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, 2022


☐	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 9, 2022, there were 63,739,650 shares of the registrant’s common stock outstanding.

Table of Contents

Part 1: FINANCIAL INFORMATION

Item 1: Consolidated Financial Statements

VUZIX CORPORATION

CONSOLIDATED BALANCE SHEETS


	(Unaudited)
	September 30,		December 31,
	2022		2021
ASSETS
Current Assets
Cash and Cash Equivalents	$	90,374,403	$	120,203,873
Accounts Receivable		3,118,036		2,242,429
Accrued Revenues in Excess of Billings		393,250		—
Inventories, Net		12,229,472		12,151,982
Manufacturing Vendor Prepayments		430,721		504,051
Prepaid Expenses and Other Assets		2,465,117		2,047,819

Total Current Assets		109,010,999		137,150,154

Long-Term Assets
Fixed Assets, Net		9,524,178		5,190,438
Operating Lease Right-of-Use Asset		707,574		1,117,022
Patents and Trademarks, Net		2,141,157		1,988,370
Technology Licenses, Net		15,657,333		1,389,936
Intangible Asset, Net		—		147,548
Other Assets, Net		1,716,810		1,483,589

Total Assets	$	138,758,051	$	148,467,057

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable	$	2,196,590	$	2,054,762
Unearned Revenue		24,370		27,797
Accrued Expenses		1,174,372		1,419,308
Licensing Fees Commitment		4,250,000		—
Income and Other Taxes Payable		46,604		120,242
Operating Lease Right-of-Use Liability		525,882		534,146

Total Current Liabilities		8,217,818		4,156,255

Long-Term Liabilities
Operating Lease Right-of-Use Liability		181,692		582,876
Licensing Fees Commitment		4,750,000		—

Total Long-Term Liabilities		4,931,692		582,876

Total Liabilities		13,149,510		4,739,131

Stockholders' Equity
Common Stock - $0.001 Par Value, 100,000,000 shares authorized; 63,776,335 shares issued and 63,739,650 shares outstanding as of September 30, 2022 and 63,672,268 shares issued and outstanding as of December 31, 2021.		63,777		63,672
Additional Paid-in Capital		358,872,631		346,736,397
Accumulated Deficit		(233,076,810)		(203,072,143)
Treasury Stock, at cost, 36,685 shares as of September 30, 2022 and 0 shares as of December 31, 2021		(251,057)		—

Total Stockholders' Equity		125,608,541		143,727,926

Total Liabilities and Stockholders' Equity	$	138,758,051	$	148,467,057

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

Table of Contents

VUZIX CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)


	Preferred Stock			Common Stock			Additional		Accumulated		Treasury Stock
	Shares	Amount		Shares	Amount		Paid-In Capital		Deficit		Shares	Amount		Total
Balance - January 1, 2022	—	$	—	63,672,268	$	63,672	$	346,736,397	$	(203,072,143)	—	$	—	$	143,727,926
Stock-Based Compensation Expense	—		—	(3,017)		(2)		12,087,836		—	—		—		12,087,834
Stock Option Exercises	—		—	107,084		107		48,398		—	—		—		48,505
Purchases of Treasury Stock	—		—	—		—		—		—	(36,685)		(251,057)		(251,057)
Net Loss	—		—	—		—		—		(30,004,667)	—		—		(30,004,667)
Balance - September 30, 2022	—	$	—	63,776,335	$	63,777	$	358,872,631	$	(233,076,810)	(36,685)	$	(251,057)	$	125,608,541


	Preferred Stock			Common Stock			Additional		Accumulated		Treasury Stock
	Shares	Amount		Shares	Amount		Paid-In Capital		Deficit		Shares	Amount		Total
Balance - July 1, 2022	—	$	—	64,025,640	$	64,026	$	355,322,990	$	(223,599,811)	(36,685)	$	(251,057)	$	131,536,148
Stock-Based Compensation Expense	—		—	(291,667)		(291)		3,549,683		—	—		—		3,549,392
Stock Option Exercises	—		—	42,362		42		(42)		—	—		—		—
Net Loss	—		—	—		—		—		(9,476,999)	—		—		(9,476,999)
Balance - September 30, 2022	—	$	—	63,776,335	$	63,777	$	358,872,631	$	(233,076,810)	(36,685)	$	(251,057)	$	125,608,541


	Preferred Stock			Common Stock			Additional		Accumulated		Treasury Stock
	Shares	Amount		Shares	Amount		Paid-In Capital		Deficit		Shares	Amount		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 (as Restated)	—		—	368,047		368		14,377,950		—	—		—		14,378,318
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 & Preferred Dividend Settlement	(49,626)		(50)	4,962,600		4,963		(10,004,913)		—	—		—		(10,000,000)
Net Loss (as Restated)	—		—	—		—		—		(28,884,390)	—		—		(28,884,390)
Balance - September 30, 2021 (as Restated)	—	$	—	63,631,054	$	63,631	$	342,644,630	$	(191,579,373)	—	$	—	$	151,128,888


	Preferred Stock			Common Stock			Additional		Accumulated		Treasury Stock
	Shares	Amount		Shares	Amount		Paid-In Capital		Deficit		Shares	Amount		Total
Balance - July 1, 2021 (as Restated)	—	$	—	63,278,096	$	63,278	$	336,770,866	$	(181,091,825)	—	$	—	$	155,742,319
Stock-Based Compensation Expense (as Restated)	—		—	300,000		300		5,833,873		—	—		—		5,834,173
Stock Option Exercises	—		—	52,958		53		39,891		—	—		—		39,944
Net Loss (as Restated)	—		—	—		—		—		(10,487,548)	—		—		(10,487,548)
Balance - September 30, 2021 (as Restated)	—	$	—	63,631,054	$	63,631	$	342,644,630	$	(191,579,373)	—	$	—	$	151,128,888

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

Table of Contents

VUZIX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
			(as Restated)				(as Restated)
	2022		2021		2022		2021
Sales:
Sales of Products	$	2,537,539	$	3,018,774	$	7,939,483	$	9,657,589
Sales of Engineering Services		889,284		—		998,150		193,113

Total Sales		3,426,823		3,018,774		8,937,633		9,850,702

Cost of Sales:
Cost of Sales - Products Sold		2,034,123		2,370,053		6,289,612		7,347,450
Cost of Sales - Engineering Services		302,707		—		362,003		29,669
Cost of Sales - Depreciation and Amortization		221,772		252,759		676,720		953,614

Total Cost of Sales		2,558,602		2,622,812		7,328,335		8,330,733

Gross Profit		868,221		395,962		1,609,298		1,519,969

Operating Expenses:
Research and Development		3,440,685		3,397,118		9,540,272		8,326,431
Selling and Marketing		1,980,748		1,653,013		5,895,332		4,305,632
General and Administrative		4,854,014		5,463,247		15,307,242		16,672,046
Depreciation and Amortization		510,099		246,902		1,149,046		731,035
Loss on Fixed Asset Disposal		—		—		—		83,908
Impairment of Patents and Trademarks		48,075		7,544		97,676		66,040

Total Operating Expenses		10,833,621		10,767,824		31,989,568		30,185,092

Loss From Operations		(9,965,400)		(10,371,862)		(30,380,270)		(28,665,123)

Other Income (Expense):
Investment Income		572,721		29,843		690,028		45,448
Income and Other Taxes		(19,768)		(105,526)		(98,727)		(138,034)
Foreign Exchange Loss		(64,552)		(40,003)		(215,698)		(126,681)

Total Other Income (Expense), Net		488,401		(115,686)		375,603		(219,267)

Loss Before Provision for Income Taxes		(9,476,999)		(10,487,548)		(30,004,667)		(28,884,390)
Provision for Income Taxes		—		—		—		—

Net Loss		(9,476,999)		(10,487,548)		(30,004,667)		(28,884,390)

Basic and Diluted Loss per Common Share	$	(0.15)	$	(0.17)	$	(0.47)	$	(0.48)
Weighted-average Shares Outstanding - Basic and Diluted		63,776,154		63,520,878		63,724,982		60,278,923

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

Table of Contents

VUZIX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
			(as Restated)
	2022		2021

Cash Flows from Operating Activities
Net Loss	$	(30,004,667)	$	(28,884,390)
Non-Cash Adjustments
Depreciation and Amortization		1,700,766		1,453,367
Amortization of Software Development Costs and Prepaid Licenses in Cost of Sales		125,000		180,296
Stock-Based Compensation		12,016,334		12,830,782
Impairment of Patents and Trademarks		97,676		66,040
Loss on Fixed Asset Disposal		—		83,908
(Increase) Decrease in Operating Assets
Accounts Receivable		(875,607)		330,092
Accrued Revenues in Excess of Billings		(393,250)		—
Inventories, Net		(77,490)		(3,779,513)
Manufacturing Vendor Prepayments		73,330		(1,417,100)
Prepaid Expenses and Other Assets		(417,298)		(238,066)
Increase (Decrease) in Operating Liabilities
Accounts Payable		141,828		(34,346)
Accrued Expenses		(244,935)		602,293
Unearned Revenue		(3,425)		(26,901)
Income and Other Taxes Payable		(73,637)		(75,890)

Net Cash Flows Used in Operating Activities		(17,935,375)		(18,909,428)

Cash Flows from Investing Activities
Purchases of Fixed Assets		(5,203,562)		(3,592,703)
Investments in Patents and Trademarks		(362,981)		(442,582)
Investments in Licenses, Intangibles and Other Assets		(6,125,000)		(305,158)

Net Cash Flows Used in Investing Activities		(11,691,543)		(4,340,443)

Cash Flows from Financing Activities
Proceeds from Exercise of Warrants		—		34,705,068
Proceeds from Exercise of Stock Options		48,505		713,703
Proceeds from Common Stock Offering, Net		—		91,652,617
Purchases of Treasury Stock		(251,057)		—
Preferred Dividend Settlement Payment		—		(10,000,000)
Employee Tax Withholdings Payment		—		(1,144,364)

Net Cash Flows (Used in) Provided from Financing Activities		(202,552)		115,927,024

Net (Decrease) Increase in Cash and Cash Equivalents		(29,829,470)		92,677,153
Cash and Cash Equivalents - Beginning of Period		120,203,873		36,069,508

Cash and Cash Equivalents - End of Period	$	90,374,403	$	128,746,661

Supplemental Disclosures
Unamortized Common Stock Expense included in Prepaid Expenses and Other Assets	$	1,204,942	$	1,729,646
Non-Cash Investment in Licenses		9,000,000		1,341,614
Stock-Based Compensation Expense - Expensed less Previously Issued		(71,502)		(1,547,536)

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

Table of Contents

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” or “Vuzix”) 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 impacting Costs of Sales, Gross Profit and Depreciation and Amortization. The results of the Company’s operations for the three and nine months ended September 30, 2022 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 and for the year ended December 31, 2021, as reported in the Company’s Annual Report on Form 10-K/A filed with the SEC on October 25, 2022.

Restatement

As described in additional detail in Note 2 to the financial statements included in its 2021 Form 10-K/A, the Company restated its previous unaudited quarterly results in the Form 10-K for the year ended December 31, 2021. Previously filed 2021 quarterly reports on Form 10-Q for the periods affected by the restatement were not amended and should no longer be relied upon. See Note 2, Restatement of Previously Issued 2021 Unaudited Quarterly Financial Statements and Note 20, Quarterly Financial Information (Unaudited) of the Notes to the consolidated financial statements in the 2021 Form 10-K/A for the impact of these adjustments on each of the quarterly periods in fiscal year 2021.

The impact of the restatement on the unaudited quarterly financial statements is presented below.

The impact of the restatement to the Consolidated Balance Sheet:


	September 30, 2021 (Unaudited)
	As Previously
Balance Sheet	Reported		Adjustment		As Restated
Additional paid-in capital	$	337,125,126	$	5,519,504	$	342,644,630
Accumulated deficit	$	(186,059,869)	$	(5,519,504)	$	(191,579,373)

Table of Contents

The impact of the restatement to the Consolidated Statements of Operation:


	For the Three Months Ended September 30, 2021 (Unaudited)						For the Nine Months Ended September 30, 2021 (Unaudited)
	As Previously						As Previously
Condensed Statement of Operations	Reported		Adjustment		As Restated		Reported		Adjustment		As Restated
Total Sales	$	3,018,774	$	—	$	3,018,774	$	9,850,702	$	—	$	9,850,702
Total Cost of Sales		2,435,437		—		2,435,437		7,608,401		—		7,608,401
Gross Profit		583,337		—		583,337		2,242,301		—		2,242,301
Operating Expenses:
Research and Development		3,270,255		126,863		3,397,118		8,050,915		275,516		8,326,431
Selling and Marketing		1,589,582		63,431		1,653,013		4,167,874		137,758		4,305,632
General and Administrative		3,112,059		2,351,188		5,463,247		11,565,816		5,106,230		16,672,046
Depreciation and Amortization		434,277		—		434,277		1,453,367		—		1,453,367
Loss on Fixed Asset Disposal		—		—		—		83,908		—		83,908
Impairment of Patents and Trademarks		7,544		—		7,544		66,040		—		66,040
Total Operating Expenses		8,413,717		2,541,482		10,955,199		25,387,920		5,519,504		30,907,424
Loss From Operations		(7,830,380)		(2,541,482)		(10,371,862)		(23,145,619)		(5,519,504)		(28,665,123)
Total Other Expense, Net		(115,686)		—		(115,686)		(219,267)		—		(219,267)
Net Loss	$	(7,946,066)	$	(2,541,482)	$	(10,487,548)	$	(23,364,886)	$	(5,519,504)	$	(28,884,390)
Basic and Diluted Loss per Common Share	$	(0.13)	$	(0.04)	$	(0.17)	$	(0.39)	$	(0.10)	$	(0.48)

The impact of the restatement to the Statement of Changes in Stockholders’ Equity:


	For the Nine Months Ended September 30, 2021 (Unaudited)
	As Previously
Condensed Statement of Changes in Stockholders' Equity	Reported	Adjustment	As Restated
Stock-Based Compensation Expense	$

		Page No.

Part I – Financial Information		3

Item 1.	Consolidated Financial Statements (Unaudited):	3

	Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	3

	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021	4

	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021	5

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021	6

	Notes to the Unaudited Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	29

Part II – Other Information		29

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 3.	Defaults Upon Senior Securities	30

Item 4.	Mine Safety Disclosure	30

Item 5.	Other Information	30

Item 6.	Exhibits	31

Signatures		32