Annual report pursuant to Section 13 and 15(d)

Going Concern Issues

v3.6.0.2
Going Concern Issues
12 Months Ended
Dec. 31, 2016
Going Concern Disclosure [Abstract]  
Going Concern Issues
Note 2 — Going Concern Issues
 
The accompanying Condensed Consolidated Financial Statements have been prepared assuming that we will continue as a going concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of liabilities in the normal course of business. These Condensed Consolidated Financial Statements do not include any adjustments to the specific amounts and classifications of assets and liabilities, which might be necessary should we be unable to continue as a going concern. The Company incurred annual net losses of $19,250,082 in 2016 and $13,427,478 in 2015, and has an accumulated deficit of $76,838,950 as of December 31, 2016.
 
The Company’s cash requirements are primarily for funding operating losses, working capital, research, debt service and capital expenditures. Our cash requirements related to funding operating losses depend on numerous factors, including new product development activities, our ability to commercialize our products, our products’ timely market acceptance, selling prices and gross margins, and other factors. Historically, the Company has met these cash needs by borrowings under notes, sales of convertible debt, and the sales of equity.
 
On July 11, 2016, the Company closed its public offering of 1,150,000 shares of common stock, at a public offering price of $5.75 per share, for gross proceeds of $6,612,500. On December 2, 2016, the Company closed its public offering of 2,000,000 shares of common stock, at a public offering price of $7.25 per share, for gross proceed of $14,500,000. Total net proceeds from these public offering was $19,238,015, after underwriting discounts and commissions and other offering expenses payable by Vuzix.
  
The Company’s management intends to take actions necessary to continue as a going concern, as discussed herein. The Company will need to grow its business significantly to become profitable and self-sustaining on a cash flow basis. Management’s plans concerning these matters and managing our liquidity includes among other things:
 
·
the commencement of volume manufacturing and sale of the new M300 Smart Glasses in March 2017; 
 
  · the recent receipt of a $1,145,000 Smart Glasses development program with Toshiba, which we expect to be complete by September 2017;
 
· the introduction of see-through waveguide including our M3000 Smart Glasses and Blade Smart Sunglasses;
 
·
tightly control operating costs and reduce spending growth rates wherever possible;
 
·
delay or curtail discretionary and non-essential capital expenditures not related to near-term new products;
 
·
reduce the rate of research and development spending on new technologies, particularly the use of costly external contractors; and
 
·
delay some planned new products based on new technology.
 
However, if these plans are not successful within a reasonable time period, we will have to raise additional capital to maintain operations and/or materially reduce our operating and new product development costs.
 
If the Company raises additional funds, the ownership interest of existing stockholders may be diluted. The amount of such dilution could increase due to the issuance of new warrants or securities with other dilutive characteristics, such as full ratchet anti-dilution clauses or price resets.
 
Based upon our current amount of cash on hand, management’s historical ability to raise capital, and our ability to manage our cost structure and adjust operating plans if and as required, we have concluded that substantial doubt of our ability to continue as a going concern has been alleviated.