UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-35955

VUZIX CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		04-3392453
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)


25 Hendrix Road, Suite A West Henrietta, New York		14586
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (585) 359-5900

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:		Trading Symbol(s)		Name of each exchange on which registered:
Common Stock, par value $0.001		VUZI		Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes ☒ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐	Non-accelerated filer	☒

Smaller reporting company	☒	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ☐ No ⌧

As of November 8, 2021, there were 63,631,676 shares of the registrant’s common stock outstanding.

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Vuzix Corporation

INDEX

		Page No.

Part I – Financial Information

Item 1.	Consolidated Financial Statements (Unaudited):

	Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	3

	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020	4

	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020	5

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	6

	Notes to the Unaudited Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	25

Part II – Other Information		26

Item 1.	Legal Proceedings	26

Item 1A.	Risk Factors	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3.	Defaults Upon Senior Securities	26

Item 4.	Mine Safety Disclosure	27

Item 5.	Other Information	27

Item 6.	Exhibits	28

Signatures		29

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Part 1: FINANCIAL INFORMATION

Item 1: Consolidated Financial Statements

VUZIX CORPORATION

CONSOLIDATED BALANCE SHEETS


	(Unaudited)
	September 30,		December 31,
	2021		2020
ASSETS
Current Assets
Cash and Cash Equivalents	$	128,746,661	$	36,069,508
Accounts Receivable		1,058,790		1,388,882
Inventories, Net		9,880,337		6,100,824
Licenses, Net		68,109		272,444
Manufacturing Vendor Prepayments		1,902,132		485,032
Prepaid Expenses and Other Assets		2,332,049		738,561

Total Current Assets		143,988,078		45,055,251

Long-Term Assets
Fixed Assets, Net		5,339,494		2,837,402
Operating Lease Right-of-Use Asset		1,221,719		1,517,306
Patents and Trademarks, Net		1,862,016		1,593,049
Licenses, Net		1,446,638		193,687
Intangible Asset, Net		252,275		566,456
Other Assets, Net		1,356,535		708,333

Total Assets	$	155,466,755	$	52,471,484

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable	$	1,482,809	$	1,517,155
Unearned Revenue		14,251		41,152
Accrued Expenses		1,585,325		983,033
Income and Other Taxes Payable		33,763		109,653
Operating Lease Right-of-Use Liability		534,146		444,495

Total Current Liabilities		3,650,294		3,095,488

Long-Term Liabilities
Operating Lease Right-of-Use Liability		687,573		1,072,811

Total Liabilities		4,337,867		4,168,299

Stockholders' Equity
Preferred Stock - $0.001 Par Value, 5,000,000 Shares Authorized; zero and 49,626 Shares Issued and Outstanding as of September 30, 2021 and December 31, 2020.		—		50
Common Stock - $0.001 Par Value, 100,000,000 Shares Authorized; 63,631,054 and 45,645,166 Shares Issued and Outstanding as of September 30, 2021 and December 31, 2020.		63,631		45,645
Additional Paid-in Capital		337,125,126		210,952,473
Accumulated Deficit		(186,059,869)		(162,694,983)

Total Stockholders' Equity		151,128,888		48,303,185

Total Liabilities and Stockholders' Equity	$	155,466,755	$	52,471,484

The accompanying notes are an integral part of these consolidated financial statements.

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VUZIX CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)


	Preferred Stock			Common Stock			Additional		Accumulated
	Shares	Amount		Shares	Amount		Paid-In Capital		Deficit		Total
Balance - January 1, 2021	49,626	$	50	45,645,166	$	45,645	$	210,952,473	$	(162,694,983)	$	48,303,185
Stock-Based Compensation Expense	—		—	368,047		368		8,858,446		—		8,858,814
Stock Option Exercises	—		—	620,784		621		713,083		—		713,704
Stock Warrant Exercises	—		—	7,274,328		7,274		34,697,794		—		34,705,068
Proceeds from Common Stock Offering	—		—	4,768,293		4,768		97,784,270		—		97,789,038
Direct Costs of Common Stock Offering	—		—	—		—		(6,136,420)		—		(6,136,420)
Shares Redeemed to Cover Employee Tax Withholdings	—		—	(83,164)		(83)		(1,144,282)		—		(1,144,365)
Stock Issued for Technology License Purchase	—		—	75,000		75		1,404,675		—		1,404,750
Preferred Stock Converted	(49,626)		(50)	4,962,600		4,963		(10,004,913)		—		(10,000,000)
Net Loss	—		—	—		—		—		(23,364,886)		(23,364,886)
Balance - September 30, 2021	—	$	—	63,631,054	$	63,631	$	337,125,126	$	(186,059,869)	$	151,128,888


	Preferred Stock			Common Stock			Additional		Accumulated
	Shares	Amount		Shares	Amount		Paid-In Capital		Deficit		Total
Balance - July 1, 2021	—	$	—	63,278,096	$	63,278	$	333,792,844	$	(178,113,803)	$	155,742,319
Stock-Based Compensation Expense	—		—	300,000		300		3,292,391		—		3,292,691
Stock Option Exercises	—		—	52,958		53		39,891		—		39,944
Net Loss	—		—	—		—		—		(7,946,066)		(7,946,066)
Balance - September 30, 2021	—	$	—	63,631,054	$	63,631	$	337,125,126	$	(186,059,869)	$	151,128,888


	Preferred Stock			Common Stock			Additional		Accumulated
	Shares	Amount		Shares	Amount		Paid-In Capital		Deficit		Total
Balance - January 1, 2020	49,626	$	50	33,128,620	$	33,128	$	168,950,076	$	(144,742,811)	$	24,240,443
Stock-Based Compensation Expense	—		—	942,986		943		1,928,880		—		1,929,823
Proceeds from Common Stock Offerings	—		—	8,647,059		8,647		26,741,355		—		26,750,002
Direct Costs of Common Stock Offerings	—		—	—		—		(1,550,666)		—		(1,550,666)
Net Loss	—		—	—		—		—		(14,361,100)		(14,361,100)
Balance - September 30, 2020	49,626	$	50	42,718,665	$	42,718	$	196,069,645	$	(159,103,911)	$	37,008,502


	Preferred Stock			Common Stock			Additional		Accumulated
	Shares	Amount		Shares	Amount		Paid-In Capital		Deficit		Total
Balance - July 1, 2020	49,626	$	50	39,004,106	$	39,004	$	180,438,200	$	(154,343,101)	$	26,134,153
Stock-Based Compensation Expense	—		—	67,500		67		1,018,065		—		1,018,132
Proceeds from Common Stock Offerings	—		—	3,647,059		3,647		15,496,355		—		15,500,002
Direct Costs of Common Stock Offerings	—		—	—		—		(882,975)		—		(882,975)
Net Loss	—		—	—		—		—		(4,760,810)		(4,760,810)
Balance - September 30, 2020	49,626	$	50	42,718,665	$	42,718	$	196,069,645	$	(159,103,911)	$	37,008,502

The accompanying notes are an integral part of these consolidated financial statements.

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VUZIX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Sales:
Sales of Products	$	3,018,774	$	2,686,166	$	9,657,589	$	6,392,865
Sales of Engineering Services		—		92,555		193,113		954,415

Total Sales		3,018,774		2,778,721		9,850,702		7,347,280

Cost of Sales:
Cost of Sales - Products Sold		2,435,437		2,393,676		7,578,732		5,942,043
Cost of Sales - Engineering Services		—		37,075		29,669		180,830

Total Cost of Sales		2,435,437		2,430,751		7,608,401		6,122,873

Gross Profit (exclusive of depreciation shown separately below)		583,337		347,970		2,242,301		1,224,407

Operating Expenses:
Research and Development		3,270,255		1,874,243		8,050,915		5,693,569
Selling and Marketing		1,589,582		936,206		4,167,874		2,885,872
General and Administrative		3,112,059		1,635,076		11,565,816		4,972,854
Depreciation and Amortization		434,277		634,669		1,453,367		1,923,922
Loss on Fixed Asset Disposal		—		—		83,908		—
Impairment of Patents and Trademarks		7,544		16,000		66,040		73,532

Total Operating Expenses		8,413,717		5,096,194		25,387,920		15,549,749

Loss From Operations		(7,830,380)		(4,748,224)		(23,145,619)		(14,325,342)

Other Income (Expense):
Investment Income		29,843		4,662		45,448		33,908
Income and Other Taxes		(105,526)		(16,802)		(138,034)		(43,867)
Foreign Exchange Loss		(40,003)		(446)		(126,681)		(25,799)

Total Other Expense, Net		(115,686)		(12,586)		(219,267)		(35,758)

Loss Before Provision for Income Taxes		(7,946,066)		(4,760,810)		(23,364,886)		(14,361,100)
Provision for Income Taxes		—		—		—		—

Net Loss		(7,946,066)		(4,760,810)		(23,364,886)		(14,361,100)
Preferred Stock Dividends - Accrued not Paid		—		(520,562)		—		(1,527,716)
Loss Attributable to Common Stockholders	$	(7,946,066)	$	(5,281,372)	$	(23,364,886)	$	(15,888,816)

Basic and Diluted Loss per Common Share	$	(0.13)	$	(0.13)	$	(0.39)	$	(0.44)
Weighted-average Shares Outstanding - Basic and Diluted		63,520,878		39,837,321		60,278,923		36,448,266

The accompanying notes are an integral part of these consolidated financial statements.

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VUZIX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
	2021		2020

Cash Flows from Operating Activities
Net Loss	$	(23,364,886)	$	(14,361,100)
Non-Cash Adjustments
Depreciation and Amortization		1,453,367		1,923,922
Amortization of Software Development Costs in Cost of Sales - Products		180,296		137,496
Stock-Based Compensation		7,311,278		2,019,006
Impairment of Patents and Trademarks		66,040		73,532
Loss on Fixed Asset Disposal		83,908		—
(Increase) Decrease in Operating Assets
Accounts Receivable		330,092		160,287
Accrued Project Revenue		—		(81,714)
Inventories		(3,779,513)		(855,613)
Manufacturing Vendor Prepayments		(1,417,100)		71,536
Prepaid Expenses and Other Assets		(238,066)		(105,686)
Increase (Decrease) in Operating Liabilities
Accounts Payable		(34,346)		(153,682)
Accrued Expenses		602,293		(11,790)
Unearned Revenue		(26,901)		(90,215)
Income and Other Taxes		(75,890)		14,144

Net Cash Flows Used in Operating Activities		(18,909,428)		(11,259,877)

Cash Flows from Investing Activities
Purchase of Fixed Assets		(3,592,703)		(467,595)
Investments in Patents and Trademarks		(442,582)		(329,347)
Investments in Licenses, Intangible and Other Assets		(305,158)		(365,650)

Net Cash Used in Investing Activities		(4,340,443)		(1,162,592)

Cash Flows from Financing Activities
Proceeds from Exercise of Warrants		34,705,068		—
Proceeds from Exercise of Stock Options		713,703		—
Proceeds from Common Stock Offering, Net		91,652,617		25,199,336
Preferred Dividend Settlement Payment		(10,000,000)		—
Employee Tax Withholdings Payment		(1,144,364)		—
Proceeds from Term Note		—		1,555,900

Net Cash Flows Provided from Financing Activities		115,927,024		26,755,236

Net Increase in Cash and Cash Equivalents		92,677,153		14,332,767
Cash and Cash Equivalents - Beginning of Period		36,069,508		10,606,091

Cash and Cash Equivalents - End of Period	$	128,746,661	$	24,938,858

Supplemental Disclosures
Unamortized Common Stock Expense included in Prepaid Expenses and Other Assets	$	1,729,646	$	277,880
Non-Cash Investment in Licenses		1,341,614		380,249
Stock-Based Compensation Expense - Expensed less Previously Issued		(1,547,536)		89,183

The accompanying notes are an integral part of these consolidated financial statements.

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VUZIX CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements of Vuzix Corporation (“the Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, the unaudited consolidated financial statements do not include all information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Certain re-classifications may have been made to prior periods to conform with current reporting. The results of the Company’s operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results of the Company’s operations for the full fiscal year or any other period.

The accompanying interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto of the Company as of December 31, 2020, as reported in the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2021.

Customer Concentrations

For the three months ended September 30, 2021, two customers represented 12% and 10% of total product revenue. For the three months ended September 30, 2020, no one customer represented more than 10% of total product revenue and one customer represented 90% of engineering services revenue.

For the nine months ended September 30, 2021, no one customer represented more than 10% of total product revenue and two customers represented 100% of engineering services revenue. For the nine months ended September 30, 2020, no one customer represented more than 10% of total product revenue and two customers represented 90% of engineering services revenue.

As of September 30, 2021, three customers represented 29%, 15% and 14% of accounts receivable. As of December 31, 2020, two customers represented 21% and 14% of accounts receivable.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). ASU 2016-13 provides for a new impairment model which requires measurement and recognition of expected credit losses for most financial assets and certain other instruments, including but not limited to accounts receivable. ASU 2016-13 will become effective for the Company on January 1, 2023 and early adoption is permitted. The Company does not anticipate that the adoption of this standard will have a material impact on our consolidated financial statements.

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Note 2 – Revenue Recognition and Contracts with Customers

Disaggregated Revenue

The Company’s total revenue was comprised of two major product lines: Smart Glasses Sales and Engineering Services. The following table summarizes the revenue recognized by major product line:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenues
Smart Glasses Sales	$	3,018,774	$	2,686,166	$	9,657,589	$	6,392,865
Engineering Services		—		92,555		193,113		954,415

Total Revenue	$	3,018,774	$	2,778,721	$	9,850,702	$	7,347,280

Significant Judgments

Under Topic 606 “Revenue from Contracts with Customers”, we use judgments that could potentially impact both the timing of our satisfaction of performance obligations and our determination of transaction prices used in determining revenue recognized by major product line. Such judgments include considerations in determining our transaction prices and when our performance obligations are satisfied for our standard product sales that include an end-user 30-day right to return if not satisfied with product and general payment terms that are between Net 30 and 60 days. For our Engineering Services, performance obligations are recognized over time using the input method and the estimated costs to complete each project are considered significant judgments.

Performance Obligations

Revenues from our performance obligations are typically satisfied at a point in time for Smart Glasses, Waveguides and Display Engines, and our OEM Products, which are recognized when the customer obtains control and ownership, which is generally upon shipment. The Company also records revenue for performance obligations relating to our Engineering Services over time by using the input method measuring progress toward satisfying the performance obligations. Satisfaction of our performance obligations related to our Engineering Services is measured by the Company’s costs incurred as a percentage of total expected costs to project completion as the inputs of actual costs incurred by the Company are directly correlated with progress toward completing the contract. As such, the Company believes that our methodologies for recognizing revenue over time for our Engineering Services correlate directly with the transfer of control of the underlying assets to our customers.

Our standard product sales include a twelve (12) month assurance-type product warranty. In the case of certain of our OEM products and waveguide sales, some include a standard product warranty of up to eighteen (18) months to allow distribution channels to offer the end customer a full twelve (12) months of coverage. We offer extended warranties to customers, which extend the standard product warranty on product sales for an additional twelve (12) month period. All revenue related to extended product warranty sales is deferred and recognized over the extended warranty period. Our Engineering Services contracts vary from contract to contract but typically include payment terms of Net 30 days from date of billing, subject to an agreed upon customer acceptance period.

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The following table presents a summary of the Company’s sales by revenue recognition method as a percentage of total net sales for the nine months ended September 30, 2021:


	% of Total Sales
Point-in-Time	98	%
Over Time – Input Method	2	%

Total	100	%

Remaining Performance Obligations

As of September 30, 2021, the Company had no outstanding performance obligations under its engineering services and waveguide development projects, as all projects were completed and delivered in the first half of 2021. In addition, the Company had no materially outstanding performance obligations related to product sales, other than its standard product warranty.

Note 3 – Loss Per Share

Basic loss per share is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution from the assumed exercise of stock options and warrants, and the conversion of convertible preferred shares. During periods of net loss, all common stock equivalents are excluded from the diluted EPS calculation because they are anti-dilutive. Since the Company reported a net loss for the three and nine months ended September 30, 2021 and 2020, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive. At September 30, 2021 and 2020, there were 8,612,869 and 17,775,890 common stock share equivalents, respectively, potentially exercisable or issuable under conversion or exercise of preferred shares, options, and warrants that could dilute basic earnings per share in the future.

Note 4 – Inventories, Net

Inventories are stated at the lower of cost and net realizable value, and consisted of the following:


	September 30,		December 31,
	2021		2020

Purchased Parts and Components	$	8,785,171	$	5,252,709
Work-in-Process		203,103		1,381,677
Finished Goods		2,180,435		3,352,057
Less: Reserve for Obsolescence		(1,288,372)		(3,885,619)

Inventories, Net	$	9,880,337	$	6,100,824

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Note 5 – Licenses, Net


	September 30,		December 31,
	2021		2020

Licenses	$	1,038,606	$	493,717
Additions		1,404,750		544,889
Less: Accumulated Amortization / Expensed		(928,609)		(572,475)
		1,514,747		466,131
Less: Current Portion		(68,109)		(272,444)

Licenses, Net	$	1,446,638	$	193,687

In December 2020, the Company renewed its global non-exclusive master reseller agreement (MRA) for certain smart glasses software under which it committed to sell a minimum number of new software licenses in 2021, as well as the unsold remainder from 2020. The amount capitalized, included in current assets on the Consolidated Balance Sheets, will be expensed to cost of sales - products sold during the period based upon actual software licenses sold, with any of the remaining prepaid licenses expensed at the end of the term of the MRA.

The Company acquired two licenses in 2017. The first related to the renegotiation of an existing license at a cost of $114,967, which resulted in lower royalty rates being paid by the Company over the next 10 years. This license went into effect as of January 1, 2018. The second license was a result of the Company entering into a Technology Purchase and Royalty Agreement where it acquired all the seller’s right, title and interest in certain Transferred Intellectual Property (IP). Pursuant to the agreement, the Company paid approximately $75,702 as reimbursement of related patent application costs incurred by the seller to date, which are included in Patents and Trademarks. The Company also issued 25,000 shares of common stock, valued at $128,750, upon the original closing in October 2017 and agreed to certain further share issuances of 75,000 shares based upon the achievement of certain development milestones as well as per unit royalties once the technology was commercialized for the life of the related patents. In June 2021, the Company assumed or purchased outright the obligations for ongoing royalties under the original license agreement and certain other intellectual property rights in connection with consulting services by the original seller in exchange for the issuance of 75,000 shares with an assigned market value of $18.73 per share or a total of $1,404,750. The underlying technology is not yet ready for commercialization, but the Company intends to proceed with further research and development work relating to such underlying technology.

Note 6 – Intangible Asset, Net


	September 30,		December 31,
	2021		2020

Intangible Asset	$	1,500,000	$	1,500,000
Less: Accumulated Amortization		(1,247,725)		(933,544)

Intangible Asset, Net	$	252,275	$	566,456

On October 4, 2018, the Company entered into amendment No. 1 to agreements (the “TDG Amendment”) with TDG Acquisition Company, LLC (“TDG”), aka Six15 Technologies, LLC. The TDG Amendment amends certain provisions of prior agreements between Vuzix and TDG, including an asset purchase agreement dated June 15, 2012, and an authorized reseller agreement dated June 15, 2012.

Pursuant to the TDG Amendment, the Company is permitted to engage in sales of heads-up display components or subsystems (and any services to support such sale) for incorporation into a finished good or system for sale to military organizations, subject to certain conditions. The Company is also permitted to sell its products to defense and security organizations that include business customers and governmental entity customers that primarily provide security and defense services, including police, fire fighters, EMTs, other first responders, and homeland and border security. The Company will owe TDG commissions with respect to all such sales until June 15, 2022, when the amendment and

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original non-compete agreements expire, after which the Company will be permitted to sell any product to any customer world-wide without owing any commission to TDG.

Total commissions expense under this agreement for the three months ended September 30, 2021 and 2020 was $2,550 and nil. Total commissions expense for the nine months ended September 30, 2021 and 2020 was $59,397 and $176,944. All commissions expense related to this agreement is included in Selling and Marketing expense.

Total amortization expense for this intangible asset for the three months ended September 30, 2021 and 2020 was $104,727 and $104,727, respectively. Total amortization expense for this intangible asset for the nine months ended September 30, 2021 and 2020 was $314,181 and $318,817, respectively. Future monthly amortization expense for the remaining 8.5 months is approximately $30,000 per month.

Note 7 – Accrued Expenses

Accrued expenses consisted of the following:


	September 30,		December 31,
	2021		2020

Accrued Wages and Related Costs	$	587,961	$	582,924
Accrued Professional Services		218,506		187,323
Accrued Warranty Obligations		194,092		143,898
Other Accrued Expenses		584,766		68,888

Total	$	1,585,325	$	983,033

The Company has warranty obligations in connection with the sale of certain of its products. The warranty period for its products is generally twelve (12) months. The costs incurred to provide for these warranty obligations are estimated and recorded as an accrued liability at the time of sale. The Company estimates its future warranty costs based upon product-based historical performance rates and related costs to repair.

The changes in the Company’s accrued warranty obligations for the nine months ended September 30, 2021 and the balance as of December 31, 2020 were as follows:


Accrued Warranty Obligations at December 31, 2020	$	143,898
Reductions for Settling Warranties		(239,534)
Warranties Issued During Period		289,728

Accrued Warranty Obligations at September 30, 2021	$	194,092

Note 8 – Income Taxes

The Company’s effective income tax rate is a combination of federal, state and foreign tax rates and differs from the U.S. statutory rate due to taxes on foreign income, permanent differences including tax-exempt interest, and the resolution of tax uncertainties, offset by a valuation allowance against U.S. deferred income tax assets.

Note 9 – Capital Stock

Preferred stock

The Board of Directors is authorized to establish and designate different series of preferred stock and to fix and determine their voting powers and other special rights and terms. A total of 5,000,000 shares of preferred stock with a par value of $0.001 are authorized as of September 30, 2021 and December 31, 2020. Of this total, 49,626 shares are

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designated as Series A Preferred Stock. There were nil and 49,626 shares of Series A Preferred Stock issued and outstanding on September 30, 2021 and December 31, 2020, respectively.

On January 28, 2021, Intel Corporation (“Intel”) (which was the holder of all of the outstanding shares of Series A Preferred Stock) converted all of its 49,626 shares of Series A Preferred Stock into 4,962,600 shares of common stock and the shares of Series A Preferred Stock have been retired and cannot be reissued. In connection with the foregoing, Intel and the Company entered into an agreement pursuant to which Intel agreed to accept $10,000,000 in full payment of all accrued Series A Preferred Stock dividends in the approximate amount of $10,800,000.

Common Stock

The Company’s authorized common stock consists of 100,000,000 shares, par value of $0.001. There were 63,631,054 and 45,645,166 shares of common stock issued and outstanding as of September 30, 2021 and December 31, 2020, respectively.

On March 25, 2021, the Company entered into an underwriting agreement with BTIG, LLC for the sale of the Company’s common stock in an underwritten public offering at a public offering price of $20.50 per share. The Company closed on this public offering (including the full exercise of the over-allotment option granted to the underwriters), receiving total gross proceeds of $97,789,037. The Company received net proceeds after the underwriting discount and issuance costs and expenses of $91,652,618.

Note 10 – Stock Warrants

A summary of the various changes in warrants during the nine months ended September 30, 2021 is as follows:


		September 30,
		2021
Warrants Outstanding at December 31, 2020		7,276,928
Exercised During the Period		(7,274,328)
Issued During the Period		—
Expired During the Period		—

Warrants Outstanding at September 30, 2021		2,600

The outstanding warrants as of September 30, 2021, expire on January 2, 2022. The average remaining term of the warrants is approximately 3 months. The exercise price is $4.10 per share.

During the three months ended September 30, 2021 and 2020, there were no warrants exercised.

During the nine months ended September 30, 2021, a total of 7,274,328 warrants were exercised on a cash basis resulting in the issuance of 7,274,328 shares of common stock and proceeds to the Company of $34,705,068. During the nine months ended September 30, 2020, there were no warrants exercised.

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Note 11 – Stock-Based Compensation

A summary of stock option activity related to the Company’s standard employee incentive plan, excluding options awarded under the Long-term Incentive Plan (LTIP), for the nine months ended September 30, 2021 is as follows: