UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 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 November 14, 2024, there were 73,615,485 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 September 30, 2024 and December 31, 2023	3

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

	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023	5

	Consolidated Statements of Cash Flows for the Nine Months Ended September 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	32

Item 4.	Controls and Procedures	32

Part II – Other Information		33

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults Upon Senior Securities	33

Item 4.	Mine Safety Disclosure	33

Item 5.	Other Information	33

Item 6.	Exhibits	33

Signatures		34

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Part 1: FINANCIAL INFORMATION

Item 1: Consolidated Financial Statements

VUZIX CORPORATION

CONSOLIDATED BALANCE SHEETS


	(Unaudited)
	September 30,		December 31,
	2024		2023
ASSETS
Current Assets
Cash and Cash Equivalents	$	14,271,666	$	26,555,592
Accounts Receivable, net of allowance for credit losses of $1,992,000 at September 30, 2024 and $1,574,000 at December 31, 2023.		2,677,474		3,827,686
Accrued Revenues in Excess of Billings		488,232		165,771
Utility Improvement Refund		—		208,271
Inventories, Net		9,825,733		9,000,430
Manufacturing Vendor Prepayments		308,668		403,801
Prepaid Expenses and Other Assets		1,139,517		1,338,860

Total Current Assets		28,711,290		41,500,411

Long-Term Assets
Fixed Assets, Net		7,883,437		8,072,830
Operating Lease Right-of-Use Asset		619,155		301,185
Patents and Trademarks, Net		2,935,361		2,627,018
Technology Licenses, Net		811,311		26,851,001
Cost Method Investment in Atomistic		—		5,784,126
Other Assets, Net		886,112		1,011,111

Total Assets	$	41,846,666	$	86,147,681

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable	$	659,272	$	1,570,630
Unearned Revenue		167,883		18,839
Accrued Expenses		715,895		2,416,443
Licensing Fees Commitment		—		1,000,000
Income and Other Taxes Payable		131,976		46,727
Operating Lease Right-of-Use Liability		506,372		163,513

Total Current Liabilities		2,181,398		5,216,152

Long-Term Liabilities
Operating Lease Right-of-Use Liability		112,783		137,672

Total Liabilities		2,294,181		5,353,824

Stockholders' Equity
Common Stock - $0.001 Par Value, 100,000,000 shares authorized; 74,195,157 shares issued and 73,615,485 shares outstanding as of September 30, 2024 and 65,304,780 shares issued and 64,725,108 shares outstanding as of December 31, 2023.		74,194		65,304
Additional Paid-in Capital		395,821,639		377,189,847
Accumulated Deficit		(353,866,847)		(293,984,793)
Treasury Stock, at cost, 579,672 shares as of September 30, 2024 and December 31, 2023.		(2,476,501)		(2,476,501)

Total Stockholders' Equity		39,552,485		80,793,857

Total Liabilities and Stockholders' Equity	$	41,846,666	$	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 - July 1, 2024	66,034,769	$	66,034	$	382,462,147	$	(344,644,568)	(579,672)	$	(2,476,501)	$	35,407,112
Stock-Based Compensation Expense	293,393		293		3,185,684		—	—		—		3,185,977
Stock Issued under Atomistic Stock Purchase Agreement	174,688		175		181,500		—	—		—		181,675
Stock Issued under Quanta Securities Purchase Agreement	7,692,307		7,692		9,992,308		—	—		—		10,000,000
Net Loss	—		—		—		(9,222,279)	—		—		(9,222,279)
Balance - September 30, 2024	74,195,157	$	74,194	$	395,821,639	$	(353,866,847)	(579,672)	$	(2,476,501)	$	39,552,485


	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	1,022,398		1,022		8,457,983		—	—		—		8,459,005
Stock Option Exercises	984		1		1		—	—		—		2
Stock Issued under Atomistic Stock Purchase Agreement	174,688		175		181,500		—	—		—		181,675
Stock Issued under Quanta Securities Purchase Agreement	7,692,307		7,692		9,992,308		—	—		—		10,000,000
Net Loss	—		—		—		(59,882,054)	—		—		(59,882,054)
Balance - September 30, 2024	74,195,157	$	74,194	$	395,821,639	$	(353,866,847)	(579,672)	$	(2,476,501)	$	39,552,485


	Common Stock			Additional		Accumulated		Treasury Stock
	Shares	Amount		Paid-In Capital		Deficit		Shares	Amount		Total
Balance - July 1, 2023	63,898,889	$	63,899	$	369,072,625	$	(263,121,219)	(579,672)	$	(2,476,501)	$	103,538,804
Stock-Based Compensation Expense	—		—		3,113,211		—	—		—		3,113,211
Stock Option Exercises	8,391		8		6,642		—	—		—		6,650
Net Loss	—		—		—		(10,983,008)	—		—		(10,983,008)
Balance - September 30, 2023	63,907,280	$	63,907	$	372,192,478	$	(274,104,227)	(579,672)	$	(2,476,501)	$	95,675,657


	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		9,663,593		—	—		—		9,663,690
Stock Option Exercises	26,976		27		21,170		—	—		—		21,197
Purchases of Treasury Stock	—		—		—		—	(115,000)		(470,757)		(470,757)
Net Loss	—		—		—		(30,268,511)	—		—		(30,268,511)
Balance - September 30, 2023	63,907,280	$	63,907	$	372,192,478	$	(274,104,227)	(579,672)	$	(2,476,501)	$	95,675,657

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 September 30,				Nine Months Ended September 30,

	2024		2023		2024		2023
Sales:
Sales of Products	$	988,328	$	1,371,851	$	3,418,665	$	9,988,374
Sales of Engineering Services		397,386		808,156		1,063,488		1,073,829

Total Sales		1,385,714		2,180,007		4,482,153		11,062,203

Cost of Sales:
Cost of Sales - Products Sold		1,395,939		1,884,239		4,270,983		8,270,658
Cost of Sales - Depreciation and Amortization		181,807		232,891		545,422		723,745
Cost of Sales - Engineering Services		67,816		300,421		311,993		456,953

Total Cost of Sales		1,645,562		2,417,551		5,128,398		9,451,356

Gross Profit (Loss)		(259,848)		(237,544)		(646,245)		1,610,847

Operating Expenses:
Research and Development		2,333,798		2,912,562		7,406,913		8,818,911
Selling and Marketing		1,766,246		2,832,031		6,245,411		7,881,612
General and Administrative		4,347,013		4,466,850		12,941,336		13,858,996
Depreciation and Amortization		410,697		959,353		2,569,413		2,896,840
Loss on Fixed Asset Disposal		—		—		11,277		—
Impairment on Intangible Asset and Equity Investment		181,676		—		30,301,355		—
Impairment of Patents and Trademarks		—		24,204		—		41,869

Total Operating Expenses		9,039,430		11,195,000		59,475,705		33,498,228

Loss From Operations		(9,299,278)		(11,432,544)		(60,121,950)		(31,887,381)

Other Income (Expense):
Investment Income		95,234		500,067		453,657		1,824,773
Income and Other Taxes		(44,706)		(21,715)		(62,547)		(144,930)
Foreign Exchange Gain (Loss)		26,471		(28,816)		(151,214)		(60,973)

Total Other Income, Net		76,999		449,536		239,896		1,618,870

Loss Before Provision for Income Taxes		(9,222,279)		(10,983,008)		(59,882,054)		(30,268,511)
Provision for Income Taxes		—		—		—		—

Net Loss		(9,222,279)		(10,983,008)		(59,882,054)		(30,268,511)

Basic and Diluted Loss per Common Share	$	(0.14)	$	(0.17)	$	(0.90)	$	(0.48)
Weighted-average Shares Outstanding - Basic and Diluted		67,842,379		63,324,942		66,325,723		63,257,863

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

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VUZIX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,

	2024		2023

Cash Flows From (Used In) Operating Activities
Net Loss	$	(59,882,054)	$	(30,268,511)
Non-Cash Adjustments
Depreciation and Amortization		3,265,636		3,620,585
Stock-Based Compensation		8,459,005		9,797,274
Impairment of Patents and Trademarks		—		41,869
Loss on Fixed Asset Disposal		11,277		—
Reserves on Trade Accounts Receivable		540,000		—
Change in Inventory Reserves for Obsolescence		—		485,183
Impairment on Intangible Assets and Equity Investments		30,301,355		—
(Increase) Decrease in Operating Assets
Accounts Receivable		610,212		(3,392,963)
Accrued Revenues in Excess of Billings		(322,461)		(168,146)
Utility Improvement Refund/Employee Retention Credit Receivable		208,271		466,705
Inventories		(825,303)		(519,092)
Manufacturing Vendor Prepayments		95,133		377,642
Prepaid Expenses and Other Assets		199,343		(295,566)
Increase (Decrease) in Operating Liabilities
Accounts Payable		(911,358)		641,516
Accrued Expenses		(1,700,548)		(832,290)
Unearned Revenue		149,044		73,086
Income and Other Taxes Payable		85,251		(160,935)

Net Cash Flows Used in Operating Activities		(19,717,197)		(20,133,643)

Cash Flows Used in Investing Activities
Purchases of Fixed Assets		(1,129,120)		(3,608,801)
Investments in Patents and Trademarks		(437,609)		(497,901)
Investments in Licenses		(1,000,000)		(9,500,000)
Investments in Software Development		—		(125,000)
Investments in Other Assets		—		(200,000)

Net Cash Flows Used in Investing Activities		(2,566,729)		(13,931,702)

Cash Flows Provided by (Used in) Financing Activities
Proceeds from Quanta Securities Purchase Agreement		10,000,000
Proceeds from Exercise of Stock Options		—		21,196
Purchases of Treasury Stock		—		(470,757)

Net Cash Flows Provided by (Used in) Financing Activities		10,000,000		(449,561)

Net Increase (Decrease) in Cash and Cash Equivalents		(12,283,926)		(34,514,906)
Cash and Cash Equivalents - Beginning of Period		26,555,592		72,563,943

Cash and Cash Equivalents - End of Period	$	14,271,666	$	38,049,037

Supplemental Disclosures
Unamortized Common Stock Expense included in Prepaid Expenses and Other Assets	$	—	$	1,126,777
Non-Cash Investment in Licenses		—		2,000,000
Depreciation and Amortization included in Research and Development Expense		150,801		—
Stock-Based Compensation Expense - Expensed less Previously Issued		—		133,584

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, two customers represented 20% of total product revenue and three customers represented 96% of engineering services revenue. For the three months ended September 30, 2023, one customer represented 21% of total product revenue and three customers represented 86% of engineering services revenue.

For the nine months ended September 30, 2024, two customers represented 23% of total product revenue and two customers represented 86% of engineering services revenue. For the nine months ended September 30, 2023, two customers represented 64% of total product revenue and four customers represented 78% of engineering services revenue.

As of September 30, 2024, three customers represented 88% 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

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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 one year of the release of the financial statements.

The Company incurred net losses for the nine months ended September 30, 2024 of $59,882,054; $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 $19,717,197 for the nine months ended September 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 September 30, 2024, the Company had an accumulated deficit of $353,866,847. The Company’s cash outflows for investing activities were $2,566,729 for the nine months ended September 30, 2024; $19,280,966 for the year ended December 31, 2023; and $21,170,816 for the year ended December 31, 2022.

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 $32,500,000 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 10). 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 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 $10,000,000 under the closing of the first tranche under a Securities Purchase Agreement for the sale of up to $20,000,000 in common stock and Series B Preferred Stock with Quanta Computer Inc. Under the first closing, the Company sold $10,000,000 of common stock. The second and third tranches, which are tied to specific milestones, will each be for the sale of $5,000,000 of Series B Preferred Stock. The Company expects that these milestones will be achieved by March 2026;

●

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

●

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 10% to 50% in exchange for stock options or stock awards, depending upon the respective base salary level for the period running from May 1, 2024 to April 30, 2025. The achieved cash savings in wages will be approximately $2,100,000;

●

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 $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);

●

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 $50,000,000 of our common stock that may be issued and sold from time to time under a. sales agreement with an investment banking 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 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 two major product lines: Smart Glasses Sales and Engineering Services. The following table summarizes the revenue recognized by major product line:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Revenues
Products Sales	$	988,328	$	1,371,851	$	3,418,665	$	9,988,374
Engineering Services		397,386		808,156		1,063,488		1,073,829

Total Revenue	$	1,385,714	$	2,180,007	$	4,482,153	$	11,062,203

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 an extended warranty to customers that extends the standard product warranty on product sales for an additional twelve (12) month period. All 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 September 30, 2024 and 2023, there were $125,400 and nil, respectively, in outstanding performance obligations remaining for extended warranties.

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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 September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Point-in-Time	71	%	63	%	76	%	90	%
Over Time – Input Method	29	%	37	%	24	%	10	%

Total	100	%	100	%	100	%	100	%

Remaining Performance Obligations

As September 30, 2024, the Company had $2,161,768 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 9% in 2024 and 91% in 2025. Revenues earned less amounts invoiced at September 30, 2024 was $488,232 and $165,771 at December 31, 2023.

As of September 30, 2023, the Company had approximately $3,200,000 of remaining performance obligations under four current waveguide development projects, which amount represents the remainder of the total transaction price of approximately $4,400,000 under this development project, less revenue recognized under percentage of completion to date.

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 10,653,332 and 8,695,308 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.

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	$	8,871,676	$	9,500,415
Work-in-Process		292,902		394,923
Finished Goods		5,326,426		4,880,643
Less: Reserve for Obsolescence		(4,665,271)		(5,775,551)

Inventories, Net	$	9,825,733	$	9,000,430

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Note 5 – Fixed Assets

Fixed Assets consisted of the following:


	September 30,		December 31,
	2024		2023
Tooling and Manufacturing Equipment	$	9,780,066	$	8,793,192
Leasehold Improvements		2,840,176		3,162,695
Computers and Purchased Software		679,138		833,794
Furniture and Equipment		2,431,846		2,580,904
		15,731,226		15,370,585
Less: Accumulated Depreciation		(7,847,789)		(7,297,755)
Fixed Assets, Net	$	7,883,437	$	8,072,830

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 $4,813,538 and $5,981,271, respectively, of fixed assets that are not yet placed into service.

Total depreciation expense for fixed assets for the three months ended September 30, 2024 and 2023 was $364,771 and $102,677, respectively. Total depreciation expense for fixed assets for the nine months ended September 30, 2024 and 2023 was $886,813 and $317,061, respectively.

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	$	32,443,356	$	32,443,356
Write-Offs		(30,000,000)		—
Less: Accumulated Amortization		(1,632,045)		(5,592,355)
Licenses, Net	$	811,311	$	26,851,001

Total amortization expense related to technology licenses for the three months ended September 30, 2024 and 2023 was $50,267 and $776,667, respectively. Total amortization expense related to technology licenses for the nine months ended September 30, 2024 and 2023 was $1,708,402 and $2,480,753, respectively.

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 $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.

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Note 7 - Other Assets

The Company’s Other Assets, were as follows: