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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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 August 14, 2024, there were
Vuzix Corporation
INDEX
2
Part 1: FINANCIAL INFORMATION
Item 1: Consolidated Financial Statements
VUZIX CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited) |
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June 30, | December 31, | |||||
| 2024 |
| 2023 | |||
ASSETS |
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Current Assets |
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Cash and Cash Equivalents | $ | | $ | | ||
Accounts Receivable, net of allowance for credit losses of $ |
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Accrued Revenues in Excess of Billings |
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Utility Improvement Refund | — | | ||||
Inventories, Net |
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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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Technology Licenses, Net |
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Cost Method Investment in Atomistic | — | | ||||
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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Licensing Fees Commitment |
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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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Common Stock - $ |
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Additional Paid-in Capital |
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Accumulated Deficit |
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Treasury Stock, at cost, |
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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)
Common Stock | Additional | Accumulated | Treasury Stock | ||||||||||||||||
| Shares |
| Amount |
| Paid-In Capital |
| Deficit |
| Shares |
| Amount |
| Total | ||||||
Balance - April 1, 2024 |
| | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||
Stock-Based Compensation Expense |
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Stock Option Exercises |
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Net Loss |
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Balance - June 30, 2024 |
| | $ | | $ | | $ | ( |
| ( | $ | ( | $ | |
Common Stock | Additional | Accumulated | Treasury Stock | ||||||||||||||||
| Shares |
| Amount |
| Paid-In Capital |
| Deficit |
| Shares |
| Amount |
| Total | ||||||
Balance - January 1, 2024 |
| | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||
Stock-Based Compensation Expense |
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Stock Option Exercises |
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Net Loss |
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Balance - June 30, 2024 |
| | $ | | $ | | $ | ( |
| ( | $ | ( | $ | |
Common Stock | Additional | Accumulated | Treasury Stock | ||||||||||||||||
| Shares |
| Amount |
| Paid-In Capital |
| Deficit |
| Shares |
| Amount |
| Total | ||||||
Balance - April 1, 2023 |
| | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||
Stock-Based Compensation Expense |
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Stock Option Exercises |
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Net Loss |
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Balance - June 30, 2023 |
| | $ | | $ | | $ | ( |
| ( | $ | ( | $ | |
Common Stock | Additional | Accumulated | Treasury Stock | ||||||||||||||||
| Shares |
| Amount |
| Paid-In Capital |
| Deficit |
| Shares |
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| Total | ||||||
Balance - January 1, 2023 |
| | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||
Stock-Based Compensation Expense |
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Stock Option Exercises |
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Purchases of Treasury Stock |
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Net Loss |
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Balance - June 30, 2023 |
| | $ | | $ | | $ | ( |
| ( | $ | ( | $ | |
The accompanying notes are an integral part of these consolidated financial statements.
4
VUZIX CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
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 - Depreciation and Amortization | | | | | ||||||||
Cost of Sales - Engineering Services |
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Total Cost of Sales |
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Gross Profit (Loss) |
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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 on Intangible Asset and Equity Investment |
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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 Income, 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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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)
Six Months Ended June 30, | ||||||
| 2024 |
| 2023 | |||
Cash Flows From (Used In) Operating Activities |
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Net Loss | $ | ( | $ | ( | ||
Non-Cash Adjustments |
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Depreciation and Amortization |
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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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Reserve on Trade Accounts Receivable |
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Change in Inventory Reserve for Obsolescence | — | | ||||
Impairment on Intangible Asset and Equity Investment | | — | ||||
(Increase) Decrease in Operating Assets |
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Accounts Receivable |
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Accrued Revenues in Excess of Billings |
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Utility Improvement Refund/Employee Retention Credit Receivable | | | ||||
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 Payable |
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Net Cash Flows Used in Operating Activities |
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Cash Flows Used in Investing Activities |
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Purchases of Fixed Assets |
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Investments in Patents and Trademarks |
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Investments in Licenses |
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Investments in Software Development | — | ( | ||||
Investments in Other Assets |
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Net Cash Flows Used in Investing Activities |
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Cash Flows Provided by (Used in) Financing Activities |
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Proceeds from Exercise of Stock Options |
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Purchases of Treasury Stock | — | ( | ||||
Net Cash Flows Provided by (Used in) Financing Activities |
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Net Increase (Decrease) 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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Depreciation and Amortization included in Research and Development Expense | $ | | $ | — | ||
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” 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,
For the six months ended June 30, 2024,
As of June 30, 2024,
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
The Company incurred net losses for the six months ended June 30, 2024 of $
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 $
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 $ |
● | Implementation of a voluntary Company-wide payroll reduction program for all individuals with optional salary reductions of |
● | 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 $ |
● | 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 $
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
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however, as of June 30, 2024, the carrying value of these investments of $
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
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 |
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Revenues |
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Products 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. 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
( ) month assurance-type product warranty. In the case of certain OEM products and waveguide sales, some include a standard product warranty of up to ( ) months to allow distribution channels to offer the end customer a full ( ) months of coverage. We offer extended warranties to customers which extend the standard product warranty on product sales for an additional ( ) month period. All10
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
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 | Six Months Ended | ||||||||
2024 |
| 2023 |
| 2024 |
| 2023 |
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Point-in-Time |
| % | % | % | % | |||||
Over Time – Input Method |
| % | % | % | % | |||||
Total |
| % | % | % | % |
Remaining Performance Obligations
As June 30, 2024, the Company had $
As of June 30, 2023, the Company had approximately $
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
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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 | $ | | $ | | ||
Work-in-Process |
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Finished Goods |
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Less: Reserve for Obsolescence |
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Inventories, Net | $ | | $ | |
Note 5 – Fixed Assets
Fixed Assets consisted of the following:
June 30, | December 31, | |||||
| 2024 |
| 2023 | |||
Tooling and Manufacturing Equipment | $ | | $ | | ||
Leaseholds |
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Computers and Purchased Software |
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Furniture and Equipment |
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Less: Accumulated Depreciation |
| ( |
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Fixed Assets, Net | $ | | $ | |
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 $
Total depreciation expense for fixed assets for the three months ended June 30, 2024 and 2023 was $
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 | $ | | $ | | ||
Write Offs |
| ( |
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Less: Accumulated Amortization |
| ( |
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Licenses, Net | $ | | $ | |
Total amortization expense related to technology licenses for the three months ended June 30, 2024 and 2023 was $
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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 $
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 $
Future royalties of the license and the
Note 8 - Other Assets
The Company’s Other Assets, were as follows:
June 30, | December 31, | |||||
| 2024 |
| 2023 | |||
Private Corporation Investments | $ | | $ | | ||
Additions | — | | ||||
Total Private Corporation Investments (at cost) | | | ||||
Software Development Costs | | | ||||
Additions | — | | ||||
Less: Accumulated Amortization | ( | ( | ||||
Software Development Costs, Net | | | ||||
Total Other Assets | $ | | $ | |
During the year ended December 31, 2021, the Company acquired, for a purchase price of $
In June 2023, the Company purchased $
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