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) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: |
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| Name of each exchange on which registered: |
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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 14, 2024, 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, | |||||
| 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.
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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 - July 1, 2024 |
| | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||
Stock-Based Compensation Expense |
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Stock Issued under Atomistic Stock Purchase Agreement |
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Stock Issued under Quanta Securities Purchase Agreement |
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Net Loss |
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Balance - September 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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Stock Issued under Atomistic Stock Purchase Agreement |
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Stock Issued under Quanta Securities Purchase Agreement |
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Net Loss |
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Balance - September 30, 2024 |
| | $ | | $ | | $ | ( |
| ( | $ | ( | $ | |
Common Stock | Additional | Accumulated | Treasury Stock | ||||||||||||||||
| Shares |
| Amount |
| Paid-In Capital |
| Deficit |
| Shares |
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| Total | ||||||
Balance - July 1, 2023 |
| | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||
Stock-Based Compensation Expense |
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Stock Option Exercises |
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Net Loss |
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Balance - September 30, 2023 |
| | $ | | $ | | $ | ( |
| ( | $ | ( | $ | |
Common Stock | Additional | Accumulated | Treasury Stock | ||||||||||||||||
| Shares |
| Amount |
| Paid-In Capital |
| Deficit |
| Shares |
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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 - September 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 September 30, | Nine Months Ended September 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 Gain (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)
Nine Months Ended September 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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Reserves on Trade Accounts Receivable |
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Change in Inventory Reserves for Obsolescence | — | | ||||
Impairment on Intangible Assets and Equity Investments | | — | ||||
(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 Quanta Securities Purchase Agreement | | |||||
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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Unamortized Common Stock Expense included in Prepaid Expenses and Other Assets | $ | — | $ | | ||
Non-Cash Investment in Licenses | — | | ||||
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.
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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 nine months ended September 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 September 30, 2024,
For the nine months ended September 30, 2024, two customers represented
As of September 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
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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.
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 nine months ended September 30, 2024 of $
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 totaling $
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 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.
These historical financial factors initially raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s management intends to take actions necessary to continue as a going concern, as discussed herein. 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.
Management’s plans concerning these matters and managing our liquidity include, among other things:
● | On September 13, 2024, the Company received $ |
● | Reductions in our cash annual operating expenses across all operating areas, representing a reduction of at least |
● | Right-sizing of operations across all areas of the Company, including headcount reductions and personnel hiring freezes; |
● | Implementation of a voluntary Company-wide payroll reduction program of |
● | The Company implemented two major rounds of staff reductions in January and June 2024. As a result the Company’s current weekly gross cash salary costs are now approximately $ |
● | Further reductions in the rate of research and development spending on new technologies, particularly the use of external contractors; |
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● | Reduction in the rate of new product introductions and further leveraging of existing platforms to reduce new product development and engineering costs; |
● | 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 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; 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 raised capital through the sale of equity securities. The Company has filed a Registration Statement on Form S-3 that became effective in May 2024, which includes a sales agreement prospectus for the issuance and sale of up to $
While there can be no assurance the Company will be able to successfully reduce operating expenses sufficiently enough or raise additional capital, management believes its historical ability to manage its cash flows and to obtain capital to continue operations 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.
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. The adoption of ASU 2023-09 is not expected to have a significant impact on the Entity’s consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”, which provides updates to qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about significant segment expenses and increased interim disclosure requirements, among others. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted, and the amendments should be applied retrospectively. The adoption of ASU 2023-07 is not expected to have a significant impact on the Entity’s 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
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 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
As of September 30, 2024 and 2023, there were $
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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 three and nine months ended September 30, 2024 and 2023:
| Three Months Ended | Nine Months Ended | ||||||||
2024 |
| 2023 |
| 2024 |
| 2023 |
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Point-in-Time |
| % | % | % | % | |||||
Over Time – Input Method |
| % | % | % | % | |||||
Total |
| % | % | % | % |
Remaining Performance Obligations
As September 30, 2024, the Company had $
As of September 30, 2023, the Company had approximately $
As of September 30, 2024, the Company had no material outstanding performance obligations related to product sales, other than its standard and extended 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 nine months ended September 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 September 30, 2024 and 2023, 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, | |||||
| 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 | $ | | $ | |
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Note 5 – Fixed Assets
Fixed Assets consisted of the following:
September 30, | December 31, | |||||
| 2024 |
| 2023 | |||
Tooling and Manufacturing Equipment | $ | | $ | | ||
Leasehold Improvements |
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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 the September 30, 2024 presentation.
As of September 30, 2024 and December 31, 2023 there was $
Total depreciation expense for fixed assets for the three months ended September 30, 2024 and 2023 was $
Note 6 – Technology Licenses, Net
The changes in the Company’s Technology Licenses for the nine months ended September 30, 2024, were as follows:
September 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 September 30, 2024 and 2023 was $
The Company decided 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.
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