10-Q 1 vuzi-20220930x10q.htm 10-Q
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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, 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 November 9, 2022, there were 63,739,650 shares of the registrant’s common stock outstanding.

Vuzix Corporation

INDEX

 

Page
No.

 

 

Part I – Financial Information

3

 

 

Item 1.

Consolidated Financial Statements (Unaudited):

3

 

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

3

 

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

4

 

Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021

5

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 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

17

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

 

Item 4.

Controls and Procedures

29

 

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

30

 

Item 3.

Defaults Upon Senior Securities

30

 

Item 4.

Mine Safety Disclosure

30

 

Item 5.

Other Information

30

 

Item 6.

Exhibits

31

 

 

Signatures

32

2

Part 1: FINANCIAL INFORMATION

Item 1: Consolidated Financial Statements

VUZIX CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

    

September 30, 

December 31, 

    

2022

    

2021

ASSETS

 

  

 

  

Current Assets

 

  

 

  

Cash and Cash Equivalents

$

90,374,403

$

120,203,873

Accounts Receivable

 

3,118,036

 

2,242,429

Accrued Revenues in Excess of Billings

 

393,250

 

Inventories, Net

 

12,229,472

 

12,151,982

Manufacturing Vendor Prepayments

 

430,721

 

504,051

Prepaid Expenses and Other Assets

 

2,465,117

 

2,047,819

Total Current Assets

 

109,010,999

 

137,150,154

Long-Term Assets

 

  

 

  

Fixed Assets, Net

 

9,524,178

 

5,190,438

Operating Lease Right-of-Use Asset

707,574

1,117,022

Patents and Trademarks, Net

 

2,141,157

 

1,988,370

Technology Licenses, Net

 

15,657,333

 

1,389,936

Intangible Asset, Net

 

 

147,548

Other Assets, Net

 

1,716,810

 

1,483,589

Total Assets

$

138,758,051

$

148,467,057

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

  

Current Liabilities

 

  

 

  

Accounts Payable

$

2,196,590

$

2,054,762

Unearned Revenue

 

24,370

 

27,797

Accrued Expenses

 

1,174,372

 

1,419,308

Licensing Fees Commitment

 

4,250,000

 

Income and Other Taxes Payable

 

46,604

 

120,242

Operating Lease Right-of-Use Liability

525,882

534,146

Total Current Liabilities

 

8,217,818

 

4,156,255

Long-Term Liabilities

Operating Lease Right-of-Use Liability

181,692

582,876

Licensing Fees Commitment

4,750,000

Total Long-Term Liabilities

4,931,692

582,876

Total Liabilities

 

13,149,510

 

4,739,131

Stockholders' Equity

 

  

 

  

Common Stock - $0.001 Par Value, 100,000,000 shares authorized; 63,776,335 shares issued and 63,739,650 shares outstanding as of September 30, 2022 and 63,672,268 shares issued and outstanding as of December 31, 2021.

 

63,777

 

63,672

Additional Paid-in Capital

 

358,872,631

 

346,736,397

Accumulated Deficit

 

(233,076,810)

 

(203,072,143)

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

 

(251,057)

 

Total Stockholders' Equity

 

125,608,541

 

143,727,926

Total Liabilities and Stockholders' Equity

$

138,758,051

$

148,467,057

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

3

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

 

 

 

(3,017)

 

(2)

 

12,087,836

 

 

 

 

12,087,834

Stock Option Exercises

 

 

 

107,084

 

107

 

48,398

 

 

 

 

48,505

Purchases of Treasury Stock

 

 

 

 

 

 

 

(36,685)

 

(251,057)

 

(251,057)

Net Loss

 

 

 

 

 

 

(30,004,667)

 

 

 

(30,004,667)

Balance - September 30, 2022

 

$

 

63,776,335

$

63,777

$

358,872,631

$

(233,076,810)

 

(36,685)

$

(251,057)

$

125,608,541

Preferred Stock

Common Stock

Additional

Accumulated

Treasury Stock

    

Shares

    

Amount

    

Shares

    

Amount

    

Paid-In Capital

    

Deficit

    

Shares

    

Amount

    

Total

Balance - July 1, 2022

$

 

64,025,640

$

64,026

$

355,322,990

$

(223,599,811)

(36,685)

$

(251,057)

$

131,536,148

Stock-Based Compensation Expense

 

 

 

(291,667)

 

(291)

 

3,549,683

 

 

 

 

3,549,392

Stock Option Exercises

 

 

 

42,362

 

42

 

(42)

 

 

 

 

Net Loss

 

 

 

 

 

 

(9,476,999)

 

 

 

(9,476,999)

Balance - September 30, 2022

 

$

 

63,776,335

$

63,777

$

358,872,631

$

(233,076,810)

 

(36,685)

$

(251,057)

$

125,608,541

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)

 

 

 

368,047

 

368

 

14,377,950

 

 

 

 

14,378,318

Stock Option Exercises

 

 

 

620,784

 

621

 

713,083

 

 

 

 

713,704

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)

 

 

 

 

 

 

(28,884,390)

 

 

 

(28,884,390)

Balance - September 30, 2021 (as Restated)

 

$

 

63,631,054

$

63,631

$

342,644,630

$

(191,579,373)

 

$

$

151,128,888

Preferred Stock

Common Stock

Additional

Accumulated

Treasury Stock

    

Shares

    

Amount

    

Shares

    

Amount

    

Paid-In Capital

    

Deficit

    

Shares

    

Amount

    

Total

Balance - July 1, 2021 (as Restated)

$

 

63,278,096

$

63,278

$

336,770,866

$

(181,091,825)

$

$

155,742,319

Stock-Based Compensation Expense (as Restated)

 

 

 

300,000

 

300

 

5,833,873

 

 

 

 

5,834,173

Stock Option Exercises

 

 

 

52,958

 

53

 

39,891

 

 

 

 

39,944

Net Loss (as Restated)

 

 

 

 

 

 

(10,487,548)

 

 

 

(10,487,548)

Balance - September 30, 2021 (as Restated)

 

$

 

63,631,054

$

63,631

$

342,644,630

$

(191,579,373)

 

$

$

151,128,888

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, 

(as Restated)

(as Restated)

    

2022

    

2021

    

2022

    

2021

Sales:

 

  

 

  

 

  

 

  

Sales of Products

$

2,537,539

$

3,018,774

$

7,939,483

$

9,657,589

Sales of Engineering Services

 

889,284

 

 

998,150

 

193,113

Total Sales

 

3,426,823

 

3,018,774

 

8,937,633

 

9,850,702

Cost of Sales:

 

  

 

  

 

  

 

  

Cost of Sales - Products Sold

 

2,034,123

 

2,370,053

 

6,289,612

 

7,347,450

Cost of Sales - Engineering Services

 

302,707

 

 

362,003

 

29,669

Cost of Sales - Depreciation and Amortization

221,772

252,759

676,720

953,614

Total Cost of Sales

 

2,558,602

 

2,622,812

 

7,328,335

 

8,330,733

Gross Profit

 

868,221

 

395,962

 

1,609,298

 

1,519,969

Operating Expenses:

 

  

 

  

 

  

 

  

Research and Development

 

3,440,685

 

3,397,118

 

9,540,272

 

8,326,431

Selling and Marketing

 

1,980,748

 

1,653,013

 

5,895,332

 

4,305,632

General and Administrative

 

4,854,014

 

5,463,247

 

15,307,242

 

16,672,046

Depreciation and Amortization

 

510,099

 

246,902

 

1,149,046

 

731,035

Loss on Fixed Asset Disposal

 

 

 

 

83,908

Impairment of Patents and Trademarks

 

48,075

 

7,544

 

97,676

 

66,040

Total Operating Expenses

 

10,833,621

 

10,767,824

 

31,989,568

 

30,185,092

Loss From Operations

 

(9,965,400)

 

(10,371,862)

 

(30,380,270)

 

(28,665,123)

Other Income (Expense):

 

  

 

  

 

  

 

  

Investment Income

 

572,721

 

29,843

 

690,028

 

45,448

Income and Other Taxes

 

(19,768)

 

(105,526)

 

(98,727)

 

(138,034)

Foreign Exchange Loss

 

(64,552)

 

(40,003)

 

(215,698)

 

(126,681)

Total Other Income (Expense), Net

 

488,401

 

(115,686)

 

375,603

 

(219,267)

Loss Before Provision for Income Taxes

 

(9,476,999)

 

(10,487,548)

 

(30,004,667)

 

(28,884,390)

Provision for Income Taxes

 

 

 

 

Net Loss

 

(9,476,999)

 

(10,487,548)

 

(30,004,667)

 

(28,884,390)

Basic and Diluted Loss per Common Share

$

(0.15)

$

(0.17)

$

(0.47)

$

(0.48)

Weighted-average Shares Outstanding - Basic and Diluted

 

63,776,154

 

63,520,878

 

63,724,982

 

60,278,923

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, 

(as Restated)

    

2022

    

2021

Cash Flows from Operating Activities

 

  

 

  

Net Loss

$

(30,004,667)

$

(28,884,390)

Non-Cash Adjustments

 

  

 

  

Depreciation and Amortization

 

1,700,766

 

1,453,367

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

 

125,000

 

180,296

Stock-Based Compensation

 

12,016,334

 

12,830,782

Impairment of Patents and Trademarks

 

97,676

 

66,040

Loss on Fixed Asset Disposal

 

 

83,908

(Increase) Decrease in Operating Assets

 

  

 

  

Accounts Receivable

 

(875,607)

 

330,092

Accrued Revenues in Excess of Billings

(393,250)

Inventories, Net

 

(77,490)

 

(3,779,513)

Manufacturing Vendor Prepayments

 

73,330

 

(1,417,100)

Prepaid Expenses and Other Assets

 

(417,298)

 

(238,066)

Increase (Decrease) in Operating Liabilities

 

  

 

  

Accounts Payable

 

141,828

 

(34,346)

Accrued Expenses

 

(244,935)

 

602,293

Unearned Revenue

 

(3,425)

 

(26,901)

Income and Other Taxes Payable

 

(73,637)

 

(75,890)

Net Cash Flows Used in Operating Activities

 

(17,935,375)

 

(18,909,428)

Cash Flows from Investing Activities

 

  

 

  

Purchases of Fixed Assets

 

(5,203,562)

 

(3,592,703)

Investments in Patents and Trademarks

 

(362,981)

 

(442,582)

Investments in Licenses, Intangibles and Other Assets

 

(6,125,000)

 

(305,158)

Net Cash Flows Used in Investing Activities

 

(11,691,543)

 

(4,340,443)

Cash Flows from Financing Activities

 

  

 

  

Proceeds from Exercise of Warrants

 

 

34,705,068

Proceeds from Exercise of Stock Options

 

48,505

 

713,703

Proceeds from Common Stock Offering, Net

91,652,617

Purchases of Treasury Stock

(251,057)

Preferred Dividend Settlement Payment

 

 

(10,000,000)

Employee Tax Withholdings Payment

 

 

(1,144,364)

Net Cash Flows (Used in) Provided from Financing Activities

 

(202,552)

 

115,927,024

Net (Decrease) Increase in Cash and Cash Equivalents

 

(29,829,470)

 

92,677,153

Cash and Cash Equivalents - Beginning of Period

 

120,203,873

 

36,069,508

Cash and Cash Equivalents - End of Period

$

90,374,403

$

128,746,661

Supplemental Disclosures

 

  

 

  

Unamortized Common Stock Expense included in Prepaid Expenses and Other Assets

$

1,204,942

$

1,729,646

Non-Cash Investment in Licenses

9,000,000

1,341,614

Stock-Based Compensation Expense - Expensed less Previously Issued

(71,502)

(1,547,536)

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. Certain re-classifications may have been made to prior periods to conform with current reporting impacting Costs of Sales, Gross Profit and Depreciation and Amortization. The results of the Company’s operations for the three and nine months ended September 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/A filed with the SEC on October 25, 2022.

Restatement

As described in additional detail in Note 2 to the financial statements included in its 2021 Form 10-K/A, 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 and should no longer be relied upon. See Note 2, Restatement of Previously Issued 2021 Unaudited Quarterly Financial Statements and Note 20, Quarterly Financial Information (Unaudited) of the Notes to the consolidated financial statements in the 2021 Form 10-K/A for the impact of these adjustments on each of the quarterly periods in fiscal year 2021.

The impact of the restatement on the unaudited quarterly financial statements is presented below.

The impact of the restatement to the Consolidated Balance Sheet:

September 30, 2021 (Unaudited)

As Previously

Balance Sheet

    

Reported

    

Adjustment

    

As Restated

Additional paid-in capital

$

337,125,126

$

5,519,504

$

342,644,630

Accumulated deficit

$

(186,059,869)

$

(5,519,504)

$

(191,579,373)

7

The impact of the restatement to the Consolidated Statements of Operation:

For the Three Months Ended
September 30, 2021 (Unaudited)

For the Nine Months Ended
September 30, 2021 (Unaudited)

As Previously

As Previously

Condensed Statement of Operations

    

Reported

    

Adjustment

    

As Restated

    

Reported

    

Adjustment

    

As Restated

Total Sales

$

3,018,774

$

$

3,018,774

$

9,850,702

$

$

9,850,702

Total Cost of Sales

2,435,437

2,435,437

7,608,401

7,608,401

Gross Profit

583,337

583,337

2,242,301

2,242,301

Operating Expenses:

Research and Development

3,270,255

126,863

3,397,118

8,050,915

275,516

8,326,431

Selling and Marketing

  

1,589,582

63,431

1,653,013

  

4,167,874

137,758

4,305,632

General and Administrative

3,112,059

2,351,188

5,463,247

11,565,816

5,106,230

16,672,046

Depreciation and Amortization

434,277

434,277

1,453,367

1,453,367

Loss on Fixed Asset Disposal

83,908

83,908

Impairment of Patents and Trademarks

  

7,544

7,544

  

66,040

66,040

Total Operating Expenses

8,413,717

2,541,482

10,955,199

25,387,920

5,519,504

30,907,424

Loss From Operations

(7,830,380)

(2,541,482)

(10,371,862)

(23,145,619)

(5,519,504)

(28,665,123)

Total Other Expense, Net

(115,686)

(115,686)

(219,267)

(219,267)

Net Loss

$

(7,946,066)

$

(2,541,482)

$

(10,487,548)

$

(23,364,886)