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 |
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(Address of principal executive offices) | (Zip Code) |
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | ☒ | |
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Smaller reporting company | Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes
As of November 9, 2023, there were
Vuzix Corporation
INDEX
2
Part 1: FINANCIAL INFORMATION
Item 1: Consolidated Financial Statements
VUZIX CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited) |
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September 30, | December 31, | |||||
| 2023 |
| 2022 | |||
ASSETS |
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Current Assets |
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Cash and Cash Equivalents | $ | | $ | | ||
Accounts Receivable, Net |
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Accrued Revenues in Excess of Billings |
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Employee Retention Credit Receivable | — | | ||||
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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Intangible Asset, Net |
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Goodwill |
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Other Assets, Net |
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Total Assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current Liabilities |
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Accounts Payable | $ | | $ | | ||
Unearned Revenue |
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Accrued Expenses |
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Licensing Fees Commitment |
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Income and Other Taxes Payable |
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Operating Lease Right-of-Use Liability | | | ||||
Total Current Liabilities |
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Long-Term Liabilities | ||||||
Operating Lease Right-of-Use Liability | | | ||||
Total Liabilities |
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Stockholders' Equity |
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Common Stock - $ |
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Additional Paid-in Capital |
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Accumulated Deficit |
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Treasury Stock, at cost, |
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Total Stockholders' Equity |
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Total Liabilities and Stockholders' Equity | $ | | $ | | ||
The accompanying notes are an integral part of these consolidated financial statements.
3
VUZIX CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
Common Stock | Additional | Accumulated | Treasury Stock | ||||||||||||||||
| Shares |
| Amount |
| Paid-In Capital |
| Deficit |
| Shares |
| Amount |
| Total | ||||||
Balance - 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 |
| Amount |
| Total | ||||||
Balance - January 1, 2023 |
| | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||
Stock-Based Compensation Expense |
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Stock Option Exercises |
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Purchases of Treasury Stock |
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Net Loss |
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Balance - September 30, 2023 |
| | $ | | $ | | $ | ( |
| ( | $ | ( | $ | | |||||
Common Stock | Additional | Accumulated | Treasury Stock | ||||||||||||||||
| Shares |
| Amount |
| Paid-In Capital |
| Deficit |
| Shares |
| Amount |
| Total | ||||||
Balance - July 1, 2022 |
| | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||
Stock-Based Compensation Expense |
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Stock Option Exercises |
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Net Loss |
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Balance - September 30, 2022 |
| | $ | | $ | | $ | ( |
| ( | $ | ( | $ | | |||||
Common Stock | Additional | Accumulated | Treasury Stock | ||||||||||||||||
| Shares |
| Amount |
| Paid-In Capital |
| Deficit |
| Shares |
| Amount |
| Total | ||||||
Balance - January 1, 2022 |
| | $ | | $ | | $ | ( | — | $ | — | $ | | ||||||
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, 2022 |
| | $ | | $ | | $ | ( |
| ( | $ | ( | $ | | |||||
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, | |||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
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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Impairment of Patents and Trademarks |
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Total Operating Expenses |
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Loss From Operations |
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Other Income (Expense): |
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Investment Income |
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Income and Other Taxes |
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Foreign Exchange Loss |
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Total Other Income, Net |
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Loss Before Provision for Income Taxes |
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Provision for Income Taxes |
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Net Loss |
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Basic and Diluted Loss per Common Share | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted-average Shares Outstanding - Basic and Diluted |
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The accompanying notes are an integral part of these consolidated financial statements.
5
VUZIX CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30, | ||||||
| 2023 |
| 2022 | |||
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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Change in Inventory Reserve for Obsolescence | | — | ||||
(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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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 From (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, Intangibles and Other Assets |
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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 From (Used In) Financing Activities |
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Proceeds from Exercise of Stock Options |
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Purchases of Treasury Stock | ( | ( | ||||
Net Cash Flows Used in Financing Activities |
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Net 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 | | | ||||
Stock-Based Compensation Expense - Expensed less Previously Issued | | ( | ||||
The accompanying notes are an integral part of these consolidated financial statements.
6
VUZIX CORPORATION
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Basis of Presentation
The accompanying unaudited consolidated financial statements of Vuzix Corporation (“the Company” or “Vuzix”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, the unaudited consolidated financial statements do not include all information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. The results of the Company’s operations for the three and nine months ended September 30, 2023, 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, 2022, as reported in the Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2023.
Customer Concentrations
For the three months ended September 30, 2023,
For the nine months ended September 30, 2023,
As of September 30, 2023,
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 re-issuance 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. The Company adopted ASU 2016-13 effective on January 1, 2023. The adoption of this standard did not have a material impact on our 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, | |||||||||||
| 2023 |
| 2022 |
| 2023 |
| 2022 | |||||
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 that include an end-user 30-day right to return if not satisfied with our product and general payment terms that are between Net 30 and Net 60 days. For our engineering services, we must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation, which determines how the transaction price is allocated among the performance obligations. The Company allocated the transaction price to each distinct performance obligation using the expected cost-plus margin approach to estimate the standalone selling price. Assumptions used in this method include the projected costs of each distinct performance obligation. Performance obligations are recognized over time using the input method, and the estimated costs to complete each project are considered significant judgments.
Performance Obligations
Revenues from our performance obligations are typically satisfied at a point-in-time for Smart Glasses, Waveguides and Display Engines, and our OEM Products, which are recognized when the customer obtains control and ownership, which is generally upon shipment. The Company considers shipping and handling activities performed to be fulfillment activities and not a separate performance obligation. The Company also records revenue for performance obligations relating to our engineering services over time by using the input method measuring progress toward satisfying the performance obligations. Satisfaction of our performance obligations related to our engineering services is measured by the Company’s costs incurred as a percentage of total expected costs to project completion, as the inputs of actual costs incurred by the Company are directly correlated with progress toward completing the contract. As such, the Company believes that our methodologies for recognizing revenue over time for our engineering services correlate directly with the transfer of control of the underlying assets to our customers.
Our standard product sales include a () month assurance-type product warranty. In the case of certain of our OEM products and waveguide sales, some include a standard product warranty of up to () months to allow distribution channels to offer the end customer a full () months of coverage. We offer extended warranties to customers, which extend the standard product warranty on product sales for an additional () month period. 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.
8
The following table presents a summary of the Company’s sales by revenue recognition method as a percentage of total net sales for the nine months ended September 30:
| % of Total Net Sales | ||||
2023 |
| 2022 |
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Point-in-Time |
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Over Time – Input Method |
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Total |
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Remaining Performance Obligations
As of September 30, 2023, the Company had approximately $
The Company had no material outstanding performance obligations related to product sales, other than its standard product warranty.
Note 3 – Loss Per Share
Basic loss per share is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution from the assumed exercise of stock options. During periods of net loss, all common stock equivalents are excluded from the diluted EPS calculation because they are anti-dilutive. Since the Company reported a net loss for the three and nine months ended September 30, 2023 and 2022, 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, 2023 and 2022, 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, | |||||
| 2023 |
| 2022 | |||
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 | $ | | $ | | ||
9
Note 5 – Fixed Assets
Fixed Assets consisted of the following:
September 30, | December 31, | |||||
| 2023 |
| 2022 | |||
Tooling and Manufacturing Equipment | $ | | $ | | ||
Leaseholds |
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Computers and Purchased Software |
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Furniture and Equipment |
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Less: Accumulated Depreciation |
| ( |
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Fixed Assets, Net | $ | | $ | | ||
During the nine months ended September 30, 2023, the Company invested $
Total depreciation expense for fixed assets, not included in cost of sales, for the three months ended September 30, 2023, and 2022 was $
Note 6 – Technology Licenses, Net
The changes in the Company’s Technology Licenses for the nine months ended September 30, 2023, were as follows:
September 30, | December 31, | |||||
| 2023 |
| 2022 | |||
Licenses | $ | | $ | | ||
Additions |
| — |
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Less: Accumulated Amortization |
| ( |
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Licenses, Net | $ | | $ | | ||
Total amortization expense related to technology licenses, not included in cost of sales, for the three months ended September 30, 2023, and 2022 was $
The Company signed a series of agreements with Atomistic SAS in 2022, which provided for an exclusive license of key micro-LED technology for cash commitments totaling $
These intangible technology license assets are to be amortized over a
10
Note 7 - Other Assets
The changes in the Company’s Other Assets for the nine months ended September 30, 2023, were as follows:
September 30, | December 31, | |||||
| 2023 |
| 2022 | |||
Private Corporation Investments | $ | | $ | | ||
Additions | | — | ||||
Total Private Corporation Investments (at cost) | | | ||||
Software Development Costs | | | ||||
Additions | | | ||||
Less: Accumulated Amortization | ( | ( | ||||
Software Development Costs, Net | | | ||||
Unamortized Common Stock Expense included in Long-Term Prepaid Expenses | | | ||||
Total Other Assets | $ | | $ | | ||
In 2021, the Company acquired, for a purchase price of $
In June 2023, the Company purchased $
During 2020, the Company invested $
Total amortization expense related to all software updates, included in cost of sales, for the three months ended September 30, 2023, and 2022 were $
11