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 June 30, 2024


☐	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 August 14, 2024, there were 65,965,431 shares of the registrant’s common stock outstanding.

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Vuzix Corporation

INDEX

		Page No.

Part I – Financial Information		3

Item 1.	Consolidated Financial Statements (Unaudited):	3

	Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	3

	Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2024 and 2023	4

	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2024 and 2023	5

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023	6

	Notes to the Unaudited Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30

Item 4.	Controls and Procedures	30

Part II – Other Information		31

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Defaults Upon Senior Securities	31

Item 4.	Mine Safety Disclosure	31

Item 5.	Other Information	31

Item 6.	Exhibits	32

Signatures		33

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Part 1: FINANCIAL INFORMATION

Item 1: Consolidated Financial Statements

VUZIX CORPORATION

CONSOLIDATED BALANCE SHEETS


	(Unaudited)
	June 30,		December 31,
	2024		2023
ASSETS
Current Assets
Cash and Cash Equivalents	$	9,881,216	$	26,555,592
Accounts Receivable, net of allowance for credit losses of $1,864,000 at June 30, 2024 and $1,574,000 at December 31, 2023.		3,024,196		3,827,686
Accrued Revenues in Excess of Billings		290,096		165,771
Utility Improvement Refund		—		208,271
Inventories, Net		10,238,163		9,000,430
Manufacturing Vendor Prepayments		329,866		403,801
Prepaid Expenses and Other Assets		897,537		1,338,860

Total Current Assets		24,661,074		41,500,411

Long-Term Assets
Fixed Assets, Net		8,188,863		8,072,830
Operating Lease Right-of-Use Asset		747,003		301,185
Patents and Trademarks, Net		2,848,084		2,627,018
Technology Licenses, Net		861,578		26,851,001
Cost Method Investment in Atomistic		—		5,784,126
Other Assets, Net		927,778		1,011,111

Total Assets	$	38,234,380	$	86,147,681

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable	$	899,662	$	1,570,630
Unearned Revenue		49,831		18,839
Accrued Expenses		1,006,409		2,416,443
Licensing Fees Commitment		—		1,000,000
Income and Other Taxes Payable		124,363		46,727
Operating Lease Right-of-Use Liability		506,372		163,513

Total Current Liabilities		2,586,637		5,216,152

Long-Term Liabilities
Operating Lease Right-of-Use Liability		240,631		137,672

Total Liabilities		2,827,268		5,353,824

Stockholders' Equity
Common Stock - $0.001 Par Value, 100,000,000 shares authorized; 66,034,769 shares issued and 65,455,097 shares outstanding as of June 30, 2024 and 65,304,780 shares issued and 64,725,108 shares outstanding as of December 31, 2023.		66,034		65,304
Additional Paid-in Capital		382,462,147		377,189,847
Accumulated Deficit		(344,644,568)		(293,984,793)
Treasury Stock, at cost, 579,672 shares as of June 30, 2024 and December 31, 2023.		(2,476,501)		(2,476,501)

Total Stockholders' Equity		35,407,112		80,793,857

Total Liabilities and Stockholders' Equity	$	38,234,380	$	86,147,681

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)


	Common Stock			Additional		Accumulated		Treasury Stock
	Shares	Amount		Paid-In Capital		Deficit		Shares	Amount		Total
Balance - April 1, 2024	65,304,780	$	65,304	$	379,582,792	$	(304,032,375)	(579,672)	$	(2,476,501)	$	73,139,220
Stock-Based Compensation Expense	729,005		729		2,879,354		—	—		—		2,880,083
Stock Option Exercises	984		1		1		—	—		—		2
Net Loss	—		—		—		(40,612,193)	—		—		(40,612,193)
Balance - June 30, 2024	66,034,769	$	66,034	$	382,462,147	$	(344,644,568)	(579,672)	$	(2,476,501)	$	35,407,112


	Common Stock			Additional		Accumulated		Treasury Stock
	Shares	Amount		Paid-In Capital		Deficit		Shares	Amount		Total
Balance - January 1, 2024	65,304,780	$	65,304	$	377,189,847	$	(293,984,793)	(579,672)	$	(2,476,501)	$	80,793,857
Stock-Based Compensation Expense	729,005		729		5,272,299		—	—		—		5,273,028
Stock Option Exercises	984		1		1		—	—		—		2
Net Loss	—		—		—		(50,659,775)	—		—		(50,659,775)
Balance - June 30, 2024	66,034,769	$	66,034	$	382,462,147	$	(344,644,568)	(579,672)	$	(2,476,501)	$	35,407,112


	Common Stock			Additional		Accumulated		Treasury Stock
	Shares	Amount		Paid-In Capital		Deficit		Shares	Amount		Total
Balance - April 1, 2023	63,787,858	$	63,787	$	365,868,487	$	(254,076,299)	(579,672)	$	(2,476,501)	$	109,379,474
Stock-Based Compensation Expense	96,525		97		3,189,606		—	—		—		3,189,703
Stock Option Exercises	14,506		15		14,532		—	—		—		14,547
Net Loss	—		—		—		(9,044,920)	—		—		(9,044,920)
Balance - June 30, 2023	63,898,889	$	63,899	$	369,072,625	$	(263,121,219)	(579,672)	$	(2,476,501)	$	103,538,804


	Common Stock			Additional		Accumulated		Treasury Stock
	Shares	Amount		Paid-In Capital		Deficit		Shares	Amount		Total
Balance - January 1, 2023	63,783,779	$	63,783	$	362,507,715	$	(243,835,716)	(464,672)	$	(2,005,744)	$	116,730,038
Stock-Based Compensation Expense	96,525		97		6,550,382		—	—		—		6,550,479
Stock Option Exercises	18,585		19		14,528		—	—		—		14,547
Purchases of Treasury Stock	—		—		—		—	(115,000)		(470,757)		(470,757)
Net Loss	—		—		—		(19,285,503)	—		—		(19,285,503)
Balance - June 30, 2023	63,898,889	$	63,899	$	369,072,625	$	(263,121,219)	(579,672)	$	(2,476,501)	$	103,538,804

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 June 30,				Six Months Ended June 30,

	2024		2023		2024		2023
Sales:
Sales of Products	$	601,263	$	4,425,162	$	2,430,336	$	8,616,523
Sales of Engineering Services		491,308		265,673		666,102		265,673

Total Sales		1,092,571		4,690,835		3,096,438		8,882,196

Cost of Sales:
Cost of Sales - Products Sold		1,067,452		3,303,979		2,875,044		6,386,418
Cost of Sales - Depreciation and Amortization		182,049		257,939		363,615		490,855
Cost of Sales - Engineering Services		176,215		156,531		244,177		156,531

Total Cost of Sales		1,425,716		3,718,449		3,482,836		7,033,804

Gross Profit (Loss)		(333,145)		972,386		(386,398)		1,848,392

Operating Expenses:
Research and Development		2,358,726		2,836,552		5,073,115		5,906,349
Selling and Marketing		2,238,221		2,509,922		4,479,165		5,049,581
General and Administrative		4,492,168		4,260,322		8,594,322		9,392,146
Depreciation and Amortization		1,188,339		973,222		2,158,716		1,937,487
Loss on Fixed Asset Disposal		—		—		11,277		—
Impairment on Intangible Asset and Equity Investment		30,119,679		—		30,119,679		—
Impairment of Patents and Trademarks		—		—		—		17,666

Total Operating Expenses		40,397,133		10,580,018		50,436,274		22,303,229

Loss From Operations		(40,730,278)		(9,607,632)		(50,822,672)		(20,454,837)

Other Income (Expense):
Investment Income		205,824		628,923		358,423		1,324,706
Income and Other Taxes		(17,559)		(35,420)		(17,841)		(123,215)
Foreign Exchange Loss		(70,180)		(30,791)		(177,685)		(32,157)

Total Other Income, Net		118,085		562,712		162,897		1,169,334

Loss Before Provision for Income Taxes		(40,612,193)		(9,044,920)		(50,659,775)		(19,285,503)
Provision for Income Taxes		—		—		—		—

Net Loss		(40,612,193)		(9,044,920)		(50,659,775)		(19,285,503)

Basic and Diluted Loss per Common Share	$	(0.62)	$	(0.14)	$	(0.77)	$	(0.31)
Weighted-average Shares Outstanding - Basic and Diluted		65,814,475		63,230,859		65,559,627		63,223,768

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

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VUZIX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,

	2024		2023

Cash Flows From (Used In) Operating Activities
Net Loss	$	(50,659,775)	$	(19,285,503)
Non-Cash Adjustments
Depreciation and Amortization		2,622,866		2,428,342
Stock-Based Compensation		5,273,028		6,500,261
Impairment of Patents and Trademarks		—		17,666
Loss on Fixed Asset Disposal		11,277		—
Reserve on Trade Accounts Receivable		290,000		—
Change in Inventory Reserve for Obsolescence		—		480,258
Impairment on Intangible Asset and Equity Investment		30,119,679		—
(Increase) Decrease in Operating Assets
Accounts Receivable		513,490		(2,986,637)
Accrued Revenues in Excess of Billings		(124,325)		(40,633)
Utility Improvement Refund/Employee Retention Credit Receivable		208,271		466,705
Inventories		(1,237,733)		(82,454)
Manufacturing Vendor Prepayments		73,936		645,272
Prepaid Expenses and Other Assets		441,323		1,692
Increase (Decrease) in Operating Liabilities
Accounts Payable		(670,968)		408,743
Accrued Expenses		(1,410,034)		(641,362)
Unearned Revenue		30,992		77,980
Income and Other Taxes Payable		77,638		(76,037)

Net Cash Flows Used in Operating Activities		(14,440,335)		(12,085,707)

Cash Flows Used in Investing Activities
Purchases of Fixed Assets		(929,635)		(2,774,513)
Investments in Patents and Trademarks		(304,406)		(340,507)
Investments in Licenses		(1,000,000)		(8,000,000)
Investments in Software Development		—		(125,000)
Investments in Other Assets		—		(200,000)

Net Cash Flows Used in Investing Activities		(2,234,041)		(11,440,020)

Cash Flows Provided by (Used in) Financing Activities
Proceeds from Exercise of Stock Options		—		14,546
Purchases of Treasury Stock		—		(470,757)

Net Cash Flows Provided by (Used in) Financing Activities		—		(456,211)

Net Increase (Decrease) in Cash and Cash Equivalents		(16,674,376)		(23,981,938)
Cash and Cash Equivalents - Beginning of Period		26,555,592		72,563,943

Cash and Cash Equivalents - End of Period	$	9,881,216	$	48,582,005

Supplemental Disclosures
Depreciation and Amortization included in Research and Development Expense	$	100,535	$	—
Stock-Based Compensation Expense - Expensed less Previously Issued		—		(50,218)

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” 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. The results of the Company’s operations for the three and six months ended June 30, 2024, 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, 2023, as reported in the Company’s Annual Report on Form 10-K filed with the SEC on April 15, 2024.

Customer Concentrations

For the three months ended June 30, 2024, four customers represented 60% of total product revenue and one customer represented 86% of engineering services revenue. For the three months ended June 30, 2023, one customer represented 75% of total product revenue.

For the six months ended June 30, 2024, three customers represented 37% of total product revenue and one customer represented 82% of engineering services revenue. For the six months ended June 30, 2023, two customers represented 75% of total product revenue.

As of June 30, 2024, three customers represented 93% of accounts receivable. As of December 31, 2023, two customers represented 73% of accounts receivable.

Fair Value of Financial Instruments

The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, accounts payable, unearned revenue, accrued expenses, and income and other taxes payable. As of the consolidated balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented due to the short maturities of these instruments.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company 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 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 Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. (ASU) 2014- 15, Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. As a result, management is primarily responsible for assessing if there is a going concern issue when issuing an entity’s financial statements. The going concern assumption underlies all GAAP financial reporting and therefore requires and assumes that the financial statements have been prepared on a going concern basis. It presumes that a Company will continue normal business operations into the future.

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Additional disclosure is required when there is substantial doubt about business continuity or substantial doubt that has not been alleviated by management’s mitigation plans. As required under applicable accounting standards, management has concluded that substantial doubt may exist surrounding the Company's ability to meet its obligations within one year of the release of the financial statements.

The Company incurred net losses for the six months ended June 30, 2024 of $50,659,775; $50,149,077 for the year ended December 31, 2023; and $40,763,573 for the year ended December 31, 2022. The Company had net cash outflows from operations of $14,440,335 for the six months ended June 30, 2024; $26,277,824 for the year ended December 31, 2023; and $24,521,082 for the year ended December 31, 2022. As of June 30, 2024, the Company had an accumulated deficit of $344,644,568. The Company’s cash outflows for investing activities were $2,234,041 for the six months ended June 30, 2024; $19,280,966 for the year ended December 31, 2023; and $21,170,816 for the year ended December 31, 2022.

These factors initially raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans to alleviate the conditions that raise substantial doubt include the implementation of operational improvements and the curtailment of certain development programs, both of which the Company expects will preserve cash.

The Company’s cash requirements going forward are primarily for funding operating losses, research and development, working capital and capital expenditures. The higher cash outflows for investments in the years ending December 31, 2023 and 2022 were mainly for the Company’s exclusive technology license and equity investment in microLED technology via Atomistic (see Notes 6 and 7). The Company paid $32,500,000 to Atomistic in the last two fiscal years. The Company’s license was terminated on July 1, 2024. As a result, the Company will not be paying further licensing development fees to Atomistic.

Our cash requirements related to funding operating losses depend upon 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 its cash needs primarily through the sale of equity securities.

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 or it will be required to cut its operating costs significantly or raise new equity and/or debt capital. Management’s plans concerning these matters and managing our liquidity include, among other things:

●

Reductions in our cash annual operating expenses by approximately $8,000,000 for 2024 across all operating areas, representing a reduction of at least 20% as compared to 2023 levels, including the areas of Research and Development, Sales and Marketing and General and Administrative;

●

Implementation of a voluntary Company-wide payroll reduction program for all individuals with optional salary reductions of 10% to 50% depending upon the respective base salary level for the period running from May 1, 2024 to April 30, 2025. The expected cash savings will be approximately $2,100,000 and will result in the issuance of stock awards or stock options, at a rate of 150% or 200%, respectively, of the net cash wage reductions;

●

After the impact of payroll reduction program for equity and two major rounds of staff reductions, including another round at the end of June 2024, the Company’s current weekly gross cash salary costs are now approximately $162,000 versus $263,000 at the beginning of 2024, a decrease of $101,000 per week or 38.4% (or a total of $5,252,000 on an annual basis);

●

Right-sizing of operations across all areas of the Company, including head-count hiring freezes or head-count reductions;

●

Further reductions in the rate of research and development spending on new technologies, particularly the use of external contractors;

●

Delaying or curtailing discretionary and non-essential capital expenditures not related to near-term product and manufacturing needs and reducing other investing activities for our 2024 fiscal year as compared to 2023 and

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2022, now that our waveguide manufacturing plant expansion has substantially been completed and the license fees payments under the Atomistic License have been completed;

●

The expected margin contribution upon the commencement of volume manufacturing and sales of waveguides from our new waveguide manufacturing plant, particularly to OEM customers;

●

Continued pursuit of licensing and strategic opportunities around our waveguide technologies with potential OEMs, which would include the receipt of upfront licensing fees and on-going supply agreements;

●

Reduction in the rate of new product introductions and further leveraging of existing platforms to reduce new product development and engineering costs; and

●

Reduction in our existing products selling prices and higher volume discount levels to turn as much of our inventory of finished products into cash and pursue external manufacturers for Vuzix non-waveguide production needs.

The Company has historically sold equity securities and currently has a new Registration Statement on Form S-3 that became effective in May 2024, which includes a sales agreement with an investment banking firm for the issuance and sale of up to $50,000,000 of our common stock that may be issued and sold from time to time in an “at the market” offering. Management monitors the capital markets on an ongoing basis and may consider raising capital if favorable market conditions develop. If the Company’s actual results are less than projected or the Company needs to raise capital for additional liquidity, the Company may be required to pursue additional equity financings, further curtail expenses, or enter into one or more strategic transactions. However, management can make no assurance that the Company will be able to successfully complete any of the forementioned pursuits on terms acceptable to the Company, or at all.

While there can be no assurance the Company will be able to successfully reduce operating expenses or raise additional capital, management believes its historical ability to manage its cash flows and to obtain capital will continue into the foreseeable future. However, as a result of this uncertainty, doubt about the Company continuing as a going concern has not been fully alleviated to the satisfaction of its external auditors as noted in their audit report included with to the Company’s 10-K filed with the SEC on April 15, 2024.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at year-end and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Variable Interest Entities

The Company determines at the inception of each arrangement whether an entity in which it has made an investment or in which the Company has other variable interests is considered a variable interest entity (VIE). The Company consolidates VIEs when it is the primary beneficiary. The Company is the primary beneficiary of a VIE when it has the power to direct activities that most significantly affect the economic performance of the VIE and have the obligation to absorb the majority of their losses or benefits. If the Company is not the primary beneficiary in a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with applicable GAAP. At each reporting period, the Company assesses whether any changes in our interest or relationship with the entity affect our determination of whether the entity is a VIE and, if so, whether the Company is the primary beneficiary.

We have an investment in a VIE, Atomistic, in which we are not the primary beneficiary. This VIE includes a private company investment, described further in Notes 6 and 7. We have determined that the governance and operating structures of this entity do not allow us to direct the activities that would significantly affect their economic performance. Therefore, we are not the primary beneficiary, and the results of operations and financial position of this VIE are not included in our consolidated financial statements. We had accounted for this investment as a technology license and an equity investment. The maximum exposure of this unconsolidated VIE is generally based on the current carrying value of the investment. We have determined that the single source of our exposure to this VIE was our capital investment in them. The carrying value and maximum exposure of this unconsolidated VIE was $31.8 million as of March 31, 2024;

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however, as of June 30, 2024, the carrying value of these investments of $30.1 million was written-off due to the termination of the Company’s exclusive license. Refer to Notes 6 and 7 for further details.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topics 740): Improvements to Income Tax Disclosures" to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

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				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Revenues
Products Sales	$	601,263	$	4,425,162	$	2,430,336	$	8,616,523
Engineering Services		491,308		265,673		666,102		265,673

Total Revenue	$	1,092,571	$	4,690,835	$	3,096,438	$	8,882,196

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. 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 considers shipping and handling activities performed to be fulfillment activities and not a separate performance obligation. 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 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

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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 the date of billing, subject to an agreed upon customer acceptance period.

As of June 30, 2024 and 2023, there were no outstanding performance obligations remaining for extended warranties.

The following table presents a summary of the Company’s sales by revenue recognition method as a percentage of total net sales for the three and six months ended June 30, 2024 and 2023:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Point-in-Time	55	%	94	%	78	%	97	%
Over Time – Input Method	45	%	6	%	22	%	3	%

Total	100	%	100	%	100	%	100	%

Remaining Performance Obligations

As June 30, 2024, the Company had $2,359,904 of remaining performance obligations under a current waveguide development project, including initial product production, which represents the remainder of transaction prices totaling $3,500,000 under this development project, which commenced in 2023, less revenue recognized under percentage of completion to date. The Company expects to recognize the remaining revenue related to this project based upon expected due dates, in the amounts of 18% in 2024 and 82% in 2025. Revenues earned less amounts invoiced at June 30, 2024 was $290,096 and $165,771 at December 31, 2023.

As of June 30, 2023, the Company had approximately $80,000 of remaining performance obligations under a current waveguide development project, which amount represents the remainder of the total transaction price of approximately $800,000 under this development project, less revenue recognized under percentage of completion to date. The Company did recognize the remaining revenue related to this project in the third quarter of 2023.

As of June 30, 2024, the Company had no material 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. 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 six months ended June 30, 2024 and 2023, 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. As of June 30, 2024 and 2023, there were 10,744,477 and 8,658,642 common stock share equivalents, for the three months then ended, respectively, potentially issuable from the exercise of stock options that could dilute basic earnings per share in the future.

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Note 4 – Inventories, Net

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


	June 30,		December 31,
	2024		2023

Purchased Parts and Components	$	10,876,973	$	9,500,415
Work-in-Process		291,432		394,923
Finished Goods		5,044,284		4,880,643
Less: Reserve for Obsolescence		(5,974,526)		(5,775,551)

Inventories, Net	$	10,238,163	$	9,000,430

Note 5 – Fixed Assets

Fixed Assets consisted of the following:


	June 30,		December 31,
	2024		2023
Tooling and Manufacturing Equipment	$	9,585,842	$	8,793,192
Leaseholds		2,839,164		3,162,695
Computers and Purchased Software		679,138		833,794
Furniture and Equipment		2,431,846		2,580,904
		15,535,990		15,370,585
Less: Accumulated Depreciation		(7,347,127)		(7,297,755)
Fixed Assets, Net	$	8,188,863	$	8,072,830

December 31, 2023 asset groupings have been reclassified to conform with June 30, 2024 presentation.

As of June 30, 2024 and December 31, there was $965,000 and $588,000, respectively of fixed assets that are not yet placed into service.

Total depreciation expense for fixed assets for the three months ended June 30, 2024 and 2023 was $231,222 and $111,934, respectively. Total depreciation expense for fixed assets for the six months ended June 30, 2024 and 2023 was $522,042 and $214,385, respectively.

Note 6 – Technology Licenses, Net

The changes in the Company’s Technology Licenses for the six months ended June 30, 2024, were as follows:


	June 30,		December 31,
	2024		2023

Licenses	$	32,443,356	$	32,443,356
Write Offs		(30,000,000)		—
Less: Accumulated Amortization		(1,581,778)		(5,592,355)
Licenses, Net	$	861,578	$	26,851,001

Total amortization expense related to technology licenses for the three months ended June 30, 2024 and 2023 was $835,542 and $826,984, respectively. Total amortization expense related to technology licenses for the six months ended June 30, 2024 and 2023 was $1,653,876 and $1,653,868, respectively. The estimated aggregate annual amortization expense for each of the next five fiscal years is approximately $201,000.

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The Company made the decision to cease further funding of development activities with Atomistic SAS (“Atomistic”) under the license agreement, dated December 16, 2022, among the Company, Atomistic, and Atomistic’s two principals (the “License Agreement”). The Company’s decision gave Atomistic the right under the License Agreement to terminate the Granted License (as defined under the License Agreement), which right Atomistic exercised on July 1, 2024. As a result of the termination of the granted license, on July 1, 2024, which was effective June 30, 2024, the Company determined that the technology license asset of $24,335,554, net book value as of June 30, 2024, had been impaired as the Company no longer held exclusive licensing rights to the technology for its use.

Notwithstanding the termination of the Granted License, the Company will be entitled to certain License Royalties (as defined under the License Agreement) from Atomistic if it licenses the technology that was the subject of the granted license.

Note 7 – Investment in Atomistic

In addition to the write-off of the Atomistic technology license discussed in Note 6, based upon the fact that Atomistic has lost future funding from the Company and most likely will not have adequate funds on its own to complete the project without raising additional funding from other third parties, the Company also determined the equity investment has been impaired and the Company recorded a charge of $5,664,446 for the period ended June 30, 2024. The Company will retain an equity interest in Atomistic, the right to appoint a member to the Atomistic board of directors and certain other rights as an equity owner pursuant to the stock purchase agreement and shareholders’ agreement entered into in connection with the License Agreement. The Company’s equity interest in Atomistic entitles it to a preferential allocation to 49% of the distributable amounts in the event of a liquidation event, such as an acquisition of Atomistic or its assets.

Future royalties of the license and the 49% liquidation preferred allocation value, if any, are considered gain contingencies and will not be recorded until any specific events materialize. At this specific point in time, the Company is unable to reasonably estimate a value to all those contingencies and therefore recorded a full impairment against the license and the investment in Atomistic preferred shares due to such uncertainty of potential outcomes.

Note 8 - Other Assets

The Company’s Other Assets, were as follows:


	June 30,		December 31,
	2024		2023
Private Corporation Investments	$	650,000	$	450,000
Additions		—		200,000
Total Private Corporation Investments (at cost)		650,000		650,000

Software Development Costs		1,000,000		875,000
Additions		—		125,000
Less: Accumulated Amortization		(722,222)		(638,889)
Software Development Costs, Net		277,778		361,111

Total Other Assets	$	927,778	$	1,011,111

During the year ended December 31, 2021, the Company acquired, for a purchase price of $200,000, an ownership interest of 3%, in the form of preferred stock, in a private corporation developing smart glasses software for use by retailers in the stockkeeping of inventory, amongst other uses. In the year ended December 31, 2023, the Company purchased an additional $100,000 of preferred stock in this corporation to retain a 2% ownership interest.

In June 2023, the Company purchased $100,000 of preferred stock, along with warrants, in a UK-based public company developing new semiconductor materials for displays. The investment represents less than a 1% ownership interest.