Vuzix(VUZI) - 2022 Q1 - Quarterly Report

Part I – Financial Information This part details the company's unaudited financial performance, condition, and related disclosures for the period Item 1. Consolidated Financial Statements (Unaudited) This section presents the company's unaudited consolidated financial statements, showing a decrease in assets and a widened net loss for the first quarter of 2022, with prior-year restatements Consolidated Balance Sheet Summary | Balance Sheet Data | Amount ($) as of March 31, 2022 | Amount ($) as of December 31, 2021 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $113,329,734 | $120,203,873 | | Total Current Assets | $129,497,433 | $137,150,154 | | Total Assets | $140,350,176 | $148,467,057 | | Total Current Liabilities | $2,940,281 | $4,156,255 | | Total Liabilities | $3,394,346 | $4,739,131 | | Total Stockholders' Equity | $136,955,830 | $143,727,926 | Consolidated Statement of Operations Summary (Three Months Ended March 31) | Income Statement Data | Amount ($) for 2022 | Amount ($) for 2021 (as Restated) | | :--- | :--- | :--- | | Total Sales | $2,503,051 | $3,915,389 | | Gross Profit | $639,354 | $1,079,591 | | Loss From Operations | $(10,413,892) | $(9,085,965) | | Net Loss | $(10,506,001) | $(9,151,370) | | Basic and Diluted Loss per Common Share | $(0.16) | $(0.17) | Consolidated Statement of Cash Flows Summary (Three Months Ended March 31) | Cash Flow Data | Amount ($) for 2022 | Amount ($) for 2021 (as Restated) | | :--- | :--- | :--- | | Net Cash Flows Used in Operating Activities | $(6,435,079) | $(5,921,629) | | Net Cash Flows Used in Investing Activities | $(217,227) | $(650,655) | | Net Cash Flows (Used in) Provided from Financing Activities | $(221,833) | $103,224,872 | | Net (Decrease) Increase in Cash and Cash Equivalents | $(6,874,139) | $96,652,588 | - The company restated its Q1 2021 financial results, which increased the previously reported Net Loss by $2.5 million and Loss per Share by $0.05, primarily due to adjustments in non-cash stock-based compensation expense[16][17] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial performance, highlighting a significant sales decline and widened net loss in Q1 2022, while maintaining a strong liquidity position - The company is engaged in the design, manufacture, and sale of wearable computing devices like Smart Glasses and AR glasses, focusing on enterprise, industrial, commercial, medical, and security markets[61][63] - On March 2, 2022, the Board of Directors approved a share buyback program to repurchase up to $25 million of common stock over one year, with 36,685 shares repurchased at an average price of $6.84 during Q1 2022[89] Results of Operations This section details the company's Q1 2022 operational results, showing a significant decline in sales and gross profit, alongside increased R&D and marketing expenses Sales Breakdown (Three Months Ended March 31) | Sales Component | Amount ($) for 2022 | Amount ($) for 2021 | % Change | | :--- | :--- | :--- | :--- | | Sales of Smart Glasses | $2,379,398 | $3,772,481 | (37)% | | Sales of Engineering Services | $0 | $110,219 | (100)% | | Total Sales | $2,503,051 | $3,915,389 | (36)% | - Gross profit margin for products remained stable at 26% for both Q1 2022 and Q1 2021[70] - R&D expenses increased by 41% ($0.9 million) year-over-year, largely due to a $0.4 million increase in external development expenses for the Next Generation Smart Glasses (Shield)[74] - Selling and marketing expenses rose 55% ($0.7 million) year-over-year, driven by increased salary expenses and a $0.3 million increase in trade show expenses as COVID-19 lockdowns eased[76] - General and administrative expenses decreased 10% ($0.6 million) year-over-year, mainly due to a $0.6 million decrease in non-cash stock-based compensation related to the LTIP, which had significant vesting in Q1 2021[78] Liquidity and Capital Resources This section assesses the company's financial position, highlighting strong liquidity with substantial cash reserves and no debt, supported by equity financing and a new share buyback program Key Liquidity Metrics | Metric | Amount ($) as of March 31, 2022 | Amount ($) as of December 31, 2021 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $113,329,734 | $120,203,873 | | Working Capital | $126,557,114 | $132,993,899 | - Net cash used in operating activities was $6.4 million in Q1 2022, compared to $5.9 million in Q1 2021[84] - The company has no current or long-term debt obligations outstanding as of March 31, 2022[87] - The company's operations are primarily financed through the net proceeds from the sale of its equity securities[90] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to market risks, primarily from interest rate fluctuations on cash investments and foreign currency exchange rates, without current hedging strategies - The company invests excess cash in high-quality short-term corporate debt, exposing it to minor interest rate risk[97] - Foreign currency exchange rate risk exists due to non-U.S. dollar denominated cash flows from operations in Japan and Europe, which the company does not currently hedge[97] Item 4. Controls and Procedures This section reports that disclosure controls and procedures were ineffective due to a material weakness in internal control over financial reporting related to LTIP stock option valuation, with remediation efforts underway - The CEO and CFO concluded that disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting[99] - The material weakness relates to the methodology used to calculate the fair market value of Long-Term Incentive Plan (LTIP) stock options issued in March 2021[100] - Remediation efforts are underway, including enhanced management reviews and processes for engaging technical accounting experts, with full remediation expected in 2022[101] Part II – Other Information This part provides additional disclosures including legal matters, updated risk factors, equity transactions, and other relevant information Item 1. Legal Proceedings The company reports that it is not currently involved in any actual or pending legal proceedings or litigation - As of the report date, the company is not involved in any legal proceedings[103] Item 1A. Risk Factors This section confirms no material changes to previously disclosed risk factors, while highlighting ongoing supply chain challenges due to global events - No material changes have occurred from the risk factors previously disclosed in the 2021 Annual Report on Form 10-K[104] - The company notes that COVID-19 and geo-political actions are causing shortages of certain chips and longer component lead times, increasing supply chain risk and the need for higher inventory levels[105] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports no unregistered equity sales and details the company's share buyback program, including shares repurchased and remaining authorization Purchase of Equity Securities (March 2022) | Period | Total Shares Purchased | Average Price Paid Per Share ($) | Maximum Dollar Value Remaining for Purchase ($) | | :--- | :--- | :--- | :--- | | March 1 - 31, 2022 | 36,685 | $6.84 | $24,748,906 | - The Board of Directors approved a repurchase program for up to $25 million of common stock, effective for one year starting March 2, 2022[106] Item 3. Defaults Upon Senior Securities None - The company reports no defaults upon senior securities[107] Item 4. Mine Safety Disclosure Not Applicable - This section is not applicable to the company[107] Item 5. Other Information None - The company reports no other information[107] Item 6. Exhibits This section lists all exhibits accompanying the filing, including required CEO and CFO certifications and Inline XBRL documents - The report includes required certifications from the CEO and CFO, as well as Inline XBRL data files as exhibits[108]