Filed Pursuant to Rule 424(b)(5)
Registration No. 333-203637
PROSPECTUS SUPPLEMENT
To Prospectus dated April 24, 2015
1,750,000 Shares of Common Stock
We are offering 1,750,000 shares (which we refer to herein as the Shares) of our Common Stock, par value
$0.0001 per share (which we refer to herein as the Common Stock), pursuant to this prospectus supplement and the accompanying base
prospectus. The sales will be made in accordance with the Securities Purchase Agreement entered into between us and the investors
(which we refer to herein as the Purchase Agreement) and a Placement Agency Agreement (which we refer to herein as the Placement
Agency Agreement) entered into between us and Aegis Capital Corp. as lead placement agent for the offering (which we refer to herein
as Aegis). Additionally, Maxim Group LLC has agreed to serve as a co-placement agent for the offering.
Pursuant to the Purchase Agreement,
we will sell to the investors the Shares at a public offering price of $4.00 per share. We will pay all of the expenses incident
to the registration, offering and sale of the Shares under this prospectus supplement and the accompanying base prospectus.
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Per Share
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Total
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Initial price to public
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$
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4.00
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$
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7,000,000
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Placement Agent Fees (1)
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$
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0.24
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$
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420,000
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Proceeds before expenses to us
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$
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3.76
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$
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6,580,000
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(1)
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In addition to the placement agent fees equal to 6% of the gross proceeds in this offering, we have agreed
to pay up to a maximum of $100,000 of the fees and expenses of Aegis in connection with this offering, which includes the fees
and expenses of Aegis’ counsel. See “Plan of Distribution” for more information.
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We estimate the expenses of this offering,
excluding placement agent fees, will be approximately $100,000.
Our Common Stock is listed on the NASDAQ
Capital Market under the symbol “NXTD.” On December 22, 2017, the last reported sale price of our Common Stock on
the NASDAQ Capital Market was $5.08 per share.
As of the date of this prospectus supplement,
the aggregate market value of our outstanding voting and non-voting common equity held by non-affiliates was $85,083,904 based
on 20,956,608 shares of outstanding Common Stock, of which 16,748,800 shares were held by non-affiliates, and the last reported
sale price of our Common Stock of $5.08 per share on December 22, 2017. Pursuant to General Instruction I.B.6 of Form S-3,
in no event will we sell securities in a public primary offering with a value exceeding more than one-third of our public float
in any 12-month period so long as our public float remains below $75,000,000. During the previous 12 calendar months prior to
and including the date of this prospectus supplement, we have offered $14,432,001 of our securities pursuant to General Instruction
I.B.6 of Form S-3.
We are an “emerging growth company”
as the term is used in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and, as such, have elected
to comply with certain reduced public company reporting requirements for this and future filings.
You should read carefully this prospectus supplement, the accompanying base prospectus and the documents
incorporated by reference into this prospectus supplement and the accompanying base prospectus before you invest. Each placement
agent is deemed to be an “underwriter” for the offering within the meaning of Section 2(a)(11) of the Securities Act
of 1933, as amended.
Delivery of the Shares is expected to
be made on or about December 26, 2017.
Our business and an investment in
our shares of Common Stock involve a high degree of risk. See “Risk Factors” beginning on page S-8 of this prospectus
supplement, on page 5 of the accompanying base prospectus and the risk factors described in the documents incorporated by reference
into this prospectus supplement and the accompanying base prospectus for more information.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus
supplement or the accompanying base prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Aegis
Capital Corp.
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Maxim
Group LLC
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Lead Placement Agent
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Co-Placement Agent
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December 21, 2017
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts, this prospectus
supplement and the accompanying base prospectus, both of which are part of a registration statement on Form S-3 that we filed
with the U.S. Securities and Exchange Commission (the “SEC”) using a “shelf” registration process.
The two parts of this document include: (1)
this prospectus supplement, which describes the specific details regarding this offering of the Shares; and (2) the accompanying
base prospectus, which provides a general description of the securities we may offer, some of which may not apply to this offering.
Generally, when we refer to this “prospectus,” we are referring to both documents combined. If information in this
prospectus supplement is inconsistent with the accompanying base prospectus, you should rely on this prospectus supplement. You
should read this prospectus supplement together with the additional information described below under the heading “Where
You Can Find More Information” and “Incorporation of Documents by Reference.”
Any statement made in this prospectus supplement
or in a document incorporated or deemed to be incorporated by reference into this prospectus supplement will be deemed to be modified
or superseded for purposes of this prospectus supplement to the extent that a statement contained in this prospectus supplement
or in any other subsequently filed document that is also incorporated by reference into this prospectus supplement modifies or
supersedes that statement. Any statements so modified or superseded will be deemed not to constitute a part of this prospectus
supplement except as so modified or superseded. In addition, to the extent of any inconsistencies between the statements in this
prospectus supplement and similar statements in any previously filed report incorporated by reference into this prospectus supplement,
the statements in this prospectus supplement will be deemed to modify and supersede such prior statements.
The registration statement that contains this
prospectus supplement, including the exhibits to the registration statement and the information incorporated by reference, contains
additional information about the securities offered under this prospectus supplement. That registration statement can be read
on the SEC website or at the SEC offices mentioned below under the heading “Where You Can Find More Information.”
We are responsible for the information contained
and incorporated by reference in this prospectus supplement, the accompanying base prospectus and any related free writing prospectus
we prepare or authorize. We have not authorized anyone to provide you with different or additional information, and we take no
responsibility for any other information that others may give you. If you receive any other information, you should not rely on
it.
This prospectus supplement and the accompanying
base prospectus do not constitute an offer to sell or the solicitation of an offer to buy any securities other than the registered
securities to which this prospectus supplement relates, nor do this prospectus supplement and the accompanying base prospectus
constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.
You should not assume that the information
in this prospectus supplement and the accompanying base prospectus is accurate at any date other than the date indicated on the
cover page of this prospectus supplement or that any information we have incorporated by reference is correct on any date subsequent
to the date of the document incorporated by reference. Our business, financial condition, results of operations or prospects may
have changed since that date.
You should not rely on or assume the accuracy
of any representation or warranty in any agreement that we have filed in connection with this offering or that we may otherwise
publicly file in the future because any such representation or warranty may be subject to exceptions and qualifications contained
in separate disclosure schedules, may represent the parties’ risk allocation in the particular transaction, may be qualified
by materiality standards that differ from what may be viewed as material for securities law purposes or may no longer continue
to be true as of any given date.
Unless stated otherwise or the context otherwise
requires, references in this prospectus supplement and the accompanying base prospectus to the “Company,” “Nxt-ID,”
“we,” “us” or “our” refer to Nxt-ID, Inc.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus supplement, the accompanying
base prospectus and the documents incorporated by reference herein, including the sections entitled “Risk Factors”,
contain “forward-looking statements” within the meaning of Section 21(E) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”).
These forward-looking statements include, without limitation: statements regarding proposed new products or services; statements
concerning litigation or other matters; statements concerning projections, predictions, expectations, estimates or forecasts for
our business, financial and operating results and future economic performance; statements of management’s goals and objectives;
statements concerning our competitive environment, availability of resources and regulation; trends affecting our financial condition,
results of operations or future prospects; our financing plans or growth strategies; and other similar expressions concerning
matters that are not historical facts. Words such as “may”, “will”, “should”, “could”,
“would”, “predicts”, “potential”, “continue”, “expects”, “anticipates”,
“future”, “intends”, “plans”, “believes” and “estimates,” and variations
of such terms or similar expressions, are intended to identify such forward-looking statements.
Forward-looking statements should not be read
as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by which,
that performance or those results will be achieved. Forward-looking statements are based on information available at the time
they are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks
and uncertainties that could cause actual performance or results to differ materially from what is expressed in or suggested by
the forward-looking statements.
Forward-looking statements speak only as of
the date they are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update
forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking
information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements,
no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. Investors
should review our subsequent reports filed with the SEC described in the sections of this prospectus supplement and the accompanying
base prospectus entitled “Where You Can Find More Information” and “Incorporation of Documents by Reference,”
all of which are accessible on the SEC’s website at
www.sec.gov
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PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights selected information
contained or incorporated by reference in this prospectus supplement and the accompanying base prospectus. This summary does not
contain all the information you should consider before investing in our securities. You should carefully read this entire prospectus
supplement, the accompanying base prospectus and the documents incorporated by reference herein and therein before making a decision
about whether to invest in our securities.
Our Company
We were incorporated in the state of Delaware
on February 8, 2012. Nxt-ID is an emerging technology company engaged in the development of proprietary products, services and
solutions for security that serve multiple end markets, including Security, Healthcare, Finance and Internet of Things (“IoT”).
On June 25, 2012, the Company acquired 100%
of the membership interests in 3D-ID LLC (“3D-ID”), a limited liability company formed in Florida in February 2011
and owned by the Company’s founders. By acquiring 3D-ID, the Company gained the rights to a portfolio of patented technology
in the field of three-dimensional facial recognition and imaging including 3D facial recognition products for access control,
law enforcement and travel and immigration. 3D-ID was an early stage company engaged in the design, research and development,
integration, analysis, modeling, system networking, sales and support of intelligent surveillance, three-dimensional facial recognition
and three-dimensional imaging devices and systems primarily for identification and access control in the security industries.
Since the Company’s acquisition of 3D-ID was a transaction between entities under common control in accordance with Accounting
Standards Codification (“ASC”) 805, “Business Combinations”, Nxt-ID recognized the net assets of 3D-ID
at their carrying amounts in the accounts of Nxt-ID on the date that 3D-ID was organized, February 14, 2011.
On July 25, 2016, we completed the acquisition
of LogicMark, LLC (“LogicMark”) pursuant to an Interest Purchase Agreement by and among the Company, LogicMark and
the holders of all of the membership interests of LogicMark (the “LogicMark Sellers”), dated May 17, 2016 (the “Interest
Purchase Agreement”). Pursuant to the Interest Purchase Agreement, we acquired all of the membership interests of LogicMark
from the LogicMark Sellers for (i) $17.5 million in cash consideration (ii) $2.5 million in a secured promissory note (the “LogicMark
Note”) issued to LogicMark Investment Partners, LLC, as representative of the LogicMark Sellers (the “LogicMark Representative”)
(iii) 78,740 shares of common stock, which were issued upon signing of the Interest Purchase Agreement (the “LogicMark Shares”),
and (iv) warrants (the “LogicMark Warrants,”) to purchase an aggregate of 157,480 shares of common stock (the “LogicMark
Warrant Shares”) for no additional consideration. In addition, we may be required to pay the LogicMark Sellers earn-out
payments of (i) up to $1,500,000 for calendar year 2016 and (ii) up to $5,000,000 for calendar year 2017 if LogicMark meets certain
gross profit targets set forth in 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.
On May 23, 2017, we completed a merger (the
“Merger”) pursuant to an executed Agreement and Plan of Merger (the “Merger Agreement”) by and among 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 his capacity as stockholder representative
representing 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 Preferred Stock; (iii) the payment of 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 the Sellers 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,
Orlando became our Chief Operating Officer and President of our new Fit Pay subsidiary effective as of May 23, 2017.
Our innovative MobileBio® security technologies
that serve these end markets include encryption and payments, biometrics, security and privacy, sensors and miniaturization. Our
core competencies and intellectual property in biometrics, security, sensors, and miniaturization – developed through intensive
research and development over the past decade enable us to target and serve multiple large and growing end markets globally.
We believe that our MobileBio® products
will provide distinct advantages within m-commerce market by improving mobile security. Currently, most mobile devices continue
to be protected simply by PIN numbers. This security methodology is easily duplicated on another device, and can easily be spoofed
or hacked. Our security paradigm is Dynamic Pairing Codes (“DPC”). DPC is a new, proprietary method to secure users,
devices, accounts, locations and servers over any communication media by sharing key identifiers, including biometric-enabled
identifiers, between end-points by passing dynamic pairing codes (random numbers) between end-points to establish sessions and/or
transactions without exposing identifiers or keys. The ongoing high-level breaches of personal credit card data demand new securities
to offer higher level of consumer protection through the use of biometrics and other proprietary solutions. Our strategic plan
envisions using our core biometric facial and voice recognition algorithms to develop security applications (both cloud based
and locally hosted) that can be used for companies (for industrial uses, such as enterprise computer networks) as well as individuals
(for consumer uses, such as smartphones, tablets or personal computers), law enforcement, the defense industry, and the U.S. Department
of Defense. Nxt-ID has numerous patents pending. Many of these patents pending focus on tokenization and protection, as well as
payment methodology, voice biometrics, and other biometric forms of directed payment.
In healthcare, our business initiatives were
bolstered by the acquisition of LogicMark, on July 25, 2016. LogicMark serves a market that enables two-way communication, sensors,
biometrics and security to make home care for chronic medical conditions, including “aging in place,” a reality. There
are three major trends driving this market: (1) an aging population; (2) desire to “age in place”; and (3) the acute
need to lower cost of care. These trends together have produced a large and growing market for us to serve. LogicMark has built
a business around emergency communications in healthcare. We have a strong business with the U.S. Department of Veterans Affairs
(VA) today serving veterans who suffer from chronic conditions that often require emergency assistance. This business is steady
and growing. Our strategic plan calls for expanding LogicMark’s business into other retail and enterprise channels to better
serve the expanding demand for secure and remote healthcare.
Remote healthcare, which includes health monitoring
and management using IoT and cloud-based processing, is an emerging area for LogicMark. The long-term trend toward more home-based
care is a massive shift that is being driven by demographics (an aging population) and basic economics. People also value autonomy
and privacy which are important factors in determining which solutions will suit the market. Consumers are beginning to enjoy
the benefits of smart home technologies and online digital assistants. One of the promising applications of our VoiceMatch™
technology is enabling secure commands for restricted medical access. This solution, when coupled with our BioCloud™, combines
biometrics with encryption and distributed access control.
Security and privacy concerns are already
central to the adoption of IoT solutions that provides a large opportunity for the Company to collaborate and license their technology
to the consumer-facing firms that are charging after the IoT opportunity.
In finance, the technology pioneered in the
Nxt-ID “Wocket” has continued to develop in both range of capability while shrinking in size. This provides a technology
package that can be integrated into a “smart wallet” that has the same technology as Apple Pay or into a card that
can be used for a variety of transactions including – magnetic stripe emulation (Wi-Mag), Near Field Communication (NFC),
tokens, barcode/QR codes and there can also be an EMV chip and a Bluetooth Beacon for remote sensing and response applications.
Versions of this technology package provide a functional and secure “vault” that allows for full consumer control
and customization by OEMs and solution providers.
Our finance business is being driven by the
development of an innovative smartcard that leverages “Wocket” technology. The smartcard is called “Flye”
and it is being developed in our partnership with World-Ventures Holdings, LLC (“WVH”). Flye is poised to finally
deliver on the smart card vision that appeared in videos years ago. Flye offers new and unique features compared to any other
“smartcards” in the market. It handles the core functions such as loading in multiple cards, gathering loyalty points
while opening – up new opportunities - for example the Bluetooth Beacon makes it simpler for service providers to automatically
open doors, provide access, initiate requests among other things – all with software. Flye is targeted at WVH members who
care about travel, food and entertainment. These concerns demand more than payments and include loyalty programs and security
features for peace of mind when traveling. Flye is designed to work in synchrony with the WVH smartphone application. It is a
“tethered” solution, albeit a wireless one. WVH has a comprehensive vision for its card that includes the ability
to deliver a highly tailored membership experience.
With respect to IoT, the Company has joined
the Cisco Solution Partner program to provide biometric and encryption solutions in conjunction with other ecosystem partners.
Cisco sees security as integral to IoT. Cisco is integrating security directly into network infrastructure to enable companies
to use their IoT networks in a secure fashion.
Our merger with FitPay has provided us with
a proprietary technology platform that adds contactless payment capabilities to wearable and IoT devices with very little start-up
time, investment in software development and instant access to the leading card networks. With payment capabilities powered by
FitPay, IoT device manufacturers can create customer loyalty, tab into recurring revenue streams, open new markets, and differentiate
their products in a competitive marketplace. FitPay’s lead customer currently is Garmin International.
Our plan also anticipates that we will use
our core biometric facial and voice recognition algorithms to develop security applications (both cloud based and locally hosted)
that can be used for companies (for industrial uses, such as enterprise computer networks) as well as individuals (for consumer
uses, such as smart phones, tablets or personal computers), law enforcement, the defense industry, and the U.S. Department of
Defense.
Recent Developments
On December 19, 2017, and effective as of
November 29, 2017, we entered into an agreement with the holders of the convertible notes (the “Exchange Notes”) and
common stock purchase warrants issued pursuant to that certain Securities Exchange Agreement, dated as of November 29, 2016 (the
“Amendment Agreement”). Pursuant to the Amendment Agreement, the parties thereto agreed to extend the maturity dates
of the Exchange Notes by one year, or November 29, 2018. The Company previously reported the execution of the Securities Exchange
Agreement, Exchange Notes and certain related ancillary agreements in a Current Report on Form 8-K filed with the SEC on November
30, 2016.
In consideration for such extension, the Company
issued to the holders of the Exchange Notes an aggregate of 387,000 restricted shares of common stock. No other terms of the Exchange
Notes were modified.
Company Information
Our principal executive offices are located
at 285 North Drive, Suite D, Melbourne, Florida 32904, and our telephone number is (203) 266-2103. Our website address is
www.nxt-id.com
.
The information contained therein or connected thereto shall not be deemed to be incorporated into this prospectus supplement.
The information on our website is not part of this prospectus supplement.
We are an “emerging growth company”
as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. We will remain an emerging growth company for up to
five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenue exceed $1 billion,
(ii) the date that 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 Stock that 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 which we 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 have provided reduced
executive compensation disclosure and have omitted a compensation discussion and analysis from this prospectus supplement. Pursuant
to Section 107 of the 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 revised accounting standards.
THE OFFERING
Common
Stock Offered by Us
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1,750,000
shares.
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Common
Stock Outstanding before the Offering
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20,956,608 shares.
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Common
Stock Outstanding after the Offering.
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22,706,608
shares.
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Use
of Proceeds
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We estimate that the net proceeds from the sale of the Shares offered by us will be approximately $6.5
million, based on the public offering price of $4.00 per share, after deducting placement agent fees and estimated offering expenses
payable by us. We intend to use approximately $1 million of the net proceeds from this offering to reduce the outstanding
debt on our balance sheet with respect to our credit facility with ExWorks Capital Fund I, L.P. (as agent to the lenders under
the credit facility), with the balance to be used for working capital and other general corporate purposes.
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Risk
Factors
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Investing
in our securities involves a high degree of risk, including the risks that are described in the “Risk Factors”
section beginning on page S-8 of this prospectus supplement, the “Risk Factors” section beginning on page
5 of the accompanying base prospectus, and the risk factors described in the documents incorporated by reference into this
prospectus supplement and the accompanying base prospectus. You should carefully consider these risks before investing
in our Common Stock.
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Trading
Symbol
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Our
Common Stock is traded on the NASDAQ Capital Market under the symbol “NXTD.”
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As of the date of this prospectus supplement
(i) no shares of our Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”),
are outstanding, (ii) no shares of our Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B
Preferred Stock”), are outstanding and (iii) there are 2,000 shares of Series C Preferred Stock outstanding. We no longer
have any securities outstanding with exercise or conversion prices that are subject to market fluctuations (known as variable
rate securities).
The total number of shares of our Common Stock
that will be outstanding immediately after this offering excludes shares underlying unexercised warrants outstanding as of December 22, 2017.
RISK FACTORS
Investing in our securities involves a
high degree of risk. You should carefully consider and evaluate all of the information contained in this prospectus supplement,
the accompanying base prospectus and in the documents we incorporate by reference into this prospectus supplement and the accompanying
base prospectus before you decide to purchase our securities. In particular, you should carefully consider and evaluate the risks
and uncertainties described under the heading “Risk Factors” in this prospectus supplement and the accompanying base
prospectus. Any of the risks and uncertainties set forth in this prospectus supplement and the accompanying base prospectus, as
updated by annual, quarterly and other reports and documents that we file with the SEC and incorporate by reference into this
prospectus supplement or the accompanying base prospectus could materially and adversely affect our business, results of operations
and financial condition, which in turn could materially and adversely affect the value of our Common Stock. As a result, you could
lose all or part of your investment.
Risks Related to this Offering of Securities
Our insiders and affiliated parties
beneficially own a significant portion of our stock.
As of the date of this prospectus supplement,
our executive officers, directors, and affiliated parties beneficially own approximately 20.08% of our Common Stock. As a result,
our executive officers, directors and affiliated parties will have significant influence to:
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Elect
or defeat the election of our directors;
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Amend
or prevent amendment of our certificate of incorporation, as amended, or by-laws;
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Effect
or prevent a merger, sale of assets or other corporate transaction; and
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Affect
the outcome of any other matter submitted to the stockholders for vote.
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In addition, any sale of a significant amount
of our Common Stock held by our directors and executive officers, or the possibility of such sales, could adversely affect the
market price of our Common Stock. Management’s stock ownership may discourage a potential acquirer from making a tender
offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders
from realizing any gains from our Common Stock.
The market price for our Common Stock
is particularly volatile given our status as a relatively unknown company with a small and thinly traded public float, and lack
of profits, which could lead to wide fluctuations in our share price. You may be unable to sell your common shares at or above
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 shares of larger, more established companies that trade on a national securities
exchange and have large public floats, and we expect that our share price will continue to be more volatile than the shares of
such larger, more established companies for the indefinite future. The volatility in our share price is attributable to a number
of factors. First, as noted above, our Common Stock is, compared to the shares of such larger, more established companies, sporadically
and thinly traded. The price for our shares could, for example, decline precipitously in the event that a large number of our
Common Stock is sold on the market without commensurate demand. Secondly, we are a speculative or “risky” investment
due to our lack of profits to date. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of
losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares
on the market more quickly and at greater discounts than would be the case with the stock of a larger, more established company
that trades on a national securities exchange and has a large public float. Many of these factors are beyond our control and may
decrease the market price of our Common Stock regardless of our operating performance.
If we are not able to comply with the
applicable continued listing requirements or standards of the NASDAQ Capital Market, NASDAQ could delist our Common Stock.
Our Common Stock is currently listed on the
NASDAQ Capital Market (“NASDAQ”). In order to maintain that listing, we must satisfy minimum financial and 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 to comply with the applicable listing standards. Although we are currently in compliance with our listing standards,
we have, in the past, fallen out of compliance and may in the future fall out of compliance. If we are unable to maintain compliance
with these NASDAQ requirements, our Common Stock will be delisted from NASDAQ.
In the event that our Common Stock is delisted
from the NASDAQ Capital Market and is not eligible for quotation on another market or exchange, trading of our Common Stock could
be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the
Pink Sheets or the OTC Bulletin Board. In such event, it could become more difficult to dispose of, or obtain accurate price quotations
for, our Common Stock, and there would likely also be a reduction in our coverage by securities analysts and the news media, which
could cause the price of our Common Stock to decline further. Also, it may be difficult for us to raise additional capital if
we are not listed on a major exchange.
In the event that our Common Stock is
delisted from NASDAQ, U.S. broker-dealers may be discouraged from effecting transactions in shares of our Common 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 rules include 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 the liquidity of penny stocks. “Penny stocks” generally are equity securities with a price of less than $5.00
per share (other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market if current
price and volume information with respect to transactions in such securities is 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 and impede 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 in excess
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
determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless
the broker-dealer or the transaction is otherwise exempt. In addition, the “penny stock” regulations require the U.S.
broker-dealer to deliver, prior to any transaction involving a “penny stock”, a disclosure schedule prepared in accordance
with SEC standards relating to the “penny stock” market, unless the broker-dealer or the transaction is otherwise
exempt. A U.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer and the registered representative
and current quotations for the securities. Finally, a U.S. broker-dealer is required to submit monthly statements disclosing recent
price information with respect to the “penny stock” held in a 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. Such patterns
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 of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii)
“boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales
persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-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
to be 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 of practical 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 subject to wide
fluctuations, and you may be unable to resell your shares at or above the price at which you acquired them.
The market price of our Common Stock may be
highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including,
but not limited to:
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Variations
in our revenues and operating expenses;
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Actual
or anticipated changes in the estimates of our operating results or changes in stock market analyst recommendations regarding
our Common Stock, other comparable companies or our industry generally;
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Market
conditions in our industry, the industries of our customers and the economy as a whole;
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Actual
or expected changes in our growth rates or our competitors’ growth rates;
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Developments
in the financial markets and worldwide or regional economies;
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Announcements
of innovations or new products or services by us or our competitors;
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Announcements
by the government relating to regulations that govern our industry;
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Sales
of our Common Stock or other securities by us or in the open market; and
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Changes
in the market valuations of other comparable companies.
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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 Stock could decline
for reasons unrelated to our business, financial condition or operating results. The trading price of our shares might also decline
in reaction 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 harm the value of your investment in our Common Stock. In the past, following periods of volatility
in the market, securities class-action litigation has often been instituted 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.
Investors will incur immediate and substantial dilution as
a result of this offering.
Investors purchasing securities in this
offering will incur immediate and substantial dilution in net tangible book value per share. Based on the per share offering
price of $4.00 for the Shares, purchasers of the Shares will effectively incur dilution of approximately $5.25 per share in
the net tangible book value of their purchased shares of Common Stock, or approximately 131% at the offering price of
the shares. In addition, purchasers of the Shares in this offering will have contributed approximately 12.9% of the aggregate
price paid by all purchasers of our Common Stock and will own approximately 9.8% of our Common Stock outstanding
after this offering. Furthermore, you may experience further dilution to the extent that shares of our Common Stock are
issued upon the exercise of outstanding stock options and warrants. See “Dilution.”
In making your investment decision,
you should understand that we and the underwriters have not authorized any other party to provide you with information concerning
us or this offering.
You should carefully evaluate all of the information
in this prospectus supplement before investing in our company. We may receive media coverage regarding our company, including
coverage that is not directly attributable to statements made by our officers, that incorrectly reports on statements made by
our officers or employees, or that is misleading as a result of omitting information provided by us, our officers or employees.
We and the underwriters have not authorized any other party to provide you with information concerning us or this offering, and
you should not rely on this information in making an investment decision.
Our ability to use our net operating
loss carry-forwards and certain other tax attributes may be limited.
Under Section 382 of the Internal Revenue
Code of 1986, as amended, referred to as the Internal Revenue Code, if a corporation undergoes an “ownership change”
(generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s
ability to use its pre-change net operating loss carry-forwards and other pre-change tax attributes (such as research tax credits)
to offset its post-change income may be limited. We may experience ownership changes in the future as a result of subsequent shifts
in our stock ownership, including as a result of the completion of this offering when it is taken together with other transactions
we may consummate in the succeeding three-year period. As a result, if we earn net taxable income, our ability to use our pre-change
net operating loss carry-forwards to offset U.S. federal taxable income may be subject to limitations, which potentially could
result in increased future tax liability to us.
We do not anticipate paying dividends
in the foreseeable future; you should not buy our stock if you expect dividends.
The payment of dividends on our Common Stock
will depend on earnings, financial condition and other business and economic factors affecting us at such time 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 your investment 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 cash dividends on our Common Stock
in the foreseeable future.
You may experience additional dilution
in the future.
We may acquire other technologies or finance
strategic alliances by issuing our equity or equity-linked securities, which may result in additional dilution to our stockholders.
We could issue “blank check”
preferred stock without stockholder approval with the effect of diluting then current stockholder interests and impairing their
voting rights; and provisions in our charter documents could discourage a takeover that stockholders may consider favorable.
Our certificate of incorporation, as amended,
authorizes the issuance of up to 10,000,000 shares of “blank check” preferred stock with designations, rights
and preferences as 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 of preferred stock with dividend, liquidation, conversion, voting or other rights which
could dilute the interest of, or impair the voting power of, our common stockholders. The issuance of a series of preferred
stock could be used as a method of discouraging, delaying or preventing a change in control. For example, it would be possible
for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of
any attempt to change control of our company.
Financial Industry Regulatory Authority
(“FINRA”) sales practice requirements may limit a stockholder’s ability to buy and sell our Common Stock.
FINRA has adopted rules that require that
in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers
must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives
and other information. Under interpretations 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 the effect 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.
Sales of a significant number of shares
of our Common Stock in the public markets or significant short sales of our Common Stock, or the perception that such sales could
occur, could depress the market price of our Common Stock and impair our ability to raise capital.
Sales of a substantial number of shares of
our Common Stock or other equity-related securities in the public markets, could depress the market price of our Common Stock.
If there are significant short sales of our Common Stock, the price decline that could result from this activity may cause the
share price to decline more so, which, in turn, may cause long holders of the Common Stock to sell their shares, thereby contributing
to sales of Common Stock in the market. Such sales also may impair our ability to raise capital through the sale of additional
equity securities in the future at a time and price that our management deems acceptable, if at all.
We have broad discretion in the use of the net proceeds from
this offering and may not use them effectively.
Our management will have broad discretion
in the application of the net proceeds from this offering, including for any of the purposes described in the section of this
prospectus supplement entitled “Use of Proceeds.” The failure by our management to apply these funds effectively could
harm our business. Pending their use, we may invest the net proceeds from this offering in interest-bearing, investment-grade,
securities. These investments may not yield a favorable return to our stockholders.
Exercise of options or warrants or conversion
of convertible securities may have a dilutive effect on your percentage ownership of Common Stock and may result in a dilution
of your voting power and an increase in the number of shares of common stock eligible for future resale in the public market,
which may negatively impact the trading price of our shares of Common Stock.
The exercise or conversion of some or all
of our outstanding warrants or convertible securities could result in significant dilution in the percentage ownership interest
of investors in this offering and in the percentage ownership interest of our existing common stockholders and in a significant
dilution of voting rights and earnings per share.
As of the date of this prospectus supplement,
we have warrants outstanding to purchase 6,426,251 shares of Common Stock. The warrants have an average exercise price of $4.77 and
a weighted average years to maturity of approximately 4.24 years.
In addition to the dilutive effects described
above, the exercise of those securities would lead to an increase in the number of shares of Common Stock eligible for resale
in the public market. Sales of substantial numbers of such shares of Common Stock in the public market could adversely affect
the market price of our shares of Common Stock. Substantial dilution and/or a substantial increase in the number of shares of
Common Stock available for future resale may negatively impact the trading price of our shares of Common Stock.
We may seek to raise additional funds,
finance acquisitions or develop strategic relationships by issuing securities that would dilute the ownership of the Common Stock.
Depending on the terms available to us, if these activities result in significant dilution, it may negatively impact the trading
price of our shares of Common Stock.
We have financed our operations, and we expect
to continue to finance our operations, acquisitions, if any, and the development of strategic relationships by issuing equity
and/or convertible securities, which could significantly reduce the percentage ownership of our existing stockholders. Further,
any additional financing that we secure may require the granting of rights, preferences or privileges senior to, or pari passu
with, those of our Common Stock. Any issuances by us of equity securities may be at or below the prevailing market price of our
Common Stock and in any event may have a dilutive impact on your ownership interest, which could cause the market price of our
Common Stock to decline. We may also raise additional funds through the incurrence of debt or the issuance or sale of other securities
or instruments senior to our shares of Common Stock. The holders of any securities or instruments we may issue may have rights
superior to the rights of our common stockholders. If we experience dilution from issuance of additional securities and we grant
superior rights to new securities over common stockholders, it may negatively impact the trading price of our shares of Common
Stock.
Our charter documents and Delaware law
could prevent a takeover that stockholders consider favorable and could also reduce the market price of our Common Stock.
Our certificate of incorporation, as amended,
and our by-laws contain provisions that could delay or prevent a change in control of our Company. These provisions could also
make it more difficult for stockholders to elect directors and take other corporate actions. These provisions include:
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authorizing
the board of directors to issue, without stockholder approval, preferred stock with rights senior to those of our Common Stock;
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limiting
the persons who may call special meetings of stockholders; and
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requiring
advance notification of stockholder nominations and proposals.
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In addition, the provisions of Section 203
of the Delaware General Corporation Law govern us. These provisions may prohibit large stockholders, in particular those owning
15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time without the consent
of our board of directors.
These and other provisions in our certificate
of incorporation, as amended, our by-laws and under Delaware law could discourage potential takeover attempts, reduce the price
that investors might be willing to pay in the future for shares of our Common Stock and result in the market price of our Common
Stock being lower than it would be without these provisions. See the section entitled “Description of Capital Stock”
in the accompanying base prospectus.
If securities or industry analysts do
not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations
regarding our Common Stock adversely, our Common Stock price and trading volume could decline.
The trading market for our shares of Common
Stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business,
our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our Common Stock
adversely, or provide more favorable relative recommendations about our competitors, our share price would likely decline. If
any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility
in the financial markets, which in turn could cause our Common Stock price or trading volume to decline.
The requirements of being a U.S. public
company may strain our resources and divert management’s attention.
As a U.S. public company, we are subject to
the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of NASDAQ,
and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and
financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on our systems
and resources. The Exchange Act requires, among other things, that we file annual and current reports with respect to our business
and operating results.
As a result of disclosure of information in
this prospectus supplement and the accompanying base prospectus 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 and operating 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 resources necessary to resolve them,
could divert resources of our management and harm our business and operating results.
An active, liquid trading market for
our Common Stock may not develop, which may cause our Common Stock to trade at a discount from the initial offering price and
make it difficult for you to sell the Common Stock you purchase.
Our Common Stock is currently listed on the
NASDAQ Capital Market. However, there can be no assurance that there will be an active market for our Common Stock either now
or in the future. If an active and liquid trading market does not develop or if developed cannot be sustained, you may have difficulty
selling any of our Common Stock that you purchase. The market price of our Common Stock may decline below the initial offering
price, and you may not be able to sell your shares of our Common Stock at or above the price you paid, or at all.
Risks Related 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, from our 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 income potential of our proposed business and operations are currently unknown. If we cannot continue as a viable
entity, you may lose some or all of your investment in our Company.
The Company is an emerging growth company
and has incurred net losses of $5,960,684 for the nine months ended September 30, 2017. As of September 30, 2017, the Company
had cash and stockholders’ equity of $514,602 and $6,835,893, respectively. At September 30, 2017, the Company had a working
capital deficiency of $6,322,182 (including contingent consideration of $5,340,432). We cannot provide any assurance that we will
be able to raise additional cash from equity financings, secure debt financing, and/or generate revenue from the sales of our
products. If we are unable to secure additional capital, we may be required to curtail our research and development initiatives
and take additional measures to reduce costs in order to conserve our cash in amounts sufficient to sustain operations and meet
our obligations.
We and the businesses we have recently
acquired or propose to acquire have limited operating histories and we cannot offer any assurance as to our future financial 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 the likelihood 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 past results 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 have experienced to date will continue. Even if we generate future revenues
sufficient to expand operations, increased infrastructure costs and cost of goods sold and marketing expenses could impair or
prevent us from generating profitable returns. We recognize that if we are unable to generate significant revenues from our
business development, we will not be able to earn profits or potentially continue operations. If we are unsuccessful in addressing
these risks, our business will most likely fail.
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, frequent new and enhanced product
introductions, rapidly changing end-user/consumer preferences and product obsolescence. In order to continue to compete effectively
in these markets, we need to respond quickly to technological changes and to understand their impact on our customers’ preferences.
It may take significant 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 with technological developments or other market factors. If any of our competitors
implement new technologies before we are able to implement them, those competitors may be able to provide more effective products
than ours. Any delay or failure in the introduction of new or enhanced products, could have a material adverse effect on our business,
results of operations and financial condition. Furthermore, our inability to keep pace with changing industry technology and consumer
preferences may cause our inventory to become obsolete at a rate faster than anticipated, which may result in our taking goodwill
impairment 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 our growth, which would
adversely affect our results of operations.
During 2016 and 2017, we completed the acquisitions
of LogicMark and Fit Pay, respectively, and are considering other acquisitions to improve our position in market segments 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 manner we anticipated or at all, and such integration could be expensive. Moreover, this significant expansion of our operations
could put significant strain on our management and our operational and financial resources. To manage future growth, we will need
to hire, train, and manage additional employees, as well as properly integrate personnel from acquired businesses. Concurrent
with expanding our operational and marketing capabilities, we will also need to increase our product development activities. We
may not be able to support, financially or otherwise, future growth, or hire, train, motivate, and manage the required personnel.
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 and improve our operational,
management, information and financial control systems and to expand, train and manage our employee base, and particularly to attract,
expand, train, manage and retain a sales force to market our products on acceptable terms. Our inability to manage growth effectively
could cause us to 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 of which 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.
The Company is an emerging growth company.
The amount of future losses and when, if ever, we will achieve profitability are uncertain. Our current products have not generated
significant commercial revenue for the Company and there can be no guarantee that we can generate sufficient revenues from the
commercial sale of our products in the near future to fund our ongoing capital needs.
We have a limited operating history
upon which you can gauge our ability to obtain profitability.
We have a limited operating history and our
business and prospects must be considered in light of the risks and uncertainties to which emerging growth companies are exposed.
We cannot provide assurances that our business strategy will be successful or that we will successfully address those risks and
the risks described herein. Most important, if we are unable to secure future capital, we may be unable to continue our operations.
We may incur losses on a quarterly 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 of your 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,
we may have to restructure our business or delay or abandon our development and expansion plans. If this occurs, you may lose
part or all of your investment. We will have ongoing capital needs as we expand our business. If we raise additional funds
through the sale of equity or convertible securities, your ownership percentage of our Common Stock 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 covenants that 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 fund our business, or that such financing will be available on terms acceptable to us.
We face intense competition in our market,
especially from larger, well-established companies, and we may lack sufficient financial or other resources to maintain 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 security products is intensely
competitive, and we expect competition to increase in the future from established competitors and new market entrants. Our current
competitors 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:
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Greater
name recognition and longer operating histories;
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Larger
sales and marketing budgets and resources;
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Broader
distribution and established relationships with distribution partners and end-customers;
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Greater
customer support resources;
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Greater
resources to make acquisitions;
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Larger
and more mature intellectual property portfolios; and
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Substantially
greater financial, technical, and other resources.
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In addition, some of our larger competitors
have substantially broader product offerings and leverage their relationships based on other products or incorporate functionality
into existing products to gain business in a manner that discourages users from purchasing our products, including through selling
at zero or negative margins, product bundling, or closed technology platforms. Conditions in our market could change rapidly and
significantly as a result of technological advancements, partnering by our competitors or continuing market consolidation. New
start-up companies that innovate and large competitors that are making significant investments in research and development may
invent similar or superior products and technologies that compete with our products and technology. Our current and potential
competitors may also establish cooperative relationships among themselves or with third parties that may further 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:
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Changing
technologies;
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Changing
customer needs;
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Frequent
new product introductions and enhancements;
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Increased
integration with other functions; and
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Product
obsolescence.
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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 must develop, gain access
to and use leading technologies in a cost-effective and timely manner and continue to expand our technical and design expertise.
The product development process is time-consuming and costly, and there can be no assurance that product development will be successfully
completed, that necessary regulatory clearances or approvals will be granted on a timely basis, or at all, or that the potential
products will achieve market acceptance. Our failure to develop, obtain necessary regulatory clearances or approvals for, or successfully
market potential new products could have a material adverse effect on 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, our business
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 other intellectual 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, or other 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 third parties. In addition, product development is inherently uncertain in a rapidly evolving technological environment in
which there may be numerous patent 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. Any claim of infringement
could cause us to incur substantial costs defending against the claim, even if the claim is invalid, and could distract the attention
of our management. If any of our products are found to violate third-party proprietary rights, we may be required to pay substantial
damages. In addition, we may be required to re-engineer our products or obtain licenses from third parties to continue to offer
our products. Any efforts to re-engineer our products or obtain licenses on commercially reasonable terms may not be successful,
which would prevent us from selling our products, and, in any case, could substantially increase our costs and have a material
adverse effect on our business, financial condition and results of operations.
Existing or pending patents could adversely
affect our business.
On November 12, 2015, we received a complaint
that one of our technologies infringed upon one or more claims of a patent(s) issued to the claimant. The claimant has subsequently
acknowledged that we are not currently infringing on their patent(s) as the technology in question is not commercially available
at the current time. We are in the process of negotiating a future royalty agreement with the claimant should we decide to introduce
this technology in the future.
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 of patents, trademarks,
copyrights, trade secrets, confidentiality procedures and non-disclosure and licensing arrangements to protect our intellectual
property rights. Despite these efforts, we cannot be certain that the steps we take to protect our proprietary information will
be adequate to prevent misappropriation of our technology or protect that proprietary information. The validity and breadth of
claims in technology patents involve complex legal and factual questions and, 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 of others will not have an
adverse effect on our ability to do business. In addition, the enforcement of laws protecting intellectual property may be inadequate
to protect 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 our intellectual
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 independently develop substantially
equivalent proprietary technology, techniques or processes, that such technology or know-how will not be disclosed or that we
can meaningfully protect our rights to such unpatented proprietary technology, trade secrets, or know-how. Although we intend
to enter into non-disclosure agreements with our employees and consultants, there can be no assurance that such non-disclosure
agreements will provide adequate protection for our trade secrets or other proprietary know-how.
Our success will depend, in part, on
our ability to obtain new patents.
To date, we have applied for (25) United
States patents, one of which has been awarded and our success will depend, in part, on our ability to obtain patent and trade
secret protection for proprietary technology that we currently possess or that we may develop in the future. No assurance can
be given that any pending or future patent applications will issue as patents, that the scope of any patent protection obtained
will be sufficient to exclude competitors or provide competitive advantages to us, that any of our patents will be held valid
if subsequently challenged or that others will not claim rights in or ownership of the patents and other proprietary rights held
by us.
Furthermore, there can be no assurance that
our competitors have not or will not independently develop technology, processes or products that are substantially 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 the future 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 products or 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 not determined 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 be required to obtain licenses to patents or proprietary rights from third parties. There can be no assurance that such
licenses will be available on acceptable terms 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 of products requiring such licenses could be foreclosed.
Accordingly, challenges to our intellectual property, whether or not ultimately successful, could have a material adverse effect
on our business and results of operations.
We rely on a third party for licenses
relating to a critical component of our technology. The failure of such licensor would materially and adversely affect our business
and product offerings.
We currently license technology for a critical
component of our current product offerings from a third party. The third party’s independent registered public accounting
firm included an explanatory paragraph in its audit report as it relates to the third party’s ability to continue as a going
concern in its recent financial statements. If our licensor were to fail, it could impact our license arrangement and impede our
ability to further commercialize our technology. In the event we were to lose our license or our license were to be renegotiated
as a result of our licensor’s failure, our ability to manage our business would suffer and it would significantly harm our
business, operating results and financial condition.
Our future success depends on the continued
service of management, engineering and sales personnel and our ability to identify, hire and retain additional personnel.
Our success depends, to a significant extent,
upon the efforts and abilities of members of senior management. We have entered into an employment agreement with our Chief Executive
Officer, but have not entered into an employment agreement with our Chief Financial officer or Chief Technology Officer, and we
have no current plans to use employment agreements as a tool to attract and retain new hires of key personnel that we may make
in the future. The loss of the services of one or more of our senior management or other key employees could adversely affect
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. We may not be able
to continue to attract and retain developers, managers, or other qualified personnel necessary for the development of our business
or to replace qualified individuals who may leave us at any time in the future. Our anticipated growth is expected to place increased
demands on our resources, and will likely require the addition of new management and engineering staff as well as the development
of additional expertise by existing management employees. If we lose the services of or fail to recruit engineers or other technical
and management personnel, our business could be harmed.
The requirements of being a public company
may strain our resources and divert management’s attention.
As a public company, we are subject to the
reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act and other applicable securities
rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make
some activities more difficult, time-consuming, or costly, and increase demand on our systems and resources. The Exchange Act
requires, among other things, that we file annual and current reports with respect to our business and operating results.
As a result of disclosure of information in
this annual report and in filings required of a public company, our business and financial condition is more visible, which we
believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful,
our business and operating 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 resources necessary 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 our operating results.
We may experience periods of rapid growth
and expansion, which may place significant strain and demands on our management, our operational and financial resources, customer
operations, research and development, marketing and sales, administrative, and other resources. To manage our possible future
growth effectively, we will be required to continue to improve our management, operational and financial systems. Future growth
would also require us to successfully hire, train, motivate and manage our employees. In addition, our continued growth and the
evolution of our business plan will require significant additional management, technical and administrative resources. If we are
unable to manage our growth successfully we may not be able to effectively manage the 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 and alternative 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 identify and enter into
an agreement with a new contract manufacturer or take the manufacturing in-house. The loss of our contract manufacturers could
significantly disrupt production as well as increase the cost of production, thereby increasing the prices of our products. These
changes could have a material adverse effect 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 maintain an effective
system of internal controls, we would not be able to accurately report our financial results on a timely basis or prevent fraud.
As a result, current and potential stockholders could lose confidence in our financial
reporting, which would
harm our business and the trading price of our stock.
Effective internal controls are necessary
for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or
prevent fraud, our brand and operating results would be harmed. We may in the future discover areas of our internal controls that
need improvement. For example, because of size and limited resources, our external auditors may determine that we lack the personnel
and infrastructure necessary to 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 and reporting in the future. Any failure to implement
required new or improved controls, or difficulties encountered in their implementation, would harm our operating results or cause
us to fail to meet our reporting obligations. Inferior internal controls would also cause investors to lose confidence in our
reported financial information, which would have a negative effect on our company and, if a public market develops for our securities,
the trading price of our stock.
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in
accordance with U.S. generally accepted accounting principles. A material weakness is a deficiency, or a combination of deficiencies,
in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual
or interim financial statements will not be prevented or detected on a timely basis.
As of September 30, 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
in that area and limited segregation of duties within our accounting and financial reporting functions.
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 significant strain on
our management systems, infrastructure and other resources. To manage our growth successfully, we must continue to improve
and expand our systems and infrastructure in a timely and efficient manner. Our controls, systems, procedures and resources
may not be adequate to support a changing and growing company. If our management fails to respond effectively to changes
and growth in our business, including acquisitions, this could have a material adverse effect on the Company’s business,
financial condition, results of operations and future prospects.
We are an emerging
growth company within the meaning of the Securities Act, and if we decide to take advantage of certain exemptions from various
reporting requirements applicable to emerging growth companies, our Common Stock could be less attractive to investors.
We are an “emerging
growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be
an emerging growth company, we may take advantage of exemptions from various reporting requirements that are not applicable to
other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our
periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth
company for up to five years, although we could lose that status sooner if our 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 of our most recently completed second fiscal quarter, in which case we would
no longer be an emerging growth company as of the following December 31. We cannot predict if investors will find our Common Stock
less attractive because we may rely on these exemptions. If some investors find our Common Stock less attractive as a result,
there may be a less active trading market for our Common Stock and our stock price may be more volatile.
Under the JOBS Act,
emerging growth companies may also delay adopting new or revised accounting standards until such time as those standards apply
to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards
and, therefore, will be subject 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 credit markets from
any of these sources could have a material adverse effect on the Company’s 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 in economies important to our businesses may adversely affect our clients’ level of spending and ability
to obtain financing, leading to us being unable to generate the levels of sales that we require. Current and continued disruption
of financial markets could have a material adverse effect on the Company’s 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 on operating 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 such disruption, our ability to raise capital may be severely restricted and the
cost of raising capital through such markets or privately may increase significantly at a 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 capital expenditures,
pursue additional expansion or acquisition opportunities, or make another discretionary use of cash and could adversely impact
our financial results.
Although recent trends point to continuing
improvements, there is still lingering volatility and uncertainty. A change or disruption in the global financial markets for
any reason may cause consumers, businesses and governments to defer purchases in response to tighter credit, decreased cash availability
and declining consumer confidence. Accordingly, demand for our products could decrease and differ materially from current expectations.
Further, some of our customers may require substantial financing in order to fund their operations and make purchases from us.
The inability of these customers to obtain sufficient credit to finance purchases of our products and meet their payment obligations
to us or possible insolvencies of our customers could result in decreased customer demand, an impaired ability for us to collect
on outstanding accounts receivable, significant delays in accounts receivable payments, and significant 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-effective financing to our end-customers or end-users, where applicable.
|
Rising interest rates could generally harm
our business and financial condition.
USE OF PROCEEDS
We estimate that the net proceeds from the
sale of the Shares offered by this prospectus supplement, after deducting placement agent fees and expenses payable by us, will
be approximately $6.5 million.
We intend to use approximately $1 million
of the net proceeds from this offering to reduce the outstanding debt on our balance sheet with respect to our credit facility
with ExWorks Capital Fund I, L.P. (as agent to the lenders under the credit facility), with the balance to be used for working
capital and other general corporate purposes. Pending use of the net proceeds, we intend to invest the net proceeds in interest-bearing,
investment-grade securities.
DILUTION
The net tangible book value of our
Common Stock as of September 30, 2017, was approximately $(29,292,739) or $(1.82) per share of Common Stock based upon 16,069,477
shares of Common Stock outstanding on such date. As adjusted net
tangible book value per share represents the amount of our total tangible assets reduced by the amount of our total liabilities,
divided by the total number of shares of Common Stock outstanding after giving effect to the sale of the Shares in this offering.
Shares we are offering based upon a
public offering price of $4.00 per share, and after placement agent fees and estimated offering expenses payable by us.
If you invest in our Shares in this
offering, your interest will be diluted to the extent of the difference between the offering price per share and the as adjusted
net tangible book value per share of our Common Stock immediately after completion of this offering.
The following table illustrates this
dilution on a per share basis to new investors:
Public
offering price per share
|
|
$
|
4.00
|
|
Net tangible book
value per share as of September 30, 2017, before giving effect to this offering
|
|
$
|
(1.82
|
)
|
Increase in net tangible
book value per share attributed to existing investors
|
|
$
|
0.57
|
|
As adjusted net tangible
book value per share after giving effect to this offering
|
|
$
|
(1.25
|
)
|
Dilution to net tangible
book value per share to new investors in this offering
|
|
$
|
5.25
|
|
The table below summarizes as of September
30, 2017, on an as adjusted basis as described above, the number of shares of our Common Stock, the total consideration and the
average price per share (i) paid to us by our existing stockholders and (ii) to be paid by new investors purchasing our Shares
in this offering at a public offering price of $4.00 per share, before placement agent fees and estimated offering expenses payable
by us.
|
|
Shares
Purchased
|
|
|
Total Consideration
|
|
|
Average Price
|
|
|
|
Number
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Per Share
|
|
Existing stockholders
|
|
|
16,069,477
|
|
|
|
90.2
|
%
|
|
$
|
47,456,378
|
|
|
|
87.1
|
%
|
|
$
|
2.95
|
|
New investors
|
|
|
1,750,000
|
|
|
|
9.8
|
%
|
|
$
|
7,000,000
|
|
|
|
12.9
|
%
|
|
$
|
4.00
|
|
Total
|
|
|
17,819,477
|
|
|
|
100.0
|
%
|
|
$
|
54,456,378
|
|
|
|
100.0
|
%
|
|
$
|
3.06
|
|
The total number of shares of our Common
Stock reflected in the discussion and tables above is based on 16,069,477 shares of our Common Stock outstanding as of September
30, 2017.
As of the date of this prospectus supplement
(i) no shares of our Series A Preferred Stock are outstanding, (ii) no shares of our Series B Preferred Stock are outstanding,
and (iii) there are 2,000 shares of our Series C Preferred Stock outstanding. The shares of Series C Preferred Stock are not convertible
into shares of Common Stock. We no longer have any securities outstanding with exercise or conversion prices that are subject
to market fluctuations (known as variable rate securities).
The total number of shares reflected excludes shares underlying unexercised warrants outstanding
as of September 30, 2017.
DESCRIPTION OF SECURITIES
Introduction
In the discussion that follows, we have summarized
selected provisions of our certificate of incorporation, as amended, by-laws and the Delaware General Corporation Law (the “DGCL”)
relating to our capital stock. This summary is not complete. This discussion is subject to the relevant provisions of Delaware
law and is qualified in its entirety by reference to our certificate of incorporation, as amended, and our by-laws. You should
read the provisions of our certificate of incorporation, as amended, and our by-laws as currently in effect for provisions that
may be important to you.
Authorized Capital Stock
The Company is authorized to
issue 110,000,000 shares of its capital stock consisting of (a) 100,000,000 shares of Common Stock, par value $0.0001 per
share and (b) 10,000,000 shares of “blank check” preferred stock. As of December 22, 2017, 20,956,608 shares of
our Common Stock were issued and outstanding.
Common Stock
Each share of Common Stock entitles the holder
to one vote, either in person or by proxy, at meetings of stockholders. The holders are not permitted to vote their shares cumulatively.
Accordingly, the stockholders of our Common Stock who hold, in the aggregate, more than fifty percent of the total voting rights
can elect all of our directors and, in such event, the holders of the remaining minority shares will not be able to elect any
of such directors. The vote of the holders of a majority of the issued and outstanding shares of Common Stock entitled to vote
thereon is sufficient to authorize, affirm, ratify or consent to such act or action, except as otherwise provided by law.
Holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared by our board of directors out of funds legally available. We have not paid
any dividends since our inception, and we presently anticipate that all earnings, if any, will be retained for development of
our business. Any future disposition of dividends will be at the discretion of our board of directors and will depend upon, among
other things, our future earnings, operating and financial condition, capital requirements, and other factors.
Holders of our Common Stock have no preemptive
rights or other subscription rights, conversion rights, redemption or sinking fund provisions. Upon our liquidation, dissolution
or winding up, the holders of our Common Stock will be entitled to share ratably in the net assets legally available for distribution
to stockholders after the payment of all of our debts and other liabilities. There are no provisions in our certificate of incorporation,
as amended, or our by-laws that would prevent or delay change in our control.
Pursuant to the Purchase Agreement between
the Company and the investors in this offering, if the Company or any of its subsidiaries issues shares of Common Stock or Common
Stock Equivalents (as defined in the Purchase Agreement) in a subsequent financing within one year from the closing date specified
in the Purchase Agreement, each such investor shall have the right to participate in up to an amount of such subsequent financing
equal to fifty percent of such subsequent financing on the same terms, conditions and price provided for such subsequent financing.
In addition, pursuant to the Purchase Agreement, until the date on which such investors hold less than 20% of the securities issued
in connection with the Purchase Agreement, neither the Company nor its subsidiaries shall issue, enter into any agreement to issue
or announce the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents at a price of less than
(i) $3.00 per share (subject to adjustment for stock splits, dividends and the like) within 90 days from the closing date specified
in the Purchase Agreement and (ii) $2.00 per share (subject to adjustment for stock splits, dividends and the like) between 91
days and 150 days after the closing date specified in the Purchase Agreement.
Preferred Stock
The following is a summary of the material
terms of the Series C Preferred Stock. This summary is not complete. The following summary of the terms and provisions of the
Series C Preferred Stock is qualified in its entirety by reference to the certificate of designations for the Series C Preferred
Stock, setting forth the terms of the Series C Preferred Stock, and our certificate of incorporation, as amended.
Series C Non-Convertible Preferred Stock
Ranking
The Series C Preferred Stock are our only
issue and outstanding preferred stock.
Dividends on Series C Non-Convertible Preferred
Stock
Holders of Series C Preferred Stock shall
be entitled to receive from, from and after the first date of issuance of the Series C Preferred Stock, cumulative dividends at
a rate of five percent (5%) per annum on a compounded basis, which dividend amount shall be guaranteed. In the event that the
Company’s market capitalization is at least $50 million for greater than thirty (30) consecutive days, then the dividend
rate shall increase to fifteen percent (15%) per annum. Accrued and unpaid dividends shall be payable in cash.
Redemption of Series C Non-Convertible
Preferred Stock
The Series C Preferred Stock may be redeemed
by the Company in cash at any time, in whole or in part, upon payment of the stated 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 then outstanding
shall be immediately paid, out of the assets of the Company or the proceeds of such fundamental change, as applicable, and legally
available for distribution 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 C Preferred
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 have been entitled to. A fundamental change includes but is not limited to any change in the ownership of at least
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
shall be entitled to vote on any matter submitted to the stockholders of the Company for a vote. One (1) share of Series C Preferred
Stock shall carry the same voting rights as one (1) share of Common Stock.
PLAN OF DISTRIBUTION
Pursuant to the Placement Agency Agreement between us and Aegis Capital Corp., dated December 21, 2017,
we have engaged Aegis Capital Corp. (“Aegis”) to act as the lead placement agent in connection with this offering.
Additionally, Maxim Group LLC (“Maxim”) has agreed to serve as a co-placement agent in the offering. Neither Aegis
nor Maxim is purchasing or selling any of the Shares that we are offering by this prospectus supplement, and is not required to
arrange the purchase or sale of any specific number of shares or dollar amount, but Aegis has agreed to use “reasonable best
efforts” to arrange for the sale of the Shares offered hereby.
The Placement Agency Agreement provides that the obligations of Aegis are subject to certain conditions
precedent, including, among other things, the absence of any material adverse change in our business and the receipt of customary
opinions and closing certificates.
Aegis proposes to arrange for the sale of the Shares that we are offering pursuant to this prospectus
supplement to one or more investors through a securities purchase agreement directly between the purchasers and us. All of the
Shares will be sold at the same price and, we expect, at a single closing. We established the price following negotiations with
prospective investors and with reference to the prevailing market price of our common stock, recent trends in such price and other
factors. It is possible that not all of the Shares that we are offering pursuant to this prospectus supplement will be sold at
the closing of this offering, in which case our net proceeds would be reduced. We expect that the sale of the Shares will be completed
on or around the date indicated on the cover page of this prospectus supplement.
Commissions and Expenses
We will pay the placement agents a placement agent fee equal to 6% of the gross cash proceeds of this
offering. The following table shows the per share and total placement agent fee we will pay to the placement agents in connection
with the sale of the Shares offered hereby, assuming the purchase of all of the Shares that we are offering.
Per
Share
|
|
$
|
0.24
|
|
Total
|
|
$
|
420,000
|
|
In addition, we have agreed to reimburse Aegis at the closing for its out-of-pocket expenses up to a maximum
of $100,000, including fees of counsel to Aegis, subject to compliance with FINRA Rule 5110(f)(2)(D). We estimate the total
expenses of this offering, which will be payable by us, excluding the placement agent fees, will be approximately $100,000. After
deducting the placement agent fees due to the placement agents and our estimated offering expenses, we expect the net proceeds
from this offering to be approximately $6.5 million.
For advisory services provided to the
Company unrelated to this offering, Maxim received or will receive fees in the form of cash and securities (the
“Advisory Fees”) that will be deemed compensation included in this offering under FINRA Rule 5110(d). Maxim will
forgo a portion of the Advisory Fees so that the aggregate placement agent compensation for this offering does not exceed 8%
of the offering proceeds.
We have agreed to indemnify Aegis, its affiliates and agents, including Maxim, against certain liabilities,
including liabilities under the Securities Act. We have also agreed to contribute to payments that Aegis, its agents or affiliates
may be required to make in respect to such liabilities.
Subsequent Equity Sales
Subject to certain exceptions, until one hundred fifty (150) days following the date hereof, we may not,
without the prior written consent of Aegis, offer, issue, enter into any agreement to issue or register the offering of any shares
of common stock or common stock equivalents. In addition, until twelve (12) months following the date hereof, we are prohibited
from directly or indirectly offering or selling common stock or common stock equivalents in any “at-the-market” or
continuous equity transaction.
Listing
Our common stock is listed on the Nasdaq Capital
Market under the symbol “NXTD”.
Electronic Distribution
This prospectus supplement and the accompanying prospectus may be made available in electronic format
on websites or through other online services maintained by the placement agents, or by their respective affiliates. Other than
this prospectus supplement and the accompanying prospectus in electronic format, the information on the placement agents’
websites and any information contained in any other websites maintained by the placement agents is not part of this prospectus
supplement or the accompanying prospectus or the registration statement of which this prospectus supplement and the accompanying
prospectus forms a part, has not been approved and/or endorsed by us or the placement agents, and should not be relied upon by
investors.
The foregoing does not purport to be a complete statement of the terms and conditions of the Placement
Agency Agreement and securities purchase agreements. A copy of the Placement Agency Agreement and the form of securities purchase
agreement with the investors are included as exhibits to our Current Report on Form 8-K filed with the SEC on December 21, 2017
and are incorporated by reference into the Registration Statement of which this prospectus supplement forms a part. See “Where
You Can Find More Information” on page S-28.
Regulation M Restrictions
Each placement agent may be deemed to be an underwriter within the meaning of Section 2(a)(11) of the
Securities Act, and any commissions received by it and any profit realized on the resale of the securities sold by it while acting
as principal might be deemed to be underwriting discounts or commissions under the Securities Act. As an underwriter, each placement
agent would be required to comply with the requirements of the Securities Act and the Exchange Act, including, without limitation,
Rule 415(a)(4) under the Securities Act and Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may
limit the timing of purchases and sales of securities by each such placement agent acting as a principal. Under these rules and
regulations, each placement agent:
|
●
|
must
not engage in any stabilization activity in connection with our securities; and
|
|
●
|
must
not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities, other than
as permitted under the Exchange Act, until it has completed their participation in the distribution.
|
LEGAL MATTERS
Robinson Brog Leinwand Greene Genovese & Gluck P.C., New York, New York, will provide us with an opinion
as to certain legal matters in connection with the shares of Common Stock offered hereby. Ellenoff Grossman & Schole LLP, New
York, New York, is representing Aegis, as lead placement agent.
EXPERTS
The consolidated financial statements of Nxt-ID,
Inc. and its Subsidiaries as of December 31, 2016, and for the year then ended have been incorporated by reference herein
and in the registration statement in reliance upon the report, of Marcum LLP, an independent registered public accounting firm,
given on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of Nxt-ID,
Inc. as of December 31, 2015 and for the year then ended have been incorporated by reference herein and in the registration
statement in reliance upon the report of KPMG LLP, independent registered public accounting firm, incorporated by reference herein
and in the registration statement, and upon the authority of said firm as experts in auditing and accounting. The audit report
contains an explanatory paragraph that states that the Company has incurred recurring losses from operations that raise substantial
doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that
might result from the outcome of that uncertainty.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus supplement constitutes a part
of a registration statement on Form S-3 filed under the Securities Act. As permitted by the SEC’s rules, this prospectus
supplement and the accompanying base prospectus, which form a part of the registration statement, do not contain all the information
that is included in the registration statement. You will find additional information about us in the registration statement. Any
statements made in this prospectus supplement concerning legal documents are not necessarily complete and you should read the
documents that are filed as exhibits to the registration statement or otherwise filed with the SEC for a more complete understanding
of the document or matter.
We file annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read, without charge, and copy the documents we file at the SEC’s
public reference room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You can request copies of these documents by writing
to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. Our SEC filings are also available to the public at no cost from the SEC’s website at
www.sec.gov
.
Our corporate website is
www.nxt-id.com
. The information on our corporate website is not incorporated by reference in this
prospectus or any prospectus supplement and you should not consider it a part of this prospectus or any accompanying prospectus
supplement.
INFORMATION INCORPORATED BY REFERENCE
The SEC permits us to “incorporate by
reference” into this prospectus the information contained in documents we file with the SEC, which means that we can disclose
important information to you by referring you to those documents. Information that is incorporated by reference is considered
to be part of this prospectus and you should read it with the same care that you read this prospectus. Information that we file
later with the SEC will automatically update and supersede the information that is either contained, or incorporated by reference,
in this prospectus, and will be considered to be a part of this prospectus from the date those documents are filed. We have filed
with the SEC and incorporate by reference in this prospectus, except as superseded, supplemented or modified by this prospectus,
the documents listed below:
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Annual
Report on Form 10-K for the fiscal year ended December 31, 2016, filed on April 14, 2017, as amended by Amendment No. 1 to
Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed on July 7, 2017.
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Quarterly
report on Form 10-Q for the fiscal quarter ended March 31, 2017, filed on May 15, 2017, Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 2017, filed on August 14, 2017 and Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 2017, filed on November 14, 2017.
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Current
Reports on Form 8-K or 8-K/A filed on January 19, 2017, February 10, 2017, March 29, 2017, April 6, 2017, April 19, 2017,
May 3, 2017, May 30, 2017, June 29, 2017, July 6, 2017, July 10, 2017, July 13, 2017, July 20, 2017, August 1, 2017, August
8, 2017, August 25, 2017, November 6, 2017, November 9, 2017, November 13, 2017, November 13, 2017, November 17, 2017, November
24, 2017, December 20, 2017 and December 21, 2017.
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Definitive
Proxy Statement on Schedule 14A, filed on August 4, 2017.
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Registration
Statement on Form 8-A, filed with the SEC on September 9, 2014, including any amendments or reports filed for the purpose
of updating the description of our Common Stock therein.
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We also incorporate by reference all additional
documents that we file with the SEC under the terms of Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until the offering
is completed, including those documents that are filed after the initial filing date of the registration statement of which this
prospectus is a part and prior to effectiveness of the registration statement. We are not, however, incorporating, in each case,
any documents or information that we are deemed to furnish and not file under Item 2.02 or Item 7.01 of any Current Report on
Form 8-K in accordance with SEC rules.
In accordance with Rule 402 of Regulation
S-T, the XBRL related information in Exhibit 101 to our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q will
not be deemed to be incorporated by reference into any registration statement or other document filed under the Securities Act,
except as will be expressly set forth by specific reference in such filing.
You can obtain a copy of any or all of the
documents incorporated by reference in this prospectus supplement (other than an exhibit to a document unless that exhibit is
specifically incorporated by reference into that document) from the SEC on its website at
www.sec.gov
. You also can obtain
these documents from us without charge by visiting our corporate website at
www.nxt-id.com
or by requesting them in writing
or by telephoning us at:
Nxt-ID, Inc.
285 North Drive
Suite D
Melbourne, FL 32934
Attn.: Corporate Secretary
(203) 266-2103
PROSPECTUS
$25,000,000
Common Stock
Preferred Stock
Debt Securities
Warrants
Rights
Units
Nxt-ID, Inc.
We may offer and sell, from time to time in
one or more offerings
,
any combination of common stock, preferred stock, debt securities, warrants, rights or units having
an aggregate offering price not exceeding $25,000,000. The preferred stock, debt securities, warrants, rights, and units may be
exercisable or exchangeable for common stock or preferred stock or other securities of ours.
This prospectus provides a general description
of the securities we may offer. We will provide specific terms of the offerings of our securities in one or more supplements to
this prospectus. The prospectus supplement may also add, update or change information in this prospectus. You should
read this prospectus and any prospectus supplement, as well as the documents incorporated by reference or deemed to be incorporated
by reference into this prospectus, carefully before you invest in any of our securities.
This prospectus may not be used to offer
or sell our securities unless accompanied by a prospectus supplement relating to the offered securities.
These securities may be sold directly by us,
through dealers or agents designated from time to time, to or through underwriters, dealers or through a combination of these
methods on a continuous or delayed basis. For additional information on the methods of sale, see the section entitled “Plan
of Distribution” in this prospectus. We will also describe the plan of distribution for any particular offering of
our securities in a prospectus supplement. If any agents, underwriters or dealers are involved in the sale of any securities in
respect of which this prospectus is being delivered, we will disclose their names and the nature of our arrangements with them
in a prospectus supplement. The price to the public of such securities and the net proceeds we expect to receive from any such
sale will also be included in a prospectus supplement.
Our common stock and warrants are currently
traded on the NASDAQ Capital Market under the symbols “NXTD” and “NXTDW”, respectively. On April 20, 2015,
the last reported sale price of our common stock and warrants as reported on the NASDAQ Capital Market was $2.70 per share and
$1.12, respectively.
The aggregate market value of our outstanding
common stock held by non-affiliates is $20,298,349 based on 25,203,338 shares of outstanding common stock, of which 7,517,907
are held by non-affiliates, and a per share price of $2.70 based on the closing sale price of our common stock on April 20, 2015.
Pursuant to General Instruction I.B.6 of Form S-3, in no event will we sell our common stock in a public primary offering with
a value exceeding more than one-third of our public float in any 12-month period so long as our public float remains below $75,000,000.
We have not offered any securities pursuant to General Instruction I.B.6. of Form S-3 during the prior 12 calendar month period
that ends on and includes the date of this prospectus.
We are an “emerging growth company”
as the term is used in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and, as such, have elected
to comply with certain reduced public company reporting requirements for this and future filings.
Investing in our securities involves risks.
You should carefully review the risks described under the heading “Risk Factors” beginning on page 5 and in the documents
which are incorporated by reference herein and contained in the applicable prospectus supplement before you invest in our securities.
Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is April 24,
2015.
TABLE OF CONTENTS
You should rely only on the information
contained in this prospectus and the accompanying prospectus supplement or incorporated by reference in these documents. No dealer,
salesperson or other person is authorized to give any information or to represent anything not contained or incorporated by reference
in this prospectus or the accompanying prospectus supplement. If anyone provides you with different, inconsistent or unauthorized
information or representations, you must not rely on them. This prospectus and the accompanying prospectus supplement are an offer
to sell only the securities offered by these documents, but only under circumstances and in jurisdictions where it is lawful to
do so. The information contained in this prospectus or any prospectus supplement is current only as of the date on the front of
those documents.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration
statement that we filed with the Securities and Exchange Commission (the “SEC”) using a “shelf” registration
process. Under this shelf registration process, we may sell any combination of the securities described in this prospectus in
one or more offerings from time to time having an aggregate offering price of up to $25,000,000. This prospectus provides you
with a general description of the securities we may offer. Each time we offer securities, we will provide you with a prospectus
supplement that describes the specific amounts, prices and terms of the securities we offer. The prospectus supplement also may
add, update or change information contained in this prospectus. You should read carefully both this prospectus, including the
section entitled “Risk Factors,” and any prospectus supplement, together with the additional information described
below under the headings “Where You Can Find More Information” and “Incorporation of Documents by Reference.”
In addition, this prospectus does not contain
all the information provided in the registration statement we filed with the SEC. For further information, we refer you to the
registration statement, including its exhibits. The registration statement can be read on the SEC website or at the SEC offices
mentioned below under the heading “Where You Can Find More Information.” Statements contained in this prospectus and
any prospectus supplement about the provisions or contents of any agreement or other document are not necessarily complete. If
the SEC’s rules and regulations require that an agreement or document be filed as an exhibit to the registration statement,
please see that agreement or document for a complete description of such matters.
You should rely only on the information contained
or incorporated by reference in this prospectus and any prospectus supplement. We have not authorized any other person to provide
you with different information. If anyone provides you with different or inconsistent information, you should not rely on it.
This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities in any jurisdiction where
the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any prospectus supplement,
as well as information we have previously filed with the SEC and incorporated by reference, is accurate as of the date on the
front of those documents only. Our business, financial condition, results of operations and prospects may have changed since those
dates. This prospectus may not be used to consummate a sale of our securities unless it is accompanied by a prospectus supplement.
In this prospectus, we refer to Nxt-ID, Inc.
as “we,” “us,” “our,” and the “Company” unless we specifically state otherwise
or the context indicates otherwise.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, the applicable prospectus
supplement and the information incorporated by reference in this prospectus contain various forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities and Exchange Act of 1934, as amended (the “Exchange Act”), which represent our expectations or beliefs
concerning future events. Forward-looking statements include statements that are predictive in nature, which depend upon or refer
to future events or conditions, and/or which include words such as “believes,” “plans,” “intends,”
“anticipates,” “estimates,” “expects,” “may,” “will” or similar expressions.
In addition, any statements concerning future financial performance, ongoing strategies or prospects, and possible future actions,
which may be provided by our management, are also forward-looking statements. Forward-looking statements are based on current
expectations and projections about future events and are subject to risks, uncertainties, and assumptions about our company, economic
and market factors, and the industry in which we do business, among other things. These statements are not guarantees of future
performance, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information,
future events, or otherwise, except as required by law. Actual events and results may differ materially from those expressed or
forecasted in forward-looking statements due to a number of factors. Factors that could cause our actual performance, future results
and actions to differ materially from any forward-looking statements include, but are not limited to, those discussed under the
heading “Risk Factors” in any of our filings with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act. The forward-looking statements in this prospectus, the applicable prospectus supplement and the information incorporated
by reference in this prospectus represent our views as of the date such statements are made. These forward-looking statements
should not be relied upon as representing our views as of any date subsequent to the date such statements are made.
PROSPECTUS SUMMARY
This summary highlights selected information
contained elsewhere in this prospectus or in documents incorporated herein by reference. This summary does not contain all the
information that you should consider before investing in our securities. You should carefully read the entire prospectus, including
“Risk Factors,” our consolidated financial statements and the information incorporated by reference herein, before
making an investment decision
Our Company
We are an early stage technology company that
is focused on products, solutions, and services that have a need for biometric secure access control. We have three distinct lines
of business that we are currently pursuing: mobile commerce (“m-commerce”); law enforcement and biometric access control
applications. Our initial efforts have primarily focused on the development of our secure products for the growing m-commerce
market, most immediately, a secure mobile electronic smart wallet. Wocket™ is a smart wallet, the next evolution in smart
devices following the smart phone and smart watch, designed to protect your identity and replace all the cards in your wallet,
with no smart phone required. Wocket™ works anywhere credit cards are accepted and only works with your biometric stamp
of approval. Credit, debit, ATM, loyalty, gift, ID, membership, insurance, ticket, emergency, medical, business, contacts, coupon,
and virtually any card can be protected on Wocket™. More than 10,000 cards, records, coupons, etc. and 100 voice commands
can also be stored on Wocket™.
Wocket™ prototype
Our plan also anticipates that we will use
our core biometric facial and voice recognition algorithms to develop security applications (both cloud based and locally hosted)
that can be used for corporations (industrial uses such as enterprise computer networks) as well as individuals (consumer uses
such as smart phones, tablets or personal computers). Finally, our plan calls for a suite of high level security products and
facial recognition applications that can be utilized by law enforcement, the defense industry, and the U.S. Department of Homeland
Security.
We believe that our MobileBio
TM
products, together with our biometric security solutions, will provide distinct advantages within these markets by improving mobile
security. Currently most mobile devices continue to be protected simply by PIN numbers. This security methodology is easily duplicated
on another device, and can be easily spoofed or hacked. Our biometric security paradigm is Dynamic Pairing Codes (DPC). DPC is
a new, proprietary method to secure users, devices, accounts, locations and servers over any communication media by sharing key
identifiers, including biometric-enabled identifiers, between end-points by passing dynamic pairing codes (random numbers) between
end-points to establish sessions and/or transactions without exposing identifiers or keys. The recent high-level breaches of personal
credit card data raise serious concerns among consumers about the safety of their money. These consumers are also resistant to
letting technology companies learn even more about their personal purchasing habits.
We also plan to service the access control
and law enforcement facial recognition markets with our existing 3D facial recognition technology products beginning with U.S.
federal and state governmental agencies. These products, whose underlying technologies have been licensed by us, provide customers
with the capability to enroll subjects in a 3D database and use that database for verification of identities. During 2012, we
acquired 100% of the membership interests in an entity affiliated with our founders as a means toward advancing our business plan.
Securities We May Offer
The descriptions of the securities contained
in this prospectus, together with the applicable prospectus supplements, summarize all the material terms and provisions of the
various types of securities that we may offer. We will describe in the applicable prospectus supplement relating to any securities
the particular terms of the securities offered by that prospectus supplement. If we indicate in the applicable prospectus supplement,
the terms of the securities may differ from the terms we have summarized below. We will also include information in the prospectus
supplement, where applicable, about material United States federal income tax considerations relating to the securities, and the
securities exchange, if any, on which the securities will be listed.
We may sell from time to time, in one or more
offerings:
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and/or
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Units.
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The aggregate offering price of the securities
offered pursuant to this prospectus may not exceed $25,000,000. This prospectus may not be used to consummate a sale of securities
unless it is accompanied by a prospectus supplement.
Corporate Information
The Company is a Delaware corporation formed
on February 8, 2012. We were initially known as Trylon Governmental Systems, Inc. We changed our name to Nxt-ID, Inc. on June
25, 2012 to reflect our primary focus on our growing biometric identification, m-commerce and secure mobile platforms.
We are an “emerging growth company”
as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. We will remain an emerging growth company for up to
five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenue exceeds $1 billion,
(ii) the date that 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 stock that 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 which we have issued more than $1 billion
in non-convertible debt during the preceding three-year period. Pursuant to Section 107 of the 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 revised accounting
standards.
Where You Can Find Us
Our principal executive offices are located
at 288 Christian Street, Oxford, CT 06478, and our telephone number is (203) 266-2103. Our website address is
www.nxt-id.com
.
The information contained therein or connected thereto shall not be deemed to be incorporated into this prospectus or the registration
statement of which it forms a part. The information on our website is not part of this prospectus.
RISK FACTORS
Investing in our securities involves a
high degree of risk. You should carefully consider the risks and uncertainties described under the heading “Risk Factors”
in our most recent Annual Report on Form 10-K on file with the SEC and any of our other filings with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, which are incorporated by reference in this prospectus and any prospectus supplement,
and the additional risks and uncertainties described below before purchasing our securities. The risks and uncertainties we have
described are not the only ones facing our company. If any of these risks actually occur, our business, financial condition or
results of operations would likely suffer. In that case, the trading price of our common stock could fall, and you may lose all
or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial
may also affect our business operations. Before making an investment decision, you should carefully consider these risks as well
as the other information we include or incorporate by reference in this prospectus and any prospectus supplement.
Risks Related to Our Securities and this Offering
An active, liquid trading market for
our common stock may not develop, which may cause our common stock to trade at a discount from the initial offering price and
make it difficult for you to sell the common stock you purchase.
Our common stock is currently listed on the
NASDAQ Capital Market. However, there can be no assurance that there will be an active market for our common stock either now
or in the future. If an active and liquid trading market does not develop or if developed cannot be sustained, you may have difficulty
selling any of our common stock that you purchase. The market price of our common stock may decline below the initial offering
price, and you may not be able to sell your shares of our common stock at or above the price you paid, or at all.
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 subject to wide
fluctuations, and you may be unable to resell your shares at or above the price at which you acquired them.
The market price of our common stock is likely
to be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control,
including, but not limited to:
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Variations
in our revenues and operating expenses;
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or anticipated changes in the estimates of our operating results or changes in stock market analyst recommendations regarding
our common stock, other comparable companies or our industry generally;
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conditions in our industry, the industries of our customers and the economy as a whole;
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or expected changes in our growth rates or our competitors’ growth rates;
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in the financial markets and worldwide or regional economies;
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Announcements
of innovations or new products or services by us or our competitors;
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by the government relating to regulations that govern our industry;
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of our common stock or other securities by us or in the open market; and
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in the market valuations of other comparable companies.
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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 stock could decline
for reasons unrelated to our business, financial condition or operating results. The trading price of our shares might also decline
in reaction 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 harm the value of your investment in our common stock. In the past, following periods of volatility
in the market, securities class-action litigation has often been instituted 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.
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 credit markets from
any of these sources could have a material adverse effect on the Company’s 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 customers’ businesses. In addition, continuation or worsening of
general market conditions in economies important to our businesses may adversely affect our customers’ level of spending
and ability to obtain financing, leading to us being unable to generate the levels of sales that we require. Current and
continued disruption of financial markets could have a material adverse effect on the Company’s 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 on operating 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 such disruption, our ability to raise capital may be severely restricted and the
cost of raising capital through such markets or privately may increase significantly at a time when we would like, or need, to
raise capital. Either of these events could have an impact on our flexibility to fund our business operations, make capital expenditures,
pursue additional expansion or acquisition opportunities, or make discretionary use of cash and could adversely impact our financial
results.
Although recent trends point to continuing
improvements, there is still lingering volatility and uncertainty. A change or disruption in the global financial markets for
any reason may cause consumers, businesses and governments to defer purchases in response to tighter credit, decreased cash availability
and declining consumer confidence. Accordingly, demand for our products could decrease and differ materially from their current
expectations. Further, some of our customers may require substantial financing in order to fund their operations and make purchases
from us. The inability of these customers to obtain sufficient credit to finance purchases of our products and meet their payment
obligations to us or possible insolvencies of our customers could result in decreased customer demand, an impaired ability for
us to collect on outstanding accounts receivable, significant delays in accounts receivable payments, and significant write-offs
of accounts receivable, each of which could adversely impact our financial results.
If securities or industry analysts do
not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations
regarding our common stock adversely, our common stock price and trading volume could decline, which may also negatively impact
the price of our preferred stock.
The trading market for our shares of common
stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business,
our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our common stock
adversely, or provide more favorable relative recommendations about our competitors, our share price would likely decline. If
any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility
in the financial markets, which in turn could cause our common stock price or trading volume to decline, and negatively impact
the price of our preferred stock.
USE OF PROCEEDS
Except as otherwise provided in the applicable
prospectus supplement, we intend to use the net proceeds from the sale of the securities offered by this prospectus for general
corporate purposes, which may include, among other things, working capital, capital expenditures, product development, marketing
activities, acquisitions of new technologies and investments, repayment of debt and repurchases and redemptions of securities.
The intended application of proceeds from
the sale of any particular offering of securities using this prospectus will be described in the accompanying prospectus supplement
relating to such offering. The precise amount and timing of the application of these proceeds will depend on our funding requirements
and the availability and costs of other funds. Accordingly, we will retain broad discretion over the use of such proceeds. Pending
use of the net proceeds, we intend to invest the net proceeds in short-term, investment-grade, interest-bearing instruments.
THE SECURITIES WE MAY OFFER
The descriptions of the securities contained
in this prospectus, together with the applicable prospectus supplements, summarize all the material terms and provisions of the
various types of securities that we may offer. We will describe in the applicable prospectus supplement relating to any securities
the particular terms of the securities offered by that prospectus supplement. If we indicate in the applicable prospectus supplement,
the terms of the securities may differ from the terms we have summarized below. We will also include in the prospectus supplement
information, where applicable, about material United States federal income tax considerations relating to the securities, and
the securities exchange, if any, on which the securities will be listed.
We may sell from time to time, in one or more
offerings:
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to purchase shares of our common stock, preferred stock, or debt securities;
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to purchase shares of our common stock, preferred stock, or other securities; and/or
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consisting of any of the securities listed above.
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The terms of any securities we offer will
be determined at the time of sale. We may issue securities that are exchangeable or exercisable for common stock or any of the
other securities that may be sold under this prospectus. When particular securities are offered, a supplement to this prospectus
will be filed with the SEC, which will describe the terms of the offering and sale of such securities.
DESCRIPTION OF CAPITAL STOCK
General
The following description of our capital stock,
together with the additional information we include in any applicable prospectus supplement, summarizes the material terms and
provisions of the capital stock that we may offer under this prospectus, but is not complete. For the complete terms of our capital
stock, please refer to our certificate of incorporation, as amended from time to time, any certificate of designation for our
preferred stock, and our bylaws, as amended from time to time. The Delaware General Corporation Law (the “DGCL”) may
also affect the terms of our capital stock.
Authorized Capital Stock
The Company is authorized to issue 110,000,000
shares of its capital stock, consisting of (a) 100,000,000 shares of common stock, par value $0.0001 per share, and (b) 10,000,000
shares of “blank check” preferred stock, par value $0.0001 per share. As of April 20, 2015, 25,203,338 shares of our
common stock were issued and outstanding. We did not have any shares of our preferred stock issued or outstanding as of April
20, 2015.
Common Stock
Each share of common stock entitles the holder
to one vote, either in person or by proxy, at meetings of stockholders. The holders are not permitted to vote their shares of
common stock cumulatively. Accordingly, the holders of our common stock who hold, in the aggregate, more than fifty percent (50%)
of the total voting rights can elect all of our directors and, in such event, the holders of the remaining minority shares of
common stock will not be able to elect any of such directors. The vote of the holders of a majority of the issued and outstanding
shares of common stock entitled to vote thereon is sufficient to authorize, affirm, ratify or consent to such act or action, except
as otherwise provided by law.
Holders of common stock are entitled to receive
ratably such dividends, if any, as may be declared by our board of directors out of funds legally available. We have not paid
any dividends since our inception, and we presently anticipate that all earnings, if any, will be retained for development of
our business. Any future disposition of dividends will be at the discretion of our board of directors and will depend upon, among
other things, our future earnings, operating and financial condition, capital requirements, and other factors.
Holders of our common stock have no preemptive
rights or other subscription rights, conversion rights, redemption or sinking fund provisions. Upon our liquidation, dissolution
or winding up, the holders of our common stock will be entitled to share ratably in the net assets legally available for distribution
to stockholders after the payment of all of our debts and other liabilities. There are no provisions in our certificate of incorporation
or our by-laws that would prevent or delay change in our control.
Preferred Stock
We are authorized to issue up to 10,000,000
shares of “blank check” preferred stock, par value $0.0001 per share, none of which is presently issued or outstanding.
Our board of directors is authorized to issue such shares of preferred stock with designations, rights and preferences as it may
determine from time to time. Accordingly, our board of directors is empowered, without stockholder approval, to issue shares of
preferred stock with dividend, liquidation, conversion, or other rights that could adversely affect the rights of the holders
of our common stock. Once designated by our board of directors, each series of preferred stock will have specific financial and
other terms that will be described in a prospectus supplement. We will also file with the SEC a certificate of designation designating
the rights and preferences of the preferred stock prior to any issuance of preferred stock, and you should read such certificate
of designation for provisions that may be important to you.
Dividends
Since inception we have not paid any dividends
on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock. Although
we intend to retain our earnings, if any, to finance the exploration and growth of our business, our board of directors will have
the discretion to declare and pay dividends in the future. Payment of dividends in the future will depend upon our earnings, capital
requirements, and other factors, which our board of directors may deem relevant.
Warrants
As of April 20, 2015, we had warrants to purchase
3,479,776 shares of our common stock at a weighted average exercise price of $2.84 outstanding. The exercise price of the warrants
is subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications,
mergers or other corporate change and dilutive issuances.
Options and Other Stock Awards
On January 4, 2013, the Company’s stockholders
authorized the Company’s 2013 Long-Term Stock Incentive Plan (the “Plan”). The maximum aggregate number of shares
of common stock that may be issued under the Plan, including stock options, stock awards and stock appreciation rights, is limited
to 10% of the shares of common stock outstanding on the first trading day of any fiscal year, less shares or awards previously
issued under the Plan, or 2,183,506 for fiscal year 2015. Currently, we have not issued any stock options under the Plan. As of
April 20, 2015, we have issued 357,985 shares of common stock under the Plan.
Registration Rights
None.
Anti-Takeover Effects of Provisions of the DGCL and our Certificate
of Incorporation and Bylaws
Provisions of the DGCL and our certificate
of incorporation and bylaws could make it more difficult to acquire us by means of a tender offer, a proxy contest or otherwise,
or to remove incumbent officers and directors. These provisions, summarized below, are expected to discourage certain types of
coercive takeover practices and takeover bids that our board of directors may consider inadequate and to encourage persons seeking
to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection
of our ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh
the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals
could result in improved terms for our stockholders.
Delaware Anti-Takeover Statute.
We
are subject to the provisions of Section 203 of the DGCL, an anti-takeover law. Subject to exceptions, the statute prohibits a
publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder”
for a period of three (3) years after the date of the transaction in which the person became an interested stockholder, unless:
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Prior
to such date, the board of directors of the corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;
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Upon
consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding, those shares owned: (1) by persons who are directors and also officers;
and (2) by employee stock plans in which employee participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer; or
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On
or after such date, the business combination is approved by the board of directors and authorized at an annual or special
meeting of stockholders and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder.
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For purposes of Section 203, a “business
combination” includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder,
with an “interested stockholder” being defined as a person who, together with affiliates and associates, owns, or
within three (3) years prior to the date of determination whether the person is an “interested stockholder,” did own,
15% or more of the corporation’s voting stock.
Amendments to Our Certificate of Incorporation.
Under
the DGCL, the affirmative vote of a majority of the outstanding shares entitled to vote thereon and a majority of the outstanding
stock of each class entitled to vote thereon is required to amend a corporation’s certificate of incorporation. Under the
DGCL, the holders of the outstanding shares of a class of our capital stock shall be entitled to vote as a class upon a proposed
amendment, whether or not entitled to vote thereon by the certificate of incorporation, if the amendment would:
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Increase
or decrease the aggregate number of authorized shares of such class;
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Increase
or decrease the par value of the shares of such class; or
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Alter
or change the powers, preferences or special rights of the shares of such class so as to affect them adversely.
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If any proposed amendment would alter or change
the powers, preferences or special rights of one or more series of any class of our capital stock so as to affect them adversely,
but shall not so affect the entire class, then only the shares of the series so affected by the amendment shall be considered
a separate class for the purposes of this provision.
Vacancies in the Board of Directors.
Our
bylaws provide that, subject to limitations, any vacancy occurring in our board of directors for any reason may be filled by a
majority of the remaining members of our board of directors then in office, even if such majority is less than a quorum. Each
director so elected shall hold office until the expiration of the term of the other directors. Each such directors shall hold
office until his or her successor is elected and qualified, or until the earlier of his or her death, resignation or removal.
Special Meetings of Stockholders.
Under
our bylaws, special meetings of stockholders may be called at any time by our President whenever so directed in writing by a majority
of the entire board of directors. Special meetings can also be called whenever one-third of the number of shares of our capital
stock entitled to vote at such meeting shall, in writing, request one. Under the DGCL, written notice of any special meeting must
be given not less than ten (10) nor more than sixty (60) days before the date of the special meeting to each stockholder entitled
to vote at such meeting.
No Cumulative Voting.
The DGCL
provides that stockholders are denied the right to cumulate votes in the election of directors unless our certificate of incorporation
provides otherwise. Our amended and restated certificate of incorporation does not provide for cumulative voting.
Limitation on Directors’ Liability; Indemnification
The DGCL authorizes Delaware corporations
to limit or eliminate the personal liability of their directors to them and their stockholders for monetary damages for breach
of a director’s fiduciary duty of care. The duty of care requires that, when acting on behalf of the corporation, directors
must exercise an informed business judgment based on all material information reasonably available to them. Absent the limitations
the DGCL authorizes, directors of Delaware corporations are accountable to those corporations and their stockholders for monetary
damages for conduct constituting gross negligence in the exercise of their duty of care. The DGCL enables Delaware corporations
to limit available relief to equitable remedies such as injunction or rescission. Our certificate of incorporation limits the
liability of our directors to us and our stockholders to the fullest extent Delaware law permits. Specifically, no director will
be personally liable for monetary damages for any breach of the director’s fiduciary duty as a director, except for liability:
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For
any breach of the director’s duty of loyalty to us or our stockholders;
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For
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
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For
unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; and
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For
any transaction from which the director derived an improper personal benefit.
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This provision could have the effect of reducing
the likelihood of derivative litigation against our directors and may discourage or deter our stockholders or management from
bringing a lawsuit against our directors for breach of their duty of care, even though such an action, if successful, might otherwise
have benefited us and our stockholders. Our bylaws provide indemnification to our officers and directors and other specified persons
with respect to their conduct in various capacities.
We maintain a general liability insurance
policy that covers liabilities of directors and officers of our corporation arising out of claims based on acts or omissions in
their capacities as directors or officers.
Insofar as the foregoing provisions permit
indemnification of directors, officers or persons controlling us for liability arising under the Securities Act, we have been
informed that in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Listing
Our common stock and warrants are quoted on
the NASDAQ Capital Market under the symbols “NXTD” and “NXTDW”, respectively.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common
stock is VStock Transfer, LLC. The transfer agent’s address is 18 Lafayette Place, Woodmere, NY 11598, and its telephone
number is (212) 828-8436.
DESCRIPTION OF DEBT SECURITIES
We may offer debt securities which may be
senior, subordinated or junior subordinated and may be convertible. We may offer general debt obligations, which may be secured
or unsecured, senior or subordinated and convertible into shares of our common stock. In this prospectus, we refer to the senior
debt securities and the subordinated debt securities together as the “debt securities.” We may issue debt securities
under a note purchase agreement or under an indenture to be entered between us and a trustee. We will file the form of debt security
and form of note purchase agreement for debt securities or form of indenture for debt securities with the SEC. The indentures
do not limit the amount of securities that may be issued under it and provides that debt securities may be issued in one or more
series. The senior debt securities will have the same rank as all of our other indebtedness that is not subordinated. The subordinated
debt securities will be subordinated to our senior debt on terms set forth in the applicable prospectus supplement. In addition,
the subordinated debt securities will be effectively subordinated to creditors and preferred stockholders of our subsidiaries.
Our board of directors will determine the terms of each series of debt securities being offered. This prospectus contains only
general terms and provisions of the debt securities. The applicable prospectus supplement will describe the particular terms of
the debt securities offered thereby. You should read any prospectus supplement and any free writing prospectus that we may authorize
to be provided to you related to the series of debt securities being offered, as well as the complete note agreements and/or indentures
that contain the terms of the debt securities.
If we decide to issue debt securities pursuant
to an indenture to be entered into between us and a trustee, we will issue the debt securities offered by this prospectus and
any accompanying prospectus supplement under an indenture to be entered into between us and the trustee identified in the applicable
prospectus supplement. The terms of the debt securities will include those stated in the indenture and those made part of the
indenture by reference to the Trust Indenture Act of 1939, as in effect on the date of the indenture. The indenture will be subject
to and governed by the terms of the Trust Indenture Act of 1939. If we offer debt securities under this prospectus, we will file
the form of indenture with the SEC.
The following description briefly sets forth
certain general terms and provisions of the debt securities that we may offer. The particular terms of the debt securities offered
by any prospectus supplement and the extent, if any, to which these general provisions may apply to the debt securities, will
be described in the related prospectus supplement. Accordingly, for a description of the terms of a particular issue of debt securities,
reference must be made to both the related prospectus supplement and to the following description. Where any provision in an accompanying
prospectus supplement is inconsistent with any provision in this summary, the prospectus supplement will control.
Debt Securities
The aggregate principal amount of debt securities
that may be issued either pursuant to a note purchase agreement or under an indenture is unlimited. The debt securities may be
issued in one or more series as may be authorized from time to time pursuant to a supplemental indenture entered into between
us and the trustee or an order delivered by us to the trustee. For each series of debt securities we offer, a prospectus supplement
accompanying this prospectus will describe the following terms and conditions of the series of debt securities that we are offering,
to the extent applicable:
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Title
and aggregate principal amount;
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Whether
the debt securities will be senior, subordinated or junior subordinated;
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Applicable
subordination provisions, if any;
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Provisions
regarding whether the debt securities will be convertible or exchangeable into other securities or property of the Company
or any other person;
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Percentage
or percentages of principal amount at which the debt securities will be issued;
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Maturity
date(s);
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Interest
rate(s) or the method for determining the interest rate(s);
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Whether
interest on the debt securities will be payable in cash or additional debt securities of the same series;
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Dates
on which interest will accrue or the method for determining dates on which interest will accrue and dates on which interest
will be payable;
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Whether
the amount of payment of principal of, premium, if any, or interest on the debt securities may be determined with reference
to an index, formula or other method;
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Redemption,
repurchase or early repayment provisions, including our obligation or right to redeem, purchase or repay debt securities under
a sinking fund, amortization or analogous provision;
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If
other than the debt securities' principal amount, the portion of the principal amount of the debt securities that will be
payable upon declaration of acceleration of the maturity;
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Authorized
denominations;
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Form;
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Amount
of discount or premium, if any, with which the debt securities will be issued, including whether the debt securities will
be issued as "original issue discount" securities;
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The
place or places where the principal of, premium, if any, and interest on the debt securities will be payable;
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Where
the debt securities may be presented for registration of transfer, exchange or conversion;
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The
place or places where notices and demands to or upon the Company in respect of the debt securities may be made;
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Whether
the debt securities will be issued in whole or in part in the form of one or more global securities;
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If
the debt securities will be issued in whole or in part in the form of a book-entry security, the depository or its nominee
with respect to the debt securities and the circumstances under which the book-entry security may be registered for transfer
or exchange or authenticated and delivered in the name of a person other than the depository or its nominee;
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Whether
a temporary security is to be issued with respect to such series and whether any interest payable prior to the issuance of
definitive securities of the series will be credited to the account of the persons entitled thereto;
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The
terms upon which beneficial interests in a temporary global security may be exchanged in whole or in part for beneficial interests
in a definitive global security or for individual definitive securities;
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The
guarantors, if any, of the debt securities, and the extent of the guarantees and any additions or changes to permit or facilitate
guarantees of such debt securities;
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Any
covenants applicable to the particular debt securities being issued;
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Any
defaults and events of default applicable to the debt securities, including the remedies available in connection therewith;
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Currency,
currencies or currency units in which the purchase price for, the principal of and any premium and any interest on, such debt
securities will be payable;
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Time
period within which, the manner in which and the terms and conditions upon which the Company or the purchaser of the debt
securities can select the payment currency;
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Securities
exchange(s) on which the debt securities will be listed, if any;
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Whether
any underwriter(s) will act as market maker(s) for the debt securities;
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Extent
to which a secondary market for the debt securities is expected to develop;
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Provisions
relating to defeasance;
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Provisions
relating to satisfaction and discharge of the indenture;
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Any
restrictions or conditions on the transferability of the debt securities;
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Provisions
relating to the modification of the indenture both with and without the consent of holders of debt securities issued under
the indenture;
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Any
addition or change in the provisions related to compensation and reimbursement of the trustee;
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Provisions,
if any, granting special rights to holders upon the occurrence of specified events;
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Whether
the debt securities will be secured or unsecured, and, if secured, the terms upon which the debt securities will be secured
and any other additions or changes relating to such security; and
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Any
other terms of the debt securities that are not inconsistent with the provisions of the Trust Indenture Act (but may modify,
amend, supplement or delete any of the terms of the indenture with respect to such series of debt securities).
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General
One or more series of debt securities may
be sold as "original issue discount" securities. These debt securities would be sold at a substantial discount below
their stated principal amount, bearing no interest or interest at a rate which at the time of issuance is below market rates.
One or more series of debt securities may be variable rate debt securities that may be exchanged for fixed rate debt securities.
United States federal income tax consequences
and special considerations, if any, applicable to any such series will be described in the applicable prospectus supplement.
Debt securities may be issued where the amount
of principal and/or interest payable is determined by reference to one or more currency exchange rates, commodity prices, equity
indices or other factors. Holders of such debt securities may receive a principal amount or a payment of interest that is greater
than or less than the amount of principal or interest otherwise payable on such dates, depending upon the value of the applicable
currencies, commodities, equity indices or other factors. Information as to the methods for determining the amount of principal
or interest, if any, payable on any date, the currencies, commodities, equity indices or other factors to which the amount payable
on such date is linked and certain additional United States federal income tax considerations will be set forth in the applicable
prospectus supplement.
The term "debt securities" includes
debt securities denominated in U.S. dollars or, if specified in the applicable prospectus supplement, in any other freely transferable
currency or units based on or relating to foreign currencies.
Subject to the limitations provided in any
indenture and in a prospectus supplement, debt securities that are issued in registered form may be transferred or exchanged at
the principal corporate trust office of the trustee, without the payment of any service charge, other than any tax or other governmental
charge payable in connection therewith.
Governing Law
All debt securities, including debt securities
issued pursuant to an indenture, shall be construed in accordance with and governed by the laws of the state of New York. To the
extent we issue securities pursuant to an indenture, such indenture will be governed by the laws of the state of New York.
DESCRIPTION OF WARRANTS
The following description, together with the
additional information we may include in any applicable prospectus supplements, summarizes the material terms and provisions of
the warrants that we may offer under this prospectus and the related warrant agreements and warrant certificates. While the terms
summarized below will apply generally to any warrants that we may offer, we will describe the particular terms of any series of
warrants in more detail in the applicable prospectus supplement. If we indicate in the prospectus supplement, the terms of any
warrants offered under that prospectus supplement may differ from the terms described below. If there are differences between
that prospectus supplement and this prospectus, the prospectus supplement will control. Thus, the statements we make in this section
may not apply to a particular series of warrants. Specific warrant agreements will contain additional important terms and
provisions and will be incorporated by reference as an exhibit to the registration statement which includes this prospectus.
General
We may issue warrants for the purchase of
common stock, preferred stock, and/or debt securities in one or more series. We may issue warrants independently or together with
common stock, preferred stock, and/or debt securities, and the warrants may be attached to or separate from these securities.
We will issue warrants under one or more warrant
agreements between us and a warrant agent that we will name in the prospectus supplement. We will file the form of warrant agreement
and form of warrant certificate with the SEC, and you should read the form of warrant agreement and form of warrant certificate
for provisions that may be important to you.
We will describe in the applicable prospectus supplement the terms
of the series of warrants, including:
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The
offering price and aggregate number of warrants offered;
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The
currency for which the warrants may be purchased;
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If
applicable, the designation and terms of the securities with which the warrants are issued and the number of warrants issued
with each such security or each principal amount of such security;
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If
applicable, the date on and after which the warrants and the related securities will be separately transferable;
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In
the case of warrants to purchase common stock or preferred stock, the number of shares of common stock or preferred stock,
as the case may be, purchasable upon the exercise of one warrant and the price at which these shares may be purchased upon
such exercise;
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The
warrant agreement under which the warrants will be issued;
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The
effect of any merger, consolidation, sale or other disposition of our business on the warrant agreement and the warrants;
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Anti-dilution
provisions of the warrants, if any;
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The
terms of any rights to redeem or call the warrants;
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Any
provisions for changes to or adjustments in the exercise price or number of securities issuable upon exercise of the warrants;
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The
dates on which the right to exercise the warrants will commence and expire or, if the warrants are not continuously exercisable
during that period, the specific date or dates on which the warrants will be exercisable;
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The
manner in which the warrant agreement and warrants may be modified;
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The
identities of the warrant agent and any calculation or other agent for the warrants;
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Federal
income tax consequences of holding or exercising the warrants;
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The
terms of the securities issuable upon exercise of the warrants;
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Any
securities exchange or quotation system on which the warrants or any securities deliverable upon exercise of the warrants
may be listed; and
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Any
other specific terms, preferences, rights or limitations of or restrictions on the warrants.
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Exercise of Warrants
Each warrant will entitle the holder to purchase
the securities that we specify in the applicable prospectus supplement at the exercise price that we describe in the applicable
prospectus supplement. Unless we otherwise specify in the applicable prospectus supplement, holders of the warrants may exercise
the warrants at any time up to 5:00 p.m. eastern time on the expiration date that we set forth in the applicable prospectus supplement.
After the close of business on the expiration date, unexercised warrants will become void.
Holders of the warrants may exercise the warrants
by delivering the warrant certificate representing the warrants to be exercised together with specified information, and paying
the required amount to the warrant agent in immediately available funds, as provided in the applicable prospectus supplement.
We will set forth on the reverse side of the warrant certificate, and in the applicable prospectus supplement, the information
that the holder of the warrant will be required to deliver to the warrant agent.
Until the warrant is properly exercised, no
holder of any warrant will be entitled to any rights of a holder of the securities purchasable upon exercise of the warrant.
Upon receipt of the required payment and the
warrant certificate properly completed and duly executed at the corporate trust office of the warrant agent or any other office
indicated in the applicable prospectus supplement, we will issue and deliver the securities purchasable upon such exercise. If
fewer than all of the warrants represented by the warrant certificate are exercised, then we will issue a new warrant certificate
for the remaining amount of warrants.
Modifications
We may amend the warrant agreements and the
warrant certificates without the consent of the holders of the warrants to cure any ambiguity, to cure, correct or supplement
any defective or inconsistent provision, or in any other manner that will not adversely affect the interests of the holders of
the warrants. We may also modify or amend certain other terms of the warrant agreements and the warrant certificates with the
written consent of the holders of not less than a majority of the then outstanding warrants.
Enforceability of Rights by Holders of
Warrants
Any warrant agent will act solely as our agent
under the applicable warrant agreement and will not assume any obligation or relationship of agency or trust with any holder of
any warrant. A single bank or trust company may act as warrant agent for more than one issue of warrants. A warrant agent will
have no duty or responsibility in case of any default by us under the applicable warrant agreement or warrant certificate, including
any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder of a warrant
may, without the consent of the related warrant agent or the holder of any other warrant, enforce by appropriate legal action
its right to exercise, and receive the securities purchasable upon exercise of, its warrants in accordance with their terms.
DESCRIPTION OF RIGHTS
We may issue rights to purchase shares of
our common stock, preferred stock, debt securities, or other securities. These rights may be issued independently or together
with any other security offered hereby and may or may not be transferable by the holder receiving the rights in such offering.
The applicable prospectus supplement may add, update or change the terms and conditions of the rights as described in this prospectus.
The applicable prospectus supplement will
describe the specific terms of any offering of rights for which this prospectus is being delivered, including the following:
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The
price, if any, per right;
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The
exercise price payable for common stock, preferred stock, or other securities upon the exercise of the rights;
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The
number of rights issued or to be issued to each holder;
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The
number and terms of common stock, preferred stock, or other securities which may be purchased per right;
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The
extent to which the rights are transferable;
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Any
other terms of the rights, including the terms, procedures and limitations relating to the exchange and exercise of the rights;
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The
date on which the holder’s ability to exercise the rights shall commence, and the date on which the rights shall expire;
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The
extent to which the rights may include an over-subscription privilege with respect to unsubscribed securities; and
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If
applicable, the material terms of any standby underwriting or purchase arrangement entered into by us in connection with the
offering of such rights.
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Holders may exercise rights as described in
the applicable prospectus supplement. Upon receipt of payment and the rights certificate properly completed and duly executed
at the corporate trust office of the rights agent or any other office indicated in the prospectus supplement, we will, as soon
as practicable, forward the applicable securities purchased upon exercise of the rights. If less than all of the rights issued
in any rights offering are exercised, we may offer any unsubscribed securities directly to persons other than stockholders, to
or through agents, underwriters or dealers or through a combination of such methods, including pursuant to standby arrangements
with one or more underwriters or other purchasers, pursuant to which the underwriters or other purchasers may be required to purchase
any securities remaining unsubscribed for after such offering, as described in the applicable prospectus supplement.
The description in the applicable prospectus
supplement of any rights that we may offer will not necessarily be complete and will be qualified in its entirety by reference
to the applicable rights certificate, which will be filed with the SEC.
DESCRIPTION OF UNITS
We may issue units comprised of one or more
of the other securities described in this prospectus in any combination. Each unit will be issued so that the holder of the unit
is also the holder of each security included in the unit. Thus, the holder of a unit will have the rights and obligations of a
holder of each included security. The unit agreement under which a unit is issued may provide that the securities included in
the unit may not be held or transferred separately, at any time or at any time before a specified date.
We may evidence units by unit certificates
that we issue under a separate unit agreement. We may issue the units under a unit agreement between us and one or more unit agents.
If we elect to enter into a unit agreement with a unit agent, the unit agent will act solely as our agent in connection with the
units and will not assume any obligation or relationship of agency or trust for or with any registered holders of units or beneficial
owners of units. We will indicate the name and address and other information regarding the unit agent in the applicable prospectus
supplement relating to a particular series of units if we elect to use a unit agent.
We will describe in the applicable prospectus
supplement the terms of the series of units being offered, including:
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The
designation and terms of the units and of the securities comprising the units, including whether and under what circumstances
those securities may be held or transferred separately;
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Any
unit agreement under which the units will be issued and any provisions of the unit agreement that differ from those described
herein;
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Any
provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units;
and
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Whether
the units will be issued in fully registered or global form.
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The other provisions regarding our common
stock, preferred stock, debt securities, warrants and rights as described in this prospectus will apply to each unit to the extent
such unit consists of shares of our common stock, preferred stock, debt securities, warrants and/or rights.
GLOBAL SECURITIES
We may issue some or all of our securities
of any series as global securities. We will register each global security in the name of a depositary identified in the applicable
prospectus supplement. The global securities will be deposited with a depositary or nominee or custodian for the depositary and
will bear a legend regarding restrictions on exchanges and registration of transfer as discussed below and any other matters to
be provided pursuant to the indenture.
As long as the depositary or its nominee is
the registered holder of a global security, that person will be considered the sole owner and holder of the global security and
the securities represented by it for all purposes under the securities and the indenture. Except in limited circumstances, owners
of a beneficial interest in a global security:
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Will
not be entitled to have the global security or any securities represented by it registered in their names;
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Will
not receive or be entitled to receive physical delivery of certificated securities in exchange for the global security; and
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Will
not be considered to be the owners or holders of the global security or any securities represented by it for any purposes
under the securities or the indenture.
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We will make all payments of principal and
any premium and interest on a global security to the depositary or its nominee as the holder of the global security. The laws
of some jurisdictions require that certain purchasers of securities take physical delivery of securities in definitive form. These
laws may impair the ability to transfer beneficial interests in a global security.
Ownership of beneficial interests in a global
security will be limited to institutions having accounts with the depositary or its nominee, called “participants”
for purposes of this discussion, and to persons that hold beneficial interests through participants. When a global security is
issued, the depositary will credit on its book-entry, registration and transfer system the principal amounts of securities represented
by the global security to the accounts of its participants. Ownership of beneficial interests in a global security will be shown
only on, and the transfer of those ownership interests will be effected only through, records maintained by:
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The
depositary, with respect to participants’ interests; or
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Any
participant, with respect to interests of persons held by the participants on their behalf.
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Payments by participants to owners of beneficial
interests held through the participants will be the responsibility of the participants. The depositary may from time to time adopt
various policies and procedures governing payments, transfers, exchanges and other matters relating to beneficial interests in
a global security. None of the following will have any responsibility or liability for any aspect of the depositary’s or
any participant’s records relating to, or for payments made on account of, beneficial interests in a global security, or
for maintaining, supervising or reviewing any records relating to those beneficial interests:
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Us
or our affiliates;
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trustee under any indenture; or
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Any
agent of any of the above.
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PLAN OF DISTRIBUTION
We may sell the securities being offered pursuant
to this prospectus from time to time in one or more transactions, including, without limitation:
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Through
underwriters or dealers;
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Through
agents;
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Directly
to purchasers;
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In
a rights offering;
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In
“at the market” offerings within the meaning of Rule 415(a)(4) of the Securities Act to or through a market maker
or into an existing trading market on an exchange or otherwise;
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Through
a combination of any of these methods; or
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Through
any other method permitted by applicable law and described in a prospectus supplement.
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The applicable prospectus supplement will
describe the terms of the offering of the securities, including:
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The
name or names of any underwriters, if any, and if required, any dealers or agents;
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The
purchase price of the securities and the proceeds we will receive from the sale;
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Any
underwriting discounts and other items constituting underwriters’ compensation;
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Any
commissions paid to agents;
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Any
discounts or concessions allowed or reallowed or paid to dealers;
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Any
delayed delivery arrangements;
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Any
additional risk factors applicable to the securities that we propose to sell; and
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Any
securities exchange or market on which the securities may be listed.
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We may sell the securities from time to time
in one or more transactions at:
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A
fixed price or prices, which may be changed;
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Market
prices prevailing at the time of sale;
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Prices
related to such prevailing market prices; or
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Negotiated
prices.
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Sale through Underwriters or Dealers
If underwriters are used in the sale, the
underwriters may resell the securities from time to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale. Underwriters may offer securities to the public
either through underwriting syndicates represented by one or more managing underwriters or directly by one or more firms acting
as underwriters. Unless we inform you otherwise in the applicable prospectus supplement, the obligations of the underwriters to
purchase the securities will be subject to certain conditions, and the underwriters will be obligated to purchase all of the offered
securities if they purchase any of them. The underwriters may change from time to time any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers.
We will describe the name or names of any
underwriters, dealers or agents and the purchase price of the securities in a prospectus supplement relating to the securities.
In connection with the sale of the securities,
underwriters may receive compensation from us or from purchasers of the securities, for whom they may act as agents, in the form
of discounts, concessions or commissions. Underwriters may sell the securities to or through dealers, and these dealers may receive
compensation in the form of discounts, concessions or commissions from the underwriters and/or commissions from the purchasers
for whom they may act as agents, which is not expected to exceed that customary in the types of transactions involved. Underwriters,
dealers and agents that participate in the distribution of the securities may be deemed to be underwriters, and any discounts
or commissions they receive from us and any profit on the resale of the securities they realize may be deemed to be underwriting
discounts and commissions under the Securities Act. The prospectus supplement will identify any underwriter or agent and will
describe any compensation they receive from us.
Underwriters could make sales in privately
negotiated transactions and/or any other method permitted by law, including sales deemed to be an “at-the-market”
offering, sales made directly on the NASDAQ Capital Market, or such other exchange or automated quotation system on which our
securities trade, or sales made to or through a market maker other than on an exchange. The name of any such underwriter or agent
involved in the offer and sale of our securities, the amounts underwritten, and the nature of its obligations to take our securities
will be described in the applicable prospectus supplement.
Unless otherwise specified in the prospectus
supplement, each series of the securities will be a new issue with no established trading market, other than our common stock,
which is currently listed on the NASDAQ Capital Market. We may elect to list any of the securities on an exchange, but are not
obligated to do so. It is possible that one or more underwriters may make a market in a series of the securities, but underwriters
will not be obligated to do so and may discontinue any market making at any time without notice. Therefore, we can give no assurance
about the liquidity of or the trading market for any of the securities.
In compliance with the guidelines of the Financial
Industry Regulatory Authority, Inc., or FINRA, the maximum aggregate discounts, commissions, agency fees or other items constituting
underwriting compensation to be received by any FINRA member or independent broker-dealer will not exceed 8% of the aggregate
offering price of the securities offered pursuant to this prospectus and any applicable prospectus supplement.
To facilitate the offering of securities,
certain persons participating in the offering may engage in transactions that stabilize, maintain or otherwise affect the price
of the securities. This may include over-allotments or short sales of the securities, which involve the sale by persons participating
in the offering of more securities than we sold to them. In these circumstances, these persons would cover such over-allotments
or short positions by making purchases in the open market or by exercising their over-allotment option, if any. In addition, these
persons may stabilize or maintain the price of the securities by bidding for or purchasing securities in the open market or by
imposing penalty bids, whereby selling concessions allowed to dealers participating in the offering may be reclaimed if securities
sold by them are repurchased in connection with stabilization transactions. The effect of these transactions may be to stabilize
or maintain the market price of the securities at a level above that which might otherwise prevail in the open market. These transactions
may be discontinued at any time.
From time to time, we or our affiliates may
engage in transactions with these underwriters, dealers and agents in the ordinary course of business. Underwriters have from
time to time in the past provided, and may from time to time in the future provide, investment banking services to us for which
they have in the past received, and may in the future receive, customary fees.
Direct Sales and Sales through Agents
We may sell the securities directly. In this
case, no underwriters or agents would be involved. We may also sell the securities through agents designated by us from time to
time. In the applicable prospectus supplement, we will name any agent involved in the offer, sale or resale of the offered securities,
and we will describe any commissions payable to the agent. Unless we inform you otherwise in the applicable prospectus supplement,
any agent will agree to use its reasonable best efforts to solicit purchases for the period of its appointment.
We may sell the securities directly to institutional
investors or others who may be deemed to be underwriters within the meaning of the Securities Act with respect to any sale of
those securities. We will describe the terms of any sales of these securities in the applicable prospectus supplement.
Remarketing Arrangements
Securities may also be offered and sold, if
so indicated in the applicable prospectus supplement, in connection with a remarketing upon their purchase, in accordance with
a redemption or repayment pursuant to their terms, or otherwise, by one or more remarketing firms, acting as principals for their
own accounts or as agents for us. Any remarketing firm will be identified and the terms of its agreements, if any, with us and
its compensation will be described in the applicable prospectus supplement.
Delayed Delivery Contracts
If we so indicate in the applicable prospectus
supplement, we may authorize agents, underwriters or dealers to solicit offers from certain types of institutions to purchase
securities from us at the public offering price under delayed delivery contracts. Institutions with which we may make these delayed
delivery contracts include commercial and savings banks, insurance companies, pension funds, investment companies, educational
and charitable institutions and others. These contracts would provide for payment and delivery on a specified date in the future.
The contracts would be subject only to those conditions described in the applicable prospectus supplement. The obligations of
any purchaser under any such delayed delivery contract will be subject to the condition that the purchase of the securities shall
not at the time of delivery be prohibited under the laws of the jurisdiction to which the purchaser is subject. The underwriters
and other agents will not have any responsibility with regard to the validity or performance of these delayed delivery contracts.
The applicable prospectus supplement will describe the commission payable for solicitation of those contracts.
General Information
We may have agreements with the underwriters,
dealers, agents and remarketing firms to indemnify them against certain civil liabilities, including liabilities under the Securities
Act, or to contribute with respect to payments that the underwriters, dealers, agents or remarketing firms may be required to
make. Underwriters, dealers, agents and remarketing firms may be customers of, engage in transactions with or perform services
for us in the ordinary course of their businesses.
LEGAL MATTERS
The validity of the issuance of the securities
offered hereby will be passed upon for us by Robinson Brog Leinwand Greene Genovese& Gluck P.C., New York, New York.
EXPERTS
The consolidated financial statements of Nxt-ID,
Inc. as of December 31, 2014 and for the year then ended, have been incorporated by reference herein in reliance upon the
report of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of
said firm as experts in auditing and accounting. The report contains an explanatory paragraph that states that the Company has
incurred recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the outcome of that uncertainty.
Our audited consolidated financial statements
as of December 31, 2013 and for the year then ended have been incorporated in reliance on the report, which includes an explanatory
paragraph as to the Company’s ability to continue as a going concern, of Marcum LLP, an independent registered public accounting
firm, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus constitutes a part of a registration
statement on Form S-3 filed under the Securities Act. As permitted by the SEC’s rules, this prospectus and any prospectus
supplement, which form a part of the registration statement, do not contain all the information that is included in the registration
statement. You will find additional information about us in the registration statement. Any statements made in this
prospectus or any prospectus supplement concerning legal documents are not necessarily complete and you should read the documents
that are filed as exhibits to the registration statement or otherwise filed with the SEC for a more complete understanding of
the document or matter.
We file annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read, without charge, and copy the documents we file at the
SEC’s public reference room at 100 F Street, NE, Room 1580, Washington, DC 20549. You can request copies of these documents
by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference room. Our SEC filings are also available to the public at no cost from the SEC’s website at
www.sec.gov
.
Our corporate website is
www.nxt-id.com
. The information on our corporate website is not incorporated by reference in this
prospectus or any prospectus supplement and you should not consider it a part of this prospectus or any accompanying prospectus
supplement.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC permits us to “incorporate by
reference” into this prospectus the information contained in documents we file with the SEC, which means that we can disclose
important information to you by referring you to those documents. Information that is incorporated by reference is considered
to be part of this prospectus and you should read it with the same care that you read this prospectus. Information that we file
later with the SEC will automatically update and supersede the information that is either contained, or incorporated by reference,
in this prospectus, and will be considered to be a part of this prospectus from the date those documents are filed. We have filed
with the SEC and incorporate by reference in this prospectus, except as superseded, supplemented or modified by this prospectus,
the documents listed below:
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Annual
Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 6, 2015;
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Current
Report on Form 8-K, filed with the SEC on April 24, 2015; and
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Registration
Statement on Form 8-A, filed with the SEC on September 9, 2014, including any amendments or reports filed for the purpose
of updating the description of our common stock therein
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We also incorporate by reference all additional
documents that we file with the SEC under the terms of Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until the offering
is completed, including those documents that are filed after the initial filing date of the registration statement of which this
prospectus is a part and prior to effectiveness of the registration statement. We are not, however, incorporating, in each case,
any documents or information that we are deemed to furnish and not file under Item 2.02 or Item 7.01 of any Current Report on
Form 8-K in accordance with SEC rules.
We will provide to each person, including
any beneficial owner, to whom a copy of this prospectus is delivered, a copy of any or all information that we have incorporated
by reference into this prospectus. You may request, and we will provide you with, a copy of these filings, at no cost, by calling
us at (203) 266-2103 or by writing to us at the following address:
Nxt-ID, Inc.
288 Christian Street
Oxford, CT 06478
Attn.: Corporate Secretary
1,750,000 Shares of Common Stock
PROSPECTUS SUPPLEMENT
Aegis
Capital Corp.
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Maxim
Group LLC
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Lead Placement Agent
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Co-Placement Agent
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December 21, 2017
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