their products with very little start-uptime and minimal investment in software development, while granting them access to the leading card network and global credit card issuing banks. It is oneof the first successful commercializations of a token requestor service provider integrated with the major payment card networks. The existing proprietycapabilities of the contactless payment companies are not available to other original equipment manufacturers (“OEMs”). The Fit Pay TPMP creates anopportunity for a whole new range of devices to be payment-enabled. Fit Pay is currently on-boarding 15 device manufactures to its platform. Garmin Pay™, a contactless payment feature for a new line of smartwatches byGarmin International, Inc., is powered by Fit Pay’s TPMP technology and went live in the fall of 2017. Fit Pay also announced the product launches for threeother customers, including the Token ring by Tokenize Inc., the Bee payment device by Radiius and a luxury smart clasp by Wearatec Inc. In addition to launching new customers, our emerging payments business also announced key ecosystem partnerships with Visa International, Mastercard,Bank of America, and Australia and New Zealand Banking Group Limited (ANZ). These agreements, along with the growing network of issuing banks, nowenables cardholders to use devices powered by the TPMP, increasing our revenue potential and providing the opportunity to expand our customer andgeographical footprint. At year-end, the TPMP was enabled by more than 60 issuing banks in 8 countries in the largest markets worldwide. Our payment and financial technology business has also expanded to include new products and services. This includes growing the capabilities of the TPMPto integrate it with additional payment networks and issuing banks. Fit Pay has also developed proprietary payment devices that it will offer throughbusiness-to-business and direct-to-consumer channels. These new products will leverage the TPMP and allow us to access new customers and emergingmarkets, such as cryptocurrency. Fit Pay’s initial product offering is a platform extension and contactless payment device called Flip™, which enablesBitcoin holders to make contactless payment transactions at millions of retail locations with value exchanged from their cryptocurrency. Together, these opportunities position our emerging payment and financial technology business for future growth as Fit Pay begins to monetize its coreTPMP technology, and expand its products and services to new markets and customers. Our Payments and Financial Technology Market Opportunity Our payments business targets the rapidly expanding IoT and wearable devices markets. According to the research firm, Gartner, IoT devices will grow at a32.9% CAGR through 2020, reaching an installed base of 20.4 billion units. Gartner estimates that by 2020 there will be more than 500 million wearabledevices in use alone and it predicts that 1 million IoT devices will be purchased every hour by 2021. As the markets for wearables and IoT devices expand, payments are also emerging as a key feature. A Business Insider Intelligence study estimates that by2020 an estimated 63% of wearable devices will be payment-enabled. The research firm International Data Corporation predicts that wearable devices willtransact more than $501 billion payment by 2020, overtaking plastic payment methods as the primary payment method in the next 5-7 years. A recent survey by Visa and the industry publication, PYMTS, entitled “How We Will Pay: Consumers Connected Devices and the Future of Payments”supports consumer demand for adding payment capabilities to devices. The survey found strong support among consumers for new forms of payments. Of thesurvey’s respondents: ●60% found buying and paying for things unproductive and time-consuming, and in need of improvements;●83% viewed using connected devices as a way to eliminate friction from how they pay; 5 ●66% would use a connected device to enable a seamless payment experience; and●77% want their financial institution/bankcard network to enable these new ways to pay. As an early and established entrant into the payments market, we believe that we are well-positioned to take advantage of both the growth of payment-enabled devices and the consumer demand for new forms of payments. Our Payments Product Offerings We offer a range of technology platform services and products that leverage both the core payment technologies that we have developed as well as the assetsgained through our business combination with Fit Pay. These include: The Fit Pay Trusted Payment Manager Platform™ The TPMP provides IoT and wearable devices with contactless payment capabilities and full digital wallet functionality. It enables consumers to simply tapand pay at near field communication (“NFC”)-enabled point-of-sale (“POS”) terminals or ATMs using an existing credit, debit or prepaid card account. TheTPMP uses tokenization, a payment security technology that replaces cardholders’ account information with a unique digital identifier (a “token”), totransact highly secure contactless payments and authentication services. Fit Pay leverages embedded secure element chip technology within devices to offera payment solution that is very power and memory efficient. This frees devices from needing to be tethered to a host device or connected to the Internet totransact payments, creating a convenient and completely frictionless payment experience for consumers. We consider Fit Pay to be the primary connection point between card networks, banks, merchants and the wearable user. Fit Pay has built a paymentecosystem that includes 15 devices manufactures, the Visa, Mastercard, Discover card networks (with additional networks to be added), and more than 60issuing banks in 8 countries in the largest markets worldwide. Issuing banks accepting payments from devices connected to the TPMP include Bank ofAmerica, Capital One, U.S. Bank, Wells Fargo in the United States, BonusCard, Cornérbank, ANZ and NAB (National Australia Bank), among others. Fit Pay became one of the first successful third-party payment network token service providers with the commercialization of the TPMP and the launch of theGarmin Pay™ feature for its customer Garmin International, Inc. World Ventures Flye™ SmartCard We continue to operate pursuant to our master product development agreement, dated December 31, 2015, with World Ventures Holdings, LLC (“WVH”), aninternational direct selling travel company, pursuant to which WVH committed to purchase an exclusive smart card from us for distribution to WVH’smembers. . In connection with such agreement, WVH also made a strategic investment in our securities in 2015. The Flye™ smart card is customized for WVHwith additional technologies and wireless features, such as the ability to seamlessly integrate with WVH’s DreamTrips™ smartphone application to wirelesslycheck-in and earn loyalty points towards free DreamTrips™ vacations at select restaurants. DreamTrips™ is a travel club and entertainment community wheremembers can enjoy exciting excursions year-round to extraordinary destinations. During the year ended December 31, 2017, we recorded revenue of $7,065,755 from WVH, a related party. WVH is considered a related party, as the ChiefTechnology Officer of WVH is a director of Nxt-ID. For additional information on our transactions with WVH, see “Management Discussion and Analysis of Financial Condition and Results of Operations”. Fit Pay General Purpose Reloadable (GRP) Mastercard® Fit Pay offers prepaid capabilities on wearable devices connected to the TPMP. The general purpose reloadable (“GPR”) program, the Fit Pay PrepaidMastercard®, gives consumers with Fit Pay’s contactless payment-enabled devices the convenience of storing funds directly on their devices. The programprovides consumers with the ease and security of contactless payments. The Fit Pay Prepaid Mastercard® is available to device OEMs that integrate theirproducts with the TPMP. The program allows consumers to load their Fit Pay-enabled IoT or wearable device with a prepaid value for contactless purchases.A digital wallet allows the user to re-load the account, set top-off thresholds and manage account settings. The Fit Pay Prepaid Mastercard® is sponsored bySunrise Banks, N.A. Cascade Financial Technology Corp. serves as the program manager. The device can be used everywhere that debit Mastercard isaccepted. 6 Flip™ Fit Pay recently announced Flip™, a new contactless payment device that will enable cryptocurrency holders to use the value of their currency to makepurchases at millions of retail locations. The new device leverages an expansion of the TPMP to connect cryptocurrencies to the payment ecosystem. Flip™will use value exchanged from Bitcoin to make traditional payment transactions. Flip™ will be NFC-enabled, allowing it to transact payments at any retail point of sale location that accepts contactless payments. Flip™ will store apreloaded amount of U.S. dollars that are exchanged from a user’s existing cryptocurrency account. It includes a digital wallet that allows users to set howmuch value they would like their Flip™ to hold and when they would like it to reload, and to suspend the account should the device become lost or stolen.Initially, Flip™ will accept value exchanged from Bitcoin and will potentially expand to other cryptocurrencies in the future. Fit Pay has begun taking pre-orders for Flip™ and anticipates initial shipments of the device will begin in the second quarter of 2018. Wi-Mag™ Our proprietary antenna and payment technology can be embedded in a mobile device to make wireless payments at most POS terminals which do not requireNFC or Europay, MasterCard, and Visa (“EMV”) technology, potentially allowing users to make payments at most POS terminals in the United States andabroad. SmartPay™ We have developed a standalone capability, SmartPayTM, on various devices with the ability to make payments by dynamic magnetic stripe or throughinteracting with a terminal through EMV, NFC or barcode functionality. We are currently pursuing significant strategic partnerships for this product. Our Payments Competition 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 cardsamong other 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, to pay from one’s phone, and orderahead at restaurants.●SamsungPay – A mobile payment system that uses Magnetic Secure Transmission to broadcast a signal to a POS payment terminal.●Fitbit Pay – Payment capability launch by fitness tracker and smartwatch producer Fitbit. 7 We believe that our payment products have certain competitive advantages. The existing contactless payment companies propriety capabilities are notavailable to other device manufacturers. Fit Pay’s TPMP creates an opportunity for a whole new range of devices to be payment-enabled by significantlyreducing the cost and time to market. While other companies are seeking to build a similar white-labeled solution, we believe that the extent of Fit Pay’sexisting relationships provides it with an advantage in the market. The TPMP offers several distinctive features, including (1) it removes friction for the consumer with very little user interaction required; (2) it does notrequire a device to be present at the time of a transaction; (3) it is extendible to any operating system or device; and (4) it is highly secure and card data is notexposed at the point of sale. Furthermore, we believe that the following factors create a defensible market position for Fit Pay: (1) we are the only independent platform to complete secureelement (“SE”) tokenization integrations with major card networks; (2) complex service deployment barriers make it difficult for new entrants and formanufacturers to develop the capability themselves; (3) we own the security keys which eliminate the ability of OEMs to change providers without majorservice disruption; (4) we offer a comprehensive, end-to-end solution as a single source for all SE-related applications, including full-featured APIs(application programming interfaces) and SDKs (software development kits) to simplify implementation; and (5) we offer a scalable platform with directaccess the major card network and issuing banks. Our Payments Business Strategy Our primary strategy for our payment business is to leverage our technological and competitive advantages across various industries in combination withestablished partners that can create meaningful distribution, monetizing the technologies and capabilities that we have developed. Our unique position as anindependent platform provider with our comprehensive, end-to-end platform positions us to serve the rapidly expanding wearable and IoT markets. Asdescribed above, the complex ecosystem needed to support full-function payment capabilities creates a barrier for new entrants and manufacturers who mayhave considered developing the capability on their own, and offers continuity for our existing customer base. Our business strategy is to leverage these attributes to (1) scale our platform to add more customers and payment use cases; (2) build new revenue streams byadding additional OEMs and our GPR program to new form factors; (3) add new capabilities to the TPMP such as cryptocurrency payments; (4) develop ourown proprietary payment devices for business-to-business or business-to-consumer channels; and (5) integrate our platform with additional ecosystems suchas transit, hotels, and building access systems. 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 32patents, six of which have 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 14/049,175 8 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 15/252,468 THE UN-PASSWORD™: RISK AWARE END-TO-END MULTI-FACTOR AUTHENTICATION VIA DYNAMIC PAIRINGPatent issued August 2, 2016Patent Number 9,407,619 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 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 15/225,780 9 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 14/843,930 LOW BANDWIDTH CRYPTO-CURRENCY TRANSACTION EXECUTION AND SYNCHRONIZATION METHOD AND SYSTEMFiled September 7, 2016Application Number 15/259,023 METHOD AND SYSTEM TO ORGANIZE AND MANAGE TRANSACTIONSFiled December 2, 2016Application Number 15/368,546 THE UN-PASSWORD™: RISK AWARE END-TO-END MULTI-FACTOR AUTHENTICATION VIA DYNAMIC PAIRINGFiled March 14, 2016Application Number 15/068,834 SYSTEM AND METHOD TO PERSONALIZE PRODUCTS AND SERVICESFiled July 15, 2016Application number 15/212,184 SYSTEM AND METHOD TO PERSONALIZE PRODUCTS AND SERVICESFiled September 6, 2016Application number 15/257,101 ACCORDION ANTENNA STRUCTUREFiled April 4, 2016Application Number 15/089,844 SYSTEM AND METHOD TO AUTHENTICATE ELECTRONICS USING ELECTRONIC-METRICSFiled July 5, 2016Application Number 15/202,553 SYSTEM AND METHOD TO DETERMINE USER PREFERENCESFiled July 15, 2016Application number 15/212,163 PREFERENCES DRIVEN ADVERTISING SYSTEMS AND METHODSFiled July 15, 2016Application number 15/212,161 AUTOMATED WEARABLE ACTIVATION SYSTEMFiled July 27, 2017Application number 62/537,904 SYSTEMS AND METHODS FOR PROVIDING AN INTERNET OF THINGS PAYMENT PLATFORMFiled March 25, 2015Application number 62/138,298 10 WIRELESS, CENTRALIZED EMERGENCY SERVICES SYSTEMPatent Number 8,275,346 VOICE-EXTENDING EMERGENCY RESPONSE SYSTEMPatent Number 8,121,588 LIST-BASED EMERGENCY CALLING DEVICEPatent Number 8,369,821 ALARM SIGNALING DEVICE AND ALARM SYSTEMPatent Number 7,312,709 FALL DETECTION SYSTEM HAVING A FLOOR HEIGHT THRESHOLD AND RESIDENT HEIGHT DETECTION DEVICEPatent Number 7,893,844 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 that 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 on the patents that are held bythird parties. In addition, product development is inherently uncertain in a rapidly evolving technological environment in which there may be numerouspatent applications 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 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. 11 Corporate Information History We were incorporated in the state of Delaware on February 8, 2012. We are an emerging technology company engaged in the development of proprietaryproducts, services and solutions for security that serve multiple end markets, including the security, healthcare, finance and IoT markets. On June 25, 2012, we acquired 100% of the membership interests in 3D-ID LLC (“3D-ID”), a limited liability company that we formed in Florida in February2011 and that was previously owned by the Company’s founders. By acquiring 3D-ID, we 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, as well as the law enforcement and traveland immigration sectors. 3D-ID is an early stage company engaged in the design, research and development, integration, analysis, modeling, systemnetworking, sales and support of intelligent surveillance, three-dimensional facial recognition and three-dimensional imaging devices and systems primarilyfor identification and access control in the security industries. As our acquisition of 3D-ID was a transaction between entities under common control inaccordance with Accounting Standards Codification (“ASC”) 805, “Business Combinations”, we recognized the net assets of 3D-ID at their carrying amountsin our accounts on the date that 3D-ID was organized, February 14, 2011. On July 25, 2016, we completed the acquisition of LogicMark pursuant to an interest purchase agreement by and among the Company, LogicMark and theholders of all of the membership interests of LogicMark (the “LogicMark Sellers”), dated May 17, 2016 (the “Interest Purchase Agreement”). Pursuant to theInterest Purchase Agreement, we acquired all of the membership interests of LogicMark from the LogicMark Sellers for (i) $17.5 million in cash consideration(ii) a $2.5 million 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 our common stock, par value $0.0001 per share (the “Common Stock”), which were issued uponsigning of the Interest Purchase Agreement (the “LogicMark Shares”), and (iv) warrants (the “LogicMark Warrants”) to purchase an aggregate of 157,480shares of our Common Stock (the “LogicMark Warrant Shares”) for no additional consideration. In addition, we may be required to pay the LogicMarkSellers 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 grossprofit targets set forth in the Interest Purchase Agreement. The LogicMark Note originally was to mature on September 23, 2016 but was extended to July 15,2017. The earn-out payment related to 2016 and the remaining balance owed on the LogicMark Note including accrued interest were both paid in July 2017.Based on LogicMark’s operating results for the year ended December 31, 2017, the 2017 earnout amount owed by the Company is $3,156,088. As a result,the Company reduced the amount of contingent consideration due to the LogicMark Sellers by $1,843,912. On May 23, 2017, we completed a merger (the “Merger”) pursuant to an agreement and plan of merger (the “Merger Agreement”) by and among theCompany, Fit Merger Sub, Inc., a wholly-owned subsidiary of the Company (the “Merger Sub”), Fit Pay, Michael J. Orlando, Giesecke & Devrient MobileSecurity America, Inc. (“G&D”), the other stockholders of Fit Pay (the “Other Holders”) and Mr. Orlando in his capacity as stockholder representativerepresenting the Other Holders (the “Stockholder Representative”, and together with Orlando and G&D, the “Fit Pay Sellers”). In connection with the Merger,Fit Pay merged with and into the Merger Sub, with the Merger Sub continuing as the surviving entity and a wholly owned subsidiary of the Company. Pursuant to the terms of the Merger Agreement, the aggregate purchase price paid for Fit Pay was: (i) 19.96% of the outstanding shares of Common Stock; (ii)2,000 shares of the Series C Non-Convertible Preferred Stock of the Company, par value $0.0001 per share (the “Series C Preferred Stock”); (iii) the paymentof certain debts by the Company; and (iv) the payment of certain unpaid expenses by the Company. In addition, the Company will be required to pay theSellers an earnout payment equal to 12.5% of the gross revenue derived from Fit Pay’s technology for sixteen (16) fiscal quarters commencing on October 1,2017 and ending on December 31, 2021. In connection with the Fit Pay transaction, Mr. Orlando became our Chief Operating Officer, as well as the President of Fit Pay, effective as of May 23, 2017. Other Our principal executive offices are located at 285 North Drive, Suite D, Melbourne, FL 32934, 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 (the “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 revenues exceed $1.07 billion, (ii) the datethat we 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 Stockthat is held 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 whichwe have issued more than $1 billion in non-convertible debt during the preceding three-year period. Pursuant to Section 102 of the JOBS Act, we haveprovided reduced executive compensation disclosure and have omitted a compensation discussion and analysis from this Report. Pursuant to Section 107 ofthe JOBS Act, 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. Our emerging growth company status will expire on December 31, 2018. Employees As of December 31, 2017, we had a total of 55 full-time employees, comprising 15 employees in product engineering, 7 employees in finance andadministration, 17 employees in sales and customer service and 16 employees in product fulfillment. None of our employees are represented by a collectivebargaining agreement, nor have we experienced any work stoppage. We consider our relations with our employees to be good. Our future success depends onour continuing ability to attract and retain highly qualified engineers, graphic designers, computer scientists, sales and marketing and senior managementpersonnel. In addition, we have independent contractors whose services we are using on an as-needed basis to assist with the engineering and design of ourproducts.12 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 $8,264,873 for the year ended December 31, 2017. As of December 31, 2017,the Company had cash and stockholders’ equity of $5,636,415 and $19,130,167, respectively. At December 31, 2017, the Company had working capital of$1,319,766. We cannot provide any assurance that we will be able to raise additional cash from equity financings, secure debt financing, and/or generaterevenue from the sales of our products. If we are unable to secure additional capital, we may be required to curtail our research and development initiativesand 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. 13 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 each of 2016 and 2017, and we may encounter difficulties in integrating these acquisitions and managing ourgrowth, which would adversely affect our results of operations. During 2016 and 2017, we completed the acquisitions of LogicMark and Fit Pay, and are considering other acquisitions to improve our position in marketsegments that we consider to be significant and strategic. We may be unable to integrate the operations of the acquired companies into our own in the mannerwe anticipated or at all, and such integration could be expensive. Moreover, this significant expansion of our operations could put significant strain on ourmanagement and our operational and financial resources. To manage future growth, we will need to hire, train, and manage additional employees, as well asproperly integrate personnel from acquired businesses. Concurrent with expanding our operational and marketing capabilities, we will also need to increaseour product development activities. We may not be able to support, financially or otherwise, future growth, or hire, train, motivate, and manage the requiredpersonnel. Our failure to manage growth effectively could limit our ability to achieve our goals. Our ability to integrate our acquisitions and manage our growth will depend in part on the ability of our executive officers to continue to implement andimprove our operational, management, information and financial control systems and to expand, train and manage our employee base, and particularly toattract, expand, train, manage and retain a sales force to market our products on acceptable terms. Our inability to manage growth effectively could cause usto fail to realize the anticipated benefits of our acquisitions or could cause our operating costs to grow at a faster pace than we currently anticipate, any ofwhich could have a material adverse effect on our business, financial condition, results of operations and prospects. Because we are an emerging growth company, we expect to incur significant additional operating losses. We are an emerging growth company. The amount of future losses and when, if ever, we will achieve profitability are uncertain. Our current products have notgenerated significant commercial revenue for us and there can be no guarantee that we can generate sufficient revenues from the commercial sale of ourproducts 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 importantly, 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. We have recently been informed by the U.S. Securities and Exchange Commission (the“SEC”) that our failure to file the financial statements associated with our Fit Pay acquisition within the 75 days of the closing of that acquisition has resultedin our no longer being eligible to register our securities with the SEC on Form S-3. Our inability to use Form S-3 to register our securities may negativelyaffect our ability to raise capital. If we raise additional funds through the sale of equity or convertible securities, your ownership percentage of our CommonStock will be reduced. In addition, these transactions may dilute the value of our Common Stock. We may have to issue securities that have rights,preferences and privileges senior to our Common Stock. The terms of any additional indebtedness may include restrictive financial and operating covenantsthat would limit our ability to compete and expand. There can be no assurance that we will be able to obtain the additional financing we may need to fundour business, or that such financing will be available on terms acceptable to us. 14 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. We may face claims by third parties that our products or technology infringe on 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 our management. If any of our productsare 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 productsor obtain licenses from third parties to continue to offer our products. Any efforts to re-engineer our products or obtain licenses on commercially reasonableterms may not be successful, which would prevent us from selling our products, and, in any case, could substantially increase our costs and have a materialadverse effect on our business, financial condition and results of operations. 15 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 32 patents in the U.S., six of which have been awarded, and our success will depend, in part, on our ability to obtain patent andtrade secret protection for proprietary technology that we currently possess or that we may develop in the future. No assurance can be given that any pendingor future patent applications will issue as patents, that the scope of any patent protection obtained will be sufficient to exclude competitors or providecompetitive advantages to us, that any of our patents will be held valid if subsequently challenged or that others will not claim rights in or ownership of thepatents 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. 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 and President, as well as our Chief Operating Officer, but have not entered into an employment agreement with our ChiefFinancial Officer or Chief Technology Officer. The loss of the services of one or more of our senior management or other key employees could adverselyaffect our business. We currently maintain a key person life insurance 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. 16 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 “Sarbanes-Oxley Act), theDodd-Frank Wall Street Reform and Consumer Protection Act and other applicable securities rules and regulations. Compliance with these rules andregulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand onour systems and resources. The Exchange Act requires, among other things, that we file annual and current reports with the SEC with respect to our businessand 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. 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 CommonStock. 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 ourCommon 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, 2017, 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. In addition, management needs additional time to fullydocument the systems and controls related to the acquisition of Fit Pay in May 2017. 17 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 our 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 JOBS Act. For as long as we continue to be an emerging growth company, we may take advantageof exemptions from various reporting requirements that are not applicable to other public companies that are not emerging growth companies, including notbeing required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regardingexecutive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote onexecutive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth companyfor up to five years, although we could lose that status sooner if our annual gross revenues exceed $1.07 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 last business day ofour most recently completed second fiscal quarter, in which case we would no longer be an emerging growth company as of the following December 31. Wecannot predict if investors will find our Common Stock less attractive because we may rely on these exemptions. If some investors find our Common Stockless attractive as a result, there may be a less active trading market for our Common Stock and the price of our Common Stock 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 our business, financial condition, results of operations, and future prospects. 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 our business,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. 18 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 the security 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. 19 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 that we have. There can be no assurance that we can continue todevelop our biometric technologies or that present or future competitors will not develop technologies that render our biometric applications obsolete or lessmarketable 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. 20 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 the price of our Common Stock. You may be unable to sell your shares of Common Stockat or above your purchase 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 securities of larger, more established companies thattrade on a national securities exchange and have large public floats, and we expect that the price of our Common Stock will continue to be more volatile thanthe securities of such larger, more established companies for the indefinite future. The volatility in the price of our Common Stock is attributable to a numberof factors. First, as noted above, our Common Stock is, compared to the securities of such larger, more established companies, sporadically and thinly traded.The price of our Common Stock could, for example, decline precipitously in the event that a large number of shares of our Common Stock is sold on themarket without commensurate demand. Secondly, we are a speculative or “risky” investment due to our lack of profits to date. As a consequence of thisenhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, bemore inclined to sell their shares of Common Stock on the market more quickly and at greater discounts than would be the case with the securities of a larger,more established company that trades on a national securities exchange and has a large public float. Many of these factors are beyond our control and maydecrease 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, our Common Stock could bedelisted from such exchange. Our Common Stock is currently listed on the NASDAQ Capital Market (“NASDAQ”). In order to maintain such listing, we must satisfy minimum financialand other continued listing requirements and standards, including those regarding director independence and independent committee requirements,minimum stockholders’ equity, minimum share price, and certain corporate governance requirements. There can be no assurances that we will be able tocomply with the applicable listing standards. Although we are currently in compliance with such listing standards, we have, in the past, fallen out ofcompliance and may in the future fall out of compliance with such standards. If we are unable to maintain compliance with these NASDAQ requirements, ourCommon Stock will be delisted from NASDAQ. In the event that our Common Stock is delisted from NASDAQ and is not eligible for quotation on another market or exchange, trading of our Common Stockcould be conducted on the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the OTC Pink Marketplace orthe OTC Bulletin Board operated by the OTC Market Group Inc. In such event, it could become more difficult to dispose of, or obtain accurate pricequotations for, our Common Stock, and there would likely also be a reduction in our coverage by securities analysts and the news media, which could causethe price of our Common Stock to decline further. Also, it may be difficult for us to raise additional capital if we are not listed on a major exchange. 21 In the event that our Common Stock is delisted from NASDAQ, U.S. broker-dealers may be discouraged from effecting transactions in shares of ourCommon Stock 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 of Common Stock 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 Common Stock might also decline inreaction to events that affect other companies in our industry, even if these events do not directly affect us. Each of these factors, among others, could harmthe value of your investment in our Common Stock. In the past, following periods of volatility in the market, securities class-action litigation has often beeninstituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources,which could materially and adversely affect our business, operating results and financial condition. Our stockholders may experience significant dilution. Although certain exercise restrictions are placed upon the holders of our warrants, the issuance of material amounts of Common Stock by us would cause ourexisting stockholders to experience significant dilution in their investment in us. In addition, if we obtain additional financing involving the issuance ofequity securities or securities convertible into equity securities, our existing stockholders’ investment would be further diluted. Such dilution could cause themarket price of our Common Stock to decline, which could impair our ability to raise additional financing. 22 We do not anticipate paying dividends in the foreseeable future; you should not buy our Common 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. If you make an additional investment in our Common Stock, you may experience additional dilution in the future. We may acquire other technologies or finance strategic alliances by issuing our equity or equity-linked securities, which may result in additional dilution toour 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 of theCompany. 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 thesuccess of any attempt to change control of the 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. 23 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 was for three years and the monthly rentincluded the base rent, an escrow for taxes and insurance, common area maintenance charges and applicable sales tax. The lease term expired on December31, 2017 and on January 5, 2018 we entered into a six-month lease extension through June 30, 2018, at a monthly rent of $6,983. 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 was for three years with a monthly rent of $1,250 per month in the first year, increasing 3% annually thereafter. The Company is currently leasing thisoffice space on a month-to-month basis with a monthly rent of $1,823. As a result of the LogicMark acquisition on July 25, 2016, we assumed two facility leases. One of the leases was for office space located in Plymouth,Minnesota with a monthly rent of $1,170. This lease agreement expired in February 2018. In addition, LogicMark subleased office and warehouse spacelocated in Louisville, Kentucky. The subleasing agreement expired on August 31, 2017. On June 6, 2017, we entered into a new three year lease agreementfor the same office and warehouse space located in Louisville, Kentucky. The monthly rent for the space is $6,911 and this lease agreement expires in August2020. As a result of the Fit Pay acquisition on May 23, 2017, we assumed one facility lease. The lease is for office space located in Boulder, Colorado. The leaseagreement expires in May 2020 and the current monthly rent is $3,356. Item 3.Legal Proceedings From time to time we may be involved in various claims and legal actions arising in the ordinary course of our business. There is no action, suit, proceeding,inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of ourexecutive officers or the executive officers of any of our subsidiaries, threatened against or affecting us, or any of our subsidiaries in which an adversedecision could have a material adverse effect upon our business, operating results, or financial condition. Item 4.Mine Safety Disclosures Not applicable. 24 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our Common Stock trades on NASDAQ under the symbol “NXTD.” Reverse Stock Split On September 1, 2016, our board of directors and stockholders approved a resolution to amend our certificate of incorporation and to authorize the Companyto effect a reverse split of the outstanding shares of Common Stock at a ratio of a 1-for-10 (the “Reverse Split”). On September 9, 2016, we effected theReverse Split. Upon effectiveness of the Reverse Split, every ten (10) shares of outstanding Common Stock decreased to one share of Common Stock. Inaddition, the Reverse Split adjusted all outstanding warrants, options, and convertible instruments but did not change the number of authorized 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, 2016 through December 31, 2017. These bid prices represent prices quoted by broker-dealers on NASDAQ. The quotations reflect inter-dealerprices, without retail mark-up, mark-down or commissions, and may not represent actual transactions. 2017 High Low 1st Quarter ended March 31, 2017 $4.17 $1.66 2nd Quarter ended June 30, 2017 $2.87 $1.21 3rd Quarter ended September 30, 2017 $2.80 $1.45 4th Quarter ended December 31, 2017 $8.59 $1.01 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 Holders As of March 29, 2018, there were approximately 98 holders of record of our Common Stock. This number does not include shares of Common Stock held bybrokerage clearing houses, depositories or others in unregistered form. 25 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 our board of directors and will depend upon a variety of factors, including ourfuture earnings, 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. Recent Sales of Unregistered Securities None. 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. Results of Operations Year ended December 31, 2017, compared with the year ended December 31, 2016. Revenue. Our revenues for the year ended December 31, 2017 were $23,316,969 compared to $7,736,320 for the year ended December 31, 2016. The increasein revenues for the year ended December 31, 2017 as compared to the year ended December 31, 2016 is primarily attributable to shipments of the FlyeTMsmart card and LogicMark product sales. At December 31, 2017, WVH had sufficient FlyeTM smart card inventory on hand and as a result we expect to beginshipping such smart cards to WVH again in the latter part of 2018. Cost of Revenue. The increase in our gross margin for the year ended December 31, 2017 was primarily attributable to shipments of the FlyeTM smart card andstrong gross margin contributed by LogicMark. For the year ended December 31, 2016, our gross margin included the operating results of LogicMark, whichwas acquired on July 25, 2016, for the period July 25, 2016 through December 31, 2016. Our cost of revenue for 2017 also included an adjustment for excessand obsolete inventory of $1,083,024 resulting primarily from the write off of the remaining raw material components related to the Wocket® product line. Inaddition, in 2017 we also recorded a lower of cost or market adjustment of $347,546 related to the Wocket® included in finished goods inventory inanticipation of our future sales to wholesale customers. 26 Operating Expenses. Operating expenses for the year ended December 31, 2017 totaled $15,270,469 and consisted of research and development expenses of$1,667,850, selling and marketing expenses of $4,899,126 and general and administrative expenses of $8,703,493. For the year ended December 31, 2017,the research and development expenses related primarily to salaries and consulting services of $1,328,087. Selling and marketing expenses consistedprimarily of salaries and consulting services of $1,616,597, amortization of intangibles of $1,089,961, freight charges of $541,364, allowance for bad debtsof $402,383, and sales commissions of $290,838. General and administrative expenses for the year ended December 31, 2017 consisted of salaries andconsulting services of $2,129,096, accrued management and employee incentives of $950,000, legal, audit and accounting fees of $708,075 and feesincurred of $642,549 related to the acquisition of LogicMark. Also included is $2,072,256 in non-cash stock compensation to vendors, employees and boardmembers. Operating expenses for the year ended December 31, 2016 totaled $10,011,540 and consisted of research and development expenses of $888,187, selling andmarketing expenses of $2,881,668 and general and administrative expenses of $6,241,685. The research and development expenses related primarily tosalaries and consulting services of $392,991, as well as expenses of $226,293 primarily related to the design and development of the smart card for WVH andmanufacturing of the Wocket®. Selling and marketing expenses consisted primarily of salaries of $1,326,220, that were paid in both cash and stock, andadvertising and promotional expenses, including trade shows of $519,397. General and administrative expenses for the year ended December 31, 2016consisted of salaries and consulting services of $1,113,574, accrued management and employee 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. Also included is $352,020 in non-cash stock compensation to vendorsand board members. Our operating expenses for the year ended December 31, 2017 were approximately $5,260,000 higher as compared to operating expenses for the year endedDecember 31, 2016. The primary reason for the higher operating expenses for the year ended December 31, 2017 versus the year ended December 31, 2016 isthat our operating expenses included a full year of operating expenses related to LogicMark, whereas for the year ended December 31, 2016, the operatingexpenses of LogicMark, which was acquired on July 25, 2016, were included for the post acquisition period only. In addition, the operating expenses for theyear ended December 31, 2017 include the operating expenses Fit Pay which was acquired on May 23, 2017. Net Loss. The net loss for the year ended December 31, 2017 was $8,264,873 and resulted in part from operational expenses of $15,270,469 incurred duringthe year ended December 31, 2017. Our net loss was also attributable to our inventory adjustments discussed above totaling $1,430,570 and interest expenseincurred of $7,736,414. The operational expenses, inventory adjustments and interest expense were partially offset by favorable gross profit margin stemmingprimarily from the sales of LogicMark product and the favorable net change in fair value of contingent consideration of $1,497,153, which resulted primarilyfrom the reduction in the 2017 earnout amount due to the LogicMark Sellers. 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 during the yearended December 31, 2016. The operational expenses were partially offset by favorable gross profit margin stemming primarily from the acquisition ofLogicMark. In addition, the net loss was attributable to interest expense incurred of $3,275,059, unfavorable changes in fair value of derivative liabilities of$2,299,020 and a loss on extinguishment of debt of $272,749 resulting from the accelerated installment payments made during the year ended December 31,2016. 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, 2017, the Company had cash of $5,636,415. 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, 2017 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 $8,264,873 and $12,752,928 for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017, theCompany had cash and stockholders’ equity of $5,636,415 and $19,130,167, respectively. At December 31, 2017, the Company had working capital of$1,319,766. During the year ended December 31, 2017, the Company raised net proceeds of approximately $13,811,429 through the issuance of its CommonStock, warrants and convertible exchange notes.27 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, 2017, net cashused in operating activities amounted to $5,608,651, which comprised a net loss of $8,264,873, positive adjustments to reconcile net loss to net cash used inoperating activities of $6,483,125 and changes in operating assets and liabilities of negative $3,826,903, as compared to net cash used in operating activitiesof $950,048 for the year ended December 31, 2016, which comprised a net loss of $12,752,928, positive adjustments to reconcile net loss to net cash used inoperating activities of $5,919,499 and changes in operating assets and liabilities of positive $5,883,381. Cash Used in Investing Activities During the year ended December 31, 2017, net cash used in investing activities amounted to $142,073 and was primarily related to equipment and toolingpurchases totaling $52,962 and the cash portion of the purchase price to acquire Fit Pay, net of the cash we acquired of $89,111, which closed on May 23,2017. During the year ended December 31, 2016, net cash used in investing activities amounted to $15,934,781 and was related to changes in restricted cashof $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. Cash Provided by Financing Activities During the year ended December 31, 2017, the Company received net proceeds of $13,291,390 from the issuance of its Common Stock and warrants and$594,408 from the issuance of its convertible exchange notes. The Company repaid $3,000,000 of revolver borrowings and also repaid the remaining balancedue on the LogicMark Note of $773,969. The Company also made a contingent consideration payment of $1,500,000 related to the earnout payment due tothe LogicMark Sellers for 2016. In addition, the Company paid $450,000 to extend the maturity date of its revolving credit facility for one additional yearand also paid $74,369 for legal and other expenses relating to both the equity offerings and the issuance of the convertible exchange notes. During the yearended December 31, 2016, the Company received net proceeds of $1,869,755 from the issuance of its Series A Convertible Preferred Stock, par value $0.0001per share (the “Series A Preferred Stock”) and $400,000 from 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 from the issuance of Series B Preferred Stock. The Company also received net proceeds of $13,906,250from the revolving credit facility which were used in part to fund the LogicMark acquisition. In addition, the Company also paid down $1,726,031 of theseller’s note that resulted from the LogicMark acquisition with net cash received from the issuance of convertible exchange notes of $1,400,000 as well ascash on hand. Sources of Liquidity We are an emerging growth company and have generated losses from operations since inception. We incurred a net loss of $8,264,873 during the year endedDecember 31, 2017. As of December 31, 2017, the Company had a working capital of $1,319,766 (including contingent consideration of $3,656,660) andstockholders’ equity of $19,130,167, respectively. Such factors raise substantial doubt about our ability to sustain operations for at least one year from theissuance of these financial statements. Given our cash position at December 31, 2017, proceeds from equity and debt offerings subsequent to December 31, 2017 and our projected cash flow fromoperations over the next twelve months, we believe that we will have sufficient capital to sustain operations over the next twelve months following the dateof this filing to alleviate such substantial doubt. In order to execute our long-term strategic plan to develop and commercialize our core products, fulfill ourproduct development commitments and fund our obligations as they come due, including the earn-out payments related to the acquisitions of LogicMarkand Fit Pay, we may need to raise additional funds, through public or private equity offerings, debt financings, or other means. Should we not be successful inobtaining the necessary financing, or generate sufficient revenue to fund our operations, we would need to curtail certain of our operational activities. Impact of Inflation We believe that our business has not been affected to a significant degree by inflationary trends during the past three years. However, inflation is still a factorin the worldwide economy and may increase the cost of purchasing products from our contract manufacturers in Asia, as well as the cost of certain rawmaterials, component parts and labor used in the production of our products. It also may increase our operating expenses, manufacturing overhead expensesand the cost to acquire or replace fixed assets. We have generally been able to maintain or improve our profit margins through productivity and efficiencyimprovements, cost reduction programs and to a lesser extent, price increases, and we expect to be able to do the same during 2018. As such, we do notbelieve that inflation will have a significant impact on our business during 2018. 28 Financings 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 was amortized over the termof the debt and the Company amortized $1,366,667 and $133,333 of the debt discount for the years ended December 31, 2017 and 2016, respectively. 29 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. July 2017 Offerings On July 13, 2017, the Company closed a registered direct offering of an aggregate of 2,170,000 shares of the Company’s common stock, and pre-fundedwarrants to purchase 230,000 shares of common stock. The Company sold the shares at a price of $1.43 per share and received $1.42 per pre-funded warrant.The Company received gross proceeds from the offering, before deducting placement agent fees and other estimated offering expenses payable by theCompany, of approximately $3,429,700. The pre-funded warrants were converted into shares of common stock on September 23, 2017 and as a result wereincluded in the common stock outstanding balance for purposes of computing earnings per share. On July 13, 2017, the Company also closed on a concurrent private placement with the same investors for no additional consideration, of warrants topurchase 1,800,000 shares of common stock. The warrants will be exercisable beginning on the six (6) month anniversary of the date of issuance, at anexercise price of $2.00 per share and will expire on the fifth anniversary of the initial exercise date. November 2017 Offerings On November 13, 2017, the Company closed a registered direct offering of an aggregate of 2,941,177 shares (the “November Shares”) of Common Stock. TheCompany sold the November Shares at a price of $1.36 per share. The Company received gross proceeds from the offering, before deducting placement agentfees and other estimated offering expenses payable by us, of approximately $4 million. Aegis Capital Corp. acted as the placement agent for the offering. On November 13, 2017, the Company also closed a previously announced concurrent private placement for no additional consideration, of the NovemberInvestor Warrants to purchase 2,500,000 shares of Common Stock. On December 19, 2017, and effective as of November 29, 2017, we entered into an agreement (the “Amendment Agreement”) with the holders of theconvertible notes and common stock purchase warrants issued pursuant to that certain Exchange Agreement, dated November 29, 2016, by and among theCompany and such holders. Pursuant to the Amendment Agreement, the parties agreed to (i) amend the maturity dates of the convertible notes by one (1)year, or November 29, 2018, and (ii) that the holders would forbear the exercise of any remedies due to the passing of the original maturity date. Inconsideration thereof, the Company issued to the holders an aggregate of 370,000 shares of restricted Common Stock. December 2017 Offering On December 26, 2017, we closed a registered direct offering of an aggregate of 1,750,000 shares (the “December Shares”) of Common Stock. We sold theDecember Shares at a price of $4.00 per share. We received gross proceeds from the offering, before deducting placement agent fees and other estimatedoffering expenses payable by us, of approximately $7 million. Aegis Capital Corp. acted as the lead placement agent for the offering and Maxim Group LLCacted as a co-placement agent for the offering. 30 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 U.S. Certain accounting policies and estimates are particularly important to theunderstanding of our financial position and results of operations and require the application of significant judgment by our management or can be materiallyaffected by changes from period to period in economic factors or conditions that are outside of our control. As a result, they are subject to an inherent degreeof uncertainty. In applying these policies, our management uses their judgment to determine the appropriate assumptions to be used in the determination ofcertain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, our observance of trends inthe industry and information available from other outside sources, as appropriate. Please see Note 3 to our consolidated financial statements for a morecomplete description of our significant accounting policies. We intend to utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act as allowed by Section 107(b)(1) of the JOBS Act forthe adoption of new or revised accounting standards as applicable to emerging growth companies. As part of the election, we will not be required to complywith any 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) ofthe Sarbanes-Oxley Act) 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 U.S. 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. 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, 2017 and 2016. 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. 31 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. 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 or binomial option valuation model to value the derivative instruments at inception and on subsequent valuation dates.The Company accounts for conversion features that are embedded within the Company’s convertible notes payable that do not have fixed settlementprovisions as a separate derivative instrument. In addition, warrants issued by the Company that do not have fixed settlement are also treated as derivativeinstruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at theend of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cashsettlement of the derivative instrument could be required within twelve (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 are requiredto perform an evaluation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Exchange Act, as of December 31,2017. Management has not completed such evaluation and has concluded that our disclosure controls and procedures were not effective to providereasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarizedand reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including ourprincipal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures. As a result of the materialweakness in internal controls over financial reporting described below, we concluded that our disclosure controls and procedures as of December 31, 2017were 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 are required to conduct an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2017, based on the criteria setforth in the report entitled Internal Control-Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission(2013), known as COSO. Management has not completed an evaluation under the criteria set forth in Internal Control-Integrated Framework, and as such ourmanagement concluded that our internal control over financial reporting was not effective as of December 31, 2017. 32 As of December 31, 2017, 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, limited segregation of duties within our accounting and financial reporting functions, and have not completed an effective assessment of theCompany’s internal controls over financial reporting based on the 2013 COSO framework. Management has concluded that, during the period covered bythis report, our internal controls and procedures were not effective to detect the inappropriate application of U.S. generally accepted accounting principles. 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 31,2017 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 on Form 10-K does not include an attestation report of the Company’s registered public accounting firm regarding internal control overfinancial reporting. Management was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permitthe Company to provide only the management’s report in this annual report. Item 9B.Other Information None. 33 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 or AppointedGino M. Pereira 60 Chief Executive Officer, President and Director February 8, 2012Vincent S. Miceli 60 Vice President and Chief Financial Officer September 29, 2014David Tunnell 52 Vice President and Chief Technology Officer June 25, 2012Michael J. Orlando 50 Chief Operating Officer and Director June 30, 2017Stanley E. Washington 54 Chief Revenue Officer and President Healthcare Division January 1, 2018Major General David R. Gust, USA, Ret 75 Director June 25, 2012Michael J. D’Almada-Remedios, PhD 55 Director September 26, 2013Daniel P. Sharkey 61 Director June 23, 2014John Bendheim 64 Director April 11, 2017 Gino M. Pereira, one of our co-founders, has served as the Chief Executive Officer, President and director of the Company since its inception. Mr. Pereira hasover 30 years of executive, operational and financial experience with technology companies in the United States, Europe and the Far East. He has also helpedto develop several technology start-ups as well as served in an executive capacity in a large multinational public company. Mr. Pereira was Chief FinancialOfficer and later Chief Executive Officer of Technest Holdings Inc., a publicly quoted defense contracting company, from 2004 to 2011. Technest Holdingsoperated subsidiaries EOIR Technologies, Inc. and Genex Technologies, Inc. Mr. Pereira is a Fellow of the Chartered Association of Certified Accountants(UK) and has an MBA, with a specialty in finance, from the Manchester Business School in England. Mr. Pereira brings to our board of directors significant expertise in the biometric and software recognition industries, as well as experience in internationalbusiness technology and extensive management and operating experience. Having founded and/or operated companies in similar or related industries duringthe past 15 years, provides our board of directors with unparalleled knowledge of the Company and its operations and an understanding of the markets inwhich the Company plans to operate. 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. Michael J. Orlando, has served as our Chief Operating Officer since May 23, 2017 and as a director of the Company since June 30, 2017. Mr. Orlandofounded Fit Pay, Inc. in September 2014. Prior to founding Fit Pay, Inc., Mr. Orlando served in numerous roles at payment, authentication, and software-as-a-service companies. From September 2012 to September 2014, Mr. Orlando served as Chief Sales Officer at Jumio, Inc., a leading mobile identify verificationsolution provider. In 2012, Mr. Orlando served as Senior Vice President, Sales and Marketing at EZ Prints, Inc., an online merchandise printing andfulfillment services company. From September 2000 to February 2012, Mr. Orlando served as Senior Vice President, Global Sales and Services atCyberSource Inc., a leading e-commerce and credit card systems management company, where he oversaw all enterprise sales and professional servicesfunctions worldwide. Mr. Orlando holds a Bachelor of Science in Management from California Coast University. Mr. Orlando’s significant experience in the payments industry and technology sector gives him the qualifications and skills necessary to serve as a director ofour Company. Stanley E. Washington, has served as our Chief Revenue Officer and President Healthcare Division since January 1, 2018. Mr. Washington is also Founder ofPantheon Business Consulting, a strategic business development firm which specializes in partnering with fast growing small & mid-sized companies inemerging growth segments with large strategic partners in order to drive accelerated revenue growth and profitability. Pantheon has worked closely withmany of the marketplace’s fastest growing payment, m-commerce, security and consumer products companies and Mr. Washington has operated as a specialadvisor to many corporate executives and industry leaders. Prior to PBC, Mr. Washington spent 17 years as an executive at American Express and wasRegional Vice President and General Manager of the Western United States operating as the region’s senior business leader where he managed AmericanExpress’ U.S. Commercial Card Division overseeing the Account Development Organization including sales and operational support across multipleindustries, to more than 260 U.S. based global companies that represented over $300 billion in annual corporate revenue. As a 17 year veteran of AmericanExpress, Mr. Washington held numerous positions within the company including Regional Vice President and General Manager of the American ExpressEstablishment Services Division where he was responsible for over $50 billion in annual charge volume and oversaw all merchant relationships and cardmember marketing to American Express merchant business locations throughout the Western States and Micronesia. During his tenure he was alsoresponsible for American Express’ penetration into several key industries, including entertainment, gaming, restaurant, wine, ski and luxury hotels. Mr.Washington has also served in many business leadership positions including: Former Chairman, Los Angeles Convention & Visitors Bureau; FormerChairman, Los Angeles Sports & Entertainment Commission; Former Chairman, National Black Economic Development Coalition for MillerCoors BrewingCompany; Board Member, Earvin “Magic” Johnson Foundation; Member, Board of Trustees Morehouse College. 34 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. 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 our board of directors valuable business expertise, particularly expertise in defense and homeland security market segments due to hissignificant experience as a director of a publicly held companies and his substantial experience gained as a member of the US Armed Services. Michael J. D’Almada-Remedios, PhD has served as a director of the Company since September 26, 2013. Dr. D’Almada-Remedios’ background includes asuccessful track record for 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. Dr. D’Almada-Remedios is the Chief Technology Officer of WorldVentures Holdings, LLC, an international travel company. In 2014, Dr. D’Almada-Remedios was the Chief Technology Officer of Swarm-Mobile, a software company. Between January 2011 and September 2013, Dr. D’Almada-Remedioswas the Chief Information Officer for Arbonne International, a billion-dollar global cosmetics company. From February 2009 to December 2010, he was aVice-President at Expedia, Inc. and was responsible for all technologies, product development and technical operations for hotels.com. Prior to February2009, Dr. D’Almada-Remedios was the Chief Technology Officer for Realtor.com and Shopping.com, a subsidiary of eBay, Inc. At eBay he was a member ofthe eBay Inc. Technology Board for eBay, PayPal and Skype. 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. D’Almada-Remedios began his career as Vice President and Manager, Systems Integration & Development at WellsFargo Bank, Consumer Banking Group. Dr. D’Almada-Remedios has a PhD in Computer Control and Fluid Dynamics from the University of Nottingham in England and a B.Sc. in Physics andComputer Science from Kings College, University of London in England. Dr. D’Almada-Remedios brings to our board of directors valuable business experience, particularly expertise in eCommerce technology and hyper growthcompanies. 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 our board of directors and serves as our financial expert. 35 John Bendheim, has served as a director of the Company since April 11, 2017. Mr. Bendheim currently serves as the President of Bendheim Enterprises, Inc.,a real estate investment holding company, and as the Vice President of the Leon Lowenstein Foundation, Inc., a foundation supporting education, health andenvironmental projects nationwide. Mr. Bendheim founded Inland Homes in 1994 and has specialized in providing equity funding for real estatetransactions. From 1988 to 1994, Mr. Bendheim served as the President of Benditel Incorporated, a manufacturer of women’s apparel. Mr. Bendheim is also amember of several boards of directors. He serves as the Chairman of the Board of the Los Angeles Sports and Entertainment Commission and as Vice-Chairman of the Psychological Trauma Center. He is also a director of Cedars Sinai Medical Center, Cedars Sinai Medical Genetics Institute – CommunityAdvisory Board, California Republic Bank, California Republic Bancorp, the Leon Lowenstein Foundation, USC Marshall Board of Leaders, University ofSouthern California Alumni Association Board of Governors, Wallace Annenberg Center for the Performing Arts, Beverly Hills Chamber of Commerce,American Fidelity Corporation, Evergreen Community School, Los Angeles Committee on Foreign Relations and the Brentwood School, as well as a memberof the Advisory Board at Mandalay Digital Group, Inc. In addition, Mr. Bendheim served as an independent director of Zoo Entertainment, Inc. from June2008 to June 2011. Mr. Bendheim received his Bachelor of Science in Business Administration in 1975 and an MBA in 1976 from the University of Southern California. Mr. Bendheim’s significant experience in business development, financing and advising boards of directors in various sectors give him the qualifications andskills necessary to serve as a director of our Company. Board Committees Our board of directors currently has the following committees: Audit – Daniel Sharkey*(1), David R. Gust, John BendheimCompensation – David R. Gust*, Daniel SharkeyNominating and Governance – David R. Gust*, Daniel Sharkey * — Indicates Committee Chair(1) — Indicates Committee Financial Expert Audit Committee Our audit committee oversees our corporate accounting and financial reporting process. Among other matters, our 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. Our audit committee operates under a written charter adopted by our board of directors that satisfies the applicable standards of NASDAQ. Our board of directors has determined that Mr. 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. Our 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 our board of directors regardingcompensation of these officers based on such evaluations. Our compensation committee administers the issuance of stock options and other awards under ourstock plans. Our compensation committee reviews and evaluates, at least annually, the performance of our compensation committee. Our compensationcommittee operates under a written charter adopted by our 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 our board of directorsregarding candidates for directorships; overseeing the evaluation of our board of directors; reviewing developments in corporate governance practices;developing a set of corporate governance guidelines, and reviewing and recommending changes to the charters of our other board committees. In addition,the corporate governance and nomination committee is responsible for overseeing our corporate governance guidelines and reporting and makingrecommendations to the board concerning corporate governance matters. 36 Involvement in Certain Legal Proceedings 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; ●been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated afederal 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 SEC. 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. We will post anyamendments 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. The informationcontained on or that may be obtained from our website is not, and shall not be deemed to be a part of this Annual Report on Form 10-K. 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 SEC. Specific due dates for these reports havebeen established. During the fiscal year ended December 31, 2017, we believe that all reports required to be filed by such 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 owners listed in the table below: Name Form DescriptionGino M. Pereira 4 One transaction was not reported on a timely basis (upon the acquisition of shares of Common Stock)David Tunnell 4 Twelve transactions were not reported on a timely basis (upon the disposal of shares of Common Stock) 37 Item 11.Executive Compensation. Summary Compensation Table for Fiscal Years 2017 and 2016 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, 2017 and 2016 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, 2017 381,150 - 100,000 - - - 25,780 506,930 Chief Executive Officer 2016 346,500 - 124,000 - - - 19,517 490,017 David Tunnell, 2017 305,000 - 80,000 - - - 14,400 399,400 Chief Technology Officer 2016 277,200 - 62,000 - - - 14,400 353,600 Vincent S. Miceli, 2017 265,650 - 70,000 - - - 26,724 362,374 Chief Financial Officer 2016 241,500 - 62,000 - - - 14,400 317,900 Michael J. Orlando, 2017 130,942 - - - - - 5,381 136,323 Chief Operating Officer (1) 2016 - - - - - - - - (1)The 2017 salary information presented for Mr. Orlando is for the post-acquisition period May 23, 2017 through December 31, 2017 only. Employment Agreements Effective October 1, 2015, we extended the employment agreement with Gino M. Pereira, our Chief Executive Officer and President. The term of theemployment agreement is for 3 years and the term commenced on October 1, 2015. Effective January 1, 2018, Mr. Pereira’s base salary increased to $420,000from $381,150. The employment agreement also provides for: ●Eligibility to participate in bonus or incentive compensation plans that may be established by our 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. Effective May 23, 2017, we entered into an employment agreement with Michael J. Orlando, our Chief Operating Officer. The term of the employmentagreement is for 1 year and commenced on May 23, 2017. Mr. Orlando’s base salary is $150,000, plus an initial stock grant of 250,000 shares of CommonStock from the Company’s 2013 Long-Term Stock Incentive Plan (the “LTIP”). Effective January 1, 2018, Mr. Orlando’s base salary increased to $350,000from $150,000. The employment agreement also provides for: ●Eligibility to participate in bonus or incentive compensation plans that may be established by the Board from time to time applicable to Mr.Orlando’s services. ●Eligibility to receive equity awards as determined by our board of directors, or a committee of our board of directors, composed in compliance withthe corporate governance standards of any applicable listing exchange. We do not have employment agreements with Vincent S. Miceli, our Chief Financial Officer, or David Tunnell, our Chief Technology Officer. A brief description of the LTIP and the Company’s 2017 Stock Incentive Plan (the “2017 SIP”) are contained in Note 9 of the Notes to the ConsolidatedFinancial Statements. 38 Outstanding Equity Awards at 2017 Fiscal Year End The following table provides information relating to the vested and unvested option and stock awards held by the named executives as of December 31,2017. Each award to each named executive is shown separately, with a footnote describing the award’s vesting schedule. The presentation of the grants onthe following table reflect the reverse stock split that was effected on September 9, 2016. Option Awards Stock Awards Name Number ofSecuritiesUnderlyingUnexercisedOptions(# Exercisable) Number ofSecuritiesUnderlyingUnexercisedOption(# Unexercisable) EquityIncentivePlanAwards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions (#) OptionExercisePrice($) OptionExpirationDate Number ofShares orUnits ofStock ThatHave NotVested (#) MarketValue ofShares orUnits ofStock ThatHave NotVested ($) EquityIncentivePlanAwards:Number ofUnearnedShares,Units orOtherRightsThat HaveNotVested (#) EquityIncentivePlanAwards:Market orPayoutValue ofUnearnedShares,Units OrOtherRightsThat HaveNotVested ($) Gino Pereira - - - - - - $ 58,140 $100,000 David Tunnell - - - - - - $ 46,512 $80,000 Vincent S.Miceli - - - - - - $ 40,698 $70,000 Michael J.Orlando - - - - - - $ - $- A brief description of the LTIP and the 2017 SIP are contained in Note 9 of the Notes to the Consolidated Financial Statements. Director Compensation for Fiscal 2017 Our non-employee directors receive $80,000 annually for serving on our board of directors, which is paid quarterly in stock. The following table reflects allcompensation awarded to, earned by or paid to the Company’s directors for the fiscal year ended December 31, 2017. Fees Earned orPaid in Cash ($) Stock Awards($)(1)(2)(3) OptionsAwards($) Non-Equity Incentive PlanCompensation($) Nonqualified Deferred CompensationEarnings ($) All Other Compen-sation($)(6) Total($) Major General David R. Gust, USA, Ret. (1) - 80,000 - - - 725 80,725 Michael J. D’Almada-Remedios, PhD (2) - 80,000 - - - 295 80,295 Daniel P. Sharkey (3) - 80,000 - - - 602 80,602 John Bendheim (4) - 60,000 - - - - 60,000 Robin Richards (5) - 60,000 - - - 1,495 61,495 (1)Mr. Gust, received 36,311 shares of Common Stock at an average price of approximately $2.20 per share.(2)Dr. D’Almada-Remedios received 36,311 shares of Common Stock at an average price of approximately $2.20 per share.(3)Mr. Sharkey received 36,311 shares of Common Stock at an average price of approximately $2.20 per share.(4)Mr. Bendheim received 25,500 shares of Common Stock at an average price of approximately $2.35 per share.(5)Mr. Richards received 25,500 shares of Common Stock at an average price of approximately $2.35 per share. Effective March 9, 2018, Mr. Richardsresigned from our board of directors. Such resignation was not due to any disagreement with our board of directors or the Company’s operations, policiesor practices.(6)The Company reimbursed Mr. Gust, Dr. D’Almada-Remedios, Mr. Sharkey and Mr. Richards for travel-related expenses. 39 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 March 29, 2018 by (a) each stockholderwho is known to us to own beneficially 5% or more of our outstanding Common Stock; (b) all directors; (c) our executive officers, and (d) all executiveofficers and directors as a group. Except as otherwise indicated, all persons listed below have (i) sole voting power and investment power with respect to theirshares of Common Stock, except to the extent that authority is shared by spouses under applicable law, and (ii) record and beneficial ownership with respectto their shares 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 March 29, 2018. For purposes of computing the percentage of outstanding shares of our common stock held by each personor group of persons named above, any shares that such person or persons has the right to acquire within 60 days of March 29, 2018 is deemed to beoutstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of anyshares listed as beneficially owned does not constitute an admission of beneficial ownership. Unless otherwise identified, the address of our directors andexecutive officers is c/o Nxt-ID, Inc. 285 North Drive, Suite D, Melbourne, FL 32934. Name and address of beneficial owner Amount andNature ofBeneficialOwnership Percent of class ofCommon Stock (1) Directors and Named Executive Officers: Gino M. PereiraChief Executive Officer and Director 866,515 3.56% David TunnellChief Technology Officer 759,933 3.12% Vincent S. MiceliVice-President and Chief Financial Officer 65,191 * Michael J. OrlandoChief Operating Officer and Director 1,272,105 5.22% Stanley E. WashingtonChief Revenue Officer and President Healthcare Division 31,250 * Major General David R. Gust, USA, Ret.Director 68,425 * Michael J. D’Almada-Remedios, PhD Director 73,793 * Daniel P. Sharkey Director 63,413 * John BendheimDirector 25,500 * Directors and Executive Officers as a group (9 persons) 3,226,125 13.25% *Less than 1% (1)Based on 24,347,482 shares of Common Stock issued and outstanding as of March 29, 2018. Shares of Common Stock subject to options or warrantscurrently exercisable or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding suchoptions or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person. 40 Equity Compensation Plan Information as of December 31, 2017 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) - $ - 686,037 Equity compensation plans not approved by security holders - - - Total - $- 686,037 (1)Represents the shares of Common Stock authorized for issuance under the LTIP, which was approved by the Company’s stockholders on January 4,2013. The maximum aggregate number of shares of Common Stock that may be issued under the Plan, including stock options, stock awards, includingstock issued to our board of directors for serving on our board of directors, and stock appreciation rights is limited to 10% of the shares of Common Stockoutstanding on the first trading day of any fiscal year, or 2,358,359 for fiscal 2018. (2)As of January 1, 2018. Item 13.Certain Relationships and Related Transactions, and Director Independence Transactions with Related Parties Except as described below, during the past two fiscal years, there have been no transactions, whether directly or indirectly, between us and any of our officers,directors, beneficial owners of more than 5% of our outstanding Common Stock or their family members, that exceeded the lesser of (i) $120,000 or (ii) onepercent of the average of our total assets at year end. During the years ended December 31, 2017 and December 31, 2016, we recognized revenue of $7,065,755 and $1,357,413, respectively from WVH a relatedparty. In addition, our accounts receivable, net balance at December 31, 2017 and December 31, 2016 included $1,364,405 and $621,724, respectively duefrom WVH. 41 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 (the “NASDAQ Rules”). Our board of directors affirmatively determined that MajorGeneral David R. Gust, Daniel P. Sharkey, and John Bendheim are “independent” directors, as that term is defined in the NASDAQ Rules. Our board ofdirectors also affirmatively determined that Robin Richards, a former director who resigned from our board of directors effective March 9, 2018, was an“independent” director, as that term is defined in the Rules. The Company expects to regain compliance with the independence requirements within the 180day period afforded by Rule 5605(b)(1)(A) of the NASDAQ Rules and has notified NASDAQ of its intent to do so. 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 31,2017, June 30, 2017 and September 30, 2017, as well as the fees to be billed for the audit of our annual consolidated financial statements for the year endedDecember 31, 2017 are expected to be $156,000. In addition, Marcum LLP billed the Company $62,137 during 2017 for professional services related toregistration statements and proposed financing arrangements. The aggregate fees billed by Marcum LLP for 2016 audit services rendered, including the auditof our annual consolidated financial statements for the year ended December 31, 2016, the review of our 2016 interim condensed consolidated financialstatements and professional services related to registration statements and proposed financing arrangements were $194,071. Audit Related Fees There were no fees for audit related services for the years ended December 31, 2017 and December 31, 2016. Tax Fees For the Company’s fiscal years ended December 31, 2017 and December 31, 2016, Marcum LLP did not provide any professional services for tax compliance,tax advice, and tax planning. 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, 2017 andDecember 31, 2016. Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors Our audit committee pre-approves all audit and non-audit services provided by the independent auditors prior to the engagement of the independent auditorswith respect to such services. The Chairman of our audit committee has been delegated the authority by such committee to pre-approve interim services bythe independent auditors other than the annual audit. The chairman of our audit committee must report all such pre-approvals to the entire audit committee atthe next committee meeting. 42 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, 2017 and December 31, 2016, the related consolidated statements of operations,changes in stockholders’ equity and cash flows for the years then ended, the footnotes thereto, and the respective report of Marcum LLP, an independentregistered public accounting firm, 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 Annual Report on Form 10-K. (b) The following are exhibits to this Annual Report on Form 10-K and, if incorporated by reference, we have indicated the document previously filed withthe SEC in which the exhibit was included. Certain of the agreements filed as exhibits to this Annual Report on Form 10-K contain representations and warranties by the parties to the agreements thathave been made solely for the benefit of such parties. 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. 43 Exhibit No. Description of Exhibit3.1(i) Certificate of Incorporation (1)3.1(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*† Employment Agreement Between Nxt-ID and Michael J. Orlando10.5 License Agreement between 3D-ID, LLC and Genex Technologies (1)10.6 Purchase Agreement between 3D-ID, LLC and Nxt-ID, Inc. (1)10.7 †† Manufacturing agreement with Identita Technologies, Inc., dated January 18, 2013 (4)10.8 Form of Registration Rights Agreement for June 2014 and August 2014 Offerings (5)10.9 Form of Registration Rights Agreement for April 2015 Offering (7)10.10 Form of Placement Agency Agreement for August 2015 Public Offering (19)10.11 Form of Securities Purchase Agreement for August 2015 Public Offering (8)10.12 Form of Registration Rights Agreement for August 2015 Public Offering (8)10.13 Form of Securities Purchase Agreement for August 2015 Private Placement (8)10.14 Form of Warrant Purchase Agreement for August 2015 Private Placement (8)10.15 Form of Securities Purchase Agreement for December 2015 Private Placement (9)10.16 Form of Registration Rights Agreement for December 2015 Private Placement (9)10.17 Form of Securities Purchase Agreement for December 2015 Agreement with WorldVentures Holdings, LLC (10)10.18 Form of Registration Rights Agreement for December 2015 Agreement with WorldVentures Holdings, LLC (10)10.19 Form of Securities Purchase Agreement for April 2016 Registered Direct Offering (11)10.20 Form of Interest Purchase Agreement for May 2016 Agreement with LogicMark, LLC (13)10.21 Form of First Amendment to Interest Purchase Agreement for May 2016 Agreement with LogicMark, LLC (14)10.22 Form of Secured Subordinated Promissory Note for July 2016 Agreement with LogicMark, LLC (15)10.23 Form of Security Agreement for July 2016 Agreement with LogicMark, LLC (15)10.24 Form of Loan Agreement for July 2016 Agreement with LogicMark, LLC (15)10.25 Form of Subordination Agreement for July 2016 Agreement with LogicMark, LLC (15)10.26 Form of Securities Purchase Agreement for July 2016 Agreement with LogicMark, LLC (15)10.27 Form of Registration Rights Agreement for July 2016 Agreement with LogicMark, LLC (15)10.28 Form of Forbearance Agreement between Nxt-ID and LogicMark Investment Partners, LLC (17)10.29 Form of Exchange Note for November 2016 Agreement with LogicMark, LLC (18)10.30 Form of Exchange Agreement for November 2016 Agreement with LogicMark, LLC (18)10.31 Form of Intercreditor Agreement for November 2016 Agreement with LogicMark, LLC (18)10.32 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 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-Oxley Actof 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-Oxley Actof 2002. 44 101.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 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.(19)Filed as an Exhibit to the Company’s Annual Report on Form 10-K with the SEC on April 14, 2017. 45 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 2, 2018By:/s/ Gino M. Pereira Gino M. Pereira Chief Executive Officer(Principal Executive Officer) Date: April 2, 2018By:/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 2, 2018By:/s/ Gino M. Pereira Gino M. Pereira Chief Executive Officer and Director(Principal Executive Officer) Date: April 2, 2018By:/s/ Vincent S. Miceli Vincent S. Miceli Chief Financial Officer(Principal Financial Officer and Accounting Officer) Date: April 2, 2018By:/s/ Michael J. Orlando Michael J. Orlando Chief Operating Officer and Director Date: April 2, 2018By:/s/ Major General David R. Gust, USA, Ret. Major General David R. Gust, USA, Ret.Director Date: April 2, 2018By:/s/ Michael J. D’Almada-Remedios, PhD Michael J. D’Almada-Remedios, PhD Director Date: April 2, 2018By:/s/ Daniel P. Sharkey Daniel P. Sharkey Director Date: April 2, 2018By:/s/ John Bendheim John Bendheim Director 46 Nxt-ID, Inc. and SubsidiariesCONTENTS Report of Independent Registered Public Accounting FirmF-2 Consolidated Financial Statements Consolidated Balance SheetsF-3Consolidated Statements of OperationsF-4Consolidated Statements of Changes in Stockholders’ EquityF-5Consolidated Statements of Cash FlowsF-6 Notes to Consolidated Financial StatementsF-7 - F-25 F-1 Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors ofNxt-ID, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Nxt-ID, Inc. (the “Company”) as of December 31, 2017 and 2016, the related consolidatedstatements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2017, and the related notes(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position ofthe Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the two years in the period ended December31, 2017, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations ofthe Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, norwere we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding ofinternal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financialreporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, andperforming procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures inthe financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well asevaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Marcum LLP Marcum llp We have served as the Company’s auditor since 2016. New York, NYApril 2, 2018 F-2 Nxt-ID, Inc. and SubsidiariesCONSOLIDATED BALANCE SHEETS December 31, December 31, 2017 2016 AssetsCurrent Assets Cash $5,636,415 $3,299,679 Restricted cash 40,371 40,371 Accounts receivable, net 1,806,785 1,218,705 Inventory, net 3,059,517 5,341,500 Prepaid expenses and other current assets 1,457,090 1,347,627 Total Current Assets 12,000,178 11,247,882 Property and equipment: Equipment 211,751 175,537 Furniture and fixtures 98,828 79,062 Tooling and molds 630,481 581,881 941,060 836,480 Accumulated depreciation (624,420) (456,752)Property and equipment, net 316,640 379,728 Goodwill 24,599,371 15,479,662 Other intangible assets, net of amortization of $1,415,411 and $318,842, respectively 11,326,556 8,285,725 Total Assets $48,242,745 $35,392,997 Liabilities, Series C Preferred Stock and Stockholders’ Equity Current Liabilities Accounts payable $1,466,379 $2,070,658 Accrued expenses 2,465,067 2,901,672 Customer deposits 2,826,105 6,068,894 Short-term debt 266,201 773,969 Convertible notes payable, net of discount of $0 and $1,366,667, respectively, and net of deferred debt issuance costsof $0 and $123,563, respectively - 9,770 Other current liabilities – contingent consideration 3,656,660 1,496,442 Total Current Liabilities 10,680,412 13,321,405 Other long-term liabilities – contingent consideration 3,904,568 4,832,028 Long-term debt 585,641 - Revolving loan facility, net of deferred debt issuance costs of $200,744 and $769,453, respectively 11,799,256 14,230,547 Deferred tax liability 335,401 190,286 Total Liabilities 27,305,278 32,574,266 Commitments and Contingencies Series C Preferred Stock Series C Preferred Stock, $0.0001 par value: 2,000 shares designated; 2,000 and 0 shares issued and outstanding as ofDecember 31, 2017 and December 31, 2016, respectively 1,807,300 - 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; 0 and 211,424 shares issued and outstanding(aggregate liquidation preferences of $0 and $440,594) as of December 31, 2017 and December 31, 2016,respectively - 182,851 Series B preferred stock, $0.0001 par value: 4,500,000 shares designated; 0 and 4,500,000 shares issued andoutstanding (aggregate liquidation preferences of $0 and $5,625,000) as of December 31, 2017 and December 31,2016, respectively - 4,090,000 Common stock, $0.0001 par value: 100,000,000 shares authorized; 23,583,593 and 7,379,924 shares issued andoutstanding, respectively 2,358 738 Additional paid-in capital 62,052,483 33,204,943 Accumulated deficit (42,924,674) (34,659,801) Total Stockholders’ Equity 19,130,167 2,818,731 Total Liabilities, Series C Preferred Stock and Stockholders’ Equity $48,242,745 $35,392,997 The accompanying notes are an integral part of these consolidated financial statements.F-3 Nxt-ID, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF OPERATIONS For the Years EndedDecember 31, 2017 2016 Revenues $23,316,969 $7,736,320 Costs of goods sold 11,685,447 4,434,868 Gross Profit 11,631,522 3,301,452 Operating Expenses General and administrative 8,703,493 6,241,685 Selling and marketing 4,899,126 2,881,668 Research and development 1,667,850 888,187 Total Operating Expenses 15,270,469 10,011,540 Operating Loss (3,638,947) (6,710,088) Other Income and (Expense) Interest income - 23 Interest expense (7,736,414) (3,275,059)Change in fair value of contingent consideration 1,497,153 - Loss on extinguishment of debt - (272,749)Change in fair value of derivative liabilities - (2,299,020)Total Other Expense, Net (6,239,261) (5,846,805) Loss before Income Taxes (9,878,208) (12,556,893)Income Tax Benefit (Expense) 1,613,335 (196,035) Net Loss (8,264,873) (12,752,928)Preferred stock dividends (729,814) (1,080,741) Net Loss applicable to Common Stockholders $(8,994,687) $(13,833,669) Net Loss Per Share - Basic and Diluted $(0.70) $(2.24) Weighted Average Number of Common Shares Outstanding - Basic and Diluted 12,812,376 6,172,272 The accompanying notes are an integral part of these consolidated financial statements. F-4 Nxt-ID, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYFOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 Preferred Stock Common Stock Additional Paid-in Accumulated Shares Amount Shares Amount Capital Deficit Total Balance - January 1, 2016 - $- 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 featureliability - - 1,702,400 - 1,702,400 Issuance of common stock and warrants inconnection with the acquisition of LogicMark 78,740 8 899,992 - 900,000 Exercise of common stock purchase warrants inconnection with the acquisition of LogicMark 157,480 16 (16) - - Conversion of convertible notes and interest tocommon 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 anddividends to common stock (2,189,732) (2,086,924) 834,718 83 2,461,058 - 374,217 Shares issued in connection with the managementincentive plan for 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 theissuance of Convertible Exchange notes onNovember 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 Issuance of common stock for services 1,704,086 170 3,153,399 - 3,153,569 Issuances of common stock and warrants for cash,net of fees 7,091,177 709 13,029,679 - 13,030,388 Issuance of common stock in connection with theacquisition of Fit Pay 1,912,303 191 3,288,970 - 3,289,161 Exercise of common stock purchase warrants on acashless basis 429,656 43 (43) - - Conversion of convertible exchange notes andinterest to common stock 1,197,867 120 2,395,613 - 2,395,733 Shares issued in connection with the convertibleexchange note maturity date extension 370,000 37 673,363 - 673,400 Conversion of Series A preferred stock anddividends to common stock (310,268) (182,851) 159,219 16 310,160 - 127,325 Shares issued in connection with the managementincentive plan for 2016 232,559 23 399,977 - 400,000 Conversion of Series B preferred stock, dividendsand liquidated damages, net (4,500,000) (4,090,000) 3,106,802 311 5,664,689 - 1,575,000 Note discount recorded in connection with theissuance of Convertible Exchange notes on July 19,2017 - - 432,917 - 432,917 Non-cash charge for modification of convertibleexchange notes and warrants - - 228,630 - 228,630 Net loss - - - (8,264,873) (8,264,873) Preferred stock dividends (729,814) (729,814)Balance - December 31, 2017 - $- 23,583,593 $2,358 $62,052,483 $(42,924,674) $19,130,167 The accompanying notes are an integral part of these consolidated financial statements. F-5 Nxt-ID, Inc. and SubsidiariesCONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2017 2016 Cash Flows from Operating Activities Net loss $(8,264,873) $(12,752,928)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 167,668 260,399 Stock based compensation 2,489,596 1,113,129 Stock issued in connection with exchange note maturity date extension 673,400 - Amortization of debt discount 1,799,584 648,365 Amortization of intangible assets 1,096,569 318,842 Amortization of discount on contingent consideration 171,530 91,682 Change in fair value of contingent consideration (1,497,153) - Non-cash charge for modification of convertible exchange notes 191,630 - Non-cash charge for modification of warrant terms 37,000 - Loss on extinguishment of debt - 272,749 Non - cash charge for bad debt allowance 402,383 - Non - cash inventory charges 1,430,570 48,405 Amortization of deferred debt issuance costs 1,149,772 631,994 Change in fair value of derivative liabilities - 2,299,020 Deferred taxes (1,629,424) 190,286 Other - 44,628 Changes in operating assets and liabilities: Accounts receivable (897,834) (721,230)Inventory 525,592 (1,055,846)Prepaid expenses and other current assets 90,027 (362,399)Accounts payable (958,319) 120,008 Accrued expenses 606,032 1,842,683 Customer deposits (3,192,401) 6,060,165 Total Adjustments 2,656,222 11,865,666 Net Cash Used in Operating Activities (5,608,651) (950,048) Cash flows from Investing Activities Restricted cash - 1,494,582 Acquisition, net of cash acquired (89,111) (17,390,290)Purchase of equipment (52,962) (39,073)Net Cash Used in Investing Activities (142,073) (15,934,781) 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 (773,969) (1,726,031)Proceeds received in connection with issuance of common stock and warrants, net 13,291,390 - Proceeds received from issuance of convertible exchange notes, net 594,408 1,400,000 Revolver borrowings, net (3,000,000) 13,906,250 Payment of Series A preferred stock dividends - (123,457)Pay down of contingent consideration (1,500,000) - Fees paid in connection with Revolver facility maturity date extension (450,000) - Fees paid in connection with equity offerings (74,369) (51,020)Net Cash Provided by Financing Activities 8,087,460 19,765,517 Net Increase in Cash 2,336,736 2,880,688 Cash - Beginning of Year 3,299,679 418,991 Cash - End of Year $5,636,415 $3,299,679 Supplemental Disclosures of Cash Flow Information: Cash paid during the periods for: Interest $3,398,289 $930,219 Taxes $4,500 $8,764 Non-cash investing and financing activities: Equipment purchases on payment terms $19,650 $- Accrued fees incurred in connection with equity offerings $157,685 $- Issuance of common stock in connection with accelerated installments of note payable $- $3,294,850 Reclassification of conversion feature liability in connection with note modification $- $1,702,400 Issuance of common stock in connection with conversion of convertible exchange notes and related accrued interest $2,359,283 $- Issuance of common stock in connection with convertible exchange notes maturity date extension $673,400 $- 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 Exchange of short-term promissory note for Series A preferred stock $- $400,000 Issuance of common stock in connection with conversion of Series A preferred stock and related dividends $338,749 $2,563,949 Issuance of common stock in connection with conversion of Series B preferred stock and related dividends andliquidated damages $6,075,000 $- Accrued Series A preferred dividends $- $92,442 Accrued Series B preferred dividends $- $490,625 Accrued Series C preferred dividends $25,000 $- Non-cash consideration paid for LogicMark acquisition (See Note 5) $- $9,900,000 Purchase Price Allocation in Connection with Fit Pay Acquisition: Assets acquired and liabilities assumed: Current assets, including cash acquired of $10,889 $157,484 $- Property and equipment 31,968 - Other intangible assets 4,137,400 Goodwill 9,142,646 - Accounts payable and accrued liabilities (1,305,424) Customer deposits (262,414) Deferred taxes (1,797,476) - Net Assets Acquired 10,104,184 - Less: cash paid to acquire Fit Pay (100,000) - Non cash consideration $10,004,184 $- Non-cash consideration consisted of: Note payable issued to seller $851,842 $- Common stock issued to sellers 3,289,161 - Series C preferred stock issued to sellers 1,807,300 Earn-out provision 4,055,881 - Non-cash consideration $10,004,184 $- The accompanying notes are an integral part of these consolidated financial statements. F-6 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND PRINCIPAL BUSINESS ACTIVITIES 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 andoperates its business in one segment – hardware and software security systems and applications. The Company evaluates the performance of its business on,among other things, profit and loss from operations. The Company’s innovative MobileBio solution mitigates risks associated with mobile computing, m-commerce and 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 companies to provide solutions for modern payment and the “Internet ofThings” (“IoT”) applications. 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, 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. Such warrants were exercised on July 27, 2016. In addition, the Company wasrequired 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 ifLogicMark met certain gross profit targets set forth in the Interest Purchase Agreement. The LogicMark Note originally was to mature on September 23, 2016but was extended to July 15, 2017. The earn-out payment related to 2016 and the remaining balance owed on the LogicMark Note including accrued interestwere both paid in July 2017. See Notes 5 and 7. Based on LogicMark’s operating results for the year ended December 31, 2017, the 2017 earnout amountowed by the Company is $3,156,088. As a result, the Company reduced the amount of contingent consideration due to the LogicMark Sellers by $1,843,912.The Company’s income statement for the year ended December 31, 2017 includes a favorable adjustment for this amount which is reflected in other incomeand expense. On May 23, 2017, the Company completed a merger (the “Merger”) pursuant to an executed Agreement and Plan of Merger (the “Merger Agreement”) by andamong the Company, Fit Merger Sub, Inc., a wholly-owned subsidiary of the Company (the “Merger Sub”), Fit Pay, Inc. (“Fit Pay”), Michael Orlando(“Orlando”), Giesecke & Devrient Mobile Security America, Inc. (“G&D”), the other stockholders of Fit Pay (the “Other Holders”) and Michael Orlando in hiscapacity as stockholder representative representing the Other Holders (the “Stockholder Representative”, and together with Orlando and G&D, the “Sellers”).Pursuant to the Merger, Fit Pay merged with and into the Merger Sub, with the Merger Sub continuing as the surviving entity and a wholly-owned subsidiaryof the Company. See Note 5. The Company’s wholly-owned subsidiary, LogicMark, manufactures and distributes non-monitored and monitored personal emergency response systemssold through the United States Department of Veterans Affairs, healthcare durable medical equipment dealers and distributors and monitored security dealersand distributors. The Company’s wholly-owned subsidiary, Fit Pay has a proprietary technology platform that delivers payment, credential management,authentication and other secure services to the IoT ecosystem. The platform uses tokenization, a payment security technology that replaces cardholders’account information with a unique digital identifier, to transact highly secure contactless payment and authentication services. NOTE 2 - 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. F-7 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 - LIQUIDITY AND MANAGEMENT PLANS The Company is an emerging growth entity and incurred a net loss of $8,264,873 during the year ended December 31, 2017. As of December 31, 2017 theCompany had working capital of $1,319,766 and stockholders’ equity of $19,130,167. Such factors raise substantial doubt about the entity’s ability tosustain operations for at least one year from the issuance of these financial statements. Given the Company’s cash position at December 31, 2017 and itsprojected cash flow from operations, the Company believes that it will have sufficient capital to sustain operations over the next twelve months following thedate of this filing to alleviate such substantial doubt. In order to execute the Company’s long-term strategic plan to develop and commercialize its coreproducts, fulfill its product development commitments and fund its obligations as they come due, the Company may need to raise additional funds, throughpublic or private equity offerings, debt financings, or other means. Should the Company not be successful in obtaining the necessary financing, or generatesufficient revenue to fund its operations, the Company would need to engage in certain cost containment efforts, and/or curtail certain of its operationalactivities. During the year ended December 31, 2017, the Company received net proceeds of $13,291,390 from the issuance of common stock and warrants and$594,408 from the issuance of convertible exchange notes. However, the Company can give no assurance that any cash raised subsequent to December 31,2017 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 in the United States (“U.S. GAAP”)requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. TheCompany’s management evaluates these significant estimates and assumptions included those related to the fair value of acquired assets and liabilities, stockbased compensation, derivative instruments, income taxes and inventories, and other matters that affect the consolidated financial statements and disclosures.Actual results could differ from those estimates. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Nxt-ID and its wholly-owned subsidiaries, 3D-ID, LogicMark and Fit Pay. Intercompanybalances and transactions 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, 2017 and 2016, the Company had no cash equivalents. RESTRICTED CASH At December 31, 2017 and 2016, the Company had restricted cash of $40,371. Restricted cash includes amounts held back by the Company’s third partycredit card processor for potential customer refunds, 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. The Company is a party to a Master Development Agreement with World Ventures Holding, a related party. WVH is considered a related party since the ChiefTechnology Officer of WVH is a director of Nxt-ID, Inc. During the years ended December 31, 2017 and 2016, the Company recognized revenue of$7,065,755 and $1,357,413, respectively from WVH. At December 31, 2017 and December 31, 2016, the Company’s accounts receivable, net balanceincluded $1,364,405 and $621,724, respectively due from WVH. F-8 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) REVENUE RECOGNITION The Company’s primary source of revenues is from product sales to its customers. The Company recognizes revenue when persuasive evidence of anarrangement exists, the service has been rendered or product delivery has occurred, the price is fixed or readily determinable and collectability of the sale isreasonably assured. The Company’s revenue is recorded at the net amount to be received after deductions for discounts, allowances and product returns. 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 sellingand marketing expenses and were not material for the years ended December 31, 2017 and 2016. ACCOUNTS RECEIVABLE For the years ended December 31, 2017 and 2016, the Company’s revenues primarily included shipments of the Flye smartcard to WVH and shipments of theLogicMark products. The terms and conditions of these sales provide certain customers with trade credit terms. In addition, these sales were made to theretailers with no rights of return and are subject to the normal 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, 2017 and 2016, the Company had anallowance for doubtful accounts of $402,383 and $0, respectively. INVENTORY The Company measures inventory at the lower of cost or net realizable value, defined as estimated selling prices in the ordinary course of business, lessreasonably predictable costs of completion, disposal and transportation. 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. During the year ended December 31, 2017, the Company wrote off $1,082,938 in excess and obsoleteinventory and also wrote down the carrying value of its finished goods Wocket inventory by $347,632. As of December 31, 2017, inventory was comprisedof $1,493,995 in raw materials and $1,565,522 in finished goods on hand. As of December 31, 2016 inventory was comprised of $3,797,499 in raw materialsand $1,544,001 in finished goods on hand. As an emerging growth company, the Company is required to prepay for raw materials with certain vendors untilcredit terms can be established. As of December 31, 2017 and 2016, $887,021 and $1,089,770, respectively of prepayments made primarily for raw materialsinventory is included in prepaid expenses and other current assets 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. 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 yearsFurniture and fixtures 3 to 5 yearsTooling and molds 2 to 3 years F-9 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) GOODWILL The Company’s goodwill relates to the acquisitions of LogicMark and Fit Pay. The Company began testing goodwill for impairment in the third quarter of2017 as it relates to the acquisition of LogicMark which occurred on July 25, 2016. The Company will begin testing the Fit Pay related goodwill forimpairment annually in the second quarter of each year. Authoritative accounting guidance allows the Company to first assess qualitative factors todetermine whether it is necessary to perform the more detailed two-step quantitative goodwill impairment test. The Company performs the quantitative test ifits qualitative assessment determined it is more likely than not that a reporting unit’s fair value is less than its carrying amount. The Company may elect tobypass the qualitative assessment and proceed directly to the quantitative test for any reporting units or assets. The quantitative goodwill impairment test, ifnecessary, is a two-step process. The first step is to identify the existence of a potential impairment by comparing the fair value of a reporting unit (theestimated 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 areporting unit exceeds its carrying amount, the reporting unit’s goodwill is considered not to be impaired and performance of the second step of thequantitative goodwill impairment test is unnecessary. However, if the carrying amount of a reporting unit exceeds its fair value, the second step of thequantitative goodwill impairment test is performed to measure the amount of impairment loss to be recorded, if any. The second step of the quantitativegoodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amountof the reporting unit’s goodwill exceeds its implied fair value, an impairment loss is recognized in an amount equal to that excess. The implied fair value ofgoodwill is determined using the same approach as employed when determining the amount of goodwill that would be recognized 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 been acquired in a business combinationand the fair value was the purchase price paid to acquire the reporting unit. As part of the annual evaluation of the LogicMark related goodwill, the Company utilized the option to first assess qualitative factors, which include but arenot limited to, economic, market and industry conditions, as well as the financial performance of LogicMark. In accordance with applicable guidance, anentity is not required to calculate the fair value of a reporting unit if, after assessing these qualitative factors, the Company determines that it is more likelythan not that its reporting unit’s fair value is greater than its carrying amount. During the year ended December 31, 2017, the Company determined that it wasmore likely than not that the fair value of LogicMark exceeded its respective carrying amount and therefore, a quantitative assessment was not required. TheCompany has not recognized any goodwill impairment in 2017 in connection with its annual impairment test. The Company considered the reduction inearnout liability due to the LogicMark Sellers for 2017, and such factors did not impact the Company’s conclusion. OTHER INTANGIBLE ASSETS The Company’s intangible assets are all related to the acquisitions of LogicMark and Fit Pay and are included in other intangible assets in the Company’sconsolidated balance sheet at December 31, 2017. At December 31, 2017, the other intangible assets relating to the acquisition of LogicMark are comprised of patents of $3,563,885; trademarks of$1,167,122; and customer relationships of $2,792,900. The Company will continue amortizing these intangible assets using the straight line method overtheir estimated useful lives which for the patents, trademarks and customer relationships are 11 years; 20 years; and 10 years, respectively. During the yearsended December 31, 2017 and 2016, the Company had amortization expense of $761,818 and $318,842, respectively, related to the LogicMark intangibleassets. At December 31, 2017, the other intangible assets relating to the acquisition of Fit Pay, which was completed on May 23, 2017, are comprised of trademarksof $181,042; technology of $2,284,739; and customer relationships of $1,336,868. The Company will continue amortizing these intangible assets using thestraight line method over their estimated useful lives which for the trademarks, technology and customer relationships are 5 years; 7 years; and 6 years,respectively. During the year ended December 31, 2017, the Company had amortization expense of $334,751, related to the Fit Pay intangible assets. Amortization expense estimated for each of the next five fiscal years, 2018 through 2022 will be approximately $1,400,000 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 ateach 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. F-10 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) CONVERTIBLE INSTRUMENTS (CONTINUED) 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. The fair value of debtdiscounts under these arrangements are amortized over the earlier of (i) the term of the related debt using the straight line method which approximates theinterest rate method or (ii) conversion of the debt. The amortization of debt discount is included as a component of interest expense included in other incomeand expenses in the accompanying statements of operations. See Note 7. 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 or binomial option valuation model to value the derivative instruments at inception and on subsequent valuation dates. The Companyaccounts for conversion features that are embedded within the Company’s convertible notes payable that do not have fixed settlement provisions as aseparate derivative instrument. In addition, warrants issued by the Company that do not have fixed settlement provisions are also treated as derivativeinstruments. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at theend of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cashsettlement of the derivative instrument could be required within 12 months of the balance sheet date. See Note 8. INCOME TAXES The Company uses the asset and liability method of accounting for income taxes. Income tax expense is recognized for the amount of: (i) taxes payable orrefundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’sfinancial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year inwhich those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates isrecognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assetsreported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will notbe 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, 2016. 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. Stock-based compensation is recorded in the same component of operating expenses as if it were paid in cash. TheCompany 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 from the exercise of 5,777,650 warrants as of December 31, 2017 were excluded from thecomputation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. As of December 31, 2016, potentially dilutivesecurities of 2,581,104 realizable from the convertible Series A and Series B Preferred Stock (defined below), 575,000 from the convertible exchange notesand from the exercise of 1,829,049 warrants were excluded from the computation of diluted net loss per share because the effect of their inclusion would havebeen 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-11 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) RECENT ACCOUNTING PRONOUNCEMENTS In May 2017, the Financial Accounting Standards Board (the “FASB”) issued ASU 2017-09, “Compensation—Stock Compensation (Topic 718): Scope ofModification Accounting” to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718,Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this Update provideguidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718.The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15,2017. Early adoption is permitted. This ASU is not expected to have a material impact on the Company’s consolidated financial statements. In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” The amendments in thisupdate clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accountedfor as acquisitions (or disposals) of businesses. The amendments in this update provide a screen to determine when a set is not a business. If the screen is notmet, it (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contributeto the ability to create output and (2) removes the evaluation of whether a market participant could replace the missing elements. The amendments in thisUpdate are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption ispermitted. This ASU is not expected to have a material impact on the Company’s consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows: Restricted Cash (“ASU No. 2016-18”). The amendments address diversityin practice that exists in the classification and presentation of changes in restricted cash and require that a statement of cash flows explain the change duringthe period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This ASU is effectiveretrospectively for fiscal years and interim periods within those years beginning after December 15, 2017. The Company does not expect the adoption of thisASU to have a material impact on its 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 adoption of this standard did not have a material impact on its consolidated financial statements. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which stipulates thatan entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which theentity expects to be entitled in exchange for such goods or services. To achieve this core principle, an entity should apply the following steps: (1) identifythe contract(s) with a customer; (2) identify the performance obligations in the contract(s); (3) determine the transaction price(s); (4) allocate the transactionprice(s) to the performance obligations in the contract(s); and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The guidancealso requires advanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts withcustomers. In August 2015, the FASB issued Accounting Standards Update No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral ofthe Effective Date ("ASU 2015-14"), which defers the effective date of FASB's revenue standard under ASU 2014-09 by one year for all entities and permitsearly adoption on a limited basis. As a result of ASU 2015-14, the guidance under ASU 2014-09 shall apply for annual reporting periods beginning afterDecember 15, 2017, including interim reporting periods within that period. Early adoption is permitted as of annual reporting periods beginning afterDecember 15, 2016, including interim reporting periods within those annual periods. In March 2016, the FASB issued Accounting Standards Update No.2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifiedthe implementation guidance on principal versus agent considerations. In April 2016, the FASB issued Accounting Standards Update No. 2016-10, Revenuefrom Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarified the implementation guidance regardingperformance obligations and licensing arrangements. As permitted under the standard for emerging growth companies, the Company plans to adopt ASU2014-09 in the first quarter of 2019 using the modified retrospective approach and recognize the cumulative effect to existing contracts in opening retainedearnings on the effective date. The Company is currently reviewing and evaluating this guidance and its impact on its consolidated financial statements. F-12 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 – ACQUISITIONS 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. Based on LogicMark’s operating results for the year ended December 31, 2017, the Company reduced the amount of contingent considerationdue to the LogicMark Sellers by $1,843,912. As a result, the Company’s income statement for the year ended December 31, 2017 includes a favorableadjustment for this amount which is reflected in other income and expense. 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”). During the year endedDecember 31, 2017, the Company paid down $3,000,000 of the revolving loan. The Company originally incurred $1,357,356 in deferred debt issue costsrelated to the revolving loan. In addition, the Company incurred an additional $450,000 in deferred debt issue costs as a result of extending the revolvingloan facility for one additional year. At December 31, 2017 the unamortized balance of deferred debt issue costs was $200,744. The maturity date of theRevolving Loan is July 25, 2018, 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, 2017, the Company was in compliance with such covenants. The Company has the ability to extend the Revolver for one additional year 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 by one year and accordingly, the Companyhas classified the Revolver as a non-current liability as of December 31, 2017. On September 23, 2016, the Company entered into a forbearance agreement with LogicMark Investment Partners, LLC in connection with the LogicMarkNote originally issued on July 22, 2016 in the amount of $2,500,000 which expired on September 22, 2016. Under the terms of the forbearance agreement, the LogicMark Sellers agreed to extend the maturity date of the LogicMark Note and the Company agreed topay to the LogicMark Sellers in immediately available funds: (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 LogicMark Note on October 31, 2016. The Company also agreed to reduce the Escrow Amount (as definedin the Interest Purchase Agreement) by a total of $500,000, and to make certain other changes to the definition of “Escrow Amount” in the PurchaseAgreement. The Company also agreed to make certain representations and warranties in respect of the LogicMark Seller’s forbearance. During June 2017, theCompany paid down $250,000 of the LogicMark Note. The LogicMark Note originally was to mature on September 23, 2016 but was extended to July 15,2017. In July 2017, the remaining balance of the LogicMark Note including the accrued interest owed was settled. See Note 7. 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 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 F-13 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 – ACQUISITIONS (CONTINUED) Acquisition of Fit Pay As discussed in Note 1, the Company completed the “Merger” on May 23, 2017. Pursuant to the terms of the Merger Agreement, the aggregate purchase pricepaid for Fit Pay stock was: (i) 1,912,303 shares of common stock which was equivalent to 19.96% of the outstanding shares of common stock of the Company(the “Common Stock”); (ii) 2,000 shares of the Series C Non-Convertible Preferred Stock of the Company (the “Series C Preferred Stock”); (iii) the paymentof certain debts by the Company; and (iv) the payment of certain unpaid expenses of the Fit Pay Sellers of $724,116 by the Company. In addition, theCompany will be required to pay the Fit Pay Sellers an earn-out payment equal to 12.5% of the gross revenue derived from Fit Pay’s technology for sixteen(16) fiscal quarters commencing on October 1, 2017 and ending on December 31, 2021. To date, Fit Pay has had minimal revenue. The operating results of FitPay have been included in the consolidated financial statements from the effective date of the acquisition, May 23, 2017. In connection with the merger on May 23, 2017, the Company recorded deferred tax liabilities of $1,774,539 as part of its purchase price allocation. Allocation of Purchase Price of Fit Pay The purchase price to acquire Fit Pay was $10,104,184 of which $100,000 was paid by the Company in cash and $10,004,184 in non-cash consideration. The non-cash consideration was comprised of a $851,842 seller note, $3,289,161 of common stock issued to the sellers, Series C preferred stock issued tosellers of $1,807,300 and $4,055,881 in an earn-out provision. At the date of acquisition, the earn-out provision was discounted using a prime borrowing rateof 3.5%. The Merger Agreement was accounted for under the acquisition method of accounting. The purchase price was allocated to the tangible and identifiableassets acquired and liabilities assumed of Fit Pay based upon their estimated fair values. The excess purchase price over the fair value of the underlying netassets acquired was allocated to goodwill. The Company completed its analysis of the fair value of the net assets acquired and the consideration grantedthrough the use of an independent valuation firm and management’s preparation of estimates. The following table summarizes the assessment of theestimated fair values of the identifiable assets acquired and liabilities assumed net of cash acquired, as of the date of acquisition of May 23, 2017: Cash $10,889 Accounts receivable 92,629 Other current assets 53,966 Property and equipment 31,968 Goodwill 9,119,709 Intangible assets (See Note 4) 4,137,400 Assets acquired 13,446,561 Accounts payable 165,650 Accrued liabilities 1,139,774 Customer deposits 262,414 Deferred taxes 1,774,539 Liabilities assumed 3,342,377 Net assets acquired $10,104,184 Goodwill arising from the transaction consists of the expected operational synergies upon combining the entity and intangibles not qualifying for separaterecognition. In connection with the Fit Pay transaction, the Company entered into an employment agreement with Michael Orlando, the former Chief Executive Officer ofFit Pay. Mr. Orlando is now the Chief Operating Officer of the Company and President of the wholly-owned subsidiary, Fit Pay. The term of the employmentagreement is for one (1) year and the employment agreement includes provisions for term extensions. In addition to Mr. Orlando’s salary, the employmentagreement also provides for all necessary and reasonable out-of-pocket expenses incurred in the performance of his duties under the agreement, eligibility toparticipate in bonus or incentive compensation plans of the Company and eligibility to receive equity awards as determined by the board of directors. F-14 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 – ACQUISITIONS (CONTINUED) Pro Forma Financial Information The following table summarizes the unaudited pro forma financial information assuming that the acquisitions of LogicMark and Fit Pay occurred on January1, 2016, and their respective results had been included in the Company’s financial results for the year ended December 31, 2017 and 2016. The pro formacombined amounts are based upon available information and reflect a reasonable estimate of the effects of the acquisitions of LogicMark and Fit Pay for theperiods presented on the basis set forth herein. The following unaudited pro forma combined financial information is presented for informational purposesonly and does not purport to represent what the financial position or results of operations would have been had the acquisitions of LogicMark and Fit Pay infact occurred on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods. For the Years ended December 31, 2017 2016 (unaudited) Pro forma: Net Sales $23,410,933 $16,329,155 Net Loss applicable to Common Stockholders $(10,139,972) $(18,723,441)Net Loss Per Share - Basic and Diluted applicable to Common Stockholders $(0.79) $(2.32) 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 acquisitions of LogicMark and Fit Pay and the application of fair value adjustments to intangible assetsoccurred on January 1, 2016. For the year ended December 31, 2017, the pro forma financial information excluded the Fit Pay acquisition-related expenses of$220,943, which are included in the actual reported results, as general and administrative expenses, but excluded from the pro forma amounts above due totheir nonrecurring nature. In addition, the pro forma adjustments for the twelve months ended December 31, 2017 include the following adjustments, (a)amortization expense related to the acquired intangible assets of $301,625; (b) interest expense of $213,510; and (c) dividends related to the Series CPreferred Stock of $44,384. For the year ended December 31, 2016, the pro forma financial information excluded the acquisition-related expenses of $605,228, which are included in theactual reported results, but excluded from the pro forma amounts above due to their nonrecurring nature. In addition, the pro forma adjustments for the yearended December 31, 2016 include the following adjustments, (a) amortization expense related to the acquired intangible assets of $1,155,267; (b) interestexpense including the amortization of deferred debt issue costs of $2,893,777; (c) reduction in depreciation expense of $23,562; and (d) dividends related tothe Series B and Series C Preferred Stock of $734,375. NOTE 6 - ACCRUED EXPENSES Accrued expenses consist of the following: December 31, 2017 2016 Salaries and payroll taxes $92,906 $77,037 Consulting fees 70,000 25,547 Merchant bank fees 28,075 31,124 State income taxes 11,049 1,135 Professional fees 31,781 7,568 Management incentives 891,667 604,125 Interest expense 639,030 691,684 Amount due to LogicMark Sellers 421,606 - Dividends – Series A & B preferred stock 25,000 583,067 Liquidated damages – Series B preferred stock - 360,000 Finder’s fees - 256,250 Other 253,953 264,135 Totals $2,465,067 $2,901,672 F-15 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7 - CONVERTIBLE NOTES PAYABLE July 2017 Exchange In order to consummate a registered direct offering and concurrent private placement on July 13, 2017 (See Note 8), the Company was required to obtainconsent from the holders (the “November Holders”) of the Company’s (i) Amended and Restated Secured Subordinated Promissory Notes, originally issuedon July 25, 2016 (i.e., the LogicMark Note), and amended on November 29, 2016 (the “November Notes”), and (ii) certain common stock purchase warrants(the “November Warrants”) that were initially exercisable on November 29, 2016. In consideration of the November Holders providing such consent to theregistered direct offering and concurrent private placement, the Company and the November Holders agreed, as of July 11, 2017, to the followingamendments to their respective November Notes, November Warrants, and that certain Exchange Agreement, dated November 29, 2016 (the “ExchangeAgreement”): 1.The conversion price of the November Notes was lowered from $3.00 to $2.00. 2.The exercise price of the November Warrants was lowered from $3.00 to $2.00. 3.The Company’s prohibition under the Exchange Agreement providing that for so long as the November Holders are holders of the November Notes,the November Warrants, or the shares of Common Stock issuable thereunder, the Company may not issue shares of our Common Stock at a price pershare less than $3.00 per share, was lowered to $2.00 per share. On December 19, 2017, and effective as of November 29, 2017, the maturity date of the agreement the Company entered into an agreement (the “AmendmentAgreement”) with the holders of the convertible notes and common stock purchase warrants issued pursuant to that certain Exchange Agreement, datedNovember 29, 2016, by and among the Company and such holders. Pursuant to the Amendment Agreement, the parties agreed to (i) amend the maturity datesof the convertible notes by one (1) year, or November 29, 2018, and (ii) that the holders would forbear the exercise of any remedies due to the passing of theoriginal maturity date. In consideration thereof, the Company issued to the holders an aggregate of 370,000 shares of restricted Common Stock with a fairvalue of $673,400. This amount was expensed and is included in interest expense for the year ended December 31, 2017. In connection with the reduction in conversion price of the November Notes from $3.00 to $2.00, the Company incurred a non-cash charge for modificationof convertible exchange note terms of $191,630 for the year ended December 31, 2017. In addition, the Company expensed the remaining unamortized notediscount and deferred debt issue costs related to the November Notes of $491,667 and $35,949, respectively. As a result of lowering the conversion price ofthe November Warrants from $3.00 to $2.00, the Company also incurred a non-cash charge for modification of terms related to the November Warrants of$37,000 for the year ended December 31, 2017. In December 2017, the November Notes and the related accrued interest balance were converted into 868,970shares of the Company’s common stock. On July 19, 2017, the November Holders purchased from LogicMark Investment Partners, LLC (“LogicMark Investment Partners”), the representative ofLogicMark, LLC, the outstanding balance of $594,403, including accrued and unpaid interest on the LogicMark Note. In connection therewith, theCompany, LogicMark Investment Partners and the November Holders entered into an Assignment and Assumption Agreement, dated July 19, 2017, pursuantto which LogicMark Investment Partners assigned the LogicMark Note to the November Holders. In addition, on July 19, 2017, the Company and theNovember Holders entered into a Securities Exchange Agreement pursuant to which the Company exchanged the LogicMark Note held by the NovemberHolders for (i) an aggregate principal amount of $594,408 of secured subordinated convertible promissory notes of the Company (the “July 2017 Notes”) duein July 2018, and (ii) warrants exercisable into 297,202 shares of Common Stock (the “July 2017 Warrants”). The July 2017 Notes are convertible into sharesof Common Stock at a conversion price of $2.00 per share and the July 2017 Warrants are exercisable into shares of Common Stock with a five year term andan exercise price of $2.00 per share. The exercise and the amount of shares of common stock issuable upon exercise of the July 2017 Warrants are subject toadjustment upon certain events, such as stock splits, combinations, dividends, distributions. reclassifications, mergers or other corporate changes and dilutiveissuances. The conversion option embedded in the convertible exchange notes was determined to contain beneficial conversion features, resulting in a debt discount atissuance. After allocating the gross proceeds to the warrants (discussed above) and beneficial conversion feature, the total debt discount recognized was$432,917. The entire debt discount was fully amortized during the year ended December 31, 2017 as a result of all the July 2017 Notes and the relatedaccrued interest balance being fully converted into 328,897 shares of the Company’s common stock in December 2017. As of December 31, 2017, there wasno remaining outstanding principal balance on the July 2017 Notes. 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. F-16 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 7 - CONVERTIBLE NOTES PAYABLE (CONTINUED) 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 was amortizedover the term of the debt and the Company amortized $1,366,667 and $133,333 of the debt discount for the years ended December 31, 2017 and 2016,respectively. As of December 31, 2017, there was no remaining outstanding principal balance on the November 2016 Exchange Notes. 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. The total face amount of the Notes outstanding on December 8, 2015 were $3,644,850. On December 8, 2015 the Company recorded adebt discount of $1,719,700 and a derivative liability of $912,330. The debt discount was attributable to the value of the separately accounted for conversion feature and common stock issued in connection with the sale ofthe December 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 which was recorded as an interest expensein the consolidated statement of operations. 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 year ended December 31, 2016, the holders of the December Notes also converted $838,171 of theconvertible notes and $38,560 of interest in exchange for 373,077 shares of common stock. At December 31, 2016, the outstanding balance on the DecemberNotes was $0. As it relates to the accelerated installments, the Company incurred a loss on extinguishment of debt of $272,749. The loss on extinguishmentof debt was equivalent to the excess fair value of the common stock issued to the holders of the December Notes as compared to the net carrying value of theconvertible debt. The fair value of the common stock issued in payment of interest exceeded the amount of interest owed by $34,628. This amount isincluded as part of interest expense on the consolidated statement of operations. F-17 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 the year ended December 31, 2016, the Company had five separate valuations performed using the Monte Carlo simulation model. The valuationscoincided with the number of accelerated installments occurring during the year ended December 31, 2016. All of the 2016 valuations occurred during thefirst quarter of 2016. The table for 2016 reflects the range of weighted average assumptions used for the 2016 valuations. January 12, -March 29, 2016 Embedded Conversion Feature Liability: Risk-free interest rate 0.46%-0.59%Expected volatility 100.00%Expected life (in years) 0.91-0.70 Expected dividend yield - F-18 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, 2017 and December 31, 2016. The carrying amounts of cash and accounts payable approximate their fair value due to their short maturities. The Company’s other financial instrumentsinclude its convertible notes payable obligations. The carrying value of these instruments approximate fair value, as they bear terms and conditionscomparable to market, for obligations with similar terms and maturities. The Company measures the fair value of financial assets and liabilities based on theexchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset orliability in an orderly transaction between market participants on the measurement date. The Company maximizes the use of observable inputs andminimizes 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 the years ended December 31, 2017 and 2016, 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 Beginning liability balance $420,360 Change in fair value of derivative liabilities 2,299,020 Recognition of conversion feature liability - Gain on derivative liabilities resulting from accelerated amortizations (1,016,980)Net realized gain on conversion feature liabilities - Net unrealized gain on conversion feature liabilities - Adjustment to additional paid-in capital upon conversion and modification (1,702,400)Ending balance $- Other Fair Value Measurements During the years ended December 31, 2017 and 2016, the Company recorded $171,530 and $91,682, respectively of interest expense related to theamortization of the discount of the contingent consideration. The fair value measurements were based on significant inputs not observed in the market andthus represented a level 3 measurement. F-19 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9 - STOCKHOLDERS’ EQUITY 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 2,189,732 shares Series A Preferred Stock converted $2,662,794 of Preferred Stock and dividends into 834,718shares of common stock. For the year ended December 31, 2017, the Company recorded Series A Preferred Stock dividends of $34,884. During the year endedDecember 31, 2017, holders of 211,424 shares of Series A Preferred Stock converted $338,749 of Series A Preferred Stock and dividends into 159,219 sharesof common stock. As of December 31, 2017, there was no remaining outstanding principal balance on the Series A Preferred Stock. 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, 2016, the Companyrecorded Series B Preferred Stock dividends of $490,625. For the year ended December 31, 2017, the Company recorded Series B Preferred Stock dividendsof $634,375. During the year ended December 31, 2017, holders of 4,500,000 shares of Series B Preferred Stock converted $6,075,000 of Series B PreferredStock, dividends and liquidated damages into 3,106,802 shares of common stock. As of December 31, 2017, there was no remaining outstanding principalbalance on the Series B Preferred Stock. July 2017 Offerings On July 13, 2017, the Company closed a registered direct offering of an aggregate of 2,170,000 shares of the Company’s common stock, and pre-fundedwarrants to purchase 230,000 shares of common stock. The Company sold the shares at a price of $1.43 per share and received $1.42 per pre-funded warrant.The Company received net proceeds from the offering, after deducting placement agent fees and other offering related expenses payable by the Company, ofapproximately $3,017,932. The pre-funded warrants were converted into shares of common stock on September 23, 2017 and as a result were included in thecommon stock outstanding balance for purposes of computing earnings per share. On July 13, 2017, the Company also closed on a concurrent private placement with the same investors for no additional consideration, of warrants topurchase 1,800,000 shares of common stock. The warrants will be exercisable beginning on the six (6) month anniversary of the date of issuance, at anexercise price of $2.00 per share and will expire on the fifth anniversary of the initial exercise date. November 2017 Offerings On November 13, 2017, the Company closed a registered direct offering of an aggregate of 2,941,177 shares (the “November Shares”) of Common Stock. TheCompany sold the November Shares at a price of $1.36 per share. The Company received net proceeds from the offering, after deducting placement agent feesand other offering related expenses of approximately $3,620,115. On November 13, 2017, the Company also closed a previously announced concurrent private placement for no additional consideration, of the NovemberInvestor Warrants to purchase 2,500,000 shares of Common Stock. On December 19, 2017, and effective as of November 29, 2017, we entered into an agreement (the “Amendment Agreement”) with the holders of theconvertible notes and common stock purchase warrants issued pursuant to that certain Exchange Agreement, dated November 29, 2016, by and among theCompany and such holders. Pursuant to the Amendment Agreement, the parties agreed to (i) amend the maturity dates of the convertible notes by one (1)year, or November 29, 2018, and (ii) that the holders would forbear the exercise of any remedies due to the passing of the original maturity date. Inconsideration thereof, the Company issued to the holders an aggregate of 370,000 shares of restricted Common Stock with a fair value of $673,400. Thisamount was expensed and is included in interest expense for the year ended December 31, 2017. F-20 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9 - STOCKHOLDERS’ EQUITY (CONTINUED) December 2017 Offering On December 26, 2017, we closed a registered direct offering of an aggregate of 1,750,000 shares (the “December Shares”) of Common Stock. We sold theDecember Shares at a price of $4.00 per share. We received net proceeds from the offering, after deducting placement agent fees and other offering relatedexpenses of $6,392,341. Series C Preferred Stock In May 2017, the Company authorized a new Series C Preferred Stock. The terms of the Series C Preferred Stock are as follows: Dividends on Series C Preferred Stock Holders of Series C Preferred Stock are entitled to receive from and after the first date of issuance of the Series C Preferred Stock, cumulative dividends at arate of 5% per annum on a compounded basis, which dividend amount shall be guaranteed. Accrued and unpaid dividends are payable in cash. For the yearended December 31, 2017, the Company recorded Series C Preferred Stock dividends of $60,556. Redemption of Series C Preferred Stock The Series C Preferred Stock may be redeemed by the Company solely at the Company’s option in cash at any time, in whole or in part, upon payment of thestated value of the Series C Preferred Stock, and all related accrued but unpaid dividends. Fundamental Change If a “fundamental change” occurs at any time while the Series C Preferred Stock is outstanding, the holders of shares of Series C Preferred Stock thenoutstanding shall be immediately paid, out of the assets of the Company or the proceeds of such fundamental change, as applicable, and legally available fordistribution to its stockholders, an amount in cash equal to the stated value of the Series C Preferred Stock, and all related accrued but unpaid dividends. If the legally available assets of the Company and the proceeds of such “fundamental change” are insufficient to pay the all of the Holders of the Series CPreferred Stock, then the Holders of the Series C Preferred Stock shall share ratably in any such distribution in proportion to the amount that they would havebeen entitled to. A fundamental change includes but is not limited to any change in the ownership of at least fifty percent (50%) of the voting stock;liquidation or dissolution; or the Common Stock ceases to be listed on the market upon which it currently trades. Voting Rights The holders of the Series C Preferred Stock are entitled to vote on any matter submitted to the stockholders of the Company for a vote. One (1) share of SeriesC Preferred Stock shall carry the same voting rights as one (1) share of Common Stock. Classification The Series C Preferred Stock was accounted for under Section 480-10-S99 - Distinguishing Liabilities from Equity (FASB Accounting Standards Codification480) as amended by ASU 2009-04 - for Redeemable Equity Instruments (“ASU 2009-04”). Under ASU 2009-04, a redeemable equity security is to beclassified as temporary equity if it is conditionally redeemable upon the occurrence of an event that is not solely within the control of the issuer. TheCompany’s financing is redeemable at the option of the holder under the specified terms and conditions of such preferred stock however, the instrument wasnot redeemable as of December 31, 2017. Therefore, the Company classified the Series C Preferred Stock as temporary equity in the consolidated balancesheet at December 31, 2017. Warrants The following table summarizes the Company’s warrants outstanding and exercisable at December 31, 2016 and 2017: Weighted Weighted Average Average Remaining Aggregate Number of Exercise Life Intrinsic Warrants Price In Years Value Outstanding at January 1, 2016 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 $- Issued 4,827,202 2.00 4.76 - Exercised (1) (878,601) 2.00 - - Cancelled - - - - Outstanding and Exercisable at December 31, 2017 5,777,650 $5.08 4.26 $6,672,902 (1)During the year ended December 31, 2017, 648,601 warrants were exercised on a cashless basis and were converted into 429,656 shares of commonstock.F-21 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9 - STOCKHOLDERS’ EQUITY (CONTINUED) 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 737,992 at December 31, 2016. 2017 Stock Incentive Plan On August 24, 2017, a majority of the Company’s stockholders approved at the 2017 Annual Shareholders’ Meeting the 2017 Stock Incentive Plan (“2017SIP”). The aggregate maximum number of shares of Common Stock (including shares underlying options) that may be issued under the 2017 SIP pursuant toawards of restricted shares or options will be limited to 10% of the outstanding shares of Common Stock, which calculation shall be made on the first (1st)business day of each new fiscal year; provided that for fiscal year 2017, 1,500,000 shares of Common Stock may be delivered to participants under the 2017SIP. Thereafter, the 10% evergreen provision shall govern the 2017 SIP. The number of shares of Common Stock that are the subject of awards under the 2017SIP which are forfeited or terminated, are settled in cash in lieu of shares of Common Stock or in a manner such that all or some of the shares covered by anaward are not issued to a participant or are exchanged for awards that do not involve shares will again immediately become available to be issued pursuant toawards granted under the 2017 SIP. If shares of Common Stock are withheld from payment of an award to satisfy tax obligations with respect to the award,those shares of Common Stock will be treated as shares that have been issued under the 2017 SIP and will not again be available for issuance under the 2017SIP. During the year ended December 31, 2017, the Company issued 159,933 shares of common stock under both the LTIP and the 2017 SIP to five (5) non-executive directors for serving on the Company’s board. The aggregate fair value of the shares issued to the directors was $360,000. Also during the yearended December 31, 2017, the Company issued 232,559 shares of common stock with an aggregate fair value of $400,000 to executive and certain non-executive employees related to the Company’s 2016 management incentive plan. The Company also granted 1,095,895 restricted shares of common stockwith an aggregate value of $1,864,253 to certain executive and non-executive employees. The vesting period for these restricted shares of common stock istwelve months and the Company expensed $1,629,049 related to these restricted stock awards. During the year ended December 31, 2016, the Companyissued 51,705 shares under the plan to three non-executive directors for serving on the Company’s board. The aggregate fair value of the shares issued to thedirectors was $180,000. Also during the year ended December 31, 2016, the Company issued 60,000 shares with an aggregate fair value of $372,000 toexecutive and certain non-executive employees related to the Company’s 2015 management incentive plan, which was previously accrued. During the year ended December 31, 2017, the Company accrued $925,000 of discretionary management and employee bonus expense. During the year ended December 31, 2017, the Company issued 448,258 fully-vested shares of common stock with a fair value of $816,955 to non-employees for services rendered. NOTE 10 - INCOME TAXES On December 22, 2017, the President signed into law new legislation, known as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), that resulted insignificant changes to the Internal Revenue Code of 1986, as amended. These changes include a federal statutory rate reduction from 34% to 21%, limitationof the deduction for net operating losses to 80% of taxable income while providing that the net operating loss carryovers for years after 2017 will not expire,limitation on the amount of research and development expenses deductible per year beginning in years after 2021, increased limitations on certain executivecompensation, elimination of the Corporate Alternative Minimum Tax, and modifying or repealing other business deductions and credits. The Company has incorporated the impact of the Tax Act in the results from operations for the tax effects of the Tax Act than can be reasonably estimated,but not completed, for the year ended December 31, 2017. As a result of the Tax Act being signed into law, the Company recognized a provisional charge of$4,295,052, equal to (43.48%) of Operating Income Before Income Tax, in the fourth quarter of 2017 related to the re-measurement of its U.S. deferred taxassets at the lower enacted corporate tax rate. Due to the history of net operating losses, the Company is in a full valuation allowance position. As a result, theadditional tax expense due to the Tax Act was offset by an equal reduction to the valuation allowance, resulting in no net tax impact from the Tax Act to theoverall financial condition and results of operations of the Company. F-22 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 - INCOME TAXES (CONTINUED) As of December 31, 2017, the Company had US federal and state net operating loss (“NOLs”) carryovers of $35,030,083 and $29,699,580, respectively,available to offset future taxable income, which expire beginning in 2033. In addition, the Company had tax credit carryforwards of $315,492 atDecember 31, 2017 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 not determined whether a change of control has occurred as of December 31, 2017 with respect to the Nxt-ID NOLs andtherefore no limitation under Section 382 has been computed related to the Nxt-ID NOLs. Management will review for such limitations before any of the Nxt-ID NOLs against future taxable income. Management has determined the acquisition of Fit Pay during the 2017 year is a change of control event underSection 382 of the Internal Revenue Code with respect to the Fit Pay pre-acquisition NOLs. Management determined that the sum of Section 382 annuallimitations on the Fit Pay pre-acquisition NOLs during the corresponding carryforward period is in excess of the total amount of Fit Pay NOL carryforwardavailable at the time of change of control. Consequently, no adjustment has been made to the amount of Fit Pay NOL available following the change incontrol. Section 384 of the Internal Revenue Code Section further limits Nxt-ID’s ability to off-set pre-acquisition NOLs of Nxt-ID against future taxable incomewhich may be created by the realization of Fit Pay built in gains during the five-year recognition period following the Fit Pay acquisition. However, taxlosses of the consolidated group generated from operations occurring after the Fit Pay acquisition are eligible to offset any taxable income resulting fromrealization of Fit Pay built in gain following the transaction. The Company has no material uncertain tax positions for any of the reporting periods presented. The Company has filed all of its tax returns for all priorperiods through December 31, 2016 and intends to timely the income tax returns for the period ending December 31, 2017. As a result, the Company’s netoperating loss carryovers will now be available to offset any future taxable income. The Company is subject to taxation in the United States and various states. As of December 31, 2017 the Company’s tax years post 2012 are subject toexamination by the tax authorities. With few exceptions, as of December 31, 2017 the Company is no longer subject to U.S. federal or state examinations bytax authorities for years before December 31, 2013. The Company has not been examined or received notice of pending examination by the federal or anystate and local tax authority. To the extent a tax authority examines an open tax year and makes an assessment, the results from operations could be affectedthrough additional tax liabilities or adjustments to the amount of NOL carryforward or tax basis of other components of deferred tax. The income tax (benefit) provision consists of the following: December 31, 2017 2016 Current Federal $- $- State 16,089 5,749 16,089 5,749 Deferred Federal 1,321,607 (2,843,866)State (483,260) (281,625) 838,347 (3,125,491)Change in valuation allowance (2,467,771) 3,315,776 Total income tax (benefit) provision $(1,613,335) $196,035 A reconciliation of the effective income tax rate and the statutory federal income tax rate is as follows: December 31, 2017 2016 U.S. federal statutory rate 34.00% 34.00%State income tax rate, net of federal benefit 3.12 1.45 Other permanent differences (2.29) (10.60)Effect of rate change under Tax Act (43.48) - Less: valuation allowance 24.98 (26.41)Provision for income taxes 16.33% (1.56)% F-23 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 - INCOME TAXES (CONTINUED) 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 valuation allowance.Nxt-ID considered the deferred tax liabilities related to indefinite lived intangibles not allowable as a source of future taxable income in determining theamount of valuation allowance at December 31, 2017 and 2016, resulting in net deferred tax liabilities in each period after applying valuation allowance. Forthe year ended December 31, 2017, the net change in valuation allowance of $841,402 was comprised of an increase of $1,626,369 related to the Fit Paypurchase accounting offset by a reduction of $2,467,771 related to a change in valuation allowance included in the income tax provision. For the year endedDecember 31, 2016, the increase in valuation allowance of $3,315,776 related to the change in valuation allowance included in the income tax provision. The tax effects of temporary differences that give rise to deferred tax assets and liabilities are presented below: December 31, 2017 2016 Deferred tax assets: Net operating loss carryforward $8,829,607 $8,887,756 Tax credits 315,492 187,856 Accruals and reserves 856,675 546,286 Restricted stock - 42,140 Tangible and intangible assets 225,711 252,638 Charitable donations 2,903 3,738 Total deferred tax assets before valuation allowance: 10,230,388 9,920,414 Valuation allowance (9,079,012) (9,920,414)Deferred tax assets, net of valuation allowance 1,151,376 - Deferred tax liabilities: Intangible assets $(1,486,777) $(190,286)Total deferred tax liabilities $(1,486,777) $(190,286) Net deferred tax liability $(335,401) $(190,286) NOTE 11 - COMMITMENTS AND CONTINGENCIES LEGAL MATTERS 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-24 Nxt-ID, Inc. and SubsidiariesNOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 11 - COMMITMENTS AND CONTINGENCIES (CONTINUED) COMMITMENTS The Company is party to certain leases for office space and warehouse facilities, with monthly payments ranging from $1,170 to $6,911, expiring on variousdates through August 2020. The Company incurred rent expense of $206,481 and $154,194 for the years ended December 31, 2017 and December 31, 2016,respectively. Minimum lease payments for non-cancelable operating leases are as follows: Future Lease Obligations 2018 $168,947 2019 128,195 2020 76,022 Total future lease obligations $373,164 The maturity of the Company’s debt is as follows: 2018 $266,201 2019 212,961 2020 212,961 2021 159,719 Total debt $851,842 Effective October 1, 2015, we extended the employment agreement with Gino M. Pereira, our Chief Executive Officer. The term of the employmentagreement is for three 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: ●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. Effective May 23, 2017, we entered into an employment agreement with Michael Orlando, our Chief Operating Officer. The term of the employmentagreement is 1 year beginning on May 23, 2017. Mr. Orlando’s base salary is $150,000, plus an initial stock grant of 250,000 shares of Common Stock fromthe Company’s 2013 LTIP. Effective January 1, 2018, Ms. Orlando’s base salary increased to $350,000 from $150,000. The employment agreement alsoprovides for: ●Eligibility to participate in bonus or incentive compensation plans that may be established by the Board from time to time applicable to Mr.Orlando’s services. ●Eligibility to receive equity awards as determined by the Board, or a committee of the Board, composed in compliance with the corporategovernance standards of any applicable listing exchange. NOTE 12 - SUBSEQUENT EVENTS The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. On January 3, 2018, the Company issued 5,103 shares of its common stock for the payment of services with a grant date fair value of $17,861. On January 11, 2018, the Company issued 437,018 shares of common stock in connection with the cashless exercise of 1,075,000 warrants. On February 20, 2018, the Company issued 163,435 shares of its common stock to certain employees under the 2017 management incentive plan. On February 26, 2018, the Company received proceeds of $200,000 in connection with the exercise of 100,000 warrants to purchase common stock at anexercise price of $2.00. On March 23, 2018, the Company issued 58,333 shares of its common stock for the payment of services with a grant date fair value of $130,666. F-25 INDEX TO EXHIBITS Exhibit No. Description of Exhibit3.1(i) Certificate of Incorporation (1)3.1(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*† Employment Agreement Between Nxt-ID and Michael J. Orlando10.5 License Agreement between 3D-ID, LLC and Genex Technologies (1)10.6 Purchase Agreement between 3D-ID, LLC and Nxt-ID, Inc. (1)10.7 †† Manufacturing agreement with Identita Technologies, Inc., dated January 18, 2013 (4)10.8 Form of Registration Rights Agreement for June 2014 and August 2014 Offerings (5)10.9 Form of Registration Rights Agreement for April 2015 Offering (7)10.10 Form of Placement Agency Agreement for August 2015 Public Offering (19)10.11 Form of Securities Purchase Agreement for August 2015 Public Offering (8)10.12 Form of Registration Rights Agreement for August 2015 Public Offering (8)10.13 Form of Securities Purchase Agreement for August 2015 Private Placement (8)10.14 Form of Warrant Purchase Agreement for August 2015 Private Placement (8)10.15 Form of Securities Purchase Agreement for December 2015 Private Placement (9)10.16 Form of Registration Rights Agreement for December 2015 Private Placement (9)10.17 Form of Securities Purchase Agreement for December 2015 Agreement with WorldVentures Holdings, LLC (10)10.18 Form of Registration Rights Agreement for December 2015 Agreement with WorldVentures Holdings, LLC (10)10.19 Form of Securities Purchase Agreement for April 2016 Registered Direct Offering (11)10.20 Form of Interest Purchase Agreement for May 2016 Agreement with LogicMark, LLC (13)10.21 Form of First Amendment to Interest Purchase Agreement for May 2016 Agreement with LogicMark, LLC (14)10.22 Form of Secured Subordinated Promissory Note for July 2016 Agreement with LogicMark, LLC (15)10.23 Form of Security Agreement for July 2016 Agreement with LogicMark, LLC (15)10.24 Form of Loan Agreement for July 2016 Agreement with LogicMark, LLC (15)10.25 Form of Subordination Agreement for July 2016 Agreement with LogicMark, LLC (15)10.26 Form of Securities Purchase Agreement for July 2016 Agreement with LogicMark, LLC (15)10.27 Form of Registration Rights Agreement for July 2016 Agreement with LogicMark, LLC (15)10.28 Form of Forbearance Agreement between Nxt-ID and LogicMark Investment Partners, LLC (17)10.29 Form of Exchange Note for November 2016 Agreement with LogicMark, LLC (18)10.30 Form of Exchange Agreement for November 2016 Agreement with LogicMark, LLC (18)10.31 Form of Intercreditor Agreement for November 2016 Agreement with LogicMark, LLC (18)10.32 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 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-Oxley Actof 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-Oxley Actof 2002. 47 101.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 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.(19)Filed as an Exhibit to the Company’s Annual Report on Form 10-K with the SEC on April 14, 2017. 48 Exhibit 10.4 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of May 19, 2017 (the “Effective Date”) is entered into by and betweenFit Pay, Inc Subsidiary of Nxt-ID, a Delaware corporation (the “Company”), and Michael J. Orlando (the “Executive”) (collectively, the “Parties,”individually, a “Party”). W I T N E S S E T H: WHEREAS, Company and the Executive desire to formalize the employment relationship that will exist between Company and theExecutive from and after the Effective Date by means of this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the Parties, intending to belegally bound, hereby agree as follows: 1.Definitions. As used in this Agreement: 1.1 The term “Board” means the Board of Directors of Nxt-ID, Inc. the Company’s parent company (the “Parent”). 1.2 The term “Compensation Committee” shall mean the Compensation Committee of the Parent. 2.Employment. 2.1 Title. The Executive shall serve as the Chief Operating Officer (“COO”) of the Company and President of the wholly ownedsubsidiary, Fit Pay, Inc. and agrees to perform services for the Company and such other affiliates of the Company, as described herein. 2.2 Term. The Company agrees to employ Executive pursuant to the terms of this Agreement, and Executive agrees to be so employedfor a term of one year (the “Initial Term”), commencing on the Effective Date. On each anniversary of the Effective Date following the Initial Term, the termof this Agreement shall be automatically extended for successive one-year periods (each a “Renewal Term”), provided, however, that either party hereto mayelect not to extend this Agreement by giving written notice to the other party at least ninety (90) days prior to such anniversary date. Notwithstanding theforegoing, Executive’s employment hereunder may be earlier terminated in accordance with Section 5. The period of time between the Effective Date and thetermination of Executive's employment hereunder shall be referred to herein as the “Employment Term”. 2.3 Duties and Responsibilities. The Executive shall report to the Chief Executive Officer of the Parent (the “CEO”) and in his capacityas an officer of the Company shall perform such duties and services as may be appropriate and as are assigned to him by the CEO. 2.4 Performance of Duties. During the term of the Agreement, except as otherwise approved by the Board or as provided below, theExecutive agrees to devote his full business time, effort, skill and attention to the affairs of the Company and its affiliates, will use his best efforts to promotethe interests of the Company, and will discharge his responsibilities in a diligent and faithful manner, consistent with sound business practices. The foregoingshall not, however, preclude Executive from devoting reasonable time, attention and energy in connection with the following activities, provided that suchactivities do not materially interfere with the performance of his duties and services hereunder: (1) serving as a director, consultant, or a member of a committee of any company or organization, if serving in such capacitydoes not involve any conflict with the business of the Company or any of its affiliates and such other company or organization is not incompetition, in any manner whatsoever, with the business of the Company or any of its affiliates; (2)fulfilling speaking engagements; (3)engaging in charitable and community activities; (4)managing his personal business and investments; and (5)any other activity approved of by the Board. 2.5 Representations and Warranties of the Executive with Respect to Conflicts, Past Employers and Corporate Opportunities. TheExecutive represents and warrants that: (1) his employment by the Company will not conflict with any obligations which he has to any other person, firm or entity; (2) he has not brought to the Company (during the period before the signing of this Agreement) and he will not bring to theCompany any materials or documents of a former or present employer, or any confidential information or property of any other person, firmor entity; and (3) he will not, without disclosure to and approval of the Board, directly or indirectly, assist or have an active interest in(whether as a principal, stockholder, lender, employee, officer, director, partner, venturer, consultant or otherwise) in any person, firm,partnership, association, corporation or business organization, entity or enterprise that competes with or is engaged in a business which issubstantially similar to the business of the Company; provided, however, that ownership of not more than two percent (2%) of theoutstanding securities of any class of any publicly held corporation shall not be deemed a violation of this Section 2.5. 2.6 Activities and Interests with Companies Doing Business with the Company. Executive shall promptly disclose to the Board, inaccordance with the Company’s policies, full information concerning any interests, direct or indirect, he holds (whether as a principal, stockholder, lender,executive, director, officer, partner, venturer, consultant or otherwise) in any business which, as reasonably known to Executive, purchases or providesservices or products to the Company or any of its subsidiaries, provided that the Executive need not disclose any such interest resulting from ownership ofnot more than two (2%) of the outstanding securities of any class of any publicly held corporation. 2.7 Other Business Opportunities. Nothing in this Agreement shall be deemed to preclude the Executive from participating in otherbusiness opportunities if and to the extent that: (a) such business opportunities are not directly competitive with, similar to the business of the Company, orwould otherwise be deemed to constitute an opportunity appropriate for the Company; (b) the Executive’s activities with respect to such opportunities do nothave a material adverse effect on the performance of the Executive’s duties hereunder, and (c) the Executive’s activities with respect to such opportunity havebeen fully disclosed in writing to the Board. 2 2.8 Reporting Location. For purposes of this Agreement, the Executive’s reporting location shall be Danville, CA or other agreed uponlocation from time to time. (the “Reporting Location”). 3.Compensation. 3.1 Base Salary. Executive shall receive an initial annual base salary of One Hundred Fifty Thousand Dollars ($150,000.00), payableaccording to the Company’s normal payroll policies and procedures (the “Base Salary”) and subject to all federal, state, and municipal withholdingrequirements. The Base Salary shall be reviewed by the Board annually. 3.2 Cash Bonus. The Executive shall be eligible for a cash bonus equal to up to one(1) times the Base Salary pursuant to Schedule 1attached hereto. Schedule 1 shall be revised for any Renewal Term by mutual agreement of the Board and the Executive. 3.3 Equity-Based Compensation. On the Effective Date, the Parent shall grant to the Executive 250,000 shares of the Parent’s CommonStock from the Parent’s long term incentive plan, which award shall be governed by the Restricted Stock Award Agreement annexed hereto as Exhibit A. 3.4 Benefit Plans. The Executive shall have the right to participate in employee benefit plans and insurance programs of the Parent thatthe Parent may sponsor from time to time and to receive customary Parent benefits, if those benefits are so offered. Nothing herein shall obligate the Companyor Parent to offer any such plans or programs. If the Company or Parent elects not to offer insurance programs, they will reimburse executive for the cost ofsourcing a plan of comparable value to the plan currently offered by Fit Pay. 3.5Vacation and Holidays. (1) The Executive shall be entitled to take four (4) weeks of vacation, with pay, per year, which vacation level shall be reviewedby the Compensation Committee from time to time. No more than 1 times (1.0x) Executive’s authorized annual vacation allocation may beaccrued, at any given time. In the event that Executive has reached his maximum authorized vacation allocation, accrual will not re-commence until Executive uses some of his paid vacation credit and thereby brings the balance below his maximum. Accrued paidvacation credit forfeited because of an excess balance cannot be retroactively reapplied. Pay will only be provided for any unused, accruedpaid vacation credit at the time of Executive’s separation from the Company. (2) The Executive shall be entitled to such paid holidays as are generally available to all employees of the Parent. 3.6 Reimbursement. Executive shall be entitled to reimbursement within a reasonable time for all properly documented and approvedexpenses for travel. The Parent shall reimburse business expenses of Executive directly related to Parent business, including, but not limited to, airfare,lodging, meals, travel expenses, medical expenses while traveling not covered by insurance, business entertainment, expenses associated with entertainingbusiness persons, local expenses to governments or governmental officials, tariffs, applicable taxes outside of the United States, special expenses associatedwith travel to certain countries, supplemental life insurance or supplemental insurance of any kind or special insurance rates or charges for travel outside theUnited States (unless such insurance is being provided by the Parent), rental cars and insurance for rental cars, and any other expenses of travel that arereasonable in nature or that have been otherwise pre-approved. Executive shall be governed by the travel and entertainment policy in effect at the Parent. 3 3.7 Payroll Procedures and Policies. All payments required to be made by the Parent to the Executive pursuant to this Article Three shallbe paid on a regular basis in accordance with the Parent’s normal payroll procedures and policies. 4.Confidentially; Non-Competition; and Non-Solicitation. 4.1 Confidentiality. In consideration of employment by the Company and Executive’s receipt of the salary and other benefits associatedwith Executive’s employment, and in acknowledgment that (a) the Company maintains secret and confidential information, (b) during the course ofExecutive’s employment by the Company such secret or confidential information may become known to Executive, and (c) full protection of the Company’sbusiness makes it essential that no employee appropriate for his or her own use, or disclose such secret or confidential information, Executive agrees thatduring the time of Executive’s employment and for a period of two (2) years following the termination of Executive’s employment with the Company,Executive agrees to hold in strict confidence and shall not, directly or indirectly, disclose or reveal to any person, or use for his own personal benefit or forthe benefit of anyone else, any trade secrets, confidential dealings, or other confidential or proprietary information of any kind, nature, or description(whether or not acquired, learned, obtained, or developed by Executive alone or in conjunction with others) belonging to or concerning the Company or anyof its subsidiaries, except (i) with the prior written consent of the Company duly authorized by its Board, (ii) in the course of the proper performance ofExecutive’s duties hereunder, (iii) for information (x) that becomes generally available to the public other than as a result of unauthorized disclosure byExecutive or his affiliates or (y) that becomes available to Executive on a nonconfidential basis from a source other than the Company or its subsidiaries whois not bound by a duty of confidentiality, or other contractual, legal, or fiduciary obligation, to the Company, or (iv) as required by applicable law or legalprocess. 4.2 Non-Competition. During Executive’s employment with the Company and for a period of two (2) years following the termination ofExecutive’s employment with the Company, Executive shall not be engaged as an officer or executive of, or in any way be associated in a management orownership capacity with any corporation, company, partnership or other enterprise or venture which conducts a business which is in direct competition withthe business of the Company; provided, however, that Executive may own not more than two percent (2%) of the outstanding securities, or equivalent equityinterests, of any class of any corporation, company, partnership, or either enterprise that is in direct competition with the business of the Company, whichsecurities are listed on a national securities exchange or traded in the over-the-counter market. It is expressly agreed that the remedy at law for breach of thiscovenant is inadequate and that injunctive relief shall be available to prevent the breach thereof. This Section 4.2 shall become void and unenforceable ifExecutive is terminated without cause, Executive’s employment is not renewed without cause or if Executive is terminated, expressly or constructively,resulting from or arising out of Parent’s unwillingness or inability to meet its obligations under this Agreement. 4.3 Non-Solicitation. Executive also agrees that he will not, directly or indirectly, during the term of his employment or within two (2)years after termination of his employment for any reason, in any manner, encourage, persuade, or induce any other employee of the Company to terminate hisemployment, or any person or entity engaged by the Company to represent it to terminate that relationship without the express written approval of theCompany. It is expressly agreed that the remedy at law for breach of this covenant is inadequate and that injunctive relief shall be available to prevent thebreach thereof. 4 5.Termination. Executive's employment and the Employment Term shall terminate on the first of the following to occur: 5.1 Inability to Work. Upon ten days' prior written notice by the Company to Executive of termination due to Inability to Work. Forpurposes of this Agreement, “Inability to Work” shall mean that Executive, because of accident, disability, or physical or mental illness, is incapable ofperforming Executive's duties to the Company or any affiliate of the Company, as determined by the Board. Notwithstanding the foregoing, Executive willbe deemed to have become incapable of performing Executive's duties to the Company or any affiliate of the Company if (i) Executive is incapable of sodoing for (A) a continuous period of one hundred eighty days and remains so incapable at the end of such one hundred eighty day period or (B) periodsamounting in the aggregate to one hundred eighty days within any one period of two hundred ten days and remains so incapable at the end of such aggregateperiod of two hundred ten days, (ii) Executive qualifies to receive long-term disability payments under the long-term disability insurance program, as it maybe amended from time to time, covering employees of the Company or affiliates of the Company to which Executive provides services and in which programExecutive participates or (iii) Executive qualifies as totally disabled under United States Social Security Administration regulations. 5.2Death. Automatically upon the date of death of Executive. 5.3 Cause. Immediately upon written notice by the Company to Executive of a termination for Cause. “Cause” shall mean (i) Executive'swillful failure to perform Executive's duties to the Company or to follow the lawful directives of the CEO or the Board (other than as a result of death orInability to Work) which failure, to the extent curable is not cured within thirty (30) days after written notice of any such failure to perform such duties ordirectives was given to Executive specifying the nature of such failure; (ii) conviction of, or pleading of guilty to, a felony; (iii) Executive's failure toreasonably cooperate in any audit or investigation of the business or financial practices of the Company or any of its affiliates, which failure, to the extentcurable is not cured within thirty (30) days after written notice of any such failure to perform such duties or directives was given to Executive specifying thenature of such failure; (iv) Executive's performance of any act of theft, embezzlement, fraud, malfeasance or misappropriation of the Company’s or any of itsaffiliates’ property; or (v) breach of this Agreement or any other agreement with the Company or any of its affiliates, or a violation of the Company’s orParent’s code of conduct or other written policy, which failure, to the extent curable is not cured within thirty (30) days after written notice of any such failureto perform such duties or directives was given to Executive specifying the nature of such failure. 5.4 Without Cause. Immediately upon written notice by the Company to Executive of an involuntary termination without Cause (otherthan for death or Inability to Work). 5.5 By Executive. Upon sixty days’ prior written notice by Executive to the Company of Executive's voluntary termination ofemployment for any reason (which the Company may, in its sole discretion, make effective earlier than any notice date), or immediately upon written noticeby Executive to the Company for Good Reason. “Good Reason” shall mean any of the following (without Executive’s express prior written consent): (i) anymaterial breach by the Company of this Agreement; (ii) any material adverse change in Executive’s title, duties, responsibilities or reporting obligations; (iii)any reduction in the Executive’s annual rate of Base Salary; (iv) a requirement by the Company that Executive perform any act that is unlawful or dishonest;or (v) a requirement by the Company that the Executive relocate his principal place of business to any location outside of a radius of 30 miles from theReporting Location. 5 5.6 Expiration of Employment Term; Non-Extension of Agreement. Automatically upon the expiration of the Employment Term due toa non-extension of the Agreement by the Company or Executive pursuant to the provisions of Section 2.2. 5.7Consequences of Termination. (1) Death. In the event that Executive’s employment and the Employment Term ends on account of Executive's death,Executive or Executive's estate, as the case may be, shall be entitled to the following (with the amounts due to be paid within sixty daysfollowing termination of employment, or such earlier date as may be required by applicable law): (i) any unpaid Base Salary through the date of termination; (ii) reimbursement for any unreimbursed business expenses incurred through the date of termination; (iii) any accrued but unused vacation time in accordance with Company policy; and (iv) all other payments, benefits or fringe benefits to which Executive shall be entitled under the terms of any applicablecompensation arrangement or benefit, equity or fringe benefit plan or program or grant or this Agreement (collectively, the“Accrued Benefits”). 5.8 Inability to Work. In the event that Executive’s employment and/or Employment Term ends on account of Executive’s Inability toWork, the Company shall pay or provide Executive with the Accrued Benefits. 5.9 Termination for Cause or by Executive or as a Result of Executive Non- Extension of this Agreement. If Executive’s employment isterminated (x) by the Company for Cause, (y) by Executive for any reason, or (z) as a result of Executive’s election not to extend the Employment Term asprovided in Section 2, the Company shall pay to Executive the Accrued Benefits. 5.10 Termination as a Result of Company Non-Extension of this Agreement. If Executive’s employment is terminated as a result of theCompany’s election not to extend the Employment Term as provided in Section 2, the Company shall pay to Executive the Accrued Benefits. 5.11 Termination Without Cause or for Good Reason. If Executive’s employment is terminated by the Company other than for Cause orby Executive for Good Reason prior to the end of the Initial Term or a Renewal Term, as the case may be, the Company shall pay or provide Executive withthe following: (1) the Accrued Benefits; and (2) subject to Executive’s continued compliance with the obligations in Article Four, an amount equal to the Base Salarymultiplied by a fraction equal to the number of days remaining in the Initial Term or a Renewal Term, as the case may be, divided by 365,paid monthly for the remainder of the Initial Term or a Renewal Term, as the case may be. 6 Payments and benefits provided in this Section shall be in lieu of any termination or severance payments or benefits for which Executive may be eligibleunder any of the plans, policies or programs of the Company. Further, the payments and benefits set out in this Section are the Company’s sole obligation and are intended and deemed to satisfy all of the Company'sobligations in connection with the termination of Executive’s employment in the event of a termination by the Company without Cause, whether statutory,contractual or at law. 5.12 Other Obligations. Upon any termination of Executive’s employment with the Company, Executive shall promptly resign or beautomatically terminated, as applicable, from the Board and any other position as an officer, director or fiduciary of any Company-related entity. 5.13 Exclusive Remedy. The amounts payable to Executive following termination of employment and the Employment Term hereundershall be in full and complete satisfaction of Executive’s rights under this Agreement and any other claims that Executive may have in respect of Executive’semployment with the Company or any of its affiliates, and Executive acknowledges that such amounts are fair and reasonable, and are Executive’s sole andexclusive remedy, in lieu of all other remedies at law or in equity, with respect to the termination of Executive’s employment hereunder or any breach of thisAgreement. 5.14 Release. Any and all amounts payable and benefits or additional rights provided pursuant to this Agreement beyond the AccruedBenefits shall only be payable if Executive delivers to the Company and does not revoke a general release of claims in favor of the Company in a formreasonably satisfactory to the Company. 6.Miscellaneous. 6.1 Benefit. This Agreement shall inure to the benefit of and be binding upon each of the Parties, and their respective successors. ThisAgreement shall not be assignable by the Executive without the prior written consent of the Company. The Company shall require any successor, whetherdirect or indirect, to all or substantially all the business and/or assets of the Company to expressly assume and agree to perform, by instrument in a formreasonably satisfactory to Executive, this Agreement and any other agreements between Executive and the Company or any of its subsidiaries, in the samemanner and to the same extent as the Company. 6.2 Governing Law. This Agreement shall be governed by, and construed in accordance with the laws of the State of Delaware withoutresort to any principle of conflict of laws that would require application of the laws of any other jurisdiction. 6.3 Counterparts. This Agreement may be executed in counterparts and via facsimile, each of which shall be deemed to constitute anoriginal, but all of which together shall constitute one and the same Agreement. Each such counterpart shall become effective when one counterpart has beensigned by each Party thereto. 6.4 Headings. The headings of the various articles and sections of this Agreement are for convenience of reference only and shall not bedeemed a part of this Agreement or considered in construing the provisions thereof. 7 6.5 Severability. Any term or provision of this Agreement that shall be prohibited or declared invalid or unenforceable in anyjurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or declaration, without invalidating the remaining terms andprovisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction, and if any term or provision of this Agreement is heldby any court of competent jurisdiction to be void, voidable, invalid or unenforceable in any given circumstance or situation, then all other terms andprovisions hereof, being severable, shall remain in full force and effect in such circumstance or situation, and such term or provision shall remain valid and ineffect in any other circumstances or situation. 6.6 Construction. Use of the masculine pronoun herein shall be deemed to refer to the feminine and neuter genders and the use ofsingular references shall be deemed to include the plural and vice versa, as appropriate. No inference in favor of or against any Party shall be drawn from thefact that such Party or such Party’s counsel has drafted any portion of this Agreement. 6.7 Equitable Remedies. The Parties hereto agree that, in the event of a breach of this Agreement by either Party, the other Party, if notthen in breach of this Agreement, may be without an adequate remedy at law owing to the unique nature of the contemplated relationship. In recognitionthereof, in addition to (and not in lieu of) any remedies at law that may be available to the non-breaching Party, the non-breaching Party shall be entitled toobtain equitable relief, including the remedies of specific performance and injunction, in the event of a breach of this Agreement, by the Party in breach, andno attempt on the part of the non-breaching Party to obtain such equitable relief shall be deemed to constitute an election of remedies by the non-breachingParty that would preclude the non-breaching Party from obtaining any remedies at law to which it would otherwise be entitled. 6.8 Attorney’s Fees . If any Party hereto shall bring an action at law or in equity to enforce its rights under this Agreement, theprevailing Party in such action shall be entitled to recover from the Party against whom enforcement is sought its costs and expenses incurred in connectionwith such action (including fees, disbursements and expenses of attorneys and costs of investigation). 6.9 No Waiver. No failure, delay or omission of or by any Party in exercising any right, power or remedy upon any breach or default ofany other Party, or otherwise, shall impair any such rights, powers or remedies of the Party not in breach or default, nor shall it be construed to be a waiver ofany such right, power or remedy, or an acquiescence in any similar breach or default; nor shall any waiver of any single breach or default be deemed a waiverof any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Party ofany provisions of this Agreement must be in writing and be executed by the Parties and shall be effective only to the extent specifically set forth in suchwriting. 6.10 Remedies Cumulative. All remedies provided in this Agreement, by law or otherwise, shall be cumulative and not alternative. 6.11 Amendment. This Agreement may be amended only by a writing signed by all of the Parties hereto. 6.12 Entire Agreement. This Agreement and the documents and instruments referred to herein constitute the entire contract between theparties to this Agreement and supersede all other understandings, written or oral, with respect to the subject matter of this Agreement. 6.13 Survival. This Agreement shall constitute a binding obligation of the Company and any successor thereto. Notwithstanding anyother provision in this Agreement, the obligations under Article 5 shall survive termination of this Agreement. 8 6.14 Savings Clause. If any provision of this Agreement or any portion thereof shall be invalidated on any ground by any court ofcompetent jurisdiction, then the remaining provisions of this Agreement shall remain in full force and effect to the fullest extent permitted by applicable law. 6.15 No Limitation. Notwithstanding any other provision of this Agreement, for avoidance of doubt, the parties confirm that theforegoing does not apply to or limit Executive’s rights under Delaware law or the Company’s Certificate of Incorporation, as amended, and/or its Bylaws, asamended. 6.16 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have beengiven (i) when delivered by hand or (ii) if mailed by certified or registered mail with postage prepaid, on the third day after the date on which it is so mailed: (1)if to Executive: Michael Orlando3968 Welshland StreetDanville, CA 94506 (2)if to the Company: Nxt-ID, Inc.,285 North Drive, Suite D Melbourne, FL 32934Attn: Chairman, Compensation Committee or to such other address as may have been furnished to Executive by the Company or to the Company by Executive, as the case may be. [signature page follows] 9 IN WITNESS WHEREOF, the parties have set their hands and seals hereunto on the date first above written. Nxt-ID, Inc Michael J. Orlando By:/s/ Gino Pereira /s/ Michael J. OrlandoName: Gino Pereira Title:CEO Schedule 1 Cash Bonus As determined and approved by the Compensation Committee. Exhibit A Restricted Stock Award Agreement Exhibit 21.1 Company Subsidiaries 3D-ID, LLC, a Florida limited liability company.LogicMark, LLC, a Delaware limited liability company.Fit Pay, Inc., a Delaware corporation. Exhibit 23.1 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT We consent to the incorporation by reference in the Registration Statements of NXT-ID, Inc. on Form S-3 (File No. 333-209001), Form S-3 (File No. 333-206955), Form S-3 (File No. 333-204026) and Form S-3 (File No. 333-203637) of our report dated April 2, 2018, with respect to our audits of theconsolidated financial statements of NXT-ID, Inc. as of December 31, 2017 and 2016, and for the years ended December 31, 2017 and 2016, which report isincluded in this Annual Report on Form 10-K of NXT-ID, Inc. for the year ended December 31, 2017. /s/ Marcum llp Marcum llp New York, NY April 2, 2018 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 2, 2018By:/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 2, 2018By:/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, 2017, 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 theCompany. Date: April 2, 2018By:/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, 2017, 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 theCompany. Date: April 2, 2018By:/s/ Vincent S. Miceli Vincent S. Miceli Chief Financial Officer (Principal Financial Officer)

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