Vuzix Corp

Previous wording

The discussion and analysis of our financial condition and results of operations is based upon our unaudited consolidated financial statements and related notes appearing elsewhere in this quarterly report. The preparation of these statements in conformity with GAAP requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements, including the statement of operations, balance sheet, cash flow and related notes. We continually evaluate our estimates used in the preparation of our financial statements, including those related to revenue recognition, allowance for credit losses, inventories, warranty reserves, product warranty, carrying value of long-lived assets, fair value measurement of financial instruments, valuation of stock compensation awards, achievement of equity market capitalization and probability of operational milestones being achieved under our LTIP, and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not apparent from other sources. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could be material to the consolidated financial statements.

Current wording

The discussion and analysis of our financial condition and results of operations is based upon our unaudited consolidated financial statements and related notes appearing elsewhere in this quarterly report. The preparation of these statements in conformity with GAAP requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements, including the statement of operations, balance sheet, cash flow and related notes. We continually evaluate our estimates used in the preparation of our financial statements, including those related to revenue recognition, allowance for credit losses, inventories, warranty reserves, product warranty, carrying value of long-lived assets, fair value measurement of financial instruments, valuation of stock compensation awards, and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not apparent from other sources. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could be material to the consolidated financial statements.

Previous wording

We are engaged in the design, manufacture, marketing and sale of augmented reality wearable display devices also referred to as head mounted displays (or HMDs, but also known as near-eye displays), in the form of Smart Glasses, AI powered Smart Glasses, Waveguides, and Augmented Reality (AR) technologies. Our wearable display devices are worn like eyeglasses or attach to a head worn mount. These devices typically include cameras, sensors, and a computer that enable the user to view, record and interact with video and digital content, such as computer data, the Internet, social media or entertainment applications. Our wearable display products integrate micro-display technology with our advanced optics to produce compact high-resolution display engines, less than half an inch diagonally, which when viewed through our Smart Glasses products create virtual images that appear comparable in size to that of a computer monitor or a large-screen television. We design and manufacture waveguide optics and related coupling optics combined for use with compact display engines from third parties to form a see-through display modules needed for AI/AR smart glasses.

Current wording

We are engaged in the design, manufacture, marketing and sale of augmented reality wearable display devices also referred to as head mounted displays (or “HMDs”, but also known as near-eye displays), in the form of Smart Glasses, AI powered Smart Glasses, Waveguides, and Augmented Reality (“AR”) technologies. Our wearable display devices are worn like eyeglasses or attach to a head worn mount. These devices typically include cameras, sensors, and a computer that enable the user to view, record and interact with video and digital content, such as computer data, the Internet, social media or entertainment applications. Our wearable display products integrate micro-display technology with our advanced optics to produce compact high-resolution display engines, less than half an inch diagonally, which when viewed through our Smart Glasses products create virtual images that appear comparable in size to that of a computer monitor or a large-screen television. We design and manufacture waveguide optics and related coupling optics combined for use with compact display engines from third parties to form a see-through display module needed for AI/AR Smart Glasses.

Previous wording

With respect to our Smart Glasses and AI/AR products, we are focused on the enterprise, defense, industrial, medical and commercial markets. All of the mobile display and mobile electronics markets in which we compete have been subject to rapid technological change over the last decade including the rapid adoption of tablets, larger screen sizes and display resolutions along with declining prices on mobile phones and other computing devices, and as a result we must continue to improve our products’ performance and lower our costs. We believe our technology, intellectual property portfolio and position in the marketplace give us a leadership position in AI/AR and Smart Glasses products, waveguide optics, microLEDs and display engine technology.

Current wording

With respect to our Smart Glasses and AI/AR products, we are focused on the enterprise, defense, industrial, medical and commercial markets. All of the mobile display and mobile electronics markets in which we compete have been subject to rapid technological change over the last decade, including the rapid adoption of tablets, larger screen sizes and display resolutions along with declining prices on mobile phones and other computing devices, and as a result we must continue to improve our products’ performance and lower our costs. We believe our technology, intellectual property portfolio and position in the marketplace give us a leadership position in AI/AR and Smart Glasses products, waveguide optics, and display engine technology.

Previous wording

Sales of products decreased by 28% for the three months ended March 31, 2025, compared to the same period in 2024. Reduced Smart Glasses revenue was the primary driver of this decrease as unit sales of our M400 product decreased compared to the previous year’s comparable period.

Current wording

Sales of products increased by 74% for the three months ended June 30, 2025, compared to the same period in 2024. Increased Smart Glasses revenue was the primary driver of this increase as unit sales of our M400 product increased compared to the previous year’s comparable period.

Previous wording

Sales of engineering services for the three months ended March 31, 2025, was $256,868 compared to $174,794 in the comparable 2024 period.

Current wording

Sales of engineering services for the three months ended June 30, 2025, was $250,399 compared to $491,308 in the comparable 2024 period.

Previous wording

Depreciation and Amortization included in cost of sales decreased by $4,697, or 3% for the three months ended March 31, 2025 versus the 2024 period.

Current wording

Depreciation and Amortization included in cost of sales decreased by $14,700, or 8% for the three months ended June 30, 2025 versus the 2024 comparable period.

Previous wording

Total research and development expenses for the three months ended March 31, 2025 decreased by $132,609, or 5% compared to the comparable period in 2024. This decrease was largely due to a $473,995 decrease in salary and benefits related expenses partially offset by a $316,918 increase in external development costs on our new products.

Current wording

Total research and development expenses for the three months ended June 30, 2025 increased by $212,147, or 9% compared to the comparable period in 2024. This increase was largely due to a $276,211 increase in external development costs for our new products; a $145,962 increase in depreciation related to under-utilized new manufacturing equipment; a $105,200 increase in rent utilities expenses; and a $25,677 increase in travel expenses; partially offset by a $373,418 decrease in salary and benefits related expenses.

Previous wording

Total selling and marketing expenses for the three months ended March 31, 2025 decreased by $683,316, or 31% compared to the comparable period in 2024. This decrease was largely due to a $365,207 decrease in salary and benefits related expenses driven by headcount decreases and cash salary decreases in exchange for equity compensation; a decrease of $157,571 in advertising and tradeshow expenses; and a $134,475 decrease in external contractor expenses.

Current wording

Total selling and marketing expenses for the three months ended June 30, 2025 decreased by $885,231, or 40% compared to the comparable period in 2024. This decrease was largely due to a $472,510 decrease in salary and benefits related expenses driven by headcount decreases and cash salary decreases in exchange for equity compensation; a $290,000 decrease in bad debt expense; a decrease of $57,915 in advertising and tradeshow expenses; a $48,365 decrease in computer hardware and software expenses; and a $41,255 decrease in external contractor expenses.

Previous wording

Total general and administrative expenses for the three months ended March 31, 2025, decreased by $137,273, or 3% compared to the comparable period in 2024. The decrease was largely due to a $391,403 decrease in cash salary and benefits related to our 2024 cash salary reduction program in exchange for equity; a $258,974 decrease in legal expenses; and a $47,246 decrease in insurance premiums; partially offset by a $344,313 increase in non-cash stock-based compensation and a $330,174 increase in IR related expenses.

Current wording

Total general and administrative expenses for the three months ended June 30, 2025, decreased by $1,735,580, or 39% compared to the comparable period in 2024. The decrease was largely due to a $122,029 decrease in cash salary and benefits; a $1,983,267 decrease in non-cash stock-based compensation expense related to our 2024 cash salary reduction program in exchange for equity, which ended on April 30, 2025; and a $261,645 decrease in accounting and auditing fees; partially offset by a $488,413 increase in IR and shareholder related expenses.

Previous wording

Depreciation and Amortization. Depreciation and amortization expense, not included in cost of sales, for the three months ended March 31,2025, was $405,011, compared to $970,377 in the comparable period in 2024, or a decrease of $565,366. This decrease was due to a significant decrease in amortization expense related to our Atomistic technology license, which was written-off as of June 30, 2024.

Current wording

Depreciation and Amortization. Depreciation and amortization expense, not included in cost of sales, for the three months ended June 30, 2025, was $413,483, compared to $1,188,339 in the comparable period in 2024, or a decrease of $774,856. This decrease was due to a significant decrease in amortization expense related to our Atomistic technology license, which was written off as of June 30, 2024.

Previous wording

Other Income, Net. Total other income was $136,793 for the three months ended March 31, 2025, compared to other income of $44,813 in the comparable period in 2024, an increase of $91,980. The overall increase in other income was primarily the result of a decrease of $94,217 in foreign exchange losses; an increase of $15,881 in investment income on excess cash on hand; partially offset by an increase in income and other taxes of $18,118.

Current wording

Other Income, Net. Total other income was $189,050 for the three months ended June 30, 2025, compared to total other income of $118,085 in the comparable period in 2024, an increase of $70,965. The overall increase in other income was primarily the result of a decrease of $82,699 in foreign exchange losses; a decrease of $58,331 in other taxes; partially offset by a decrease of $70,065 in investment income on excess cash on hand.

Previous wording

Provision for Income Taxes. There was not a provision for income taxes in the respective three-month periods ending March 31, 2025 and 2024.

Current wording

Provision for Income Taxes. There was no provision for income taxes in the respective three-month periods ending June 30, 2025 and 2024.

Previous wording

Sales. There was a decrease in total sales for the three months ended March 31, 2025, compared to the same period in 2024 of $422,926, or 21%. The following table reflects the major components of our sales:

Current wording

Sales. There was a decrease in total sales for the six months ended June 30, 2025, compared to the same period in 2024 of $219,788, or 7%. The following table reflects the major components of our sales:

Previous wording

For the three months ended March 31, 2025, there was a gross loss from total sales of $265,118, or 17% compared to a gross loss of $53,253, or 3% in the comparable period in 2024.

Current wording

For the six months ended June 30, 2025, there was a gross loss from total sales of $1,026,488, or 36% compared to a gross loss of $386,398, or 12% in the comparable period in 2024.

Previous wording

Unapplied manufacturing overhead costs, not already added into product cost of sales, increased by $93,867, or 19% for the three months ended March 31, 2025 over the 2024 comparable period. As a percentage of total sales, such costs increased to 37% compared to 24% in 2024 due to lower quarterly product revenue. The increase in the net dollar amount of these unapplied overhead costs in the current period versus the prior period was primarily driven by a further decrease in actual production levels during the 2025 period compared to the same period in 2024, as the Company has sufficient finished goods on hand to meet currently expected demand for current Smart Glasses models for the foreseeable future.

Current wording

Unapplied manufacturing overhead costs, not already added into product cost of sales, increased by $143,204, or 15% for the six months ended June 30, 2025 as compared to the 2024 comparable period. As a percentage of total sales, such costs increased to 38% compared to 31% in 2024 due to lower product revenue. The increase in the net dollar amount of these unapplied overhead costs in the current period versus the prior period was primarily driven by a further decrease in actual production levels during the 2025 period compared to the same period in 2024, as the Company has sufficient finished goods on hand to meet currently expected demand for current Smart Glasses models for the foreseeable future.

Previous wording

Capital Resources: As of March 31, 2025, we had cash and cash equivalents of $15,231,001, a decrease of $2,955,505 from $18,186,506 as of December 31, 2024.

Current wording

Capital Resources: As of June 30, 2025, we had cash and cash equivalents of $17,454,585, a decrease of $731,921 from $18,186,506 as of December 31, 2024.

Previous wording

As of March 31, 2025, we had current assets of $22,385,266 compared to current liabilities of $2,915,505 which resulted in a positive working capital position of $19,469,761. As of December 31, 2024, we had a working capital position of $24,610,217. Our current liabilities are comprised principally of accounts payable, accrued expenses, and operating lease right-of-use liabilities.

Current wording

As of June 30, 2025, we had current assets of $23,321,417 compared to current liabilities of $3,037,976 which resulted in a positive working capital position of $20,283,441. As of December 31, 2024, we had a positive working capital position of $24,610,217. Our current liabilities are comprised principally of accounts payable, accrued expenses, and operating lease right-of-use liabilities.

Previous wording

The following table summarizes our select cash flows for the three months ended:

Current wording

The following table summarizes our select cash flows for the six months ended:

Previous wording

During the three months ended March 31, 2025, we used $3,453,623 of cash for operating activities, a reduction of $5,351,515 from the comparable 2024 period. Net changes in working capital items were $1,622,854 for the three months ended March 31, 2025, with the largest factors resulting from a $681,608 decrease in inventory and vendor prepayments; a $540,415 decrease in trade accounts and other receivables; and a $203,923 increase in trade accounts payables and accrued expenses. For the three months ended March 31, 2024, we used a total of $8,805,138 in cash for operating activities.

Current wording

During the six months ended June 30, 2025, we used $8,241,812 of cash for operating activities, a reduction of $6,198,523 from the comparable 2024 period. Net changes in working capital items were $2,927,104 for the six months ended June 30, 2025, with the largest factors resulting from a $1,666,629 decrease in inventory and vendor prepayments; a $251,584 increase in trade accounts payables and accrued expenses; and a $684,432 decrease in trade accounts and other receivables. For the six months ended June 30, 2024, we used a total of $14,440,335 in cash for operating activities.

Previous wording

During the three months ended March 31, 2025, we used $764,132 of cash for investing activities, which included: $613,397 in manufacturing equipment and tooling for our new waveguide manufacturing facility; $100,735 in patent and trademark expenditures, and $50,000 of additional investment in a private corporation (see Note 8 for further details). For the three months ended March 31, 2024, we used a total of $1,249,053 in cash for investing activities.

Current wording

During the six months ended June 30, 2025, we used $1,631,941 of cash for investing activities, which included: $1,340,873 in manufacturing equipment and tooling for our new waveguide manufacturing facility; $241,068 in patent and trademark expenditures, and $50,000 of additional investment in a private corporation (see Note 8 for further details). For the six months ended June 30, 2024, we used a total of $2,234,041 in cash for investing activities.

Previous wording

During the three months ending March 31, 2025, we received $1,262,250 of net proceeds from sales of common stock under our ATM program. For the three months ended March 31, 2024, we used nil net cash for financing activities.

Current wording

During the six months ending June 30, 2025, we received $9,141,832 from financing activities, which included: $5,000,000 in proceeds from the sale of our Series B Convertible Preferred Stock to Quanta Computer Inc., under our SPA; $4,089,850 in net proceeds from sales of common stock under our ATM program; and $51,982 of proceeds from stock option exercises. For the six months ended June 30, 2024, no cash was provided by financing activities.

Previous wording

The Company incurred net losses for the three months ended March 31, 2025 of $8,637,626; $73,538,157 for the year ended December 31, 2024; and $50,149,077 for the year ended December 31, 2023. The Company had net cash outflows from operations of $3,453,623 for the three months ended March 31, 2025; $23,739,372 for the year ended December 31, 2024; and $26,277,824 for the year ended December 31, 2023. As of March 31, 2025, the Company had an accumulated deficit of $376,160,576. The Company’s cash outflows for investing activities were $764,132 for the three months ended March 31, 2025; $2,919,949 for the year ended December 31, 2024; and $19,280,966 for the year ended December 31, 2023.

Current wording

The Company incurred net losses for the six months ended June 30, 2025 of $16,303,881; $73,538,157 for the year ended December 31, 2024; and $50,149,077 for the year ended December 31, 2023. The Company had net cash outflows from operations of $8,241,812 for the six months ended June 30, 2025; $23,739,372 for the year ended December 31, 2024; and $26,277,824 for the year ended December 31, 2023. As of June 30, 2025, the Company had an accumulated deficit of $383,826,831. The Company’s cash outflows for investing activities were $1,631,941 for the six months ended June 30, 2025; $2,919,949 for the year ended December 31, 2024; and $19,280,966 for the year ended December 31, 2023.

Previous wording

The Company has historically raised capital through the sale of equity securities. The Company 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 bank in an “at the market” (or ATM) offering. Since commencement of the ATM offering in May 2024, the Company has raised $9,854,809, including $1,262,250 in the three months ended March 31, 2025 and $413,084 subsequent to March 31, 2025. Management monitors the capital markets on an ongoing basis and may consider raising capital if favorable market conditions develop. If the Company needs to raise capital for additional liquidity, the Company may 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.

Current wording

The Company has historically raised capital through the sale of equity securities. The Company 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 bank in an “at the market” (“ATM”) offering. Since commencement of the ATM offering in May 2024, the Company has raised $12,221,011, including $2,835,408 and $4,089,850, respectively, in the three and six months ended June 30, 2025, under this sales agreement. Management monitors the capital markets on an ongoing basis and may consider raising capital if favorable market conditions develop. If the Company needs to raise capital for additional liquidity, the Company may pursue additional equity financings, further curtail expenses, or enter into one or more strategic