Financial Data and Key Metrics Changes - Total revenues for Q2 2020 increased by $0.8 million to $3 million compared to the same period in 2019, driven by higher sales of non-OEM smart glass products, which rose 183% year-over-year [32][34] - Gross profit for Q2 2020 was $0.8 million, up from $0.2 million in Q2 2019, attributed to improved product gross margins and stronger margins on engineering services [34] - The net loss attributable to common stockholders for Q2 2020 was $4.2 million, an improvement from a net loss of $5.1 million in Q2 2019, resulting in a net loss of $0.13 per share compared to $0.20 per share in the prior year [38] Business Line Data and Key Metrics Changes - Vuzix Smart Glasses revenues reached a record $2.3 million in Q2 2020, representing a year-over-year increase of 183% compared to Q2 2019 [7][8] - Engineering services revenues for Q2 2020 were $0.7 million, up from $0.4 million in the prior year's period [34] - Sales of OEM products were nil for Q2 2020, compared to just under $1 million in the same period in 2019 [32] Market Data and Key Metrics Changes - The U.S. remains the primary market for Vuzix, followed by Europe, with Asia, particularly Japan, showing significant growth, now representing over 20% of sales [60] - The COVID-19 pandemic has accelerated the adoption of smart glasses across various sectors, including field service, telehealth, and healthcare [10][18] Company Strategy and Development Direction - The company is focusing on expanding its customer base and increasing the adoption of smart glasses as part of the new normal in business operations due to COVID-19 [9][10] - A partnership with ProGlove aims to enhance efficiency and safety in industries such as retail and logistics, potentially increasing customer reach [17] - The development of the M4000 smart glasses is expected to complement the existing M400 model, providing additional options for enterprise customers [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued growth in Q3 2020, with revenues outpacing Q2 sales rates [42] - The pandemic has created a shift in urgency for businesses to deploy smart glasses, which are seen as safer and more efficient alternatives to traditional methods [11][12] - The company anticipates that the adoption of smart glasses will expand further as businesses return to normal operations [42] Other Important Information - The company has a cash position of $13.2 million as of June 30, 2020, with net working capital totaling $20.1 million [39] - Vuzix has regulatory approvals to ship the M400 into China, which is expected to drive significant sales growth in the region [20] Q&A Session Summary Question: Growth commentary for Q2 - Management confirmed that growth commentary applies to both year-over-year and sequential growth [45] Question: Avionics opportunity potential - Management indicated that the avionics opportunity could be significant, with potential ASPs greater than $1,500 to $2,000 [46][47] Question: Expectations for Verizon and defense contractor contributions - Management expects significant revenue contributions from both Verizon and defense contractor programs in 2021 [49][50] Question: International sales distribution - The U.S. remains the largest market, followed by Europe, with Asia, particularly Japan, growing rapidly [60] Question: Cost of sales improvements - Management believes there is still room for improvement in cost of sales as volumes increase [61] Question: Status of the upgraded Blade - The upgraded Blade is expected to address a broader customer set and has received positive feedback [65] Question: Q3 sales pace - Management confirmed that Q3 sales are currently outpacing Q2 sales [68][69] Question: Aerospace customer relationship status - The relationship with the Tier 1 aerospace customer is progressing, with negotiations for a supply agreement underway [72][73] Question: Engineering services revenue expectations - Engineering revenues are expected to be lumpy, with new programs potentially contributing in Q3 [80] Question: Delayed projects coming back online - Some projects that were on hold due to COVID-19 are starting to resume, particularly those that align with business continuity needs [82]

[Part I – Financial Information](index=3&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information) [Item 1. Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This section presents Vuzix Corporation's unaudited consolidated financial statements, including balance sheets, statements of operations, and cash flows, for periods ending June 30, 2020 [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2020, total assets increased to **$31.1 million**, total liabilities to **$5.0 million**, and stockholders' equity to **$26.1 million** Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Current Assets** | | | | Cash and Cash Equivalents | $13,229,182 | $10,606,091 | | Inventories, Net | $6,256,333 | $5,707,867 | | Total Current Assets | $22,923,268 | $19,073,508 | | **Total Assets** | **$31,102,080** | **$28,446,465** | | **Current Liabilities** | | | | Total Current Liabilities | $2,814,108 | $2,634,657 | | **Total Liabilities** | **$4,967,927** | **$4,206,022** | | **Total Stockholders' Equity** | **$26,134,153** | **$24,240,443** | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) For Q2 2020, sales increased to **$3.0 million** and net loss narrowed to **$4.2 million**; for H1 2020, sales grew to **$4.6 million** and net loss decreased to **$9.6 million** Statement of Operations Summary (Unaudited) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Total Sales | $3,036,843 | $2,185,861 | $4,568,559 | $3,559,232 | | Gross Profit | $795,920 | $152,039 | $876,437 | $191,928 | | Loss from Operations | ($4,237,874) | ($5,069,394) | ($9,577,117) | ($11,419,060) | | Net Loss | ($4,238,666) | ($5,055,934) | ($9,600,290) | ($11,415,695) | | Basic and Diluted Loss per Share | ($0.13) | ($0.20) | ($0.31) | ($0.45) | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For H1 2020, net cash used in operations was **$8.9 million**, offset by **$12.1 million** from financing activities, resulting in a **$2.6 million** net cash increase Cash Flow Summary (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($8,871,081) | ($11,683,121) | | Net Cash Used in Investing Activities | ($644,037) | ($2,220,792) | | Net Cash from Financing Activities | $12,138,209 | $0 | | **Net Increase (Decrease) in Cash** | **$2,623,091** | **($13,903,913)** | | **Cash at End of Period** | **$13,229,182** | **$3,359,730** | [Notes to the Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Unaudited%20Consolidated%20Financial%20Statements) These notes detail accounting policies, going concern analysis, revenue recognition, debt obligations, capital structure, and litigation related to the financial statements - The company has a history of net losses, with a net loss of **$9.6 million** for the first six months of 2020 and an accumulated deficit of **$154.3 million** as of June 30, 2020[19](index=19&type=chunk) - Management has concluded that substantial doubt about the company's ability to continue as a going concern has been alleviated, based on cash on hand, historical ability to raise capital, and cost management plans[24](index=24&type=chunk) - In May 2020, the company raised **$11.25 million** in gross proceeds (**$10.58 million** net) through a registered direct offering of **5,000,000** shares of common stock at **$2.25** per share[21](index=21&type=chunk)[53](index=53&type=chunk) - The company received a Paycheck Protection Program (PPP) loan of **$1,555,900** in April 2020, bearing a **1%** interest rate and a two-year term, with intent to apply for forgiveness[40](index=40&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, business operations, and outlook, including COVID-19 impacts, results of operations, and liquidity and capital resources [Business Matters and COVID-19 Impact](index=22&type=section&id=Business%20Matters%20and%20COVID-19%20Impact) Vuzix focuses on enterprise Smart Glasses and AR products, experiencing mixed COVID-19 impacts with both order delays and new opportunities in remote support and telemedicine - The company is focused on enterprise, industrial, commercial, security, first responder, and medical markets for its Smart Glasses and AR products[71](index=71&type=chunk) - The COVID-19 pandemic has caused delays in expected orders and the launch of new products like the M4000 and upgraded Blade Smart Glasses[73](index=73&type=chunk) - Conversely, the pandemic has accelerated opportunities for Vuzix products in telemedicine, guided remote support, and remote training as companies adapt to travel restrictions[74](index=74&type=chunk)[75](index=75&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Q2 2020 sales grew **39%** to **$3.0 million** driven by Smart Glasses, while H1 2020 sales grew **28%** to **$4.6 million**, with improved gross profit and reduced net loss Q2 2020 vs Q2 2019 Performance | Metric | Q2 2020 | Q2 2019 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Sales | $3,036,843 | $2,185,861 | $850,982 | 39% | | Gross Profit | $795,920 | $152,039 | $643,881 | 423% | | Loss from Operations | ($4,237,874) | ($5,069,394) | $831,520 | (16)% | | Net Loss | ($4,238,666) | ($5,055,934) | $817,268 | (16)% | - Q2 2020 sales of Smart Glasses products rose **183%** YoY, primarily due to the M400 Smart Glasses, which began selling in Q4 2019. M-Series Smart Glasses revenue increased **374%** YoY[80](index=80&type=chunk) H1 2020 vs H1 2019 Performance | Metric | H1 2020 | H1 2019 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Sales | $4,568,559 | $3,559,232 | $1,009,327 | 28% | | Gross Profit | $876,437 | $191,928 | $684,509 | 357% | | Loss from Operations | ($9,577,117) | ($11,419,060) | $1,841,943 | (16)% | | Net Loss | ($9,600,290) | ($11,415,695) | $1,815,405 | (16)% | - For H1 2020, R&D expenses decreased by **15%**, Selling & Marketing by **13%**, and General & Administrative by **10%** compared to H1 2019, reflecting cost control measures[108](index=108&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2020, cash increased to **$13.2 million** due to **$12.1 million** from financing activities, improving working capital to **$20.1 million** and alleviating going concern doubts - Cash and cash equivalents increased to **$13,229,182** as of June 30, 2020, from **$10,606,091** at December 31, 2019[115](index=115&type=chunk) - Working capital improved to **$20,109,160** as of June 30, 2020, from **$16,438,851** at year-end 2019[116](index=116&type=chunk) - During the first six months of 2020, the company received **$10.6 million** in net proceeds from a stock sale and **$1.6 million** from a PPP term loan[120](index=120&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate and foreign currency fluctuations, primarily in Japan and Europe, but does not currently hedge these non-material risks - The company's primary market risks are related to interest rate changes on its cash investments and foreign currency exchange rate fluctuations from its business in Japan and Europe[134](index=134&type=chunk) - Vuzix does not currently use hedging instruments to manage foreign currency risk and estimates that the associated market risk is not material[134](index=134&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of the end of the reporting period, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[135](index=135&type=chunk) - No changes occurred in the company's internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[136](index=136&type=chunk) [Part II – Other Information](index=40&type=section&id=Part%20II%20%E2%80%93%20Other%20Information) [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company reports a patent infringement lawsuit filed by Throop, LLC in December 2019, which was voluntarily dismissed without prejudice in March 2020 - Throop, LLC filed a patent infringement lawsuit against Vuzix on December 16, 2019, concerning two U.S. patents that expired in January 2020[138](index=138&type=chunk) - Throop filed a voluntary dismissal without prejudice on March 6, 2020. The company denies the claims and will defend itself against any future related lawsuits[138](index=138&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors to include potential negative effects of the COVID-19 pandemic, such as supply chain constraints, product delays, and capital raising challenges - The company has identified the COVID-19 pandemic as a new material risk factor that could negatively affect its business, operations, and financial performance[139](index=139&type=chunk)[140](index=140&type=chunk) - Specific pandemic-related risks include significant supply chain constraints, delays in new product introductions, and potential impacts on the ability to raise capital due to market volatility[141](index=141&type=chunk)[142](index=142&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports unregistered stock awards, including **830,486** shares for a payroll reduction program, issued under Section 4(a)(2) of the Securities Act of 1933 - The company issued **830,486** shares to employees, officers, and directors as part of its voluntary payroll reduction program, vesting on January 15, 2021[142](index=142&type=chunk) - These unregistered sales of equity securities were made in reliance upon the exemption from registration under Section 4(a)(2) of the Securities Act of 1933[141](index=141&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - The exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[143](index=143&type=chunk) - Interactive data files (Inline XBRL) are also included as exhibits[143](index=143&type=chunk)

Financial Data and Key Metrics Changes - The first quarter revenues rose 12% year-over-year to $1.5 million, largely due to increased engineering services revenues and strong sales of M400 smart glasses, which drove a 35% increase in overall M Series glasses revenues [36][40] - Sales revenues of Blade smart glasses decreased by nearly $0.3 million, or 55%, primarily driven by a 20% decrease in their average selling price and lower unit sales [36][40] - The net loss attributable to common shareholders for the first quarter was $5.9 million or $0.18 per share, compared to a net loss of $6.8 million or $0.25 per share for the same period in 2019 [40] Business Line Data and Key Metrics Changes - The M Series smart glasses saw a significant increase in sales, while Blade smart glasses experienced a decline in sales [36][66] - Engineering services revenue is expected to be over $600,000 in Q2, with the potential for one or two new programs before the quarter ends [70][83] Market Data and Key Metrics Changes - There has been a notable increase in demand for smart glasses in the telemedicine sector, with many hundreds sold for telemedicine purposes in Q2 [53][55] - The company is experiencing increased customer order flow, average order size, and the number of customers placing reorders, particularly in the U.S., Europe, and Asia-Pacific regions [14] Company Strategy and Development Direction - The company is adapting its sales strategy to focus on remote support and telemedicine, driven by the COVID-19 pandemic [8][14] - Vuzix is working on the M4000 smart glasses, which will feature an optical see-through display, expected to be priced around $2,499, indicating a significant rise in price compared to the M400 [28][74] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, noting that the current environment has accelerated interest in smart glasses for remote support and telemedicine [15][79] - The company is focused on minimizing cash burn and has implemented a compensation adjustment plan to save $1.2 million in cash [41][45] Other Important Information - The company has entered into a stock sale agreement to sell five million common shares at a price of $2.25 per share, aimed at strengthening its balance sheet [49][50] - Vuzix has over 157 patents and patents pending, positioning itself as a leader in the development of AR smart glasses [32] Q&A Session Summary Question: Can you quantify roughly how many smart glasses have been sold for telemedicine purposes in Q2? - Management indicated that the sales are in the hundreds, with a significant shift towards remote support in hospitals due to the pandemic [53][55] Question: What was the biggest inhibitor to growth in the last quarter? - Management noted that many companies were deferring decisions and initiatives due to the pandemic, impacting growth expectations [58][79] Question: Has there been any change in the supply chain perspective? - Management confirmed that while there were some delays, the supply chain is generally stable, with minor glitches affecting new product introductions [59] Question: What is the current cash position ahead of the recent announcement on the raise? - Management indicated that the cash position was above $3 million, including federal loan proceeds [60][62] Question: Has there been an increase in sales for the Blade as well? - Management confirmed that the M-Series products have seen stronger demand, while the Blade has participated to a lesser extent [66] Question: Can you elaborate on the price delta between the M400 and M4000? - The M4000 is expected to be priced around $2,499, offering advanced features that cater to different applications compared to the M400 [74]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2020 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 25 Hendrix Ro ...

Financial Data and Key Metrics Changes - For the full year ended December 31, 2019, total revenues were $6.7 million, a decrease of 18% from $8.1 million in the prior year [44] - The net loss for 2019 was $28.4 million, or $0.94 per share, compared to a loss of $23.7 million, or $0.87 per share in 2018 [55] - Cash position as of December 31, 2019, was $10.6 million, with net working capital of $16.4 million [56] Business Line Data and Key Metrics Changes - Total sales of M Series Smart Glasses decreased by 44% year-over-year, while Vuzix Blade revenues increased by 244% in 2019 compared to 2018 [44] - Sales of engineering services increased by 67% to $0.7 million from $0.4 million in 2018 [44] - In Q4 2019, sales of M Series Smart Glasses rose by 16% quarter-over-quarter, and Vuzix Blade sales increased by 54% compared to Q4 2018 [46] Market Data and Key Metrics Changes - The coronavirus outbreak has led to a surge in demand for smart glasses for remote support, business continuity, and education, with initial growth in Japan and the Asia Pacific region, followed by Europe and the U.S. [23] - Vuzix has multiple partners offering remote support through their applications, and has released connectors for Zoom and Skype for business [24] Company Strategy and Development Direction - The company aims to grow sales and deployment sizes for existing M Series Smart Glasses and plans to commence shipment of M4000 Smart Glasses in volume during the second half of 2020 [40] - Vuzix is focusing on expanding its OEM program engagements, which typically come with upfront cash payments and higher gross margins [41] - The strategy includes leveraging existing platforms to reduce new product development costs, particularly for the M4000, which is based on the M400 Smart Glasses [55] Management Comments on Operating Environment and Future Outlook - Management expects solid year-over-year revenue growth in 2020, driven by enterprise applications in remote support, logistics, telemedicine, and manufacturing [12] - The company is optimistic about the performance of the M400 Smart Glasses, which has been well received in the market [13] - Management acknowledges uncertainty due to the COVID-19 pandemic but notes that demand for remote support applications is accelerating [75] Other Important Information - Vuzix achieved ISO 9001:2015 certification for its West Henrietta facility, which is crucial for supplying larger OEM partners [8] - The company has over 150 patents and patents pending, positioning it as a leader in near-eye display technology [32] Q&A Session Summary Question: Revenue magnitude expectations for the second half of the year - Management indicated that the base business is expected to grow, with significant potential from engineering programs that could yield millions in revenue [69] Question: Impact of COVID-19 on customer purchasing decisions - Management noted that while some purchasing decisions are delayed, there is an acceleration in demand for remote support applications due to business continuity issues [75] Question: Expectations for operating expenses moving forward - Management suggested that Q4 2019 expenses could serve as a good baseline, with hopes to reduce them slightly [80] Question: Status of the M300C project - Management clarified that while there have been no follow-on orders, the project is still ongoing, but orders have not been received recently [83] Question: Revenue trajectory throughout the year - Management confirmed that revenues are expected to build throughout the year, with the second half likely to be stronger than the first half [92][95]

Part I [Business](index=5&type=section&id=Item%201.%20Business) Vuzix Corporation designs, manufactures, and sells augmented reality (AR) wearable display and computing devices, known as Smart Glasses - The company is engaged in the design, manufacture, marketing, and sale of AR wearable display and computing devices, such as Smart Glasses[21](index=21&type=chunk) - Vuzix's core technology includes proprietary waveguide optics and compact display engines, which it believes provide a competitive advantage in image quality, power efficiency, and form factor[23](index=23&type=chunk) - Key target markets are enterprise, consumer electronics, OEM, defense, and security. The company is re-engaging the defense and security markets after a non-compete agreement was amended in October 2018[24](index=24&type=chunk)[26](index=26&type=chunk) - The company's intellectual property portfolio includes **71 issued patents** and **79 pending patent applications**, along with expertise in nano-imprinting manufacturing processes[69](index=69&type=chunk) [Products and Applications](index=8&type=section&id=Item%201.%20Business%20-%20Products%20and%20Applications) Vuzix's main products are the M-series (M300XL, M400, M4000) for enterprise and the Vuzix Blade for prosumer markets, supported by an App Store and third-party connectors - Current products include the M-series (M300XL, M400, M4000) for enterprise and the Blade Smart Glasses for prosumers[40](index=40&type=chunk)[43](index=43&type=chunk) - The M400 began commercial production in September 2019, and the M4000, featuring proprietary waveguide optics, is planned for mass production in the second half of 2020[40](index=40&type=chunk)[42](index=42&type=chunk) - Vuzix offers applications through its own App Store, including Vuzix Remote Assist (VRA) on a subscription basis, and is developing connectors for third-party collaboration tools[47](index=47&type=chunk)[49](index=49&type=chunk) [Manufacturing and Sales](index=14&type=section&id=Item%201.%20Business%20-%20Manufacturing%20and%20Sales) Vuzix primarily performs final assembly and manufactures proprietary waveguide optics in Rochester, New York, sourcing key components from third parties and selling directly or through VARs - Final assembly of products was moved from China to the Rochester, New York facility in the summer of 2019. All waveguide optics are manufactured in Rochester[96](index=96&type=chunk) - The company relies on third-party suppliers for key components, including micro-displays from Sony, Texas Instruments, and Kopin, without long-term supply contracts[97](index=97&type=chunk) - Sales channels include direct sales, a network of Value-Added Resellers (VARs)/Vuzix Integration Partners (VIPs), and online web stores[84](index=84&type=chunk)[85](index=85&type=chunk) [Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including a history of net losses, intense competition, reliance on limited suppliers, and potential impacts from technological change and IP disputes Net Loss and Accumulated Deficit | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | **Net Loss** | $(26,476,370) | $(21,875,713) | $(19,633,502) | | **Accumulated Deficit (as of Dec 31)** | $(144,742,811) | - | - | - The company has a history of net losses and may not achieve or maintain profitability. It may need to raise additional capital to continue operations[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) - Competition is intense from established companies like Google, Microsoft, Facebook, and Sony, which have greater resources and brand recognition[116](index=116&type=chunk)[117](index=117&type=chunk) - Vuzix relies on third-party suppliers, some of which are sole-source (e.g., Sony, TI, Kopin for micro-displays), creating risks of supply shortages, long lead times, and price increases[186](index=186&type=chunk)[191](index=191&type=chunk) - The company's intellectual property (**71 issued patents**, **79 pending**) may not adequately protect its products, and it faces risks of infringing on the IP of others[144](index=144&type=chunk)[145](index=145&type=chunk) - Intel Corporation, which holds Series A Preferred Stock representing approximately **15% of voting power**, has stated it no longer desires a strategic relationship and may seek an orderly disposition of its stock, which could depress the stock price[205](index=205&type=chunk)[206](index=206&type=chunk) [Unresolved Staff Comments](index=45&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[209](index=209&type=chunk) [Properties](index=45&type=section&id=Item%202.%20Properties) Vuzix's main facility is a leased 39,000 square foot space in West Henrietta, New York, with smaller sales offices in England and Japan - The main facility is a **39,000 sq. ft.** leased space in West Henrietta, NY, with the lease extended to October 3, 2023[210](index=210&type=chunk) - The company rents a **400 sq. ft.** office in Oxford, England and a **577 sq. ft.** office in Tokyo, Japan[211](index=211&type=chunk) [Legal Proceedings](index=45&type=section&id=Item%203.%20Legal%20Proceedings) Vuzix is defending a patent infringement lawsuit while two other legal matters, a defamation suit and a shareholder derivative suit, were resolved in 2019 - A patent infringement lawsuit was filed by Throop, LLC in December 2019. The company denies the claims and intends to defend itself vigorously[212](index=212&type=chunk) - A shareholder derivative suit filed in October 2018 against certain directors and officers was voluntarily discontinued by the plaintiffs in December 2019[215](index=215&type=chunk) - A defamation lawsuit filed by the company against Ricardo Pearson was dismissed in November 2019 due to a lack of personal jurisdiction[214](index=214&type=chunk) [Mine Safety Disclosures](index=47&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[217](index=217&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=47&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Vuzix common stock trades on NASDAQ, with 45 record holders, and the company has never paid common stock dividends, though Series A Preferred Stock receives a 6% annual dividend - The company's common stock is listed on the NASDAQ Capital Market under the symbol "VUZI"[219](index=219&type=chunk) - As of March 16, 2020, there were **45 holders of record** of the common stock[222](index=222&type=chunk) - The company has not paid and does not expect to pay dividends on its common stock. Series A Preferred stock has a **6% annual dividend**[223](index=223&type=chunk)[224](index=224&type=chunk) [Selected Financial Data](index=49&type=section&id=Item%206.%20Selected%20Financial%20Data) The company's selected financial data shows fluctuating revenues and consistent, significant net losses, with total sales decreasing and net loss widening in 2019 Selected Financial Data (In thousands) | (In thousands) | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Sales** | $6,671 | $8,094 | $5,538 | $2,127 | $2,750 | | **Gross Profit (Loss)** | $(4,408) | $1,768 | $(677) | $(1,164) | $566 | | **Loss from Operations** | $(26,566) | $(21,861) | $(19,355) | $(18,536) | $(11,341) | | **Net Loss** | $(26,476) | $(21,876) | $(19,634) | $(19,250) | $(13,427) | | **Total Assets** | $28,446 | $35,134 | $26,833 | $22,345 | $19,563 | | **Total Stockholders' Equity** | $24,240 | $30,457 | $21,380 | $17,722 | $16,093 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=51&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses decreased 2019 revenue due to lower Smart Glasses sales, a significant gross loss from inventory write-downs, and plans to manage costs and raise capital to ensure going concern [Results of Operations (2019 vs. 2018)](index=56&type=section&id=Item%207.%20MD%26A%20-%20Results%20of%20Operations%20%282019%20vs.%202018%29) For fiscal 2019, total sales decreased by 18% to $6.7 million, resulting in a $4.4 million gross loss primarily due to a $4.6 million inventory write-down, and a 22% increase in loss from operations Financial Performance (2019 vs. 2018) | Metric | 2019 | 2018 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total Sales** | $6,670,604 | $8,094,368 | $(1,423,764) | (18)% | | **Gross Profit (Loss)** | $(4,408,121) | $1,768,282 | $(6,176,403) | (349)% | | **Loss from Operations** | $(26,566,242) | $(21,860,794) | $(4,705,448) | 22% | | **Net Loss** | $(26,476,370) | $(21,875,713) | $(4,600,657) | 21% | - Sales of Smart Glasses decreased by **19%** to **$4.8 million** due to price reductions, the M400 launch transition, and fewer large customer orders compared to 2018[254](index=254&type=chunk) - Cost of sales included a **$4,572,659** inventory write-down and obsolescence provision for M300 and M300XL products, which were being replaced by the new M400[258](index=258&type=chunk) - Research and Development (R&D) expenses decreased by **14%** to **$8.9 million**, mainly due to lower external consulting fees for the Blade product, which was in active development in 2018[262](index=262&type=chunk) [Liquidity and Capital Resources](index=64&type=section&id=Item%207.%20MD%26A%20-%20Liquidity%20and%20Capital%20Resources) Vuzix's cash decreased to $10.6 million by year-end 2019, with $22.4 million used in operations, offset by $18.9 million raised from an equity offering, as management outlines plans to ensure going concern - Cash and cash equivalents decreased by **$6.7 million** to **$10.6 million** at year-end 2019[289](index=289&type=chunk) - Net cash used in operating activities was **$22.4 million** for the year ended December 31, 2019[291](index=291&type=chunk) - The company generated **$18.9 million** in net cash from financing activities through a registered direct offering of common stock and warrants in July 2019[294](index=294&type=chunk)[296](index=296&type=chunk) - Management has outlined several plans to manage liquidity and continue as a going concern, including controlling operating costs, promoting new products (M400), and pursuing licensing opportunities[298](index=298&type=chunk)[424](index=424&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=68&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's market risks are primarily related to interest rates on cash investments and foreign currency exchange rates, both considered minimal or not material without hedging - The company is exposed to interest rate risk on its portfolio of marketable debt securities, but intends to hold them to maturity, minimizing the impact[303](index=303&type=chunk) - Foreign currency exchange rate risk exists due to business activities in Asia and the UK, but the company does not currently hedge this exposure and considers the risk not material[304](index=304&type=chunk) [Controls and Procedures](index=68&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2019, with no material changes during the fourth quarter - Management concluded that disclosure controls and procedures were effective as of December 31, 2019[308](index=308&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2019, based on the COSO framework[311](index=311&type=chunk) - No material changes were made to the company's internal control over financial reporting during the fourth quarter of 2019[314](index=314&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Compensation, and Principal Accounting Fees](index=70&type=section&id=Item%2010%2C%2011%2C%2012%2C%2013%2C%2014) Information for Items 10 through 14, covering directors, executive officers, corporate governance, compensation, and accounting fees, is incorporated by reference from the upcoming proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's definitive proxy statement for its 2020 annual meeting of stockholders[318](index=318&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk)[321](index=321&type=chunk)[322](index=322&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=71&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the annual report, including consolidated financial statements, valuation schedules, and an index of exhibits - The report includes an index of financial statements and Schedule II – Valuation and Qualifying Accounts[325](index=325&type=chunk)[326](index=326&type=chunk) - An exhibit index lists all filed documents, including the Certificate of Incorporation, bylaws, material contracts, and Sarbanes-Oxley certifications[327](index=327&type=chunk)[524](index=524&type=chunk) Consolidated Financial Statements [Consolidated Statements of Operations](index=77&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported a net loss of $26.5 million for 2019, an increase from 2018, with total sales decreasing and a significant gross loss due to inventory obsolescence Consolidated Statements of Operations | For Year Ended Dec 31, | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | **Total Sales** | $6,670,604 | $8,094,368 | $5,537,753 | | **Gross Profit (Loss)** | $(4,408,121) | $1,768,282 | $(676,598) | | **Loss from Operations** | $(26,566,242) | $(21,860,794) | $(19,354,546) | | **Net Loss** | $(26,476,370) | $(21,875,713) | $(19,633,502) | | **Basic and Diluted Loss per Share** | $(0.94) | $(0.87) | $(1.02) | [Consolidated Balance Sheets](index=75&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2019, total assets decreased to $28.4 million, primarily due to reduced cash, while total stockholders' equity also declined and the accumulated deficit grew to $144.7 million Consolidated Balance Sheets | As of December 31, | 2019 | 2018 | | :--- | :--- | :--- | | **Cash and Cash Equivalents** | $10,606,091 | $17,263,643 | | **Inventories, Net** | $5,707,867 | $7,281,802 | | **Total Current Assets** | $19,073,508 | $27,383,095 | | **Total Assets** | $28,446,465 | $35,133,640 | | **Total Current Liabilities** | $2,634,657 | $4,676,665 | | **Total Liabilities** | $4,206,022 | $4,676,665 | | **Accumulated Deficit** | $(144,742,811) | $(118,266,441) | | **Total Stockholders' Equity** | $24,240,443 | $30,456,975 | [Consolidated Statements of Cash Flows](index=78&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For 2019, the company used $22.4 million in cash from operations, $3.2 million in investing, and generated $18.9 million from financing, resulting in a $6.7 million net decrease in cash Consolidated Statements of Cash Flows | For Year Ended Dec 31, 2019 | Amount | | :--- | :--- | | **Net Cash Used in Operating Activities** | $(22,355,020) | | **Net Cash Used in Investing Activities** | $(3,157,539) | | **Net Cash from Financing Activities** | $18,855,007 | | **Net Decrease in Cash** | $(6,657,552) | | **Cash at End of Period** | $10,606,091 | [Notes to Consolidated Financial Statements](index=80&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, including the adoption of Topic 842, a $4.6 million inventory write-down, Intel's Series A Preferred Stock, $118 million in NOLs, and management's going concern assessment - **Going Concern (Note 3):** Despite recurring net losses and an accumulated deficit of **$144.7 million**, management has concluded that its plans to manage liquidity and its ability to raise capital alleviate substantial doubt about its ability to continue as a going concern[422](index=422&type=chunk)[427](index=427&type=chunk) - **Inventories (Note 4):** The company recorded a **$4,572,659** write-down and obsolescence provision for its M300 and M300XL Smart Glasses inventory due to the introduction of the newer M400 model[431](index=431&type=chunk) - **Income Taxes (Note 11):** As of December 31, 2019, the company has approximately **$118 million** in US federal net operating loss (NOL) carry-forwards available to offset future taxable income. A full valuation allowance has been recorded against these deferred tax assets[460](index=460&type=chunk) - **Capital Stock (Note 12):** Intel Corporation holds **49,626 shares** of Series A Preferred Stock, convertible into **4,962,600 common shares**, representing significant voting power and carrying a **6% annual dividend**[464](index=464&type=chunk)[468](index=468&type=chunk) - **Leases (Note 15):** The company adopted the new lease accounting standard (ASU 2016-02, Topic 842) on January 1, 2019, resulting in the recognition of a **$2.1 million** Operating Lease Right-of-Use Asset and a corresponding lease liability[499](index=499&type=chunk)[500](index=500&type=chunk)

Vuzix Corporation (NASDAQ:VUZI) Q3 2019 Earnings Conference Call November 7, 2019 4:30 PM ET Company Participants Ed McGregor - Director of Investor Relations Paul Travers - Chief Executive Officer Grant Russell - Chief Financial Officer Conference Call Participants Tyler Burmeister - Craig-Hallum Capital Group Jim Mcilree - Chardan Capital Operator Greetings and welcome to the Vuzix’s Third Quarter 2019 Financial Results and Business Update Conference Call. At this time, all participants are in a listen-on ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Delaware 04-3392453 State or other jurisdiction of incorporation or organization 25 Hendrix Road, Suite A West Henrietta, New York 14586 (Address of principal executive offices) (Zip Code) (I.R.S. Employer Identification No.) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2019 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SE ...

Vuzix Corporation (NASDAQ:VUZI) Q2 2019 Results Conference Call August 8, 2019 8:30 AM ET Company Participants Ed McGregor – Director of Investor Relations Paul Travers – Chief Executive Officer Grant Russell – Chief Financial Officer Conference Call Participants Nehal Chokshi – Maxim Group Christian Schwab – Craig-Hallum Jim McIlree – Chardan Capital Brian Kinstlinger – Alliance Global Partners Operator Greetings and welcome to the Vuzix’s Second Quarter 2019 Financial Results and Business Update Conferenc ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2019 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 25 Hendrix Roa ...