SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of
December 10, 2020, information regarding beneficial ownership of our capital stock by:
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Each person, or group of affiliated persons, known
by us to beneficially own more than 5% of our Common Stock, Series C Preferred Stock or Series D Preferred Stock;
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Each of our executive officers;
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Each of our directors; and
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All of our current executive officers and directors as a group.
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Beneficial ownership is determined according
to the rules of the Securities and Exchange Commission (the “SEC’) and generally means that a person has beneficial
ownership of a security if he, she or it possesses sole or shared voting or investment power of that security, including securities
that are exercisable for shares of Common Stock, Series C Preferred Stock or Series D Preferred Stock within sixty (60) days of
December 10, 2020. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the
persons named in the table below have sole voting and investment power with respect to all shares of Common Stock, Series C Preferred
Stock or Series D Preferred Stock shown that they beneficially own, subject to community property laws where applicable.
For purposes of computing the percentage
of outstanding shares of our Common Stock and Series C Preferred Stock held by each person or group of persons named above, any
shares of Common Stock, Series C Preferred Stock or Series D Preferred Stock that such person or persons has the right to acquire
within sixty (60) days of December 10, 2020 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. The inclusion herein of any shares of Common Stock, Series C Preferred
Stock and Series D Preferred Stock listed as beneficially owned does not constitute an admission of beneficial ownership. Unless
otherwise identified, the address of each beneficial owner listed in the table below is c/o Nxt-ID, Inc., 288 Christian Street,
Hangar C 2nd Floor, Oxford, CT 06478.
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Shares Beneficially Owned
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% Total
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Common Stock
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Series C Preferred Stock
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Series D Preferred Stock
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Voting
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Name and Address of Beneficial Owner
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Shares
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%(1)
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Shares
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%
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Shares
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%
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Power (2)
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Non-Director or Officer 5% Stockholders:
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Anson Funds Management LP (3)
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1,838,750
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4.99
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—
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—
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—
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—
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4.99
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Giesecke & Devrient Mobile Security America, Inc. (4)
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584,795
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1.67
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2,000
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100 (5)
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—
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—
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1.67 (5)
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Directors and Executive Officers:
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Vincent S. Miceli
Chief Executive Officer,
Chief Financial Officer and Director
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464,607
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1.33
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—
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—
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—
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—
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1.33
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David Tunnell
Chief Technology Officer
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764,582
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2.18
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—
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—
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—
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—
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2.18
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Major General David R. Gust, USA, Ret.
Director (6)
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344,091
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*
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—
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—
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—
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—
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*
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Michael J. D’Almada-Remedios, PhD
Director (7)
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349,459
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*
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—
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—
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—
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*
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Daniel P. Sharkey
Director (8)
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339,079
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*
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—
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*
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Robert A. Curtis, Pharm.D.
Director (9)
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253,988
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*
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—
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*
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Directors and Executive Officers as a Group (6 persons)
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2,515,806
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7.12
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7.12
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(1)
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Based on 35,009,952 shares of Common Stock issued and outstanding
as of December 10, 2020.
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(2)
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Percentage of total voting power represents voting power with
respect to all shares of our Common Stock, Series C Preferred Stock, which have the same voting rights as our shares of Common
Stock, and Series D Preferred Stock, which have voting rights on an as-converted basis to Common Stock, which is currently
based on one (1) share of Common Stock for each share of Series D Preferred Stock held by them. The holders of our Common
Stock, Series C Preferred Stock and Series D Preferred Stock are each entitled to one vote per share.
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(3)
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Anson Funds Management LP, as co-investment advisor to a private
fund which directly holds warrants to purchase up to 6,730,721 shares of Common Stock, has shared voting and investment power with
respect to the warrants to purchase up to 6,730,721 shares of Common Stock. As a result of 4.99% beneficial ownership limitation
provisions in such warrants, Anson Funds Management LP beneficially owns 1,838,750 shares of Common Stock issuable pursuant to
the warrants. The address of Anson Funds Management LP is 5950 Berkshire Lane, Suite 210, Dallas, Texas 75225.
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(4)
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The address of Giesecke & Devrient Mobile Security America,
Inc. (“G&D”) is 45925 Horseshoe Drive, Dulles, VA 20166.
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(5)
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G&D is the sole holder of our Series C Preferred Stock and
thus has 100% of the voting power of our outstanding shares of Series C Preferred Stock, which have the same voting rights
as our shares of Common Stock (one vote per share). G&D’s percentage of total voting power, which includes both
our Common Stock and Series C Preferred Stock, is 1.71%.
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(6)
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Includes stock options to purchase 77,568 shares of Common Stock
at an average exercise price of $0.39 per share.
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(7)
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Includes stock options to purchase 77,568 shares of Common Stock
at an average exercise price of $0.39 per share.
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(8)
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Includes stock options to purchase 77,568 shares of Common Stock
at an average exercise price of $0.39 per share.
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(9)
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Includes stock options to purchase 77,568 shares of Common Stock
at an average exercise price of $0.39 per share.
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PROPOSAL TO AUTHORIZE THE
BOARD OF DIRECTORS TO AMEND THE COMPANY’S
CERTIFICATE OF INCORPORATION TO EFFECT
A REVERSE STOCK SPLIT OF OUR
OUTSTANDING COMMON STOCK
(Proposal No. 1)
Summary
Our Board has unanimously approved a proposal
to amend the Certificate of Incorporation to effect a reverse stock split of all of our outstanding shares of Common Stock by
a ratio in the range of one-for-three to one-for-fifteen (the “Common Stock Reverse Stock Split”). The proposal provides
that our Board shall have sole discretion pursuant to Section 242(c) of Delaware General Corporation Law (the “DGCL”)
to elect, as it determines to be in the Company’s best interests, solely for the purpose of maintaining the listing of our
Common Stock on the Nasdaq Capital Market, whether or not to effect the Common Stock Reverse Stock Split before the Company’s
2021 Annual Meeting of Stockholders. The Company’s stockholders previously approved a similar amendment in connection with
the 2019 Annual Meeting of Stockholders. Originally intended to be utilized prior to May 18, 2020, the Board elected not to implement
the reverse stock split at that time owing to the Common Stock’s volatility during the middle of the COVID-19 pandemic,
coupled with the relaxing of the Minimum Bid Price Requirement (defined below) by Nasdaq through June 30, 2020. The Company’s
stockholders did not approve a similar amendment in connection with the 2020 Annual Meeting of Stockholders.
Should the Board proceed with the Common
Stock Reverse Stock Split, the exact ratio shall be set at a whole number within the above range as determined by our Board in
its sole discretion. Our Board believes that the availability of alternative reverse stock split ratios will provide it with the
flexibility to implement the Common Stock Reverse Stock Split in a manner designed to maximize the anticipated benefits for the
Company and its stockholders. In determining whether to implement the Common Stock Reverse Stock Split following the receipt of
stockholder approval, our Board may consider, among other things, factors such as:
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the historical trading price and trading volume of our Common
Stock;
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the then prevailing trading price and trading volume of our
Common Stock and the anticipated impact of the Common Stock Reverse Stock Split on the trading market for our Common Stock;
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our ability to have our shares of Common Stock remain listed
on the Nasdaq Capital Market;
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the anticipated impact of the Common Stock Reverse Stock Split
on our ability to raise additional financing; and
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prevailing general market and economic conditions.
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If our Board determines, in its sole discretion,
that effecting the Common Stock Reverse Stock Split is necessary to maintain the listing of our Common Stock on the Nasdaq Capital
Market and it is also in our best interest, the Common Stock Reverse Stock Split will become effective upon filing of an amendment
to our Certificate of Incorporation with the Secretary of State of the State of Delaware. The amendment filed thereby will set
forth the number of shares of Common Stock to be combined into one share of our Common Stock, within the limits set forth in this
proposal. Except for adjustments that may result from the treatment of fractional shares as described below, each holder of our
shares of Common Stock will hold the same percentage of our outstanding Common Stock immediately following the Common Stock Reverse
Stock Split as such stockholder holds immediately prior to the Common Stock Reverse Stock Split. Additionally, the terms of the
Series D Preferred Stock will result in an adjustment to the conversion ratio of the shares of Series D Preferred Stock to shares
of Common Stock, by the same ratio as the Common Stock Reverse Stock Split, but each holder of our shares of Series D Preferred
Stock will continue to hold the same number of shares of Series D Preferred Stock as such stockholder held immediately prior to
the Common Stock Reverse Stock Split and will continue to hold the same percentage, on an as-converted to Common Stock basis,
immediately following the Common Stock Reverse Stock Split, as such stockholder holds immediately prior to the Common Stock Reverse
Stock Split. Further, assuming that the Series C Preferred Reverse Stock Split is implemented by the Board at the same ratio as
the Common Stock Reverse Stock Split, each holder of Common Stock and each holder of Series D Preferred Stock, on an as-converted
to Common Stock basis, will hold the same percentage of our outstanding Common Stock and Series C Preferred Stock, in the aggregate,
immediately following the Common Stock Reverse Stock Split as such holder of Common Stock or holder of Series D Preferred Stock,
on an as converted to Common Stock basis, holds immediately prior to the Common Stock Reverse Stock Split.
The text of the form of amendment to the
Certificate of Incorporation, which would be filed with the Secretary of State of the State of Delaware to effect the Common Stock
Reverse Stock Split, is set forth in Appendix A to this Proxy Statement. The text of the form of amendment accompanying
this Proxy Statement is, however, subject to amendment to reflect the exact ratio for the Common Stock Reverse Stock Split and
any changes that may be required by the office of the Secretary of State of the State of Delaware or that the Board may determine
to be necessary or advisable ultimately to comply with applicable law and to effect the Common Stock Reverse Stock Split.
Our Board believes that approval of the
amendment to the Certificate of Incorporation to effect the Common Stock Reverse Stock Split is in the best interests of the Company
and our stockholders and has unanimously recommended that the proposed amendment be presented to our stockholders for approval.
Board Discretion to Implement the Common
Stock Reverse Stock Split
The Common Stock Reverse Stock Split
will be effected, if at all, only upon a determination by our Board that the Common Stock Reverse Stock Split (with an exchange
ratio determined by our Board as described above) is necessary to maintain the listing of our Common Stock on the Nasdaq Capital
Market and is also in the best interests of the Company and its stockholders. Such determination shall be based upon certain factors,
including, but not limited to, the historical trading price and trading volume of our Common Stock, the then prevailing trading
price and trading volume of our Common Stock and the anticipated impact of the Common Stock Reverse Stock Split on the trading
market for our Common Stock, our ability to have our shares of Common Stock remain listed on the Nasdaq Capital Market, the anticipated
impact of the Common Stock Reverse Stock Split on our ability to raise additional financing, and prevailing general market and
economic conditions. No further action on the part of stockholders would be required to either implement or not implement the
Common Stock Reverse Stock Split. If our stockholders approve the proposal, and the Board determines to effect the Common Stock
Reverse Stock Split, we would communicate to the public, prior to the Effective Date (as defined below), additional details regarding
the Common Stock Reverse Stock Split, including the specific ratio selected by the Board.
If the Board does not implement
the Common Stock Reverse Stock Split prior to the Company’s 2021 Annual Meeting of Stockholders, the authority granted in
this proposal to implement the Common Stock Reverse Stock Split will terminate. The Board is requesting authorization to implement
the Common Stock Reverse Stock Split up until such time in the event the Company needs to utilize this Proposal No. 1 in order
to regain compliance with the minimum bid price requirement of $1.00 per share for continued listing of our Common Stock on the
Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”) (described
below under “Purpose of the Common Stock Reverse Stock Split”). The Board of Directors would only want to implement
the Common Stock Reverse Stock Split to regain compliance with the Minimum Bid Price Requirement in order to remain listed on
the Nasdaq Capital Market. As such, the Board reserves its right to elect not to proceed with the Common Stock Reverse Stock Split
if it determines, in its sole discretion, that this proposal is no longer in the Company’s best interest. In the event that
the stock price of our Common Stock satisfies the Minimum Bid Price Requirement for at least ten (10) consecutive trading days,
without requiring the Common Stock Reverse Stock Split, then the Board may not implement the Common Stock Reverse Stock Split
unless it becomes necessary at some point later in the future.
Effective Date
If the proposed amendment to the Certificate
of Incorporation to give effect to the Common Stock Reverse Stock Split is approved at the Special Meeting and the Board determines
to effect the Common Stock Reverse Stock Split, subject to the conditions set out in this Proposal No. 1, then the Common Stock
Reverse Stock Split will become effective as of 5:30 p.m. Eastern Time on the effective date of the certificate of amendment to
our Certificate of Incorporation with the office of the Secretary of State of the State of Delaware, which we would expect to
be the date of filing (the “Effective Date”). Except as explained below with respect to fractional shares, each issued
share of Common Stock immediately prior to the Effective Date will automatically be changed, as of the Effective Date, into a
fraction of a share of Common Stock, based on the exchange ratio within the approved range determined by the Board.
Purpose of the Reverse Stock Split
The sole purpose for the Common Stock
Reverse Stock Split is based on the Board’s belief that the Common Stock Reverse Stock Split will be necessary to maintain
the listing of our Common Stock on the Nasdaq Capital Market. In the event that the Board, in its sole discretion, determines
to implement the Common Stock Reverse Stock Split for such purpose, subject to the conditions set out in this Proposal No. 1,
the Board believes that the Common Stock Reverse Stock Split could also improve the marketability and liquidity of the Common
Stock.
Maintain our listing on the Nasdaq
Capital Market. Our Common Stock is traded on the Nasdaq Capital Market. On May 24, 2019, the Company received notice
from Nasdaq that it no longer satisfied the Minimum Bid Price Requirement and had 180 calendar days from the date therein to regain
compliance. On November 21, 2019, the Company received a second notice from Nasdaq indicating that, while the Company had not
regained compliance with the Minimum Bid Price Requirement, Nasdaq had determined that the Company was eligible for an additional
180-day period, or until May 18, 2020, to regain compliance. However, on April 17, 2020, the Company received notice from Nasdaq
that the 180-day grace period to regain compliance with the Minimum Bid Price Requirement under applicable Nasdaq rules was extended
due to the global market impact caused by COVID-19. More specifically, Nasdaq stated that the compliance periods for any company
previously notified about non-compliance would be suspended effective April 16, 2020, through June 30, 2020. On July 1, 2020,
companies would receive the balance of any pending compliance period exception to come back into compliance with the applicable
Minimum Bid Price Requirement. As a result of this extension, the Company had until August 3, 2020 to regain compliance with the
Minimum Bid Price Requirement. Since the Company did not satisfy the Minimum Bid Price Requirement by August 3, 2020, the Company
received written notification (the “Letter”) from Nasdaq that the Company’s shares of Common Stock would be
delisted, unless the Company requested a hearing to appeal Nasdaq’s determination. On August 6, 2020, the Company requested
a hearing before the Nasdaq Hearings Panel (the “Hearings Panel”) to appeal the Letter, and, on August 7, 2020, Nasdaq
notified the Company that a hearing was scheduled for September 10, 2020. The Company provided the Hearings Panel with a plan
to regain compliance with the Minimum Bid Price Requirement while requesting additional time to effect compliance with the Minimum
Bid Price Requirement either organically or by securing authorization for the Common Stock Reverse Stock Split. On September 16,
2020, the Hearings Panel granted our request to continue the listing of our shares of Common Stock on the Nasdaq Capital Market,
subject to certain conditions. In order for our shares of Common Stock to continue to be listed on the Nasdaq Capital Market,
the decision of the Hearing Panel required that, on or before October 31, 2020, the Company shall have completed a reverse stock
split and shall have demonstrated compliance with the Minimum Bid Price Requirement by evidencing a closing bid price above $1
per share for the previous ten consecutive trading sessions. On October 9, 2020, the Company submitted a request to the Hearings
Panel to extend the deadline to regain compliance with the Minimum Bid Price Requirement to November 30, 2020, which request was
granted by the Hearings Panel on October 12, 2020. On November 30, 2020, the Company submitted a second request to the Hearings
Panel to extend the deadline to regain compliance with the Minimum Bid Price Requirement to February 1, 2021, which request was
granted by the Hearings Panel on December 7, 2020. The Company, therefore, has until February 1, 2021 to demonstrate compliance
with the Minimum Bid Price Requirement by evidencing a closing bid price above $1 per share for the previous ten consecutive trading
sessions.
A similar proposal was approved by our
stockholders at the 2019 Annual Meeting of Stockholders, which was originally held on December 17, 2019 and adjourned to January
17, 2020, which gave the Board authority to amend the Certificate of Incorporation to effect a reverse stock split of all of our
outstanding shares of Common Stock, by a ratio in the range of one-for-three to one-for-fifteen, until May 18, 2020, which was
the original date by which Nasdaq had advised the Company it needed to achieve compliance with the Minimum Bid Price Requirement
(the “2019 Approved Reverse Stock Split”). Despite Nasdaq’s unforeseen action that provided an extension for
all exchange listed companies that were not in compliance with this requirement, which effectively extended the Company’s
180-day grace period to August 3, 2020 to regain compliance with the Minimum Bid Price Requirement, the Board’s authority
expired on May 18, 2020 to authorize the 2019 Approved Reverse Stock Split. The volatility that the stock market experienced during
the height of the COVID-19 pandemic, including the weeks and months leading up to May 18, 2020, resulted in the determination
that it was not in the best interests of the Company and its stockholders to effect the 2019 Approved Reverse Stock Split at that
time. The Company’s stockholders did not approve a similar amendment in connection with the 2020 Annual Meeting of Stockholders.
The Company believes that providing the Board until the 2021 Annual Meeting to authorize the Common Stock Reverse Stock Split
will be a sufficient amount of time for the Board to select the ratio that will enable the Company to achieve and maintain compliance
with the Minimum Bid Price Requirement and that will be in the best interests of the Company and its stockholders.
The Company will be required to comply
with all of the conditions established by the Hearings Panel in order to regain compliance with the Minimum Bid Price Requirement,
otherwise our Common Stock will be delisted by Nasdaq. As of the date of this Proxy Statement, our stock price has not had a minimum
bid price of at least $1.00 for at least ten (10) consecutive trading days. In the event that our stock price satisfies the Minimum
Bid Price Requirement for at least ten (10) consecutive trading days without requiring the Common Stock Reverse Stock Split, the
Board may not immediately implement the Common Stock Reverse Stock Split.
The Board has considered the potential
harm to the Company and its stockholders should Nasdaq delist our Common Stock from the Nasdaq Capital Market. Delisting our Common
Stock could adversely affect the liquidity of our Common Stock because alternatives, such as the OTC Bulletin Board and the pink
sheets, are generally considered to be less efficient markets. An investor likely would find it less convenient to sell, or to
obtain accurate quotations in seeking to buy our Common Stock on an over-the-counter market. Many investors likely would not buy
or sell our Common Stock due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities
not listed on a national exchange or other reasons. The Board of Directors believes that the Common Stock Reverse Stock Split
is a potentially effective means for us to maintain compliance with the rules of Nasdaq and to avoid, or at least mitigate, the
likely adverse consequences of our Common Stock being delisted from the Nasdaq Capital Market by producing the immediate effect
of increasing the bid price of our Common Stock.
Improve the marketability and liquidity
of the Common Stock. In the event the Board elects to implement the Common Stock Reverse Stock Split in order to avoid
the delisting of our Common Stock from the Nasdaq Capital Market, we also believe that the increased market price of our Common
Stock expected as a result of implementing the Common Stock Reverse Stock Split will improve the marketability and liquidity of
our Common Stock and will encourage interest and trading in our Common Stock. The Common Stock Reverse Stock Split could allow
a broader range of institutions to invest in our Common Stock (namely, funds that are prohibited from buying stocks whose price
is below a certain threshold), potentially increasing the liquidity of our Common Stock. The Common Stock Reverse Stock Split
could also help increase analyst and broker interest in our stock as their policies can discourage them from following or recommending
companies with low stock prices. Because of the trading volatility often associated with low-priced stocks, many brokerage houses
and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks
or tend to discourage individual brokers from recommending low-priced stocks to their customers. Some of those policies and practices
may function to make the processing of trades in low-priced stocks economically unattractive to brokers. Additionally, because
brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on
higher-priced stocks, the current average price per share of our Common Stock can result in individual stockholders paying transaction
costs representing a higher percentage of their total share value than would be the case if the share price were substantially
higher. It should be noted, however, that the liquidity of our Common Stock may in fact be adversely affected by the proposed
Common Stock Reverse Stock Split given the reduced number of shares of Common Stock that would be outstanding after the Common
Stock Reverse Stock Split.
For the above reasons, we believe that
providing the Board with the ability to effect the Common Stock Reverse Stock Split, in the event that it determines, in its sole
discretion, that implementing the Common Stock Reverse Stock Split will help us regain and maintain compliance with the Nasdaq
listing requirements and, as a result, could also improve the marketability and liquidity of our Common Stock, is in the best
interests of the Company and our stockholders. However, regardless as to whether or not the Board believes that implementing the
Common Stock Reverse Stock Split could help us regain and maintain compliance with the Nasdaq listing requirements, the Board
of Directors reserves the right not to implement the Common Stock Reverse Stock Split if it determines, in its sole discretion,
that it otherwise would not be in our and our stockholders’ best interests.
Risks of the Common Stock Reverse Stock
Split
We cannot assure you that the proposed
Common Stock Reverse Stock Split will increase our stock price and have the desired effect of maintaining compliance with the
rules of Nasdaq. The Board of Directors expects that the Common Stock Reverse Stock Split of our Common Stock will increase
the market price of our Common Stock so that we are able to regain and maintain compliance with the Minimum Bid Price Requirement.
However, the effect of the Common Stock Reverse Stock Split upon the market price of our Common Stock cannot be predicted with
any certainty, and the history of similar reverse stock splits for companies in like circumstances is varied. Under applicable
Nasdaq rules, in order to regain compliance with the Minimum Bid Price Requirement and maintain our listing on the Nasdaq Capital
Market, the $1.00 closing bid price must be maintained for a minimum of ten (10) consecutive trading days. In determining whether
to monitor bid price beyond ten trading days, Nasdaq will consider the following four factors: (1) margin of compliance (the amount
by which the price is above the $1.00 minimum standard); (2) trading volume (a lack of trading volume may indicate a lack of bona
fide market interest in the security at the posted bid price); (3) the market maker montage (the number of market makers quoting
at or above $1.00 and the size of their quotes); and (4) the trend of the stock price. Accordingly, we cannot assure you that
we will be able to maintain our Nasdaq listing after the Common Stock Reverse Stock Split is effected or that the market price
per share after the Common Stock Reverse Stock Split will exceed or remain in excess of the $1.00 minimum bid price for a sustained
period of time.
It is possible that the per share price
of our Common Stock after the Common Stock Reverse Stock Split will not rise in proportion to the reduction in the number of shares
of our Common Stock outstanding resulting from the Common Stock Reverse Stock Split, and the market price per post-Common Stock
Reverse Stock Split share may not exceed or remain in excess of the $1.00 minimum bid price for a sustained period of time, and
the Common Stock Reverse Stock Split may not result in a per share price that would attract brokers and investors who do not trade
in lower priced stocks. Even if we effect the Common Stock Reverse Stock Split, the market price of our Common Stock may decrease
due to factors unrelated to the Common Stock Reverse Stock Split. In any case, the market price of our Common Stock may also be
based on other factors which may be unrelated to the number of shares outstanding, including our future performance. If the Common
Stock Reverse Stock Split is consummated and the trading price of the Common Stock declines, the percentage decline as an absolute
number and as a percentage of our overall market capitalization may be greater than would occur in the absence of the Common Stock
Reverse Stock Split. Even if the market price per post-Common Stock Reverse Stock Split share of our Common Stock remains in excess
of $1.00 per share, we may be delisted due to a failure to meet other continued listing requirements, including Nasdaq requirements
related to the minimum stockholders’ equity, the minimum number of shares that must be in the public float, the minimum
market value of the public float and the minimum number of round lot holders.
The Common Stock Reverse Stock Split
may decrease the liquidity of our Common Stock. The liquidity of our Common Stock may be harmed by the Common Stock Reverse
Stock Split given the reduced number of shares of Common Stock that would be outstanding after the Common Stock Reverse Stock
Split, particularly if the stock price does not increase as a result of the Common Stock Reverse Stock Split. In addition, investors
might consider the increased proportion of unissued authorized shares of Common Stock to issued shares to have an anti-takeover
effect under certain circumstances, because the proportion allows for dilutive issuances which could prevent certain stockholders
from changing the composition of the Board or render tender offers for a combination with another entity more difficult to successfully
complete. The Board does not intend for the Common Stock Reverse Stock Split to have any anti-takeover effects.
Principal Effects of the Common Stock
Reverse Stock Split
Common Stock. If this proposal
is approved by the stockholders at the Annual Meeting and the Board determines to effect the Common Stock Reverse Stock Split,
subject to the conditions set out in this Proposal No. 1, and thus amend the Certificate of Incorporation, the Company will file
a certificate of amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware. Except for
adjustments that may result from the treatment of fractional shares as described below, each issued share of Common Stock immediately
prior to the Effective Date will automatically be changed, as of the Effective Date, into a fraction of a share of Common Stock
based on the exchange ratio within the approved range determined by the Board. In addition, proportional adjustments will be made
to the maximum number of shares of Common Stock issuable under, and other terms of, (i) the Series D Preferred Stock, (ii) our
stock plans, and (iii) the number of shares of Common Stock issuable under, and the exercise price of, our outstanding options
and warrants.
Except for adjustments that may result
from the treatment of fractional shares of Common Stock as described below, because the Common Stock Reverse Stock Split would
apply to all issued shares of our Common Stock, and assuming Proposal No. 2 is approved by the Company’s stockholders and
the Board implements the Series C Preferred Reverse Stock Split at the same ratio that the Board sets for the Common Stock Reverse
Stock Split, as described in Proposal No. 2, the Common Stock Reverse Stock Split would not alter the relative rights and preferences
of our existing stockholders nor affect any stockholder’s proportionate equity interest in the Company. For example, a holder
of two percent (2%) of the voting power of the outstanding shares of our Common Stock, Series C Preferred Stock and Series D Preferred
Stock, on an as converted to Common Stock basis, in the aggregate, immediately prior to the effectiveness of the Common Stock Reverse
Stock Split will generally continue to hold two percent (2%) of the voting power of the outstanding shares of our Common Stock,
Series C Preferred Stock and Series D Preferred Stock, on an as-converted to Common Stock basis, in the aggregate, immediately
after the Common Stock Reverse Stock Split. Moreover, the number of stockholders of record of the Company’s Common Stock,
Series C Preferred Stock and Series D Preferred Stock will not be affected by the Common Stock Reverse Stock Split. The amendment
to the Certificate of Incorporation itself would not change the number of authorized shares of our Common Stock. The Common Stock
Reverse Stock Split will have the effect of creating additional unreserved shares of our authorized Common Stock. Although at present
we have no current arrangements or understandings providing for the issuance of the additional shares of Common Stock that would
be made available for issuance upon effectiveness of the Common Stock Reverse Stock Split, other than those shares needed to satisfy
the conversion and/or exercise of the Company’s outstanding convertible notes, convertible preferred stock (including the
Series D Preferred Stock), warrants and options, these additional shares of Common Stock may be used by us for various purposes
in the future without further stockholder approval, including, among other things:
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raising capital to fund our operations and to continue as a going concern;
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establishing strategic relationships with other companies;
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providing equity incentives to our employees, officers or directors; and
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expanding our business or product lines through the acquisition of other businesses or products.
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While the Common Stock Reverse Stock Split
will make additional shares of Common Stock available for the Company to use in connection with the foregoing, the sole purpose
of the Common Stock Reverse Stock Split is to increase our stock price in order to regain and maintain compliance with the Minimum
Bid Price Requirement, which compliance will be the sole factor in determining the ratio of the Common Stock Reverse Stock Split.
Effect on Employee Plans, Options, Restricted
Stock Awards and Convertible or Exchangeable Securities. Pursuant to the terms of the 2013 Long Term Incentive Plan and
the 2017 Stock Incentive Plan (collectively, the “Plans”), the Board or a committee thereof, as applicable, will adjust
the number of shares of Common Stock available for future grant under the Plans, the number of shares of Common Stock underlying
outstanding awards, the exercise price per share of outstanding stock options, and other terms of outstanding awards issued pursuant
to the Plans to equitably reflect the effects of the Common Stock Reverse Stock Split. Based upon the Common Stock Reverse Stock
Split ratio determined by the Board, proportionate adjustments are also generally required to be made to the per share exercise
price and the number of shares of Common Stock issuable upon the exercise or conversion of outstanding options, and any convertible
or exchangeable securities entitling the holders to purchase, exchange for, or convert into, shares of Common Stock. This would
result in approximately the same aggregate price being required to be paid under such options, and convertible or exchangeable
securities upon exercise, and approximately the same value of shares of Common Stock being delivered upon such exercise, exchange
or conversion, immediately following the Common Stock Reverse Stock Split as was the case immediately preceding the Common Stock
Reverse Stock Split. The number of shares of Common Stock subject to restricted stock awards and restricted stock units will be
similarly adjusted, subject to our treatment of fractional shares of Common Stock. The number of shares of Common Stock reserved
for issuance pursuant to these securities and our Plans will be adjusted proportionately based upon the Common Stock Reverse Stock
Split ratio determined by the Board of Directors, subject to our treatment of fractional shares of Common Stock.
Listing. Our shares of Common
Stock currently trade on the Nasdaq Capital Market. The Common Stock Reverse Stock Split will not directly affect the listing of
our Common Stock on the Nasdaq Capital Market, although we believe that the Common Stock Reverse Stock Split could potentially
increase our stock price, facilitating compliance with the Minimum Bid Price Requirement. Following the Common Stock Reverse Stock
Split, our Common Stock will continue to be listed on the Nasdaq Capital Market under the symbol “NXTD,” although our
Common Stock would have a new committee on uniform securities identification procedures (“CUSIP”) number, a number
used to identify our Common Stock.
“Public Company” Status. Our
Common Stock is currently registered under Section 12(b) and 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and we are subject to the “public company” periodic reporting and other requirements of the Exchange Act.
The proposed Common Stock Reverse Stock Split will not affect our status as a public company or this registration under the Exchange
Act. The Common Stock Reverse Stock Split is not intended as, and will not have the effect of, a “going private transaction”
covered by Rule 13e-3 under the Exchange Act.
Odd Lot Transactions. It is
likely that some of our stockholders will own “odd-lots” of less than 100 shares of Common Stock following the Common
Stock Reverse Stock Split. A purchase or sale of less than 100 shares of Common Stock (an “odd lot” transaction) may
result in incrementally higher trading costs through certain brokers, particularly “full service” brokers, and generally
may be more difficult than a “round lot” sale. Therefore, those stockholders who own less than 100 shares of Common
Stock following the Common Stock Reverse Stock Split may be required to pay somewhat higher transaction costs and may experience
some difficulties or delays should they then determine to sell their shares of Common Stock.
Authorized but Unissued Shares; Potential
Anti-Takeover Effects. Our Certificate of Incorporation presently authorizes 100,000,000 shares of Common Stock and 10,000,000
shares of blank check preferred stock, par value $0.0001 per share. The Common Stock Reverse Stock Split would not change the number
of authorized shares of the Common Stock, although the Common Stock Reverse Stock Split would decrease the number of issued and
outstanding shares of Common Stock. Therefore, because the number of issued and outstanding shares of Common Stock would decrease,
the number of shares of Common Stock remaining available for issuance by us in the future would increase.
Such additional shares of Common Stock
would be available for issuance from time to time for corporate purposes such as issuances of Common Stock in connection with capital-raising
transactions and acquisitions of companies or other assets, as well as for issuance upon conversion or exercise of securities such
as convertible preferred stock, convertible debt, warrants or options convertible into or exercisable for Common Stock. We believe
that the availability of the additional shares of Common Stock will provide us with the flexibility to meet business needs as they
arise, to take advantage of favorable opportunities and to respond effectively in a changing corporate environment. For example,
we may elect to issue shares of Common Stock to raise equity capital, to make acquisitions through the use of stock, to establish
strategic relationships with other companies, to adopt additional employee benefit plans or reserve additional shares of Common
Stock for issuance under such plans, where the Board determines it advisable to do so, without the necessity of soliciting further
stockholder approval, subject to applicable stockholder vote requirements under Delaware law and Nasdaq rules. If we issue additional
shares of Common Stock for any of these purposes, the aggregate ownership interest of our current stockholders, and the interest
of each such existing stockholder, would be diluted, possibly substantially.
The additional shares of our Common Stock
that would become available for issuance upon an effective Common Stock Reverse Stock Split could also be used by us to oppose
a hostile takeover attempt or delay or prevent a change of control or changes in or removal of our management, including any transaction
that may be favored by a majority of our stockholders or in which our stockholders might otherwise receive a premium for their
shares of Common Stock over then-current market prices or benefit in some other manner. Although the increased proportion of authorized
but unissued shares of Common Stock to issued shares of Common Stock could, under certain circumstances, have an anti-takeover
effect, the Common Stock Reverse Stock Split is not being proposed in order to respond to a hostile takeover attempt or to an attempt
to obtain control of the Company.
Fractional Shares
We will not issue fractional certificates
for post-Common Stock Reverse Stock Split shares of Common Stock in connection with the Common Stock Reverse Stock Split. To the
extent any holders of pre-Common Stock Reverse Stock Split shares of Common Stock are entitled to fractional shares of Common Stock
as a result of the Common Stock Reverse Stock Split, the Company will issue an additional share to all holders of fractional shares
of Common Stock.
No Dissenters’ Rights
Under Delaware law, our stockholders would
not be entitled to dissenters’ rights or rights of appraisal in connection with the implementation of the Common Stock Reverse
Stock Split, and we will not independently provide our stockholders with any such rights.
Certain United States Federal Income
Tax Consequences
The following is a summary of certain United
States federal income tax consequences of the Common Stock Reverse Stock Split. It does not address any state, local or foreign
income or other tax consequences, which, depending upon the jurisdiction and the status of the stockholder/taxpayer, may vary from
the United States federal income tax consequences. It applies to you only if you held pre-Common Stock Reverse Stock Split shares
of Common Stock as capital assets for United States federal income tax purposes. This discussion does not apply to you if you are
a member of a class of our stockholders subject to special rules, such as (a) a dealer in securities or currencies, (b) a trader
in securities that elects to use a mark-to-market method of accounting for your securities holdings, (c) a bank, (d) a life insurance
company, (e) a tax-exempt organization, (f) a person that owns shares of Common Stock that are a hedge, or that are hedged, against
interest rate risks, (g) a person who owns shares of Common Stock as part of a straddle or conversion transaction for tax purposes
or (h) a person whose functional currency for tax purposes is not the U.S. dollar. The discussion is based on the Internal Revenue
Code of 1986, as amended (the “Internal Revenue Code”), its legislative history, existing, temporary and proposed regulations
under the Internal Revenue Code, published rulings and court decisions, all as of the date hereof. These laws, regulations and
other guidance are subject to change, possibly on a retroactive basis. We have not sought and will not seek an opinion of counsel
or a ruling from the Internal Revenue Service regarding the United States federal income tax consequences of the Common Stock Reverse
Stock Split.
PLEASE CONSULT YOUR OWN TAX ADVISOR CONCERNING
THE CONSEQUENCES OF THE COMMON STOCK REVERSE STOCK SPLIT IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE INTERNAL REVENUE CODE AND THE
LAWS OF ANY OTHER TAXING JURISDICTION.
Tax Consequences to United States Holders
of Common Stock. A United States holder, as used herein, is a stockholder who or that is, for United States federal income
tax purposes: (a) a citizen or individual resident of the United States, (b) a domestic corporation, (c) an estate whose income
is subject to United States federal income tax regardless of its source, or (d) a trust, if a United States court can exercise
primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial
decisions of the trust. This discussion applies only to United States holders.
Except for adjustments that may result
from the treatment of fractional shares of Common Stock as described above, no gain or loss should be recognized by a stockholder
upon such stockholder’s exchange of pre-Common Stock Reverse Stock Split shares of Common Stock for post-Common Stock Reverse
Stock Split shares of Common Stock pursuant to the Common Stock Reverse Stock Split, and the aggregate adjusted basis of the post-Common
Stock Reverse Stock Split shares of Common Stock received will be the same as the aggregate adjusted basis of the Common Stock
exchanged for such new shares. The stockholder’s holding period for the post-Common Stock Reverse Stock Split shares of Common
Stock will include the period during which the stockholder held the pre-Common Stock Reverse Stock Split shares of Common Stock
surrendered.
Accounting Consequences
Following the Effective Date of the Common
Stock Reverse Stock Split, if any, the net income or loss and net book value per share of Common Stock will be increased because
there will be fewer shares of the Common Stock outstanding. We do not anticipate that any other accounting consequences would arise
as a result of the Common Stock Reverse Stock Split.
Exchange of Stock Certificates
As of the Effective Date, each certificate
representing shares of our Common Stock outstanding before the Common Stock Reverse Stock Split will be deemed, for all corporate
purposes, to evidence ownership of the reduced number of shares of our Common Stock resulting from the Common Stock Reverse Stock
Split. All shares of Common Stock which may be converted pursuant to the provisions of the Series D Preferred Stock and all shares
of Common Stock underlying options, warrants and other securities exchangeable or exercisable for or convertible into Common Stock
also automatically will be adjusted on the Effective Date.
Our transfer agent, Continental Stock Transfer & Trust Company, will act as the exchange agent for purposes of exchanging stock certificates subsequent to the Common Stock
Reverse Stock Split. Shortly after the Effective Date, stockholders of record will receive written instructions requesting them
to complete and return a letter of transmittal and surrender their old stock certificates for new stock certificates reflecting
the adjusted number of shares as a result of the Common Stock Reverse Stock Split. Certificates representing shares of Common Stock
issued in connection with the Common Stock Reverse Stock Split will continue to bear the same restrictive legends, if any, that
were borne by the surrendered certificates representing the shares of Common Stock outstanding prior to the Common Stock Reverse
Stock Split. No new certificates will be issued until such stockholder has surrendered any outstanding certificates, together with
the properly completed and executed letter of transmittal, to the exchange agent. Until surrendered, each certificate representing
shares of Common Stock outstanding before the Common Stock Reverse Stock Split would continue to be valid and would represent the
adjusted number of shares of Common Stock, based on the ratio of the Common Stock Reverse Stock Split.
Any stockholder whose stock certificates
are lost, destroyed or stolen will be entitled to a new certificate or certificates representing post-Common Stock Reverse Stock
Split shares of Common Stock upon compliance with the requirements that we and our transfer agent customarily apply in connection
with lost, destroyed or stolen certificates. Instructions as to lost, destroyed or stolen certificates will be included in the
letter of instructions from the exchange agent.
Upon the Common Stock Reverse Stock Split,
we intend to treat stockholders holding our Common Stock in “street name,” through a bank, broker or other nominee,
in the same manner as registered stockholders whose shares of Common Stock are registered in their names. Banks, brokers and other
nominees will be instructed to effect the Common Stock Reverse Stock Split for their beneficial holders holding our Common Stock
in “street name”. However, such banks, brokers and other nominees may have different procedures than registered stockholders
for processing the Common Stock Reverse Stock Split. If you hold your shares in “street name” with a bank, broker or
other nominee, and if you have any questions in this regard, we encourage you to contact your bank, broker or nominee.
YOU SHOULD NOT DESTROY YOUR STOCK CERTIFICATES
AND YOU SHOULD NOT SEND THEM NOW. YOU SHOULD SEND YOUR STOCK CERTIFICATES ONLY AFTER YOU HAVE RECEIVED INSTRUCTIONS FROM THE EXCHANGE
AGENT AND IN ACCORDANCE WITH THOSE INSTRUCTIONS.
If any certificates for shares of Common
Stock are to be issued in a name other than that in which the certificates for shares of Common Stock surrendered are registered,
the stockholder requesting the reissuance will be required to pay to us any transfer taxes or establish to our satisfaction that
such taxes have been paid or are not payable and, in addition, (a) the transfer must comply with all applicable federal and state
securities laws, and (b) the surrendered certificate must be properly endorsed and otherwise be in proper form for transfer.
Book-Entry
The Company’s registered stockholders
may hold some or all of their shares electronically in book-entry form with our transfer agent. These stockholders do not have
stock certificates evidencing their ownership of Common Stock. They are, however, provided with a statement reflecting the number
of shares of Common Stock registered in their accounts.
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If you hold registered shares of Common Stock in book-entry form, you do not need to take any action to receive your post-Common Stock Reverse Stock Split shares of Common Stock in registered book-entry form.
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If you are entitled to post-Common Stock Reverse Stock Split shares of Common Stock, a transaction statement will automatically be sent to your address of record by our transfer agent as soon as practicable after the Effective Date indicating the number of shares of Common Stock that you hold.
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Interests of Directors and Executive
Officers
Our directors and executive officers have
no substantial interests, directly or indirectly, in the matters set forth in this proposal except to the extent of their ownership
of shares of our Common Stock and equity awards granted to them under our equity incentive plans.
Vote Required and Recommendation
Our Bylaws provide that, on all matters
(other than the election of directors and except to the extent otherwise required by our Certificate of Incorporation or applicable
Delaware law), the affirmative vote of a majority of the shares outstanding and entitled to vote on the matter will be required
for approval. Accordingly, the affirmative vote of a majority of the shares of Common Stock, Series C Preferred Stock and Series
D Preferred Stock, voting on an as-converted basis to Common Stock, in the aggregate, outstanding on the Record Date and entitled
to vote on the matter will be required to approve the Common Stock Reverse Stock Split.
At the Special Meeting a vote will be
taken on a proposal to amend the Company’s Certificate of Incorporation to effect the Common Stock Reverse Stock Split at
the discretion of the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” THE APPROVAL OF
PROPOSAL NO. 1.
PROPOSAL TO AUTHORIZE THE
BOARD OF DIRECTORS TO AMEND THE COMPANY’S
CERTIFICATE OF INCORPORATION BY AMENDING
THE SERIES C PREFERRED CERTIFICATE OF DESIGNATIONS TO
(i) EFFECT A REVERSE STOCK SPLIT OF OUR
OUTSTANDING SERIES C PREFERRED STOCK
BY THE SAME RATIO THAT THE BOARD SELECTS FOR THE COMMON STOCK REVERSE STOCK SPLIT AND (ii) INCREASE THE STATED VALUE OF THE SERIES
C PREFERRED STOCK BY THE SAME AMOUNT AS THE RATIO OF THE SERIES C PREFERRED REVERSE STOCK SPLIT
(Proposal No. 2)
Summary
Our Board has unanimously approved a proposal
to amend the Certificate of Incorporation by amending the Series C Preferred Certificate of Designations to effect the Series C
Preferred Reverse Stock Split by the same ratio that the Board selects for the Common Stock Reverse Stock Split. The proposal provides
that our Board shall be required, pursuant to Section 242(b) of the DGCL, to effect the Series C Preferred Reverse Stock Split,
if it determines to implement the Common Stock Reverse Stock Split described in Proposal No. 1, solely for the purpose of maintaining
the proportionate relationship of the Series C Preferred Stock to the Common Stock, at the same time the Board effects the Common
Stock Reverse Stock Split, and in any event, before the Company’s 2021 Annual Meeting of Stockholders. The proposal also
provides that the Board’s authority to effect the Series C Preferred Reverse Stock Split is conditioned on the Board’s
implementing the Common Stock Reverse Stock Split at the same ratio as implemented with respect to the Series C Preferred Reverse
Stock Split. Therefore, if Proposal No. 1 is not approved, or, even if approved, if the Board does not otherwise elect to implement
the Common Stock Reverse Stock Split at the same ratio as the Series C Preferred Reverse Stock Split, then the Board shall not
have authority to effect the Series C Preferred Reverse Stock Split pursuant to this Proposal No. 2.
Should the Board proceed with the Series
C Preferred Reverse Stock Split, the same ratio that is set for the Common Stock Reverse Stock Split shall be set for the Series
C Preferred Reverse Stock Split, so that the proportionate relationship of the Series C Preferred Stock to the Common Stock remains
the same, and so that neither the ratio set for the Common Stock Reverse Stock Split, nor the ratio set for the Series C Preferred
Reverse Stock Split, adversely affects the rights, preferences or privileges of the Series C Preferred Stock.
If our Board determines, in its sole discretion,
that effecting the Series C Preferred Reverse Stock Split is necessary to maintain the proportionate relationship of the Series
C Preferred Stock to the Common Stock and it is also in the best interests of the Company and our stockholders, then the Series
C Preferred Stock Reverse Stock Split will become effective upon filing of an amendment to our Series C Preferred Certificate of
Designations with the Secretary of State of the State of Delaware. The amendment filed thereby will set forth the number of shares
of Series C Preferred Stock to be combined into one share of our Series C Preferred Stock, within the limits set forth in this
proposal. Except for adjustments that may result from the treatment of fractional shares as described below, each holder of Series
C Preferred Stock will hold (i) the same percentage of our outstanding Series C Preferred Stock and (ii) assuming the implementation
of the Common Stock Reverse Stock Split, the same percentage of our outstanding Common Stock and Series C Preferred Stock, in the
aggregate, immediately following the Series C Preferred Reverse Stock Split as such stockholder holds immediately prior to the
Series C Preferred Stock Reverse Stock Split.
Additionally, our Board has unanimously
approved a corresponding amendment to our Series C Preferred Certificate of Designations to increase the stated value of the Series
C Preferred Stock by the same amount as the ratio of the Series C Preferred Reverse Stock Split so that the rights and preferences
of the Series C Preferred Stock including, without limitation, the amount payable to them upon a redemption of the Series C Preferred
Stock by the Company would not be affected by the Series C Preferred Reverse Stock Split. Any amendment increasing the stated value
of the Series C Preferred Stock is solely conditioned on the implementation of the Series C Preferred Reverse Stock Split. In the
event that the Series C Preferred Reverse Stock Split is not implemented by the Board, the amendment increasing the stated value
of the Series C Preferred Stock shall not be implemented.
The text of the form of amendment to the
Series C Preferred Certificate of Designations, which would be filed with the Secretary of State of the State of Delaware to effect
(i) the Series C Preferred Reverse Stock Split and (ii) the increase in stated value of the Series C Preferred Stock, is set forth
in Appendix B to this Proxy Statement. The text of the form of amendment accompanying this Proxy Statement is,
however, subject to amendment to reflect the exact ratio for the Series C Preferred Reverse Stock Split and any changes that may
be required by the office of the Secretary of State of the State of Delaware or that the Board may determine to be necessary or
advisable ultimately to comply with applicable law and to effect the Series C Preferred Reverse Stock Split.
Our Board believes that approval of the
amendments to the Series C Preferred Certificate of Designations to (i) effect the Series C Preferred Reverse Stock Split and (ii)
increase the stated value of the Series C Preferred Stock is in the best interests of the Company and our stockholders and has
unanimously recommended that the proposed amendment be presented to our stockholders for approval.
Implementation of the Series C Preferred
Reverse Stock Split
The Series C Preferred Reverse Stock
Split will be effected, if at all, only upon a determination by our Board to implement the Common Stock Reverse Stock Split, in
which case the Board will also implement the Series C Preferred Reverse Stock Split (at the same ratio determined by our Board
for the Common Stock Reverse Stock Split as described above) in order to maintain the proportionate relationship of the Series
C Preferred Stock to the Common Stock. No further action on the part of stockholders would be required to implement the Series
C Preferred Reverse Stock Split. If our stockholders approve the proposal, and the Board effects the Series C Preferred Reverse
Stock Split, we would communicate to the public, prior to the Effective Date, additional details regarding the Series C Preferred
Reverse Stock Split, including the specific ratio selected by the Board. Notwithstanding the foregoing, the Board’s authority
to effect the Series C Preferred Reverse Stock Split is conditioned on the Board’s also implementing the Common Stock Reverse
Stock Split at the same ratio as implemented with respect to the Series C Preferred Reverse Stock Split. Therefore, if Proposal
No. 1 is not approved, or, even if approved, if the Board does not otherwise elect to implement the Common Stock Reverse Stock
Split at the same ratio as the Series C Preferred Reverse Stock Split, then the Board shall not have authority to effect the Series
C Preferred Reverse Stock Split pursuant to this Proposal No. 2.
If the Board does not implement the
Series C Preferred Reverse Stock Split prior to the Company’s 2021 Annual Meeting of Stockholders, the authority granted
in this proposal to implement the Series C Preferred Reverse Stock Split will terminate. The Board is requesting authorization
to implement the Series C Preferred Reverse Stock Split up until such time in the event the Company needs to utilize this Proposal
No. 2 in order to maintain the proportionate relationship of the Series C Preferred Stock to the Common Stock.
Increase in the Stated Value of the
Series C Preferred Stock
The amendment to our Series C Certificate
of Designations will be effected, if at all, only upon the implementation of the Series C Preferred Reverse Stock Split so that
the rights and preferences of the Series C Preferred Stock including, without limitation, the amount payable to the holders of
Series C Preferred Stock upon a redemption of the Series C Preferred Stock by the Company, would not be affected by the Series
C Preferred Reverse Stock Split.
Effective Date
If the proposed amendment to the Certificate
of Incorporation by amending the Series C Preferred Certificate of Designations to (i) give effect to the Series C Preferred Stock
Reverse Stock Split and (ii) increase the stated value of the Series C Preferred Stock is approved at the Special Meeting, and
the Board effects the Series C Preferred Reverse Stock Split as a result of its determination to implement the Common Stock Reverse
Stock Split, the Company will file the amendment to the Series C Preferred Certificate of Designations with the office of the Secretary
of State of Delaware on the Effective Date and it will become effective as of 5:30 p.m. Eastern Time on the Effective Date. Except
as explained below with respect to fractional shares, each issued share of Series C Preferred Stock immediately prior to the Effective
Date will automatically be changed, as of the Effective Date, into a fraction of a share of Series C Preferred Stock, based on
the exchange ratio within the approved range determined by the Board.
Purpose of the Series C Preferred
Reverse Stock Split
The sole purpose for the Series C Preferred
Reverse Stock Split is based on the Board’s belief that the Series C Preferred Reverse Stock Split will be necessary to maintain
the proportionate relationship of the Series C Preferred Stock to the Common Stock.
Principal Effects of the Series C Preferred
Reverse Stock Split and Increase in the Stated Value of the Series C Preferred Stock
Series C Preferred Stock. If
this proposal is approved by the stockholders at the Special Meeting and the Board effects the Series C Preferred Reverse Stock
Split, as a result of its determination to implement the Common Stock Reverse Stock Split, and thus amend the Certificate of Incorporation
by amending the Series C Preferred Certificate of Designations, the Company will file a certificate of amendment to the Series
C Preferred Certificate of Designations with the Secretary of State of the State of Delaware.
There is only one holder of our Series
C Preferred Stock. Because the Series C Preferred Reverse Stock Split would be applied proportionately to the outstanding shares
of Series C Preferred Stock as the application of the Common Stock Reverse Stock Split would be applied to the outstanding shares
of Common Stock, the proposed Series C Preferred Reverse Stock Split would not alter the Series C Preferred stockholder’s
percentage ownership of the outstanding shares of Series C Preferred Stock or the outstanding shares of Common Stock and Series
C Preferred Stock, in the aggregate. Such holder will continue to hold one hundred percent (100%) of the voting power of the outstanding
shares of our Series C Preferred Stock immediately after the Series C Preferred Reverse Stock Split. Such holder will also continue
to hold the same percentage of the voting power of the outstanding shares of our Common Stock and Series C Preferred Stock, in
the aggregate, after the Series C Preferred Reverse Stock Split. One (1) share of Series C Preferred Stock shall continue to carry
the same voting rights as one (1) share of Common Stock. The amendment to the Series C Preferred Certificate of Designations would
not change the number of authorized shares of our blank check preferred stock, par value $0.0001 per share, nor will it change
the number of designated shares of Series C Preferred Stock. The Series C Preferred Reverse Stock Split will have the effect of
creating unreserved designated shares of Series C Preferred Stock. We have no current arrangements or understandings providing
for the issuance of the additional shares of Series C Preferred Stock that would be made available for issuance upon effectiveness
of the Series C Preferred Reverse Stock Split; provided, however, if we plan to issue any additional shares of
Series C Preferred Stock, pursuant to the provisions of the Series C Preferred Certificate of Designations, we would be required
to obtain the approval of the holder of Series C Preferred Stock to do so.
Effect on Employee Plans, Options, Restricted
Stock Awards and Convertible or Exchangeable Securities. We do not have any employee plans which provide for the issuance
of our Series C Preferred Stock.
Listing. Our Series C Preferred
Stock is not listed on any exchange and does not trade.
Authorized but Unissued Shares; Potential
Anti-Takeover Effects. Our Certificate of Incorporation presently authorizes 10,000,000 shares of blank check preferred
stock, par value $0.0001 per share, 2,000 shares of which are designated as Series C Preferred Stock. The Series C Preferred Reverse
Stock Split would not change the number of authorized shares of the blank check preferred stock as designated. Therefore, because
the number of issued and outstanding shares of Series C Preferred Stock would decrease, the number of shares of Series C Preferred
Stock remaining available for issuance by us in the future would increase. We have no current arrangements or understandings providing
for the issuance of the additional shares of Series C Preferred Stock that would be made available for issuance upon effectiveness
of the Series C Preferred Reverse Stock Split; provided, however, if we plan to issue any additional shares of
Series C Preferred Stock, pursuant to the provisions of the Series C Preferred Certificate of Designations, we would be required
to obtain the approval of the holder of Series C Preferred Stock to do so.
Fractional Shares
We will not issue fractional certificates
for post-Series C Preferred Reverse Stock Split shares of Series C Preferred Stock in connection with the Series C Preferred Reverse
Stock Split. To the extent any holders of pre-Series C Preferred Reverse Stock Split shares of Series C Preferred Stock are entitled
to fractional shares of Series C Preferred Stock as a result of the Series C Preferred Reverse Stock Split, the Company will issue
an additional share to all holders of fractional shares of Series C Preferred Stock.
No Dissenters’ Rights
Under Delaware law, our stockholders would
not be entitled to dissenters’ rights or rights of appraisal in connection with the implementation of the Series C Preferred
Stock Reverse Stock Split, and we will not independently provide our stockholders with any such rights.
Certain United States Federal Income
Tax Consequences
Holders of our shares of Series C Preferred
Stock should consult with their personal tax advisors concerning any tax matters relating to the proposed Series C Preferred Reverse
Stock Split and an increase in the stated value of the Series C Preferred Stock.
Exchange of Stock Certificates
The holders of shares of Series C Preferred
Stock may, but shall not be required to, exchange each certificate representing shares of our Series C Preferred Stock outstanding
before the Series C Preferred Reverse Stock Split for the reduced number of shares of our Series C Preferred Stock resulting from
the Series C Preferred Reverse Stock Split. The Company will provide such new certificates upon a written request by a holder of
Series C Preferred Stock accompanied by such holder’s pre-Series C Preferred Stock certificate being exchanged.
Interests of Directors and Executive
Officers
Our directors and executive officers have
no substantial interests, directly or indirectly, in the matters set forth in this proposal.
Vote Required and Recommendation
Our Bylaws provide that, on all matters
(other than the election of directors and except to the extent otherwise required by our Certificate of Incorporation or applicable
Delaware law), the affirmative vote of a majority of the shares outstanding and entitled to vote on the matter will be required
for approval.
Section 242(b) of the DGCL requires that
we obtain the approval of the majority of the shares of Series C Preferred Stock outstanding and entitled to vote, separately as
a class, in addition to the approval of the majority of the shares of Common Stock, Series C Preferred Stock and Series D Preferred
Stock, voting on an as-converted to Common Stock basis, outstanding and entitled to vote, in the aggregate, if we take any action
that adversely affects the powers, preferences or rights of our Series C Preferred Stock. The provisions of our Series C Preferred
Certificate of Designations requires that we obtain the approval of the holders of at least seventy percent (70%) of the outstanding
shares of our Series C Preferred Stock, separately as a class, in addition to the approval of the majority of the shares of Common
Stock, Series C Preferred Stock and Series D Preferred Stock, voting on an as-converted to Common Stock basis, outstanding and
entitled to vote, in the aggregate, if we take any action that adversely affects the rights, preferences or privileges of the holders
of our Series C Preferred Stock. Such separate approval would also be required if we were increasing or reducing the number of
shares designated as Series C Preferred Stock. Since the Series C Preferred Reverse Stock Split can be implemented only if the
ratio is the same as the ratio for the Common Stock Reverse Stock Split, and, further, since the stated value of the Series C Preferred
Stock must be relatively increased by an amount equal to the ratio of the Series C Preferred Reverse Stock Split, the rights, preferences
and privileges of the holder of the Series C Preferred Stock will not be affected adversely or disproportionately compared to the
rights of the holders of our Common Stock. Additionally, we are not proposing to increase or reduce the number of shares designated
as Series C Preferred Stock.
Accordingly, the affirmative vote of a
majority of the shares of Common Stock, Series C Preferred Stock and Series D Preferred Stock, on an as-converted to Common Stock
basis, in the aggregate, outstanding on the Record Date and entitled to vote on the matter will be required to (i) approve the
Series C Preferred Reverse Stock Split and (ii) increase the stated value of the Series C Preferred Stock as stated herein.
At the Special Meeting a vote will be
taken on a proposal to amend the Company’s Certificate of Incorporation to effect (i) the Series C Preferred Reverse Stock
Split and (ii) the increase of the stated value of the Series C Preferred Stock as provided herein.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” THE APPROVAL OF
PROPOSAL NO. 2.
FUTURE STOCKHOLDER PROPOSALS
The Board has not yet determined the date
on which the next Annual Meeting of Stockholders will be held. Stockholders may submit proposals on matters appropriate for stockholder
action at annual meetings in accordance with the rules and regulations adopted by the SEC. Any proposal which an eligible stockholder
desires to have included in our proxy statement and presented at the next Annual Meeting of Stockholders will be included in our
proxy statement and related proxy card if it is received by us a reasonable time before we begin to print and send our proxy materials
and if it complies with SEC rules regarding inclusion of proposals in proxy statements. In order to avoid controversy as to the
date on which we receive a proposal, it is suggested that any stockholder who wishes to submit a proposal submit such proposal
by certified mail, return receipt requested.
Other deadlines apply to the submission
of stockholder proposals for the next Annual Meeting of Stockholders that are not required to be included in our proxy statement
under SEC rules. With respect to these stockholder proposals for the next Annual Meeting of Stockholders, a stockholder’s
notice must be received by us a reasonable time before we begin to print and send our proxy materials. The form of proxy distributed
by the Board for such meeting will confer discretionary authority to vote on any such proposal not received by such date. If any
such proposal is received by such date, the proxy statement for the meeting will provide advice on the nature of the matter and
how we intend to exercise our discretion to vote on each such matter if it is presented at that meeting.
EXPENSES AND SOLICITATION
We will bear the costs of printing and
mailing proxies. In addition to soliciting stockholders by mail or through our regular employees, we may request banks, brokers
and other custodians, nominees and fiduciaries to solicit their customers who have shares of our Common Stock registered in the
name of a nominee and, if so, will reimburse such banks, brokers and other custodians, nominees and fiduciaries for their reasonable
out-of-pocket costs. Solicitation by our officers and employees may also be made of some stockholders following the original solicitation.
ADDITIONAL INFORMATION
We are subject to the information and reporting
requirements of the Exchange Act, and in accordance therewith, we file periodic reports, documents and other information with the
SEC relating to our business, financial statements and other matters. Such reports and other information may be accessed at www.sec.gov.
You are encouraged to review our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on
March 30, 2020, together with any subsequent information we filed or will file with the SEC and other publicly available information.
A copy of any public filing is also available, at no charge, by contacting our legal counsel, Sullivan & Worcester LLP, Attn:
David E. Danovitch, Esq. at (212) 660-3060.
*************
It is important that the proxies be returned
promptly and that your shares of Common Stock, Series C Preferred Stock and/or Series D Preferred Stock be represented. Stockholders
are urged to mark, date, execute, and promptly return the accompanying proxy card.
December __, 2020
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By Order of the Board of Directors,
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/s/ Vincent S. Miceli
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Vincent S. Miceli
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Chief Executive Officer
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Appendix A
FORM OF CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
NXT-ID, INC.
Nxt-ID, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of Delaware (the “Corporation”), does
hereby certify that:
FIRST: The name of the Corporation is Nxt-ID,
Inc.
SECOND: This Certificate of Amendment (this
“Certificate of Amendment”) amends the provisions of the Corporation’s Certificate of Incorporation, as
amended, and any amendments thereto (the “Certificate of Incorporation”), last amended by a certificate of amendment
to the Certificate of Incorporation filed with the Secretary of State on September 9, 2016.
THIRD: A new Article 4(b) is added to the
Certificate of Incorporation to provide in its entirety as follows:
“b) Upon the filing of
this Amendment with the Secretary of State of the State of Delaware (the “Effective Time”), each ________ outstanding
shares of Common Stock outstanding immediately prior to the Effective Time (the “Old Common Stock”) shall be
combined and converted into one (1) share of Common Stock (the “New Common Stock”) based on a ratio of one share
of New Common Stock for each _____ shares of Old Common Stock (the “Reverse Split Ratio”). This reverse stock
split (the “Reverse Split”) of the outstanding shares of Common Stock shall not affect the total number of shares
of capital stock, including the Common Stock, that the Company is authorized to issue, which shall remain as set forth under this
Article 4.
The Reverse Split shall occur
without any further action on the part of the Corporation or the holders of shares of New Common Stock and whether or not certificates
representing such holders’ shares prior to the Reverse Split are surrendered for cancellation. No fractional interest in
a share of New Common Stock shall be deliverable upon the Reverse Split, all of which shares of New Common Stock be rounded up
to the nearest whole number of such shares. All references to “Common Stock” in these Articles shall be to the New
Common Stock.
The Reverse Split will be effectuated
on a stockholder-by-stockholder (as opposed to certificate-by-certificate) basis, except that the Reverse Split will be effectuated
on a certificate-by-certificate basis for shares held by registered holders. For shares held in certificated form, certificates
dated as of a date prior to the Effective Time representing outstanding shares of Old Common Stock shall, after the Effective Time,
represent a number of shares of New Common Stock as is reflected on the face of such certificates for the Old Common Stock, divided
by the Reverse Split Ratio and rounded up to the nearest whole number. The Corporation shall not be obligated to issue new certificates
evidencing the shares of New Common Stock outstanding as a result of the Reverse Split unless and until the certificates evidencing
the shares held by a holder prior to the Reverse Split are either delivered to the Corporation or its transfer agent, or the holder
notifies the Corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any loss incurred by it in connection with such certificates.
FOURTH: This amendment was duly adopted
in accordance with the provisions of Sections 212 and 242 of the General Corporation Law of the State of Delaware.
FIFTH: This Certificate of Amendment shall
be effective as of New York Time on the date written below.
IN WITNESS WHEREOF, the Corporation has
caused this Certificate of Amendment to be signed by its officer thereunto duly authorized this day
of , 202 .
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NXT-ID, INC.
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By:
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/s/ Vincent S. Miceli
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Name:
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Vincent S. Miceli
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Title:
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Chief Executive Officer
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Appendix B
FORM OF CERTIFICATE OF AMENDMENT OF CERTIFICATE
OF DESIGNATIONS, PREFERENCES AND RIGHTS OF
SERIES C NON-CONVERTIBLE VOTING PREFERRED
STOCK OF
NXT-ID, INC.
The undersigned, Vincent
Miceli, the Chief Executive Officer of Nxt-ID, Inc. (the “Corporation”), pursuant to the provisions of the General
Corporation Law of the State of Delaware (the “GCL”), does hereby certify and set forth as follows:
First: The
date on which the Certificate of Designations, Preferences and Rights of Series C Non-Convertible Voting Preferred Stock of the
Corporation (the “Certificate of Designations”) was originally filed with the Secretary of State of the State
of Delaware was May 23, 2017.
Second: The
Board of Directors of the Corporation (the “Board”), acting in accordance with the provisions of 242 of the
GCL and pursuant to the authority vested in the Board by the affirmative vote of a majority of the shares of the Corporation’s
common stock, par value $0.0001 per share, Series C Non-Convertible Voting Preferred Stock, par value $0.0001 per share (the
“Series C Preferred Stock”), and Series D Convertible Preferred Stock, par value $0.0001
per share, in the aggregate, outstanding and entitled to vote on the matter, adopted resolutions
amending the Certificate of Designations (the “Certificate of Amendment”) as provided below.
Third: Section
12 of the Certificate of Designations has been added to read as follows:
12. REVERSE
STOCK SPLIT. Upon the filing of this certificate of amendment with the Secretary of State of the State of Delaware (the “Effective
Time”), each ________ outstanding shares of Series C Preferred Stock outstanding immediately prior to the Effective Time
(the “Old Series C Preferred Stock”) shall be combined and converted into one (1) share of Series C Preferred
Stock (the “New Series C Preferred Stock”) based on a ratio of one share of New Series C Preferred Stock for
each _____ shares of Old Series C Preferred Stock (the “Reverse Split Ratio”). This reverse stock split (the
“Reverse Split”) of the outstanding shares of Series C Preferred Stock shall not affect the total number of
shares of authorized preferred stock, par value $0.0001 per share, that the Company has designated as Series C Preferred Stock,
which shall remain as set forth under Section 1.
The Reverse Split shall occur
without any further action on the part of the Company or the holders of shares of New Series C Preferred Stock and whether or not
certificates representing such holders’ shares prior to the Reverse Split are surrendered for cancellation. No fractional
interest in a share of New Series C Preferred Stock shall be deliverable upon the Reverse Split, all of which shares of New Series
C Preferred Stock be rounded up to the nearest whole number of such shares. All references to “Series C Preferred Stock”
in these Articles shall be to the New Series C Preferred Stock.
The Reverse Split will be effectuated
on a stockholder-by-stockholder (as opposed to certificate-by-certificate) basis, except that the Reverse Split will be effectuated
on a certificate-by-certificate basis for shares held by registered holders. For shares held in certificated form, certificates
dated as of a date prior to the Effective Time representing outstanding shares of Old Series C Preferred Stock shall, after the
Effective Time, represent a number of shares of New Series C Preferred Stock as is reflected on the face of such certificates for
the Old Series C Preferred Stock, divided by the Reverse Split Ratio and rounded up to the nearest whole number. The Company shall
not be obligated to issue new certificates evidencing the shares of New Series C Preferred Stock outstanding as a result of the
Reverse Split unless and until the certificates evidencing the shares held by a holder prior to the Reverse Split are either delivered
to the Company or its transfer agent, or the holder notifies the Company or its transfer agent that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred
by it in connection with such certificates.”
Fourth: Section
4(l) of the Certificate of Designations, which sets forth the stated value of the Series C Preferred Stock shall be amended and
restated in its entirety to adjust the stated value, as a result of the one-for-_____ reverse split of the Series C Preferred Stock,
to read as follows:
(l) “Stated Value” means
$______.00 per share, subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, combinations,
subdivisions or other similar events occurring after the Effective Time.
Fifth: All
other provisions of the Certificate of Designations shall remain in full force and effect.
Sixth: This
amendment was duly adopted in accordance with the provisions of Sections 228 and 242 of the GCL.
Seventh: This
Certificate of Amendment shall be effective as of 5:30 P.M. New York time on the date written below.
IN WITNESS WHEREOF,
the Corporation has caused this Certificate of Amendment to the Certificate of Designations to be signed by the undersigned, a
duly authorized officer of the Corporation, and the undersigned has executed this Certificate of Amendment and affirms the foregoing
as true and under penalty of perjury this day of , 202 .
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NXT-ID, INC.
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By:
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/s/ Vincent S. Miceli
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Name: Vincent S. Miceli
Title: Chief Executive Officer
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* SPECIMEN *
1 MAIN STREET
ANYWHERE PA 99999-9999
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VOTE ON INTERNET
Go to http://www.vstocktransfer.com/proxy
and log-on using the below control number.
CONTROL #
VOTE BY MAIL
Mark, sign and date your proxy card and
return it in the envelope we have provided.
VOTE IN PERSON
If you would like to vote in person, please
attend the Special Meeting to be held on January 15, 2021 at 9:00 a.m. Eastern Time.
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Please Vote, Sign, Date and Return Promptly
in the Enclosed Envelope.