UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number
(Exact name of registrant as specified in its charter)
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State or other jurisdiction of | (I.R.S. Employer |
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(Address of principal executive offices) | (Zip Code) |
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Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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 | ☐ | ☒ | |
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Smaller reporting company | Emerging growth company |
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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
As of November 8, 2021, there were
Vuzix Corporation
INDEX
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Part 1: FINANCIAL INFORMATION
Item 1: Consolidated Financial Statements
VUZIX CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited) |
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September 30, | December 31, | |||||
| 2021 |
| 2020 | |||
ASSETS |
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Current Assets |
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Cash and Cash Equivalents | $ | | $ | | ||
Accounts Receivable |
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Inventories, Net |
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Licenses, Net | | | ||||
Manufacturing Vendor Prepayments |
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Prepaid Expenses and Other Assets |
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Total Current Assets |
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Long-Term Assets |
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Fixed Assets, Net |
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Operating Lease Right-of-Use Asset | | | ||||
Patents and Trademarks, Net |
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Licenses, Net |
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Intangible Asset, Net |
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Other Assets, Net |
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Total Assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current Liabilities |
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Accounts Payable | $ | | $ | | ||
Unearned Revenue |
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Accrued Expenses |
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Income and Other Taxes Payable |
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Operating Lease Right-of-Use Liability | | | ||||
Total Current Liabilities |
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Long-Term Liabilities | ||||||
Operating Lease Right-of-Use Liability | | | ||||
Total Liabilities |
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Stockholders' Equity |
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Preferred Stock - $ |
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Common Stock - $ |
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Additional Paid-in Capital |
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Accumulated Deficit |
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Total Stockholders' Equity |
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Total Liabilities and Stockholders' Equity | $ | | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
3
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 | | $ | |
| | $ | | $ | | $ | ( | $ | | ||||||
Stock-Based Compensation Expense |
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Stock Option Exercises |
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Stock Warrant Exercises |
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Proceeds from Common Stock Offering |
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Direct Costs of Common Stock Offering |
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Shares Redeemed to Cover Employee Tax Withholdings | — |
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Stock Issued for Technology License Purchase | — | — | | | | — | | ||||||||||||
Preferred Stock Converted |
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Net Loss |
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Balance - September 30, 2021 |
| — | $ | — |
| | $ | | $ | | $ | ( | $ | |
Preferred Stock | Common Stock | Additional | Accumulated | ||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Paid-In Capital |
| Deficit |
| Total | ||||||
Balance - July 1, 2021 | — | $ | — |
| | $ | | $ | | $ | ( | $ | | ||||||
Stock-Based Compensation Expense |
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Stock Option Exercises |
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Net Loss |
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Balance - September 30, 2021 |
| — | $ | — |
| | $ | | $ | | $ | ( | $ | |
Preferred Stock | Common Stock | Additional | Accumulated | ||||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Paid-In Capital |
| Deficit |
| Total | ||||||
Balance - January 1, 2020 | | $ | |
| | $ | | $ | | $ | ( | $ | | ||||||
Stock-Based Compensation Expense |
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Proceeds from Common Stock Offerings |
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Direct Costs of Common Stock Offerings |
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Net Loss |
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Balance - September 30, 2020 |
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| | $ | | $ | | $ | ( | $ | |
Preferred Stock | Common Stock | Additional | Accumulated | ||||||||||||||||
| Shares |
| Amount |
| Shares |
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| Paid-In Capital |
| Deficit |
| Total | ||||||
Balance - July 1, 2020 | | $ | |
| | $ | | $ | | $ | ( | $ | | ||||||
Stock-Based Compensation Expense |
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Proceeds from Common Stock Offerings |
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Direct Costs of Common Stock Offerings |
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Net Loss |
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Balance - September 30, 2020 |
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| | $ | | $ | | $ | ( | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
4
VUZIX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Sales: |
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Sales of Products | $ | | $ | | $ | | $ | | ||||
Sales of Engineering Services |
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Total Sales |
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Cost of Sales: |
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Cost of Sales - Products Sold |
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Cost of Sales - Engineering Services |
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Total Cost of Sales |
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Gross Profit (exclusive of depreciation shown separately below) |
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Operating Expenses: |
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Research and Development |
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Selling and Marketing |
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General and Administrative |
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Depreciation and Amortization |
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Loss on Fixed Asset Disposal |
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Impairment of Patents and Trademarks |
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Total Operating Expenses |
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Loss From Operations |
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Other Income (Expense): |
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Investment Income |
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Income and Other Taxes |
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Foreign Exchange Loss |
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Total Other Expense, Net |
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Loss Before Provision for Income Taxes |
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Provision for Income Taxes |
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Net Loss |
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Preferred Stock Dividends - Accrued not Paid |
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Loss Attributable to Common Stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Basic and Diluted Loss per Common Share | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted-average Shares Outstanding - Basic and Diluted |
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The accompanying notes are an integral part of these consolidated financial statements.
5
VUZIX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30, | ||||||
| 2021 |
| 2020 | |||
Cash Flows from Operating Activities |
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Net Loss | $ | ( | $ | ( | ||
Non-Cash Adjustments |
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Depreciation and Amortization |
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Amortization of Software Development Costs in Cost of Sales - Products |
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Stock-Based Compensation |
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Impairment of Patents and Trademarks |
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Loss on Fixed Asset Disposal |
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(Increase) Decrease in Operating Assets |
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Accounts Receivable |
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Accrued Project Revenue |
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Inventories |
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Manufacturing Vendor Prepayments |
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Prepaid Expenses and Other Assets |
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Increase (Decrease) in Operating Liabilities |
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Accounts Payable |
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Accrued Expenses |
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Unearned Revenue |
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Income and Other Taxes |
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Net Cash Flows Used in Operating Activities |
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Cash Flows from Investing Activities |
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Purchase of Fixed Assets |
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Investments in Patents and Trademarks |
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Investments in Licenses, Intangible and Other Assets |
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Net Cash Used in Investing Activities |
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Cash Flows from Financing Activities |
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Proceeds from Exercise of Warrants |
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Proceeds from Exercise of Stock Options |
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Proceeds from Common Stock Offering, Net | | | ||||
Preferred Dividend Settlement Payment |
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Employee Tax Withholdings Payment |
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Proceeds from Term Note | — | | ||||
Net Cash Flows Provided from Financing Activities |
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Net Increase in Cash and Cash Equivalents |
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Cash and Cash Equivalents - Beginning of Period |
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Cash and Cash Equivalents - End of Period | $ | | $ | | ||
Supplemental Disclosures |
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Unamortized Common Stock Expense included in Prepaid Expenses and Other Assets | $ | | $ | | ||
Non-Cash Investment in Licenses | | | ||||
Stock-Based Compensation Expense - Expensed less Previously Issued | ( | |
The accompanying notes are an integral part of these consolidated financial statements.
6
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,
For the nine months ended September 30, 2021, no
As of September 30, 2021,
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 |
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Smart Glasses Sales | $ | | $ | | $ | | $ | | ||||
Engineering Services |
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Total Revenue | $ | | $ | | $ | | $ | |
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
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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 |
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Point-in-Time |
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Over Time – Input Method |
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Total |
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Remaining Performance Obligations
As of September 30, 2021, the Company had
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
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 | $ | | $ | | ||
Work-in-Process |
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Finished Goods |
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Less: Reserve for Obsolescence |
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Inventories, Net | $ | | $ | |
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Note 5 – Licenses, Net
September 30, | December 31, | |||||
| 2021 |
| 2020 | |||
Licenses | $ | | $ | | ||
Additions |
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Less: Accumulated Amortization / Expensed |
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Less: Current Portion | ( | ( | ||||
Licenses, Net | $ | | $ | |
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
Note 6 – Intangible Asset, Net
| September 30, |
| December 31, | |||
2021 | 2020 | |||||
Intangible Asset | $ | | $ | | ||
Less: Accumulated Amortization |
| ( |
| ( | ||
Intangible Asset, Net | $ | | $ | |
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 $
Total amortization expense for this intangible asset for the three months ended September 30, 2021 and 2020 was $
Note 7 – Accrued Expenses
Accrued expenses consisted of the following:
September 30, | December 31, | |||||
| 2021 |
| 2020 | |||
Accrued Wages and Related Costs | $ | | $ | | ||
Accrued Professional Services |
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Accrued Warranty Obligations |
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Other Accrued Expenses |
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Total | $ | | $ | |
The Company has warranty obligations in connection with the sale of certain of its products. The warranty period for its products is generally
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 | $ | | |
Reductions for Settling Warranties |
| ( | |
Warranties Issued During Period |
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Accrued Warranty Obligations at September 30, 2021 | $ | |
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
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designated as Series A Preferred Stock. There were
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
Common Stock
The Company’s authorized common stock consists of
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 $
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 |
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Exercised During the Period |
| ( |
Issued During the Period |
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Expired During the Period |
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Warrants Outstanding at September 30, 2021 |
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The outstanding warrants as of September 30, 2021, expire on January 2, 2022. The average remaining term of the warrants is approximately
During the three months ended September 30, 2021 and 2020, there were
During the nine months ended September 30, 2021, a total of
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