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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended June 30, 2022

OR

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: (585359-5900

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol(s)

    

Name of each exchange on which registered:

Common Stock, par value $0.001

 

VUZI

 

Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days.   Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

 

 

 

 

 

 

Smaller reporting company

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes No 

As of August 9, 2022, there were 63,990,955 shares of the registrant’s common stock outstanding.

Table of Contents

Vuzix Corporation

INDEX

 

Page
No.

 

 

Part I – Financial Information

3

 

 

Item 1.

Consolidated Financial Statements (Unaudited):

3

 

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

3

 

Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2022 and 2021

4

 

Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021

5

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021

6

 

Notes to the Unaudited Consolidated Financial Statements

7

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

 

Item 4.

Controls and Procedures

28

 

Part II – Other Information

29

 

Item 1.

Legal Proceedings

29

 

Item 1A.

Risk Factors

29

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

 

Item 3.

Defaults Upon Senior Securities

29

 

Item 4.

Mine Safety Disclosure

29

 

Item 5.

Other Information

29

 

Item 6.

Exhibits

30

 

 

Signatures

31

2

Table of Contents

Part 1: FINANCIAL INFORMATION

Item 1: Consolidated Financial Statements

VUZIX CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

    

June 30, 

December 31, 

    

2022

    

2021

ASSETS

 

  

 

  

Current Assets

 

  

 

  

Cash and Cash Equivalents

$

100,581,795

$

120,203,873

Accounts Receivable

 

1,563,906

 

2,242,429

Accrued Revenues in Excess of Billings

 

108,866

 

Inventories, Net

 

11,792,089

 

12,151,982

Manufacturing Vendor Prepayments

 

1,158,620

 

504,051

Prepaid Expenses and Other Assets

 

1,735,955

 

2,047,819

Total Current Assets

 

116,941,231

 

137,150,154

Long-Term Assets

 

  

 

  

Fixed Assets, Net

 

8,051,264

 

5,190,438

Operating Lease Right-of-Use Asset

837,920

1,117,022

Patents and Trademarks, Net

 

2,136,585

 

1,988,370

Technology Licenses, Net

 

16,089,035

 

1,389,936

Intangible Asset, Net

 

 

147,548

Other Assets, Net

 

1,839,047

 

1,483,589

Total Assets

$

145,895,082

$

148,467,057

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

  

Current Liabilities

 

  

 

  

Accounts Payable

$

1,321,949

$

2,054,762

Unearned Revenue

 

40,626

 

27,797

Accrued Expenses

 

1,614,583

 

1,419,308

Licensing Fees Commitment

 

4,250,000

 

Income and Other Taxes Payable

 

43,856

 

120,242

Operating Lease Right-of-Use Liability

520,009

534,146

Total Current Liabilities

 

7,791,023

 

4,156,255

Long-Term Liabilities

Operating Lease Right-of-Use Liability

317,911

582,876

Licensing Fees Commitment

6,250,000

Total Long-Term Liabilities

6,567,911

582,876

Total Liabilities

 

14,358,934

 

4,739,131

Stockholders' Equity

 

  

 

  

Common Stock - $0.001 Par Value, 100,000,000 shares authorized; 64,025,640 shares issued and 63,988,955 shares outstanding as of June 30, 2022 and 63,672,268 shares issued and outstanding as of December 31, 2021.

 

64,026

 

63,672

Additional Paid-in Capital

 

355,322,990

 

346,736,397

Accumulated Deficit

 

(223,599,811)

 

(203,072,143)

Treasury Stock, at cost, 36,685 shares as of June 30, 2022 and 0 shares as of December 31, 2021

 

(251,057)

 

Total Stockholders' Equity

 

131,536,148

 

143,727,926

Total Liabilities and Stockholders' Equity

$

145,895,082

$

148,467,057

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

3

Table of Contents

VUZIX CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

Preferred Stock

Common Stock

Additional

Accumulated

Treasury Stock

    

Shares

    

Amount

    

Shares

    

Amount

    

Paid-In Capital

    

Deficit

    

Shares

    

Amount

    

Total

Balance - January 1, 2022

$

 

63,672,268

$

63,672

$

346,736,397

$

(203,072,143)

$

$

143,727,926

Stock-Based Compensation Expense

 

 

 

288,650

 

289

 

8,538,153

 

 

 

 

8,538,441

Stock Option Exercises

 

 

 

64,722

 

65

 

48,440

 

 

 

 

48,506

Purchases of Treasury Stock

 

 

 

 

 

 

 

(36,685)

 

(251,057)

 

(251,057)

Net Loss

 

 

 

 

 

 

(20,527,668)

 

 

 

(20,527,668)

Balance - June 30, 2022

 

$

 

64,025,640

$

64,026

$

355,322,990

$

(223,599,811)

 

(36,685)

$

(251,057)

$

131,536,148

Preferred Stock

Common Stock

Additional

Accumulated

Treasury Stock

    

Shares

    

Amount

    

Shares

    

Amount

    

Paid-In Capital

    

Deficit

    

Shares

    

Amount

    

Total

Balance - April 1, 2022

$

 

63,704,626

$

63,705

$

350,721,326

$

(213,578,143)

(36,685)

$

(251,057)

$

136,955,831

Stock-Based Compensation Expense

 

 

 

288,650

 

289

 

4,582,414

 

 

 

 

4,582,703

Stock Option Exercises

 

 

 

32,364

 

32

 

19,250

 

 

 

 

19,282

Net Loss

 

 

 

 

 

 

(10,021,668)

 

 

 

(10,021,668)

Balance - June 30, 2022

 

$

 

64,025,640

$

64,026

$

355,322,990

$

(223,599,811)

 

(36,685)

$

(251,057)

$

131,536,148

Preferred Stock

Common Stock

Additional

Accumulated

Treasury Stock

    

Shares

    

Amount

    

Shares

    

Amount

    

Paid-In Capital

    

Deficit

    

Shares

    

Amount

    

Total

Balance - January 1, 2021

49,626

$

50

 

45,645,166

$

45,645

$

210,952,473

$

(162,694,983)

$

$

48,303,185

Stock-Based Compensation Expense (as Restated)

 

 

 

68,047

 

68

 

8,544,078

 

 

 

 

8,544,146

Stock Option Exercises

 

 

 

567,826

 

568

 

673,191

 

 

 

 

673,759

Stock Warrant Exercises

 

 

 

7,274,328

 

7,274

 

34,697,794

 

 

 

 

34,705,068

Proceeds from Common Stock Offering

 

 

 

4,768,293

 

4,768

 

97,784,270

 

 

 

 

97,789,038

Direct Costs of Common Stock Offering

 

 

 

 

 

(6,136,420)

 

 

 

 

(6,136,420)

Shares Redeemed to Cover Employee Tax Withholdings

 

 

 

(83,164)

 

(83)

 

(1,144,282)

 

 

 

 

(1,144,365)

Stock Issued for Technology License Purchase

 

 

 

75,000

 

75

 

1,404,675

 

 

 

 

1,404,750

Preferred Stock Converted & Preferred Dividend Settlement

(49,626)

(50)

4,962,600

4,963

(10,004,913)

(10,000,000)

Net Loss (as Restated)

 

 

 

 

 

 

(18,396,842)

 

 

 

(18,396,842)

Balance - June 30, 2021 (as Restated)

 

$

 

63,278,096

$

63,278

$

336,770,866

$

(181,091,825)

 

$

$

155,742,319

Preferred Stock

Common Stock

Additional

Accumulated

Treasury Stock

    

Shares

    

Amount

    

Shares

    

Amount

    

Paid-In Capital

    

Deficit

    

Shares

    

Amount

    

Total

Balance - April 1, 2021

$

 

62,142,940

$

62,143

$

318,720,283

$

(171,846,353)

$

$

146,936,073

Stock-Based Compensation Expense (as Restated)

 

 

 

68,047

 

68

 

3,984,694

 

 

 

 

3,984,762

Stock Option Exercises

 

 

 

336,858

 

337

 

476,593

 

 

 

 

476,930

Stock Warrant Exercises

 

 

 

33,300

 

33

 

136,497

 

 

 

 

136,530

Proceeds from Common Stock Offerings

 

 

 

621,951

 

622

 

12,748,752

 

 

 

 

12,749,374

Direct Costs of Common Stock Offerings

 

 

 

 

 

(700,628)

 

 

 

 

(700,628)

Stock Issued for Technology License Purchase

75,000

75

1,404,675

1,404,750

Net Loss (as Restated)

 

 

 

 

 

 

(9,245,472)

 

 

 

(9,245,472)

Balance - June 30, 2021 (as Restated)

 

$

 

63,278,096

$

63,278

$

336,770,866

$

(181,091,825)

 

$

$

155,742,319

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

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VUZIX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended June 30, 

Six Months Ended June 30, 

(as Restated)

(as Restated)

    

2022

    

2021

    

2022

    

2021

Sales:

 

  

 

  

 

  

 

  

Sales of Products

$

2,898,892

$

2,833,644

$

5,401,944

$

6,638,814

Sales of Engineering Services

 

108,866

 

82,894

 

108,866

 

193,113

Total Sales

 

3,007,758

 

2,916,538

 

5,510,810

 

6,831,927

Cost of Sales:

 

  

 

  

 

  

 

  

Cost of Sales - Products Sold

 

2,522,674

 

2,323,324

 

4,386,371

 

5,143,295

Cost of Sales - Engineering Services

 

59,296

 

13,842

 

59,296

 

29,669

Total Cost of Sales

 

2,581,970

 

2,337,166

 

4,445,667

 

5,172,964

Gross Profit (exclusive of depreciation shown separately below)

 

425,788

 

579,372

 

1,065,143

 

1,658,963

Operating Expenses:

 

  

 

  

 

  

 

  

Research and Development

 

2,996,144

 

2,723,994

 

6,099,588

 

4,929,312

Selling and Marketing

 

1,850,595

 

1,349,189

 

3,914,584

 

2,652,619

General and Administrative

 

5,039,949

 

5,181,042

 

10,453,228

 

11,208,799

Depreciation and Amortization

 

540,081

 

501,678

 

963,012

 

1,019,090

Loss on Fixed Asset Disposal

 

 

 

 

83,908

Impairment of Patents and Trademarks

 

 

30,765

 

49,602

 

58,496

Total Operating Expenses

 

10,426,769

 

9,786,668

 

21,480,014

 

19,952,224

Loss From Operations

 

(10,000,981)

 

(9,207,296)

 

(20,414,871)

 

(18,293,261)

Other Income (Expense):

 

  

 

  

 

  

 

  

Investment Income

 

111,027

 

7,767

 

117,307

 

15,605

Income and Other Taxes

 

(31,326)

 

(12,783)

 

(78,959)

 

(32,508)

Foreign Exchange Loss

 

(100,388)

 

(33,160)

 

(151,145)

 

(86,678)

Total Other Expense, Net

 

(20,687)

 

(38,176)

 

(112,797)

 

(103,581)

Loss Before Provision for Income Taxes

 

(10,021,668)

 

(9,245,472)

 

(20,527,668)

 

(18,396,842)

Provision for Income Taxes

 

 

 

 

Net Loss

 

(10,021,668)

 

(9,245,472)

 

(20,527,668)

 

(18,396,842)

Basic and Diluted Loss per Common Share

$

(0.16)

$

(0.15)

$

(0.32)

$

(0.31)

Weighted-average Shares Outstanding - Basic and Diluted

 

63,739,863

 

63,071,061

 

63,717,618

 

58,631,078

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

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VUZIX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended June 30, 

(as Restated)

    

2022

    

2021

Cash Flows from Operating Activities

 

  

 

  

Net Loss

$

(20,527,668)

$

(18,396,842)

Non-Cash Adjustments

 

  

 

  

Depreciation and Amortization

 

963,012

 

1,019,090

Amortization of Software Development Costs and Prepaid Licenses in Cost of Sales - Products

 

130,883

 

120,197

Stock-Based Compensation

 

8,200,774

 

8,661,613

Impairment of Patents and Trademarks

 

49,602

 

58,496

Loss on Fixed Asset Disposal

 

 

83,908

(Increase) Decrease in Operating Assets

 

  

 

  

Accounts Receivable

 

678,523

 

289,567

Accrued Revenues in Excess of Billings

(108,866)

Inventories

 

359,893

 

(1,783,539)

Manufacturing Vendor Prepayments

 

(654,569)

 

(2,565,073)

Prepaid Expenses and Other Assets

 

492,599

 

(522,084)

Increase (Decrease) in Operating Liabilities

 

  

 

  

Accounts Payable

 

(732,813)

 

(92,188)

Accrued Expenses

 

195,276

 

75,055

Unearned Revenue

 

12,829

 

(27,453)

Income and Other Taxes

 

(76,384)

 

(29,450)

Net Cash Flows Used in Operating Activities

 

(11,016,909)

 

(13,108,703)

Cash Flows from Investing Activities

 

  

 

  

Purchases of Fixed Assets

 

(3,504,931)

 

(719,164)

Investments in Patents and Trademarks

 

(272,686)

 

(214,450)

Investments in Licenses, Intangible and Other Assets

 

(4,625,000)

 

(305,158)

Net Cash Flows Used in Investing Activities

 

(8,402,617)

 

(1,238,772)

Cash Flows from Financing Activities

 

  

 

  

Proceeds from Exercise of Warrants

 

 

34,705,068

Proceeds from Exercise of Stock Options

 

48,505

 

673,759

Proceeds from Common Stock Offering, Net

91,647,850

Purchases of Treasury Stock

(251,057)

Preferred Dividend Settlement Payment

 

 

(10,000,000)

Employee Tax Withholdings Payment

 

 

(1,144,365)

Net Cash Flows (Used in) Provided from Financing Activities

 

(202,552)

 

115,882,312

Net (Decrease) Increase in Cash and Cash Equivalents

 

(19,622,078)

 

101,534,837

Cash and Cash Equivalents - Beginning of Period

 

120,203,873

 

36,069,508

Cash and Cash Equivalents - End of Period

$

100,581,795

$

137,604,345

Supplemental Disclosures

 

  

 

  

Unamortized Common Stock Expense included in Prepaid Expenses and Other Assets

$

1,223,691

$

101,517

Non-Cash Investment in Licenses

10,500,000

1,404,750

Stock-Based Compensation Expense - Expensed less Previously Issued

(337,379)

117,467

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. Certain re-classifications may have been made to prior periods to conform with current reporting. The results of the Company’s operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results of the Company’s operations for the full fiscal year or any other period.

The accompanying interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto of the Company as of and for the year ended December 31, 2021, as reported in the Company’s Annual Report on Form 10-K filed with the SEC on March 2, 2022.

Restatement

As described in additional detail in Note 14 to the financial statements included in its 2021 Form 10-K, the Company restated its previous unaudited quarterly results in the Form 10-K for the year ended December 31, 2021. Previously filed 2021 quarterly reports on Form 10-Q for the periods affected by the restatement were not amended. See Note 14, Long-Term Incentive Plan and Note 19, Quarterly Financial Information (Unaudited) of the Notes to the consolidated financial statements in the 2021 Form 10-K for the impact of these adjustments on each of the quarterly periods in fiscal year 2021.

The effect of these changes on non-cash stock-based compensation expense included in 2021 unaudited quarterly operating results was as follows:

    

Three Months Ended
June 30, 2021

    

Six Months Ended
June 30, 2021

Additional Paid-in Capital

Increase of $466,015

Increase of $2,978,022

Research and Development Expense

Increase of $23,262

Increase of $148,653

Sales and Marketing

Increase of $11,631

Increase of $74,327

General and Administrative

Increase of $431,122

Increase of $2,755,042

Net Loss

Increase of $466,015

Increase of $2,978,022

Loss per Share

Increase of $0.01

Increase of $0.06

Customer Concentrations

For the three months ended June 30, 2022, one customer represented 45% of total product revenue and one customer represented 100% of engineering services revenue. For the three months ended June 30, 2021, no one customer represented more than 10% of total product revenue and one customer represented 100% of engineering services revenue.

For the six months ended June 30, 2022, one customer represented 24% of total product revenue and one customer represented 100% of engineering services revenue. For the six months ended June 30, 2021, no one customer represented more than 10% of total product revenue and two customers represented 100% of engineering services revenue.

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As of June 30, 2022, three customers represented 42%, 15% and 15% of accounts receivable. As of December 31, 2021, three customers represented 27%, 20% and 10% of accounts receivable.

Treasury Stock

Treasury stock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. Gains and losses on the subsequent reissuance of shares will be credited or charged to paid-in capital in excess of par value using the average-cost method.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). ASU 2016-13 provides for a new impairment model which requires measurement and recognition of expected credit losses for most financial assets and certain other instruments, including but not limited to accounts receivable. ASU 2016-13 will become effective for the Company on January 1, 2023 and early adoption is permitted. The Company does not anticipate that the adoption of this standard will have a material impact on our consolidated financial statements.

Note 2 – Revenue Recognition and Contracts with Customers

Disaggregated Revenue

The Company’s total revenue was comprised of two major product lines: Smart Glasses Sales and Engineering Services. The following table summarizes the revenue recognized by major product line:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2022

    

2021

    

2022

    

2021

Revenues

 

  

 

  

 

  

 

  

Smart Glasses Sales

$

2,898,892

$

2,833,644

$

5,401,944

$

6,638,814

Engineering Services

 

108,866

 

82,894

 

108,866

 

193,113

Total Revenue

$

3,007,758

$

2,916,538

$

5,510,810

$

6,831,927

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 that include an end-user 30-day right to return if not satisfied with product and general payment terms that are between Net 30 and 60 days. 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 also records revenue for performance obligations relating to our engineering services over time by using the input method to measure the 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

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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 of our OEM products and waveguide sales, some include a standard product warranty of up to eighteen (18) months to allow distribution channels to offer the end customer a full twelve (12) months of coverage. We offer extended warranties to customers, which extend the standard product warranty on product sales for an additional twelve (12) month period. All 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 date of billing, subject to an agreed upon customer acceptance period.

The following table presents a summary of the Company’s sales by revenue recognition method as a percentage of total net sales for the six months ended June 30, 2022:

    

% of Total Net Sales

2022

 

2021

 

Point-in-Time

 

98

%

97

%

Over Time – Input Method

 

2

%

3

%

Total

 

100

%

100

%

Remaining Performance Obligations

As of June 30, 2022, the Company had $691,134 of remaining performance obligations under a current waveguide development project, which represents the remainder of the total transaction price of an $800,000 development agreement, less revenue recognized under percentage of completion to date. The Company currently expects to recognize the remaining revenue relating to this existing performance obligation of $691,134 before the end of 2022. Revenues earned less amounts invoiced at June 30, 2022 in the amount of $108,866 are reflected as Accrued Revenues in Excess of Billings in the accompanying Consolidated Balance Sheets.

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 and warrants, and the conversion of convertible preferred shares. 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, 2022 and 2021, 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. At June 30, 2022 and 2021, there were 8,528,668 and 8,584,030 common stock share equivalents, respectively, potentially exercisable or issuable under conversion or exercise of stock options that could dilute basic earnings per share in the future.

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Note 4 – Inventories, Net

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

June 30, 

December 31, 

    

2022

    

2021

Purchased Parts and Components

$

10,414,139

$

11,580,766

Work-in-Process

 

285,481

 

226,126

Finished Goods

 

2,095,643

 

1,472,534

Less: Reserve for Obsolescence

 

(1,003,174)

 

(1,127,444)

Inventories, Net

$

11,792,089

$

12,151,982

Note 5 – Fixed Assets

Fixed Assets consisted of the following:

June 30, 

December 31, 

    

2022

    

2021

Tooling and Manufacturing Equipment

$

9,930,222

$

6,612,811

Leaseholds

 

826,329

 

797,059

Computers and Purchased Software

 

1,035,358

 

980,561