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What changed in Vuzix Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Vuzix Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+370 added−408 removedSource: 10-K (2024-04-15) vs 10-K (2023-03-01)

Top changes in Vuzix Corp's 2023 10-K

370 paragraphs added · 408 removed · 244 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

112 edited+40 added−27 removed46 unchanged
Biggest changeWe believe the demand for head-worn displays in these markets is being driven by such factors and expectations as: ● the continued growth of mobile computing devices; ● an increasing number of “ready-to-go” hands-free enterprise, commercial and medical applications for which our products are well-suited; ● increasing demand for Internet, and cloud services’ access “anywhere, anytime”; ● the expansion of IoT that enables the exchange of information amongst smart connected devices to improve timeliness and visibility; ● the need for better efficiencies from training and on-boarding to the ROI created by having hands-free mobile computing allowing frontline workers to work more efficiently and accurately; ● the need to solve complex problems remotely ranging from medical technologists and doctors in a surgery to equipment in factories around the world; and ● the growing use of AR/XR applications that will drive the need for head-worn display solutions to replace the need to hold up handheld devices to use the applications.
Biggest changeWe believe the demand for head-worn displays in these markets is being driven by the following: ● the continued growth of mobile computing devices; ● increasing demand for Internet, social media, and cloud services’ access “anywhere, anytime”; ● the expansion of IoT that enables the exchange of information among smart connected devices to improve timeliness and visibility; ● the growing use of AR/XR applications that will drive the need for head-worn display solutions to replace the need to hold up handheld devices to use the applications; 3 ​ Table of Contents ● the exploding use of AI with its potential to change how most people live, work and play.
We believe Vuzix is gaining market awareness and has the opportunity to move up the value chain, increase market share and to create a sustainable higher software subscription margin business by: ● Properly implementing a digital solution strategy that retains more of the customer relationship across a wide range of industries; and ● Improving Vuzix’ participation in more areas of the customer relationship and having less reliance on VARs to deliver the full solution.
We believe Vuzix is gaining market awareness and has the opportunity to move up the value chain, increase market share, and create a sustainable higher software subscription margin business by: ● properly implementing a digital solution strategy that retains more of the customer relationship across a wide range of industries; and ● improving Vuzix’ participation in more areas of the customer relationship and having less reliance on VARs to deliver the full solution.
Further, industry watchers have speculated that companies such as Apple, Google, Snap, and Meta may offer or support AR wearable display products in the future, but to date, no specific product launch details have been officially announced. Today, many of these products are fairly bulky and are typically tethered to an external controller.
Further, industry watchers have speculated that companies such as Google, Snap, and Meta may offer or support AR wearable display products in the future, but to date, no specific product launch details have been officially announced. Today, many of these products are fairly bulky and are typically tethered to an external controller.
Our Smart Glasses are also being used in telemedicine for remote calls made to provide a virtual presence within hospitals and senior care facilities that are video broadcast securely. Further, our Smart Glasses provide virtual training, health care for patients in the ICU and the operating room, and assistance in performing virtual patient rounds.
Our Smart Glasses are also being used in telemedicine for remote calls made to provide a virtual presence within hospitals and senior care facilities that are video broadcast securely. Our Smart Glasses provide virtual training, health care for patients in the ICU and the operating room, and assistance in performing virtual patient rounds.
Our Smart Glasses and AR glasses are designed for all day use cases and are small enough to fit in a user’s pocket or purse. No external cabling or tethering to an external computing device is required to use our current Smart Glasses unlike most competitors today.
Our Smart Glasses and AR glasses are designed for all day use cases and are small enough to fit in a user’s pocket or purse. No external cabling or tethering to an external computing device or battery is required to use our current Smart Glasses, unlike most competitors today.
We have developed thin optics, called waveguides, that are fully see-through and enable miniature display engines to be mounted in the temples of the HMD which allows the form factor of the Smart Glasses to be near comparable to conventional eyeglasses.
We have developed thin optics, called waveguides, that are fully see-through and enable miniature display engines to be mounted in the temples of the HMD which allows the form factor and weight of the Smart Glasses to be near comparable to conventional eyeglasses.
There are also several China-based companies that have been showing monocular smart glasses products, including Lenovo but their sales activities thus far have been somewhat limited and focused primarily on Asia. We expect that we will encounter competition in the future from major consumer electronics companies and suppliers of imaging and information products for defense applications.
There are also several China-based companies that have been showing monocular smart glasses products, including Lenovo but their sales activities thus far have been somewhat limited and focused primarily on Asia. We expect to encounter competition in the future from major consumer electronics companies and suppliers of imaging and information products for defense applications.
We are developing, with partners, new micro LED display technologies that should greatly increase the ability to offer high resolution displays that can overlay AR information and graphics to wearers in nearly any environment. The goal is to have extremely efficient full color micro displays capable of high brightness for use in any conditions.
We are developing, with partners, new microLED display technologies that should greatly increase the ability to offer high resolution displays that can overlay AR information and graphics to wearers in nearly any environment. The goal is to have extremely efficient full color micro displays capable of high brightness for use in any conditions.
Our products provide hands-free virtual large screens that are interactive and fit into eyeglass form factors. AR-based displays are designed to be "see-through" or "see-around" and allow the user to still see and interact with their surroundings. They may contain one (monocular) or two (binocular) displays.
Our products provide hands-free virtual large screens that are interactive and fit into conventional form factors. AR-based displays are designed to be "see-through" or "see-around" and allow the user to still see and interact with their surroundings. They may contain one (monocular) or two (binocular) displays.
In some cases, we procure specific components and either sell them or consign them to our contract manufacturers. Products are either shipped to our customers or shipped to our West Henrietta, New York facility to be inventoried as finished goods. We currently use several manufacturing sources in Asia where we have located some of our tooling.
In some cases, we procure specific components and either sell them or consign them to our contract manufacturers. Products are either shipped to our customers or shipped to our West Henrietta, New York facilities to be inventoried as finished goods. We currently use several manufacturing sources in Asia where we have located some of our tooling.
Manufacturing We purchase product components from our suppliers, engage third-party contract manufacturing firms to perform electronic circuit board and cable assemblies, and now do the final assembly of our products primarily in our West Henrietta, New York facility. We are experienced in the successful production of our products in moderate volumes.
Manufacturing We purchase product components from our suppliers, engage third-party contract manufacturing firms to perform electronic circuit board and cable assemblies, and now do the final assembly of our products primarily in our West Henrietta, New York facilities. We are experienced in the successful production of our products in moderate volumes.
Overall Strategy Our goal is to establish and maintain a leadership position as a worldwide supplier of wearable displays and computers including AR glasses and Smart Glasses solutions, as well as manufacturing related components needed to build such products, to third party OEMs.
Overall Strategy Our goal is to establish and maintain a leadership position as a worldwide supplier of wearable displays and computers including AR smart glasses solutions, as well as manufacturing related components needed to build such products, for third party OEMs and ODMs.
We currently undertake specific marketing activities as needed, including, but not limited to: ● product reviews, case studies and promotions in trade publications; ● case studies and white papers on successful enterprise uses of Smart Glasses and AR; ● product and technology views for our website and social media; ● internet search engine ads and social media advertising and targeted emails; ● public relations; and ● trade shows and event sponsorships.
We currently undertake specific marketing activities as needed, including, but not limited to: ● product reviews, case studies and promotions in trade publications; ● case studies and white papers on successful enterprise uses of Smart Glasses and AR; ● product and technology views for our website and social media; 13 ​ Table of Contents ● internet search engine ads and social media advertising and targeted emails; ● public relations; and ● trade shows and event sponsorships.
Our Smart Glasses are being used in operating rooms to enable MedTech experts, assisting surgeons, medical student training, patient care, and other healthcare professionals to see and communicate with surgeons in real-time. This unique solution empowers surgeons, medical device specialists, and other experts to work together remotely without incurring costly expenses to commute on-sight for consultations and surgeries.
Our Smart Glasses are currently being used in operating rooms to enable MedTech experts, assisting surgeons, medical student training, patient care, and other healthcare professionals to see and communicate with surgeons in real-time. This unique solution empowers surgeons, medical device specialists, and other experts to work together remotely without incurring costly expenses to commute on-site for consultations and surgeries.
The ability to deliver video feeds and real-time facial recognition and weapons detection alerts in a covert fashion to our smart glasses wearers literally provides security personnel and first responders with eyes in the back of their heads, allowing them to view and interact with their immediate surroundings while also staying remotely connected and informed.
The ability to deliver video feeds and real-time facial recognition and weapons 4 ​ Table of Contents detection alerts in a covert fashion to our smart glasses wearers literally provides security personnel and first responders with eyes in the back of their heads, allowing them to view and interact with their immediate surroundings while also staying remotely connected and informed.
Forte was originally owned and controlled by Kopin Corporation, one of our prior micro-display suppliers. Most of the technologies developed by Forte are now owned and used by us. Reference in this report to “Vuzix”, the “Company”, “we,” “us,” “our” and similar words refer to Vuzix Corporation and its wholly-owned subsidiary.
Forte was originally owned and controlled by Kopin Corporation, one of our prior micro-display suppliers. Most of the technologies developed by Forte are now owned and used by us. Reference in this report to “Vuzix”, the “Company”, “we,” “us,” “our” and similar words refer to Vuzix Corporation and its wholly-owned subsidiary. 15 ​ Table of Contents
We continue to foster the development of an ecosystem of third-party developers to offer applications and trials for their smart glasses apps, many of which will be sold on an industry common revenue share model, with the publisher receiving approximately 70% of the subscriptions collected.
We continue to foster the development of an ecosystem of third-party developers to offer applications and trials for their smart glasses apps, many of which will be sold on an industry common revenue share 7 ​ Table of Contents model, with the publisher receiving approximately 70% of the subscriptions collected.
Our primary development efforts are focused on waveguide optics (and their manufacture), projection engines, new micro LED-display technologies, low-power electronic designs, firmware and wearable computing software, and the design and ergonomics of wearable displays. Our display product development efforts are focused towards continually enhancing the resolution, performance and manufacturability of our display products.
Our primary development efforts are focused on waveguide optics (and their manufacture), projection engines, new microLED-display technologies, low-power electronic designs, firmware and wearable computing software, and the design and ergonomics of wearable displays. Our display product development efforts are focused towards continually enhancing the resolution, performance and manufacturability of our display products.
We also have a portfolio of trade secrets and expertise in nano-imprinting using high stability mold substrates, nano structure embossing, and engineering tool-sets for the design and manufacturing of diffractive waveguide optics. We believe that display engines are also important for commercializing wearable displays.
We also have a portfolio of trade secrets and expertise in nano-imprinting using high- stability mold substrates, nano structure embossing, and engineering toolsets for the design and manufacturing of diffractive waveguide optics. We believe that display engines are also important for commercializing wearable displays.
These agreements provided for an exclusive license by the Company of key micro LED technology and for the custom design of a backplane, for cash commitments totaling $30 million along with equity issuance commitments to be made by the Company relating to certain deliverables and the achievement of performance milestones by Atomistic.
These agreements provided for an exclusive license by the Company of key microLED technology and for the custom design of a backplane, for cash commitments totaling $30 million along with equity issuance commitments to be made by the Company relating to certain deliverables and the achievement of performance milestones by Atomistic.
On December 16, 2022, the Company signed new agreements with Atomistic (the “Atomistic Agreements”) that superseded the prior May 12, 2022 agreements, whereby the scope for the construction of a backplane was modified and the Company obtained an additional license in an alternative self-emissive micro LED technology.
On December 16, 2022, the Company signed new agreements with Atomistic (the “Atomistic Agreements”) that superseded the prior May 12, 2022 agreements, whereby the scope for the construction of a backplane was modified and the Company obtained an additional license in an alternative self-emissive microLED technology.
There is competition in all types of products we manufacture, from both large and small companies. The principal points of competition for these products include, among other factors: price, product performance, the availability of supporting applications, and the experience and brand name of the particular company and history of its dealings in such products.
There is competition in all types of products we manufacture, from both large and small companies. The principal points of competition for these products include price, product performance, the availability of supporting applications, and the experience and brand name of the particular company and history of its dealings in such products.
We evaluate contract manufacturers and component suppliers on an ongoing basis, including whether or not to utilize new or alternative contract manufacturers or component suppliers. However, we also expect to manufacture all of our 13 ​ Table of Contents waveguide optics only at our West Henrietta, New York facility.
We evaluate contract manufacturers and component suppliers on an ongoing basis, including whether or not to utilize new or alternative contract manufacturers or component suppliers. However, we also expect to manufacture all of our waveguide optics only at our West Henrietta, New York facility.
In addition, in connection with the sale of our defense division in 2012, we received a worldwide, royalty-free, assignable grant-back license to all the patents and other intellectual property sold for use in the manufacture and sale of products in the consumer markets. In addition to our various patents, we have 7 registered U.S. trademarks and 79 trademark registrations worldwide.
In addition, in connection with the sale of our defense division in 2012, we received a worldwide, royalty-free, assignable grant-back license to all the patents and other intellectual property sold for use in the manufacture and sale of products in the consumer markets. In addition to our various patents, we have 8 registered U.S. trademarks and 81 trademark registrations worldwide.
Any such request must be made in writing to us, c/o Investor Relations, Vuzix Corporation, 25 Hendrix Road, West Henrietta, NY, 14586. ​ 14 ​ Table of Contents Information about Geographic Revenue Information about geographic revenue is described in Note 19, “Geographic and Other Financial Information” in the notes to our consolidated financial statements.
Any such request must be made in writing to us, c/o Investor Relations, Vuzix Corporation, 25 Hendrix Road, West Henrietta, NY, 14586. ​ Information about Geographic Revenue Information about geographic revenue is described in Note 19, “Geographic and Other Financial Information” in the notes to our consolidated financial statements.
Our Smart Glasses are being used for numerous applications including: remote service video support, wearable computer displays, viewing of wireless sensor data, quality assurance, hands-free access to work instructions such as assembly checklists and manuals, in-the-field maintenance, warehouse pick-and-pack, real-time viewing of remote images, and training and education.
Our target markets and applications by sector are: Enterprise Our Smart Glasses are being used for numerous applications including: remote service video support, wearable computer displays, viewing of wireless sensor data, quality assurance, hands-free access to work instructions such as assembly checklists and manuals, in-the-field maintenance, warehouse pick-and-pack, real-time viewing of remote images, and training and education.
There are many reasons why enterprise users are adopting Smart Glasses, such as for: • Increasing productivity; • Eliminating travel costs; • Improving worker safety; • Lowering carbon footprint; • Reducing worker errors; and • Protecting worker health Medical The healthcare industry continues to be an early adopter of Smart Glasses to deliver a variety of benefits in and outside of the operating room.
There are many reasons why enterprise users are adopting Smart Glasses, such as for: • increasing productivity; • eliminating travel costs; • improving worker safety; • lowering carbon footprint; • augmenting worker intelligence; • remote mentoring and training; • reducing worker errors; and • protecting worker health Medical The healthcare industry continues to be an early adopter of Smart Glasses to deliver a variety of benefits in and outside of the operating room.
We have developed a proprietary micro digital light processing (DLP) based engine and micro LED engines designed specifically for our waveguide optics solutions. We are currently working with multiple partners in the micro LED arena and unveiled our first micro LED display-based binocular AR Smart Glasses called the Shield as well as the Vuzix Ultralite at CES 2023.
We have developed a proprietary micro digital light processing (DLP) based engine and are working on microLED engines designed specifically for our waveguide optics solutions. We are currently working with multiple partners in the microLED arena and unveiled our first microLED display-based binocular AR Smart Glasses called the Shield as well as the Vuzix Ultralite at CES 2022.
Our wearable display products integrate micro-display technology with our advanced optics to produce compact high-resolution display engines, less than half an inch diagonally, which when viewed through our Smart Glasses and AR glasses create virtual images that appear comparable in size to that of a computer monitor or a large-screen television.
Our wearable display products integrate display technology with our advanced optics to produce compact high-resolution display engines, less than half an inch diagonally, which when viewed through our Smart Glasses products, create virtual images that appear comparable in size to that of a computer monitor, smartphone, tablet or a large-screen television.
We believe head-worn displays that are hands-free can connect the digital world to the real world and have the ability to change the future of the computing industry. Current mobile display technology is almost universally based upon direct view screens. These displays are designed to be handheld and small to make portability easy.
We believe head-worn displays that are hands-free that can delivery real-time digital content have the ability to change the future of the computing industry. Current mobile display technology is almost universally based upon direct view screens. These displays are designed to be handheld and small to make portability easy.
In 2022, we began investing in our own next generation micro-LED display technology with Atomistic SAS, a new entity based in France with whom we are engaged as a partner.
In 2022, we began investing in our own next generation microLED display technology with Atomistic SAS, a new entity based in France with whom we are engaged as a partner.
We also believe that our waveguide optics give us a substantial advantage over competitors’ optics, including other waveguides, because our solution allows us to produce optics that are fully transparent when off while also delivering the high brightness required for AR and enterprise Smart Glasses applications.
We also believe that our waveguide optics give us a substantial advantage over competitors’ optics, including other waveguides, because our solution allows us to produce optics that are fully transparent when powered off or on while also delivering high brightness levels required for AR and enterprise Smart Glasses applications.
Our business strategy is to commercialize our waveguide and display engine technologies and products to permit select ODMs and OEMs to integrate and embed our technologies and products in a way that best matches their unique capabilities and timeline for bringing their products to market.
Our business strategy is to commercialize our waveguide and display 8 ​ Table of Contents engine technologies and products to permit select ODMs and OEMs to integrate and embed our technologies and products in a way that best matches their unique capabilities and timeline for bringing their products to market.
On May 12, 2022, the Company signed a series of agreements with Atomistic SAS, a French company that is developing new micro LED displays and a related backplane.
On May 12, 2022, the Company signed a series of agreements with Atomistic SAS, a French company that is developing new microLED displays and a related backplane.
We believe that interactive AR content, Artificial Intelligence (“AI”), Edge Computing, internet of things (IoT), and speech-based cloud services will significantly further change the way such mobile computing devices are used and how content is delivered to the user, including the enabling of new experiences that cannot be experienced in any other way.
We believe that interactive AR content, Artificial Intelligence (“AI”), Edge Computing, internet of things (“IoT”), and speech-based cloud services will significantly further change the way such mobile computing devices are used and how content is delivered to the user though head worn displays, including the enabling of new experiences that cannot be experienced in any other way.
Marketing Our marketing and sales group, in conjunction with external firms, is responsible for product management, planning, advertising, marketing communications, and public relations. We have both internal and external public 12 ​ Table of Contents relations efforts in the U.S. and UK.
Marketing Our marketing and sales group, in conjunction with external firms, is responsible for product management, planning, advertising, marketing communications, and public relations. We have both internal and external public relations efforts in the U.S. and UK.
We have developed technology for waveguide design and production, including: tool design and creation, custom designed software for grating structures and layout, lithography processes, high index low shrinkage polymers and other materials, mold treatments, automation equipment and test/QA processes and procedures, to name a few. 9 ​ Table of Contents Custom Display Engines: We have patents and patents-pending on intellectual property around micro DLP display engines.
We have developed technology for waveguide design and production, including: tool design and creation, custom designed software for grating structures and layout, lithography processes, high index low shrinkage polymers and other materials, mold treatments, automation equipment and test/QA processes and procedures, to name a few. Custom Display Engines: We have patents and patents-pending on intellectual property around microDLP display engines.
Today’s near-eye or HMD products for AR, MR, XR and Virtual Reality are typically large goggles which are bulky and as a result, they have limited mass-market appeal.
Today’s near-eye or HMD products for AR, MR, XR and Virtual Reality are typically large goggles which are bulky and heavy and, as a result, have limited broad market appeal.
Moviynt, a boutique-specialized software firm which was founded in 2018 by three principals, has developed a logistics mobility software platform (Mobilium®) which eliminates traditional middleware, and is device agnostic. Mobilium can ultimately support multiple ERP systems and modern-day warehouse picking with wearable devices such as Vuzix’ smart glasses, handheld devices such as scanners, and even mobile phone-based systems.
Moviynt, a boutique-specialized software firm, has developed a logistics mobility software platform (Mobilium®) which eliminates traditional middleware, and is device agnostic. Mobilium can ultimately support multiple ERP systems and modern-day warehouse picking with wearable devices such as Vuzix’ smart glasses, handheld devices such as scanners, and even mobile phone-based systems.
Another potential channel to these markets that we are in the early stages of developing include the sale of components to Original Equipment Manufacturers (“OEMs”) where we intend to supply mass production of our waveguide optics and display engines to select third parties to use in their products or provide a white-labeled AR Smart Glasses reference design that select third parties can customize and sell as a branded product.
Another potential channel to these markets that we are in the early stages of developing includes the sale of components to OEMs and ODMs where we intend to supply mass production of our waveguide optics and display engines to select third parties to use in their products or provide a white-labeled AR Smart Glasses reference design that select third parties can customize and sell as a branded product.
These next generation waveguides and Micro LED display engines have allowed us to shrink the entire assembly to fit in the space available in a typical off-the-shelf pair of sports sunglasses in the case of the Shield and reading glasses in the case of the Ultralite.
These next generation waveguides and microLED display engines have allowed us to shrink the entire assembly to fit in the space available in a typical off-the-shelf pair of sports sunglasses with the Shield and in reading glasses in with the Ultralite.
The Vuzix Shield Smart Glasses offer all the computing power and performance of our M400 series platform and its related enhanced AR capabilities coupled with Vuzix' proprietary waveguide optics driven by miniature micro LED stereo displays to provide a completely non-occluded see-through heads-up display.
The Vuzix Shield Smart Glasses offer a computing platform with more power and performance over our M400 series platform and its related enhanced AR capabilities coupled with Vuzix' proprietary waveguide optics driven by miniature microLED stereo displays to provide a completely non-occluded see-through heads-up display.
Consumer We believe that the most significant driver of longer-term wearable display market adoption that will change the future of computing and will result in broad adoption of AR smart glasses in smaller wearable packages will be the augmentation of the real world with cloud-based information.
Consumer We believe that one of the most significant drivers of longer-term wearable display market adoption that will change the future of computing and result in broad adoption of AR in smaller wearable packages will be the augmentation of the real world with cloud-based information and AI.
Competitors to our waveguide products include Lumus, WaveOptics (acquired by Snap), Digilens, 11 ​ Table of Contents Dispelix, Optinvent and several others. In addition, several new waveguide manufacturers from China have begun demonstrating their solutions at recent trade shows.
Competitors to our waveguide products include or have included Lumus, WaveOptics (acquired by Snap), Digilens, Dispelix, Optinvent and several others. In addition, several new waveguide manufacturers from China have begun demonstrating their solutions at recent trade shows.
Our business for the last five years has primarily focused on enterprise, industrial and medical markets.
Our business for the last several years has primarily focused on the enterprise, industrial, medical, and defense markets.
Most mobile workers need the use of their hands while working and having ready access to the information required while being hands-free can significantly improve their work performance, enhance safety, and reduce errors.
Most mobile workers need the use of their hands while working, and gaining hands-free access to information can significantly improve work performance, enhance safety, and reduce errors.
We believe there are significant business opportunities in having the Vuzix smart glasses offering a traditional eyeglass unique form factor that can assist law enforcement and security personnel in keeping people safe or identifying suspicious persons or those associated with unlawful activities.
We believe there are significant business opportunities in offering our technology in a traditional eyeglass unique form factor that can assist law enforcement and security personnel in keeping people safe or identifying suspicious persons or those associated with unlawful activities.
These Smart Glasses products run native Android applications within the glasses that, for example, allow them to stream video in real-time, scan bar codes, share visuals that are related to the work at hand and much more, all of 3 ​ Table of Contents which are highly useful for many enterprise applications.
Our products can typically run native Android applications within the glasses that, for example, allow them to stream video in real-time, scan bar codes, share visuals related to the work at hand and much more, all of which are highly useful for many enterprise applications.
Our technologies relate to advanced optics systems including passive and active see-through imaging waveguides, micro- 8 ​ Table of Contents projection display engines, investments in micro LED displays, and specialized software drivers and applications for wearable displays and computers.
Our technologies relate to advanced optics systems including passive and active see-through imaging waveguides, micro-projection display engines, investments in microLED displays, and specialized software drivers and applications for wearable displays and computers.
The Vuzix third-party developer community is able to leverage the open Android platform of the Vuzix M-Series and the Vuzix Blade to bring new and creative ideas to life. 7 ​ Table of Contents Waveguide Optics, Display Engines and Design Reference Kits We selectively offer waveguide optics and related coupling optics combined with our compact proprietary display engine to form a see-through display module.
The Vuzix third-party developer community is able to leverage the open Android platform of the Vuzix M-Series and the Vuzix Blade to bring new and creative ideas to life. OEM Services and Products Waveguide Optics and Display Engines We selectively offer waveguide optics and related coupling optics combined with our compact proprietary display engine to form a see-through display module.
We are addressing most of these markets by developing and selling our own finished products and building a growing eco-system of software and services internally and with our value-added resellers (VARs), distributors, software developers and end customers.
We are addressing most of these current markets by developing and selling our own finished products and building a growing eco-system of software and services internally, including with our Moviynt SAP logistics group and with our value-added resellers (VARs), distributors, system integrators, software developers and end customers.
We sell limited numbers of our waveguide optic design reference kits to select qualified potential OEMs/ODMs, which include a projector, waveguide optics and associated electronics, to help these customers evaluate our technologies and to assist their efforts to build and test new products incorporating our proprietary solutions.
We sell limited numbers of our waveguide optic design reference kits to select qualified potential OEMs/ODMs, which include a projector, waveguide optics and associated electronics, to help these customers evaluate our technologies and to assist their efforts to build and test new products incorporating our proprietary solutions. Waveguides require a display engine built for the purpose of the intended design.
We believe that our waveguide optics and display engines offer a number of significant advantages over other wearable display solutions, including higher contrast, greater power efficiency, less weight, more compact size, and high brightness images for use outdoors.
We believe that our waveguide optics and display engines offer numerous advantages over other wearable display solutions, including higher contrast, greater power efficiency, less weight, compact size and industrial design, and high brightness images for use outdoors.
Sales and Marketing Sales Our strategy is to sell our products and components both directly and through distributors and value-added resellers (VARs – also referred to as Vuzix Integration Partners or VIPs), and on a select basis to OEMs. As a result, we have distinct strategies for the sales of our products.
Sales and Marketing Sales Our strategy is to sell our products and components both directly and through distributors and value-added resellers (VARs – also referred to as Vuzix Integration Partners or VIPs), and on a select basis to OEMs.
Available Information We make available free of charge through our website, www.vuzix.com, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and our proxy statements and other reports that we file or furnish with the SEC as soon as reasonably practicable after they are filed or furnished, as well as certain of our corporate governance policies, including the charters for the Board of Directors’ audit, compensation and nominating and corporate governance committees and our code of ethics, corporate governance guidelines and whistleblower policy.
In addition, we believe our compensation structure aligns with our stockholders’ long-term interests and reflects the Company’s commitment to pay for performance. ​ Available Information We make available free of charge through our website, www.vuzix.com, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and our proxy statements and other reports that we file or furnish with the SEC as soon as reasonably practicable after they are filed or furnished, as well as certain of our corporate governance policies, including the charters for the Board of Directors’ audit, compensation, nominating, and acquisition committees and our code of ethics, corporate governance guidelines and whistleblower policy.
We strive to be an innovator in designing wearable display devices that can enable hands-free enterprise productivity applications, see-what-I see remote viewing and AR applications. We seek to generate top and bottom-line revenue growth through the continued introduction of new AR Smart Glasses, waveguides and display engines, and, to a lesser degree, software applications and solutions.
We strive to be an innovator in designing ubiquitous wearable display devices and computers that can enable hands-free enterprise productivity applications, see-what-I see remote viewing, and AI and AR applications. We seek to generate top-line revenue and bottom-line profitability growth through the continued introduction of market leading technologies, including AR Smart Glasses, waveguides and display engines, software applications and solutions.
The Blade also has connector applications, with annual subscriptions, that allow the glasses to join the most popular video conferencing applications including Microsoft Teams, Zoom, Blue Jeans, WebEx Teams and others. We believe the Blade Smart Glasses is the first natural step to replacing the smart phone with a ubiquitous wearable device for all.
The Blade also has connector applications, with annual subscriptions, that allow the glasses to join the most popular video conferencing applications. We believe the Blade Smart Glasses is the first natural step to replacing the smart phone with a ubiquitous wearable device for all.
To broaden our position as a leading provider of wearable display products for AR and hands-free computing, as well as waveguides and display engines for OEMs, we seek to: ● develop innovative products based on our unique technology for both specialized and large enterprise and medical markets, as well as for defense and security; ● develop a suite of software applications that can take advantage of our products, offering these solutions bundled with our hardware and through our “app store”; ● promote and enhance the development of third-party software that can take advantage of our products, including offering apps and software through our own “app store”; ● sell our products or license our technology to third-party companies that would incorporate and sell them as a new product with their own brand name (OEM partners); ● sell our waveguide products to OEMs as a standard product or on a custom order basis to meet their design requirements; ● develop new micro-display engine products utilizing third-party displays and ultimately our own micro LED displays to sell to third-party OEMs ● build or acquire our own internal capabilities to deliver SaaS-based solutions directly to our customers; ● extend our innovative and proprietary technology leadership; ● enhance and protect our intellectual property portfolio; ● broaden and develop strategic relationships and partnerships; ● establish multiple revenue sources; ● improve brand recognition; ● provide excellent products and service; and ● attract and retain highly qualified personnel.
To broaden our position as a leading provider of wearable display products for AR and hands-free computing, as well as waveguides and display engines for OEMs and ODMs, we seek to: ● develop innovative products based on our unique technology for both specialized and large enterprise and medical markets, as well as for defense and security; ● develop a select suite of software applications that can take advantage of our products, offering these solutions bundled with our hardware and through our “app store”; ● promote and enhance the development of third-party software that can take advantage of our products, including offering apps and software through our own “app store”; ● sell our products or license our technology to third-party companies that would incorporate and sell them as a new product with their own brand name (OEM partners); 2 ​ Table of Contents ● sell our waveguide products to OEMs and ODMs as a standard product or on a custom order basis to meet their design requirements; ● optimize waveguide manufacturing efficiencies while protecting proprietary processes; ● invest in new microLED display technologies; ● develop OEM and mass production partnerships in the AR Smart Glasses market; ● develop new microdisplay engine products utilizing third-party displays and ultimately our own microLED displays to sell to third-party OEMs ● extend our innovative and proprietary technology leadership; ● enhance and protect our intellectual property portfolio; ● broaden and develop strategic relationships and partnerships; ● leverage third-party technology and marketing strategic relationships; ● establish multiple revenue sources; ● improve brand recognition; ● provide excellent products and service; and ● attract and retain highly qualified personnel.
In September 2022, we introduced the Blade 2, an upgraded replacement version, which added a host of advanced features and performance, including stereo audio, improved CPU performance, Android 11 OS and an autofocus camera, all to help meet the needs of connected workers.
The Blade 2 added a host of advanced features and performance, including stereo audio, improved CPU performance, Android 11 OS and an autofocus camera, all to help meet the needs of connected workers.
Many of these applications are similar to what is available to the customer with modern smart phones. These standard applications are designed to be simple to get started and easy-to-use, and we believe can immediately provide the fundamental benefits of Smart Glasses to novice and expert users alike.
These standard applications are designed to be simple to get started and easy-to-use, and we believe can immediately provide the fundamental benefits of Smart Glasses to novice and expert users alike.
The advent of AI programs such as OpenAI and ChatGPT are expected to, if anything, create awareness that could significantly accelerate this demand in the upcoming years. We believe that the keys to the consumer AR market are fashion forward light weight smart glasses that have the ability to support the user’s prescription.
The advent of AI programs such as OpenAI and ChatGPT are expected to significantly accelerate this demand in the upcoming years. We believe that the keys to the consumer AR market are fashion-forward lightweight smart glasses that can support the user’s prescription.
Our products tend to have two to three-year life cycles. We have assembled a group of highly skilled engineers who work internally as well as with external consultants to continue our product development efforts.
Our products tend to have life cycles that span less than five years. We have assembled a group of highly skilled engineers who work internally as well as with external consultants to continue our product development efforts.
Competition – AR Glasses In the AR markets, there are currently few competitors with most of this market currently aimed at the high-end and research markets. Companies that have offered or are offering products or intend to do so in this area include Microsoft Corporation, Sony Corporation, Epson, Lenovo, Magic Leap, Nreal and CastAR.
Competition – AR Glasses In the AR markets, there are currently few competitors with most of this market currently aimed at the high-end and research markets. Companies with products in this area include Microsoft Corporation, Sony Corporation, Epson, Lenovo, Magic Leap, Xreal, CastAR, and Apple.
The 5 ​ Table of Contents intuitive and feature-packed Vuzix Blade OS allows the user to simply and intuitively navigate via simple swipes and taps, or leverage voice controls and external AI systems, allowing users to leave their phones in their pockets for most functions and adds the ability to connect the information being presented to the real world, including that from cloud-based speech AI platforms such as Amazon Alexa.
The intuitive and feature-packed Vuzix Blade OS can leverage voice controls and external AI systems, allowing users to leave their phones in their pockets for most functions and adds the ability to connect the information being presented to the real world, including from cloud-based speech AI platforms such as Amazon Alexa.
We believe that our waveguide and display engine technologies address the critical performance parameters for next generation AR products, including higher brightness, sharper resolution, true see-through capabilities, compact size, lower power consumption and longer life. ​ Products We produce and sell AR Smart Glasses for a variety of applications.
OEM Waveguide Optics and Display Engines We believe our waveguide and display engine technologies address the critical performance parameters for next generation AR products, including higher brightness, sharper resolution, true see-through capabilities, compact size, lower power consumption, and longer operational life.
To protect our technologies, we have developed a patent portfolio which currently consists of 148 issued U.S. and foreign patents and 130 pending U.S. and foreign patent applications. We are also currently preparing several invention disclosures for the purposes of submitting design and utility patent applications. Our U.S. and foreign patents expire on various dates to January 24, 2040.
To protect our technologies, we have developed a patent portfolio which currently consists of 194 issued U.S. and foreign patents and 178 pending U.S. and foreign patent applications. We are also currently evaluating several invention disclosures for the purposes of submitting design and utility patent applications.
Many are being sold as AR Smart Glasses and are currently targeted at enterprise and academic researchers. The most complete and functional systems today are the Microsoft Hololens II and the Magic Leap Two, both of which cost $2,295 - $3,500 per unit. And Magic Leap 2 for Enterprise starts at $4,999 and higher based upon features purchased.
The most complete and functional systems today are the Microsoft Hololens II and the Magic Leap Two, both of which cost $2,295-$3,500 per unit. Magic Leap 2 for Enterprise starts at $4,999 and goes higher based on features purchased.
This capability will allow smart phone users to be able to keep their phones in their pocket and at the same time still receive location-aware content overlaid with their real-world view. These glasses are expected to be ideal for consumer needs such as language translation, closed captioning, messaging, directions, health reporting, and workout status, amongst many other things.
This capability will allow smart phone users to be able to keep their phones in their pockets yet still receive location-aware content overlaid with their real-world view. Glasses equipped with AI capabilities are ideal for consumer needs such as language translation, closed captioning, messaging, directions, health reporting, and workout status, among others.
We believe that our compact display engine technologies coupled with our waveguides are a key differentiator for enabling next generation AR and Smart Glasses hardware for the enterprise and many other market segments because they will ultimately allow us to make HMDs nearly indistinguishable from regular fashion forward eyeglasses.
We believe that our compact display engine technologies coupled with our waveguides are a key differentiator for enabling next generation AR and Smart Glasses hardware because they will ultimately allow us to make HMDs nearly indistinguishable from everyday eyeglasses. We believe that key growth areas for us currently are the enterprise, medical, defense, and security and the broader consumer markets.
We have also developed “connector” applications to enable third party applications like Zoom, Cisco WebEx, Microsoft Teams, BlueJeans and others, for use with our smart glasses. In some cases these applications will be free to the user and in others we will charge annual fees.
We are offering the VRA app on a monthly or one-year subscription basis. We have also developed “connector” applications to enable third party applications like Zoom and Microsoft Teams and others, for use with our smart glasses. In some cases these applications will be free to the user and in others we will charge annual subscription fees.
Vuzix Shield™ Smart Glasses We introduced the Vuzix Shield Smart Glasses, which we believe is a revolutionary leap for enterprise AR smart glasses, as our first binocular AR system utilizing micro LED displays at CES January 2022.
Vuzix Shield™ Smart Glasses We announced the Vuzix Shield Smart Glasses in 2022, which we believe is a revolutionary leap for enterprise AR smart glasses, as our first binocular AR system utilizing microLED.
This allows us to again pursue, on an unrestricted basis, opportunities related to the Company’s smart glasses and waveguide optics technologies into these expanded market opportunities related to first responders, US Department of Defense, Security Organizations and the Military. Product Development We believe that the continued introduction of new products in our target markets is essential to our growth.
This allows us to again pursue, on an unrestricted basis, opportunities related to the Company’s smart glasses and waveguide optics technologies into these expanded market opportunities related to first responders, US Department of Defense, security organizations and the Military. Technology We believe that it is important to make substantial investments in research and development to maintain our competitive advantage.
We have developed our own intellectual property portfolio that includes not only patents, but also over 25 years of manufacturing know-how, software, proprietary processes, materials, and equipment to create high performance waveguides, and near-eye display products. Our in-house waveguide manufacturing processes and equipment has the ability to produce in volume and at broad market price points.
We have developed our own intellectual property portfolio that includes not only patents, but also over 25 years of wearable HMD products experience, including manufacturing know-how, industrial design, mechanical design, software, proprietary processes, materials, and equipment to create high performance waveguides, and near-eye display products.
The Market The mobile phone has evolved into a ubiquitous, location-aware, and powerful smart mobile computing device. Mobile technology has redefined the way people interact with their world, both at work and play, and it has become an essential technology for most individuals around the globe.
Mobile technology has redefined the way people interact with their world, both at work and play, and has become an essential technology for most individuals around the globe.
As a result, we believe that our near-eye display technologies can significantly increase user satisfaction and allow for widespread AR adoption and applications. Target Markets We offer smart wearable display and computing products that enable the development and deployment of AR applications.
As a result, we believe that our near-eye display technologies can significantly increase user satisfaction and allow for widespread AR and AI adoption and applications.
These devices typically include a built-in computer, cameras, and sensors that enable the user to view, record and interact with video and digital content, such as computer data, the Internet, enterprise data, social media or entertainment applications effectively connecting the metaverse to the real world.
These devices typically include cameras, sensors, and a computer that enable the user to view, record and interact with video and digital content, such as computer data, the internet, social media or entertainment applications as well as interact and receive information from cloud-based Artificial Intelligence agents.
We also currently serve other APAC customers through North American West Coast and Tokyo sales offices. For customer support for the EMEA, we have contracted with a third-party end-user technical support firm that provides sixteen (16) hours of customer and technical support daily.
For customer support for the EMEA, we have contracted with a third-party end-user technical support firm that provides sixteen (16) hours of customer and technical support daily.
Security and First Responders Our Smart Glasses, particularly the versions that have a sunglass look, have the potential to become disruptive and market changing products for security providers and first responders such as police and firefighters.
Further, our Smart Glasses are being used in orthopedic surgeries as a fundamental tool to help align and install implant replacements. Security and First Responders Our Smart Glasses, particularly the versions that have a sunglasses look, have the potential to become disruptive and market changing products for security providers and first responders such as police and firefighters.
Some are using external view cameras to simulate an AR environment where the wearer can see the outside world in effectively a pair of VR goggles with limited success thus far. The Meta Quest Pro announced in fall of 2022 is an example of this and it retails for $1,500.
Some VR goggles are using external view cameras to simulate an AR environment where the wearer can see the outside world. The Meta Quest Pro announced in the Fall of 2022 is an example of this and it retails for $1,500. Many such devices are being sold as AR Smart Glasses and are currently targeted at enterprise and academic researchers.
Integrated head tracking, camera, touchpad, buttons and speech recognition gives versatility to navigate and use these M-series Smart Glasses in almost any environment. These products include pre-installed apps that can be used to record and play-back still pictures and broadcast quality video, track timed events, manage a user’s calendar, link to a phone, scan barcodes and much more.
These products include pre-installed apps that can be used to record and play-back still pictures and broadcast quality video, track timed events, manage a user’s calendar, link to a phone, scan barcodes and much more.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we fail to achieve or maintain profitability on a quarterly or annual basis within the timeframe expected by investors, the market price of our common stock may decline. 15 ​ Table of Contents We operate in a highly competitive market and the size, resources and brand name of some of our competitors may allow them to compete more effectively than we can, which could result in a loss of our market share and a decrease in our revenue and profitability.
Biggest changeThe size, resources and brand name of some of our competitors may allow them to compete more effectively than we can, which could result in a loss of our market share and a decrease in our revenue and profitability. The market for head-worn display devices, including AR and Smart Glasses, is highly competitive.
We depend on third parties to provide integrated circuit chip sets and other critical components for use in our products. We do not manufacture the integrated circuit chip sets, microprocessors, wireless chips, optics, micro-displays, backlights, projection engines, printed circuit boards or other electronic components which are used in our products.
We depend on third parties to provide integrated circuit chip sets, micro-displays and other critical components for use in our products. We do not manufacture the integrated circuit chip sets, microprocessors, wireless chips, optics, micro-displays, backlights, projection engines, printed circuit boards or other electronic components which are used in our products.
Given our capital plans, needs and expectations, we may issue additional shares of common stock or securities convertible or exercisable for shares of common stock, including convertible preferred stock, convertible notes, stock options or warrants. The issuance of additional securities in the future will dilute the percentage ownership of the then existing stockholders.
Given our capital plans, needs and expectations, we may issue additional shares of common stock, preferred stock or securities convertible or exercisable for shares of common stock, including convertible preferred stock, convertible notes, stock options or warrants. The issuance of additional securities in the future will dilute the percentage ownership of the then existing stockholders.
We are also subject to various environmental laws and governmental regulations related to toxic, volatile, and other hazardous chemicals used in the third-party components incorporated into our products, including the Restriction of Certain Hazardous Substances Directive, or RoHS and the EU Waste Electrical and Electronic Equipment Directive, or the WEEE Directive, as well as the implementing legislation of the EU member states, which directive restricts the distribution of products within the EU that exceed very low maximum concentration amounts of certain substances, including lead.
We are also subject to various environmental laws and governmental regulations related to toxic, volatile, and other hazardous chemicals used in the third-party components incorporated into our products, including the Restriction of Certain Hazardous Substances Directive, or RoHS and the EU Waste Electrical and Electronic Equipment Directive, or the WEEE Directive, as well as the implementing legislation of the EU member states, such Directive which restricts the distribution of products within the EU that exceed very low maximum concentration amounts of certain substances, including lead.
If an author or other third-party that distributes open source software that we use or license were to allege that we had not complied with the conditions of the applicable license, we could be required to incur significant legal expenses defending against those allegations and could be subject to significant damages, enjoined from offering or selling our products that contained the open source software and be required to comply with the foregoing conditions.
If an author or other third-party who distributes open source software that we use or license were to allege that we had not complied with the conditions of the applicable license, we could be required to incur significant legal expenses defending against those allegations and could be subject to significant damages, enjoined from offering or selling our products that contained the open source software, and be required to comply with the foregoing conditions.
If any of these firms were to discontinue its relationship with us, or discontinue providing specific products to us, and we are unable to contract with a new supplier that can meet our requirements, or if they or such other supplier were to suffer a disruption in their production, we could experience disruption of our inventory flow, a decrease in sales and the possible need to re-design our products.
If any of these firms were to discontinue their relationship with us, or discontinue providing specific products to us, and we are unable to contract with a new supplier that can meet our requirements, or if they or such other supplier were to suffer a disruption in their production, we could experience disruption of our inventory flow, a decrease in sales and the possible need to re-design our products.
There are a number of competing providers of micro-display-based personal display technology, including smart glasses, and we may fail to capture a substantial portion of the personal wearable display market. In addition to competing with direct view displays, we also compete with micro-display-based personal display technologies that have been developed by other companies.
There are a number of competing providers of micro-display-based personal display technology, including smart glasses, and we may fail to capture a substantial portion of the personal wearable display market. In addition to competing with direct view displays, we also compete with micro-display-based personal display technologies that have been developed by many other companies.
Our relationship with these companies generally is on a purchase order basis and these firms do not have a contractual obligation to provide adequate supply or acceptable pricing to us on a long-term basis. These firms could discontinue sourcing components for us at any time.
Our relationship with these source companies generally is on a purchase order basis and these firms do not have a contractual obligation to provide adequate supply or acceptable pricing to us on a long-term basis. These firms could discontinue sourcing components for us at any time.
Risks associated with our doing business outside of the United States include: ● compliance burdens and costs with a wide variety of foreign laws and regulations, particularly labor, environmental and other laws and regulations that govern our operations in those countries; 27 ​ Table of Contents ● legal uncertainties regarding foreign taxes, tariffs, border taxes, quotas, export controls, export licenses, import controls and other trade barriers; ● economic instability and high levels of inflation in the countries of our suppliers and customers, particularly in the Asia-Pacific region, causing delays or reductions in orders for their products and therefore our sales; ● political or public health instability, including global pandemics, such as COVID-19, in the countries in which our suppliers operate; ● changes or volatility in currency exchange rates; and ● difficulties in collecting accounts receivable and longer accounts receivable payment cycles.
Risks associated with our doing business outside of the United States include: ● compliance burdens and costs with a wide variety of foreign laws and regulations, particularly labor, environmental and other laws and regulations that govern our operations in those countries; ● legal uncertainties regarding foreign taxes, tariffs, border taxes, quotas, export controls, export licenses, import controls and other trade barriers; ● economic instability and high levels of inflation in the countries of our suppliers and customers, particularly in the Asia-Pacific region, causing delays or reductions in orders for their products and therefore our sales; ● political or public health instability, including global pandemics, such as COVID-19, in the countries in which our suppliers operate; ● changes or volatility in currency exchange rates; and ● difficulties in collecting accounts receivable and longer accounts receivable payment cycles.
Changes in our management could have an adverse effect on our business, and in particular, while our staff is relatively small with just over 100 employees and full-time foreign contractors globally, we are dependent upon the active participation of several key management personnel, including Paul Travers, our President and Chief Executive Officer. Mr.
Changes in our management could have an adverse effect on our business and, in particular, while our staff is relatively small with just under 100 employees and full-time foreign contractors globally, we are dependent upon the active participation of several key management personnel, including Paul Travers, our President and Chief Executive Officer. Mr.
Such activities might not result in useful technologies or components for us. We are attempting to mitigate this risk by exploring ways to develop our own micro-display technologies using micro LED and laser scanning displays, but there can be no assurance that we will be successful in doing so.
Such activities might not result in useful technologies or components for us. We are attempting to mitigate this risk by exploring ways to develop our own micro-display technologies using microLED and laser scanning displays, but there can be no assurance that we will be successful in doing so.
There is uncertainty as to whether we would seek to, or whether we could successfully, apply this exclusive forum provision to any actions that may be brought against us under the Securities Act. Additional stock offerings in the future may dilute then existing stockholders’ percentage ownership of our company.
There is uncertainty as to whether we would seek to, or whether we could successfully, apply this exclusive forum provision to any actions that may be brought against us under the Securities Acts. Additional stock offerings in the future may dilute then existing stockholders’ percentage ownership of our Company.
Any such event could disrupt our operations and have an adverse effect on our business, financial condition and results of operations. Several new LCOS, alternative OLED, as well as micro-LED suppliers have begun offering micro-displays suitable for use in our products.
Any such event could disrupt our operations and have an adverse effect on our business, financial condition and results of operations. Several new LCOS, alternative OLED, as well as microLED suppliers have begun offering micro-displays suitable for use in our products.
In addition, we have and will continue to incur additional costs to comply with the disclosure requirements, including costs related to conducting diligence procedures to determine the sources of conflict minerals that may be used in, or necessary for the production of, our products and, if applicable, potential changes to products, processes or sources of supply as a consequence of such verification activities.
In addition, we have and will continue to incur additional costs to comply with the disclosure requirements, including costs related to conducting diligence procedures to determine the sources of conflict minerals that may be used in, or necessary for the production of, our products and, if applicable, potential changes to products, processes or sources of supply as a consequence of such 27 ​ Table of Contents verification activities.
Our Executive Vice President and Chief Financial Officer, Grant Russell, a Canadian citizen, currently has his principal residence in Vancouver, Canada and a second residence in West Henrietta, New York. If he becomes unable to legally or efficiently travel to, and work in, the United States, his ability to perform some of his duties could be materially adversely affected.
Our Executive Vice President and Chief Financial Officer, Grant Russell, a Canadian citizen, currently has his principal residence in Vancouver, Canada and a second residence in West Henrietta, New York. If he becomes unable to travel to and work in the United States, his ability to perform some of his duties could be materially adversely affected.
Advances in direct view LCD and OLED technology, micro LED or other technologies, including foldable and stretchable displays may overcome current market limitations and permit them to remain or become more attractive technologies for personal viewing applications, which could limit the potential market for our near-eye display and computing technology and cause our business strategy to fail.
Advances in direct view LCD and OLED technology, microLED or other technologies, including foldable and stretchable displays may overcome current market limitations and permit them to remain or become more attractive technologies for personal viewing applications, which could limit the potential market for our near-eye display and computing technology and cause our business strategy to fail.
Our failure to obtain required import or export approval for our products could harm our international and domestic sales and adversely affect our revenue. 28 ​ Table of Contents If significant tariffs or other restrictions are placed and maintained on Chinese imports or any related counter-measures are taken by China, our revenue and results of operations may be materially harmed.
Our failure to obtain required import or export approval for our products could harm our international and domestic sales and adversely affect our revenue. If significant tariffs or other restrictions are placed and maintained on Chinese imports or any related counter-measures are taken by China, our revenue and results of operations may be materially harmed.
It is possible further tariffs will be imposed on imports of our products, or that our business will be impacted by retaliatory trade measures taken by China or other countries in response to existing or future tariffs, causing us to raise prices or make changes to our operations, any of which could materially harm our revenue or operating results.
It is possible further tariffs will be imposed on imports of our products, or that our business will be impacted by retaliatory 28 ​ Table of Contents trade measures taken by China or other countries in response to existing or future tariffs, causing us to raise prices or make changes to our operations, any of which could materially harm our revenue or operating results.
If those customers do not continue to purchase our products, our sales volume could decline rapidly with little or no warning. We cannot currently rely on long-term purchase orders or commitments to protect us from the negative financial effects of a decline in demand for our products.
If those customers do not continue to purchase our products, our sales volume could decline rapidly with little or no warning. 17 ​ Table of Contents We cannot currently rely on long-term purchase orders or commitments to protect us from the negative financial effects of a decline in demand for our products.
Some of these licenses contain requirements that we make available source code for modifications or derivative works we create based upon the open source software, and that we license such modifications or derivative works under the terms of a particular open source license or other license granting third parties certain rights of further use.
Some of these licenses contain requirements that we make 19 ​ Table of Contents available source code for modifications or derivative works we create based upon the open-source software, and that we license such modifications or derivative works under the terms of a particular open-source license or other license granting third parties certain rights of further use.
Risks Related to Manufacturing The manufacture of waveguides encompasses several complex processes and several steps of our production processes are dependent upon certain critical machines and tools which could result in delivery interruptions, which could adversely affect our operating results. Our product technology and manufacturing processes are evolving which can result in production challenges and difficulties.
Operational Risks The manufacture of waveguides encompasses several complex processes, and several steps of our production processes are dependent upon certain critical machines and tools which could result in delivery interruptions, which could adversely affect our operating results. Our product technology and manufacturing processes are evolving which can result in production challenges and difficulties.
We assemble our finished products to our plant in West Henrietta, New York. Additionally, we use our West Henrietta, New York facility for the production of waveguides and their related display engines and intend to do so for some time. In the future, our mature products could have their final assembly performed outside the United States.
Additionally, we use our West Henrietta, New York facility for the production of waveguides and their related display engines and intend to do so for some time. In the future, our mature products could have their final assembly performed outside the United States.
In the markets in which we compete, prices of established consumer electronics displays, personal computers, and mobile products tend to decline significantly over time or as new enhanced versions are introduced, frequently every 18 ​ Table of Contents 12 to 24 months.
In the markets in which we compete, prices of established consumer electronics displays, personal computers, and mobile products tend to decline significantly over time or as new enhanced versions are introduced, frequently every 12 to 24 months.
As of the date of this filing, we have 148 issued U.S. and foreign patents and 130 pending U.S. and foreign patent applications. We apply for patents covering our products, services, technologies and designs, as we deem appropriate. We may fail to apply for patents on important products, services, technologies or designs in a timely fashion, or at all.
As of the date of this filing, we have 194 issued U.S. and foreign patents and 178 pending U.S. and foreign patent applications. We apply for patents covering our products, services, technologies and designs, as we deem appropriate. We may fail to apply for patents on important products, services, technologies or designs in a timely fashion, or at all.
If we experience any significant disruption in the operation of our manufacturing facility or a serious failure of a critical piece of equipment, we may be unable to supply products to our customers in a timely manner.
If we experience any significant disruption in the operation of our manufacturing facility or a 22 ​ Table of Contents serious failure of a critical piece of equipment, we may be unable to supply products to our customers in a timely manner.
Interruptions in our manufacturing could be caused by equipment problems, the introduction of new equipment 22 ​ Table of Contents into the manufacturing process or delays in the delivery of new manufacturing equipment. Lead-time for delivery, installation, testing, repair and maintenance of manufacturing equipment can be extensive.
Interruptions in our manufacturing could be caused by equipment problems, the introduction of new equipment into the manufacturing process or delays in the delivery of new manufacturing equipment. Lead-time for delivery, installation, testing, repair and maintenance of manufacturing equipment can be extensive.
While we anticipate many opportunities to reduce production costs over time, we may not be able to reduce our component costs. We expect to attempt to offset the anticipated decrease in our average selling price by introducing new products, increasing our sales volumes or adjusting our product mix.
While we anticipate many opportunities to reduce production costs over time, we may not be able to reduce our component costs. We expect to attempt to offset the 18 ​ Table of Contents anticipated decrease in our average selling price by introducing new products, increasing our sales volumes or adjusting our product mix.
We will be able to protect our intellectual property from unauthorized use by third parties only to the extent that these assets are covered by valid and enforceable patents, trademarks, copyrights or other intellectual property rights, or are effectively maintained as trade secrets.
We will be able to protect our intellectual property from unauthorized use by third parties only to the extent that these assets are covered 29 ​ Table of Contents by valid and enforceable patents, trademarks, copyrights or other intellectual property rights, or are effectively maintained as trade secrets.
The U.S. government has indicated and demonstrated its intent to alter its approach to international trade policy through the renegotiation, and potential termination, of certain existing bilateral or multilateral trade agreements and treaties with, and the imposition of tariffs on a wide range of products and other goods from China, countries in EMEA and other countries.
The U.S. government may alter its approach to international trade policy through the renegotiation, and potential termination, of certain existing bilateral or multilateral trade agreements and treaties with, and the imposition of tariffs on a wide range of products and other goods from China, countries in EMEA and other countries.
If we do not pay dividends, our common stock may be less valuable because a return on a stockholders’ investment will only occur if our stock price appreciates. 23 ​ Table of Contents Our stock price may be volatile in the future.
If we do not pay dividends, our common stock may be less valuable because a return on a stockholders’ investment will only occur if our stock price appreciates. Our stock price may be volatile in the future.
Companies in the consumer electronics, wireless communications, semiconductor, IT and display industries steadfastly pursue and protect intellectual property rights, often times resulting in considerable and costly litigation to determine the validity of patents and claims by third parties of infringement of patents or other intellectual property rights.
Our products could infringe on the intellectual property rights of others. Companies in the consumer electronics, wireless communications, semiconductor, IT and display industries steadfastly pursue and protect intellectual property rights, often times resulting in considerable and costly litigation to determine the validity of patents and claims by third parties of infringement of patents or other intellectual property rights.
Numerous other start-up companies have announced their intentions to offer smart glasses and AR products and developer kits in the near future. Further, industry blogs have speculated that companies such as Apple may offer AR glasses in the near future. Most of our competitors have greater financial, marketing, distribution and technical resources than we do.
Numerous other start-up companies have announced their intentions to offer smart glasses and AR products and developer kits in the near future. Most of our competitors have greater financial, marketing, distribution and technical resources than we do.
Given our manufacturing in those countries, and our lack of manufacturing elsewhere, policy changes in the United States or other countries, such as the tariffs already proposed, implemented and threatened, present particular risks for us.
Given our manufacturing in those countries, and our lack of manufacturing elsewhere, policy changes in the United States or other countries, such as the tariffs already proposed, implemented and threatened, present particular risks for us. There are also risks associated with retaliatory tariffs and resulting trade wars.
Many of our current competitors have substantial market share, longer operating histories, larger intellectual property portfolios, diversified product lines, ability to bundle competitive offerings with our products and services, well-established supply and distribution systems, strong worldwide brand recognition and greater financial, marketing, research and development and other resources than we do.
We compete against established, well-known diversified consumer electronics manufacturers including Samsung Electronics Co., Sony Corporation, LG Electronics (LGE), HTC, Lenovo, and many of our current competitors have substantial market share, longer operating histories, larger intellectual property portfolios, diversified product lines, ability to bundle competitive offerings with our products and services, well-established supply and distribution systems, strong worldwide brand recognition and greater financial, marketing, research and development and other resources than we do.
We have an accumulated deficit of $243,835,716 as of December 31, 2022. We may not achieve or maintain profitability in the future. We will need to increase sales in order to achieve and maintain profitability.
We have an accumulated deficit of $293,984,793 as of December 31, 2023. We may not achieve or maintain profitability in the future. We will need to increase sales in order to achieve and maintain profitability.
Risks Related to Our Business We have incurred net losses since our inception and may continue to incur losses. We reported a net loss of $40,763,573 for the year ended December 31, 2022, a net loss of $40,377,160 for the year ended December 31, 2021, and a net loss of $17,952,172 for the year ended December 31, 2020.
General Business and Industry Risks We have incurred net losses since our inception and may continue to incur losses. We reported a net loss of $50,149,077 for the year ended December 31, 2023, a net loss of $40,763,573 for the year ended December 31, 2022, and a net loss of $40,377,160 for the year ended December 31, 2021.
There is no assurance that we will undertake any such hedging activities or that, if we do so, they will be successful in reducing the risks to us of our exposure to foreign currency fluctuations.
Although we do not currently enter into currency option contracts or engage in other hedging activities, we may do so in the future. There is no assurance that we will undertake any such hedging activities or that, if we do so, they will be successful in reducing the risks to us of our exposure to foreign currency fluctuations.
We require employees, contractors, consultants, financial advisors, suppliers and strategic partners to enter into confidentiality and intellectual property assignment agreements (as appropriate), but these agreements may not provide sufficient protection for our trade secrets, know-how or other proprietary information.
We require employees, contractors, consultants, financial advisors, suppliers and strategic partners to enter into confidentiality and intellectual property assignment agreements (as appropriate), but these agreements may not provide sufficient protection for our trade secrets, know-how or other proprietary information. Human Capital Resources As of December 31, 2023, our consolidated business employed just under 100 individuals.
Compliance with regulations enacted in the future could substantially increase our cost of doing business or otherwise have a material adverse effect on our results of operations and our business.
From time to time, our products are subject to new domestic and international requirements. Compliance with regulations enacted in the future could substantially increase our cost of doing business or otherwise have a material adverse effect on our results of operations and our business.
Similar laws and regulations have been passed or are pending in China, Japan, and numerous countries around the world and may be enacted in other regions, including in the United States, and we are, or may in the future be, subject to these laws and regulations. From time to time, our products are subject to new domestic and international requirements.
Similar laws and regulations have been passed or are pending in China, Japan, and numerous countries 26 ​ Table of Contents around the world and may be enacted in other regions, including in the United States, and we are, or may in the future be, subject to these laws and regulations.
Our operating results may be adversely impacted by worldwide political, economic, public health uncertainties, wars and specific conditions in the markets we address.
Any of the foregoing could disrupt and harm our business and financial condition. Our operating results may be adversely impacted by worldwide political, economic, public health uncertainties, wars and specific conditions in the markets we address.
We operate the majority of our business from one location in West Henrietta, New York (a suburb of Rochester). We also rely on third-party manufacturing plants in the United States and Asia and third-party logistics, sales and marketing facilities in Japan and Europe, and in other parts of the world to provide key components for our products and services.
We also rely on third-party manufacturing plants in the United States and Asia and third-party logistics, sales and marketing facilities in Japan and Europe, and in other parts of the world to provide key components for our products and services.
We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition, and other business and economic factors affecting us at such time as our Board of Directors may consider relevant.
The payment of dividends on our common stock will depend on earnings, financial condition, and other business and economic factors affecting us at such time as our Board of Directors may consider relevant.
The market for head-worn display devices, including AR and Smart Glasses, is highly competitive. Further, we expect competition to intensify in the future as existing competitors introduce new and more competitive offerings alongside their existing products, and as new market entrants introduce new products into our markets.
Further, we expect competition to intensify in the future as existing competitors introduce new and more competitive offerings alongside their existing products, and as new market entrants introduce new products into our markets.
We cannot predict future trade policy, the terms of any renegotiated trade agreements or treaties, or tariffs and their impact on our business. A trade war could have a significant adverse effect on world trade and the world economy.
We cannot predict future trade policy, the terms of any renegotiated trade agreements or treaties, or tariffs and their impact on our business.
Changes in interpretation of the directive may cause us to incur costs or have additional regulatory requirements to meet in the future in order to comply with this directive, or with any similar laws adopted in other jurisdictions.
The WEEE Directive requires electronic goods producers to be responsible for the collection, recycling and treatment of such products. Changes in interpretation of the Directive may cause us to incur costs or have additional regulatory requirements to meet in the future in order to comply with this Directive, or with any similar laws adopted in other jurisdictions.
As a result of our lack of long-term purchase orders and purchase commitments, we may experience a rapid decline in our sales. As a result of these and other factors, investors should not rely on our revenues and our operating results for any one quarter or year as an indication of our future revenues or operating results.
As a result of these and other factors, investors should not rely on our revenues and our operating results for any one quarter or year as an indication of our future revenues or operating results.
We rely on third-party suppliers, some of which are sole-source suppliers, to provide components for our products which may lead to supply shortages, long lead times for components, and supply changes, any one of which could disrupt our supply chain, may increase our costs, and we may be unable to meet the demands of our customers and end-users on a timely basis.
Our failure to manage one or more of these risks could result in excess inventory or shortages that could adversely impact our operating results and financial condition. 23 ​ Table of Contents We rely on third-party suppliers, some of which are sole-source suppliers, to provide components for our products which may lead to supply shortages, long lead times for components, and supply changes, any one of which could disrupt our supply chain, may increase our costs, and may cause us to be unable to meet the demands of our customers and end-users on a timely basis.
We also may face reputational harm if we determine that certain of our products contain minerals 26 ​ Table of Contents not determined to be conflict free or if we are unable to alter our products, processes or sources of supply to avoid such materials.
We also may face reputational harm if we determine that certain of our products contain minerals not determined to be conflict free or if we are unable to alter our products, processes or sources of supply to avoid such materials. We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act, the U.K.
The global nature of our business and the significance of our international revenue create various domestic and local regulatory challenges and subject us to risks associated with our international operations.
Bribery Act or similar anti-bribery laws in other jurisdictions in which we operate. The global nature of our business and the significance of our international revenue create various domestic and local regulatory challenges and subject us to risks associated with our international operations.
The costs of retaining or attracting new personnel may have a material adverse effect on our business and operating results. If we fail to attract and retain the technical and managerial personnel required to be successful, our business, operating results and financial condition could be materially adversely affected.
If we fail to attract and retain the technical and managerial personnel required to be successful, our business, operating results and financial condition could be materially adversely affected.
If we fail to do so, our results of operations will be materially and adversely affected. Our products could infringe on the intellectual property rights of others.
If we fail to do so, our results of operations will be materially and adversely affected.
In addition, if there are changes to these or other laws (or their interpretation) or if new related laws are passed in other jurisdictions, we may be 25 ​ Table of Contents required to re-engineer our products to use components compatible with these regulations.
In addition, if there are changes to these or other laws (or their interpretation) or if new related laws are passed in other jurisdictions, we may be required to re-engineer our products to use components compatible with these regulations. This re-engineering and component substitution could result in additional costs to us or disrupt our operations or logistics.
This may require us to manage a more complex supply chain and monitor the financial condition and credit worthiness of our distributors and VARs and their major end user customers. Our failure to manage one or more of these risks could result in excess inventory or shortages that could adversely impact our operating results and financial condition.
This may require us to manage a more complex supply chain and monitor the financial condition and credit worthiness of our distributors and VARs and their major end user customers.
As our business grows, both our sales and production costs may increasingly be denominated in other currencies. Where such sales or production costs are denominated in other currencies, they are converted to U.S. dollars for the purpose of calculating any sales or costs to us.
Where such sales or production 25 ​ Table of Contents costs are denominated in other currencies, they are converted to U.S. dollars for the purpose of calculating any sales or costs to us. Our sales may decrease as a result of any appreciation of the U.S. dollar against these other currencies.
Our use of open source software could negatively affect our ability to sell our products and could subject us to possible litigation. We incorporate open source software into our products. Open source software is generally licensed by its authors or other third parties under open source licenses.
We incorporate open-source software into our products. Open-source software is generally licensed by its authors or other third parties under open-source licenses.
Certain other components and services necessary for the manufacture of our products are available from only a limited number of sources, and other components and services are only available from a single source. We currently purchase almost all of the micro-displays used in our Smart Glasses products from Sony Corporation and Texas Instruments.
Certain other components and services necessary for the manufacture of our products are available from only a limited number of sources, and other components and services are only available from a single source.
Further the electronic components we utilize can go end-of-life due to technological changes, which can require us to invest in implementation costs of alternatives and the potential for the forced obsolescence of other related items. We have in the past experienced end-of-life issues and expect to see more shortages in the future.
In addition, the lead times associated with certain components are lengthy and preclude rapid changes in quantities and delivery schedules. Further, the electronic components we utilize can go end-of-life due to technological changes, which can require us to invest in implementation costs of alternatives and the potential for the forced obsolescence of other related items.
Our business and products are subject to government regulation and we may incur additional compliance costs or, if we fail to comply with applicable regulations, may incur fines or be forced to suspend or cease operations.
In addition, these companies currently in receipt of our investment dollars may be required to raise additional capital, which may result in our ownership percentage being decreased. ​ Legal and Regulatory Risks ​ Our business and products are subject to government regulation and we may incur additional compliance costs or, if we fail to comply with applicable regulations, may incur fines or be forced to suspend or cease operations.
Intellectual property protection and patent rights outside of the United States are even less predictable. As a result, the validity and enforceability of patents cannot be predicted with certainty.
Intellectual property protection and patent rights outside of the United States are even less predictable. As a result, the validity and enforceability of patents cannot be predicted with certainty. We rely in part on unpatented proprietary technology, and others may independently develop the same or similar technology or otherwise obtain access to our unpatented technology.
Compliance with such requirements could also require additional expenditures by us or our suppliers, which could have a material adverse effect on our business, results of operations, financial condition and cash flows. Our operations, supply chain and products are not currently subject to carbon pricing or other legally required carbon taxation or penalties.
Compliance with such requirements could also require additional expenditures by us or our suppliers, which could have a material adverse effect on our business, results of operations, financial condition and cash flows. In addition, ESG reporting and disclosure requirements are continuing to evolve, with increasing global regulation and heightened investor expectations.
In addition, any such breaches may result in negative publicity, adversely affect our brand, decrease demand for our products and services, and adversely affect our operating results and financial condition. 30 ​ Table of Contents Our failure to effectively manage growth could harm our business. We intend to expand the number and types of products we sell.
In addition, any such breaches may result in negative publicity, adversely affect our brand, decrease demand for our products and services, and adversely affect our operating results and financial condition.
Our failure to comply with past, present and future similar laws could result in reduced sales of our products, reputational damage, penalties and other sanctions, which could harm our business and financial condition. Our products could likely experience declining unit prices and we may not be able to offset that decline with production cost decreases or higher unit sales.
Our products could likely experience declining unit prices and we may not be able to offset that decline with production cost decreases or higher unit sales.
Many of our various reseller relationships for our Smart Glasses and AR products and their accessories could involve them taking inventory positions and reselling to multiple customers.
Our dependence on sales to distributors, VARs, and resellers increases the risks of managing our supply chain and may result in excess inventory or inventory shortages. Many of our various reseller relationships for our Smart Glasses and AR products and their accessories could involve such resellers taking inventory positions and reselling to multiple customers.
We cannot predict the timing, strength, or duration of any economic slowdown or subsequent economic recovery, worldwide, or such impact on the display industry. Our results of operations may suffer if we are not able to successfully manage our increasing exposure to foreign exchange rate risks. A majority of our sales and cost of components are denominated in U.S. dollars.
Our results of operations may suffer if we are not able to successfully manage our increasing exposure to foreign exchange rate risks. A majority of our sales and cost of components are denominated in U.S. dollars. As our business grows, both our sales and production costs may increasingly be denominated in other currencies.
If the pegged exchange rates change adversely or are allowed to float up, additional U.S. dollars will be required to fund our purchases of these components. Although we do not currently enter into currency option contracts or engage in other hedging activities, we may do so in the future.
The majority of our current expenditures are incurred in U.S. dollars and many of our components come from countries that currently peg their currency against the U.S. dollar. If the pegged exchange rates change adversely or are allowed to float up, additional U.S. dollars will be required to fund our purchases of these components.
Due to our significant level of international operations, including the use of foreign suppliers and contract manufactures, we are subject to international operational, financial, legal, political and public health risks which could harm our operating results. We purchase product components from our suppliers and engage third-party contract manufacturing firms to perform electronic circuit board and cable assemblies.
We cannot predict the timing, strength, or duration of any economic slowdown or subsequent economic recovery, or such impact on the display industry. Due to our significant level of international operations, including the use of foreign suppliers and contract manufactures, we are subject to international operational, financial, legal, political and public health risks which could harm our operating results.
Moreover, smartphones, tablets, and new wearable devices with ever-expanding video display screens, including foldable and expandable screens, and ever-increasing computing power have significantly improved the mobile personal computing experience. In the future, the manufacturers of these devices, such as Apple Inc., Samsung, LGE, Lenovo, Google, Snap, Garmin, Meta/Facebook, Microsoft and others may design or develop products similar to ours.
Moreover, smartphones, tablets, and new wearable devices with ever-expanding video display screens, including foldable and expandable screens, and ever-increasing computing power have significantly improved the mobile personal computing experience.
Cybersecurity risks could adversely affect our business and disrupt our operations. The threats to network and data security are increasingly diverse and sophisticated.
Any of these factors could harm our own, our suppliers’ and our customers’ international operations and businesses and impair our and/or their ability to continue expanding into international markets. 20 ​ Table of Contents Cybersecurity risks could adversely affect our business and disrupt our operations. The threats to network and data security are increasingly diverse and sophisticated.
If we are unable to scale and improve our forecasting, planning, production, and logistics management, we could frustrate our customers, lose product sales or accumulate excess inventory. Our facilities and information systems and those of our key suppliers could be damaged as a result of disasters or unpredictable events, which could have an adverse effect on our business operations.
Our facilities and information systems and those of our key suppliers could be damaged as a result of disasters or unpredictable events, which could have an adverse effect on our business operations. We operate the majority of our business from one campus location in West Henrietta, New York (a suburb of Rochester).
To be competitive, we may have to increase the compensation, bonuses, stock options and other fringe benefits we offer to employees in order to attract and retain such personnel. Further, during COVID-19, many employees began working remotely and many now want to make it a permanent arrangement, which can further complicate the management of such personnel.
To be competitive, we may have to increase the compensation, bonuses, stock options and other fringe benefits we offer to employees in order to attract and retain such personnel. The costs of retaining or attracting new personnel may have a material adverse effect on our business and operating results.
We may not be able to raise any necessary capital on commercially reasonable terms or at all.
We may not be able to raise any necessary capital on commercially reasonable terms or at all. If we fail to achieve or maintain profitability on a quarterly or annual basis within the timeframe expected by investors, the market price of our common stock may decline.
We may lose the services of key management personnel and may not be able to attract and retain other necessary personnel.
Any of these could have a material adverse effect on our competitive position, results of operations, financial condition or liquidity. Due to the evolving nature of such risks, the impact of any potential incident cannot be predicted. ​ We may lose the services of key management personnel and may not be able to attract and retain other necessary personnel.
The possible negative impact of takeover attempts could adversely affect the price of our common stock. Although we have no present intention to issue any shares of preferred stock, we may issue these shares in the future. We have not paid dividends in the past and do not expect to pay dividends in the future on our common stock.
Financial and Market Risks ​ 24 ​ Table of Contents We have not paid dividends in the past and do not expect to pay dividends in the future on our common stock. We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future.
In addition to competition or potential competition from large, established companies, new companies may emerge and offer competitive products.
In the future, most all large consumer electronics manufacturers of those devices, such as Apple Inc., Samsung, LGE, Lenovo, Alphabet/Google, Snap, Garmin, Meta/Facebook, Microsoft and others may design or develop products similar to ours. In addition to competition or potential competition from large, established companies, new companies may emerge and offer competitive products.
Removed
We compete against established, well-known diversified consumer electronics manufacturers such as Samsung Electronics Co., Sony Corporation, LG Electronics (LGE), HTC, Lenovo, and large software and other products companies such as Alphabet Inc. (Google), Microsoft Corporation, Meta (Facebook) and Snap.
Added
We operate in a highly competitive and complex market and believe our future success depends in part on our ability to effectively manage the growth and increased complexity of our business.
Removed
If our quarterly revenues or results of operations fall below the expectations of investors or public market analysts, the price of our common stock could fall substantially.
Added
The following factors could present difficulties to us: 16 ​ Table of Contents ● Managing our ongoing research and development efforts associated with the development of new products based on emerging and innovative technologies; ● Managing product quality issues to minimize higher-than-expected warranty claims or returns that could harm our business and operating results; ● Managing our rights under our third-party technology licenses to avoid losing any competitive advantages in the market or the ability to commercialize certain products or technologies completely, which could substantially decrease our revenues; ● Managing our marketing initiatives effectively to generate sufficient levels of product and brand awareness; ● Managing our technical support, firmware or software updates on products to maintain customer satisfaction; ● Managing the need to replace and regularly introduce on a timely basis new products and technologies, enhance existing products, and effectively stimulate customer demand for new products and upgraded or enhanced versions of our existing products; ● Managing the maintenance and further development of our sales channels for our products, including developing and supporting our value-added resellers (VARs), distributors and retail sales channels, many of which offer products from several different manufacturers and could give a higher priority to selling other companies’ products.
Removed
If we do not effectively maintain and further develop our sales channels for our products, including developing and supporting our value added resellers (VARs), distributors and retail sales channels, our business could be harmed. We depend upon effective sales channels to assist us in reaching the customers who are the ultimate purchasers of our Smart Glass and AR products.

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Item 2. Properties

Properties — owned and leased real estate

4 edited+1 added−2 removed1 unchanged
Biggest changeThe lease for this location expired on September 30, 2021 and is currently on a month-to-month basis. 33 ​ Table of Contents In Tokyo, Japan, we rent 577 square feet of office space at a cost of approximately $85,000 per year.
Biggest changeIn Tokyo, Japan, we rent 577 square feet of office space at a cost of approximately $85,000 per year. We lease this location pursuant to a renewable one-year lease which expired on February 28, 2022 and is currently on a month-to-month basis.
The lease at 30 Becker Road has an original three-year term with an option by the Company to renew for two additional one-year terms at pre-agreed to lease rates. We believe that our West Henrietta facilities are in good operating condition and currently adequately serves our needs.
The lease at 30 Becker Road has an original three-year term with an option by the Company to renew for two additional one-year terms at pre-agreed to lease rates. We believe that our West Henrietta facilities are in good operating condition and currently adequately serve our needs.
In October 2022, we leased an additional 12,000 square feet for our new waveguide manufacturing facility at 30 Becker Road, also in West Henrietta, New York. The base rent contractual payment obligations under these operating leases is currently $698,000 per year.
In October 2022, we leased an additional 12,000 square feet for our new waveguide manufacturing facility at 30 Becker Road, also in West Henrietta, New York. The base rent contractual payment obligations under these operating leases is currently $570,000 per year.
The lease at 25 Hendrix Road has an original five-year term with an option by the Company to renew for two additional three-year terms at pre-agreed to lease rates. As of June 25, 2020, the Company exercised the first of the two renewal terms, extending our current lease expiration date to January 31, 2024.
The lease at 25 Hendrix Road has an original five-year term with an option by the Company to renew for two additional three-year terms at pre-agreed to lease rates.
Removed
Note, our new expansion space at 30 Becker Road is currently under construction and its planned completion is May or June of 2023. In Oxford, England, we rent 400 square feet of office space at a cost of approximately $9,700 per year.
Added
As of June 25, 2020, the Company exercised the first of the two renewal terms and on January 16, 2024 the Company exercised its second renewal term extending its current lease to November 30, 2025.
Removed
We lease this location pursuant to a renewable one-year lease which expired on February 28, 2022 and is currently on a month-to-month basis.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

51 edited+41 added−35 removed51 unchanged
Biggest changeWe incurred a net loss for the years ended December 31, 2022, 2021 and 2020 of $40,763,573 (of which $15,775,553 was related to non-cash stock-based compensation primarily due to our LTIP), $40,377,160 (of which $17,302,833 was related to non-cash stock-based compensation primarily due to our LTIP), and $17,952,172 in 2020, respectively.
Biggest changeWe incurred a net loss for the years ended December 31, 2023, 2022 and 2021 of $50,149,077 (of which $12,711,084 was related to non-cash stock-based compensation primarily due to our LTIP; $4,358,062 was related to our excess and obsolescence impairment charge to inventory; $2,136,993 was related to a goodwill and intangible impairment charge for our Moviynt acquisition in 2022; and $1,574,000 was related to a bad debt reserve), $40,763,573 (of which $15,775,553 was related to non-cash stock-based compensation primarily due to our LTIP), and $40,377,160 in 2021 (of which $17,302,833 was related to non-cash stock-based compensation primarily due to our LTIP), respectively.
If we are not the primary beneficiary in a VIE, we account for the investment or other variable interests in a VIE in accordance with applicable GAAP.
If we are not the primary beneficiary in a VIE, we account for the investment or other variable interests in a VIE in accordance with other applicable GAAP.
The fair market value of our common stock on the date of each option grant is determined based on the most recent quoted sales price on our primary trading stock exchange, currently the NASDAQ Capital Market. For stock options awards under the Company's LTIP (Long-term Incentive Plan), options vest upon the achievement of certain equity market conditions and performance-based milestones.
The fair value of our common stock on the date of each option grant is determined based on the most recent quoted sales price on our primary trading stock exchange, currently the NASDAQ Capital Market. For stock options awards under the Company's LTIP (Long-term Incentive Plan), options vest upon the achievement of certain equity market conditions and performance-based milestones.
Selling and marketing costs consist of trade show costs, advertising, sales samples, travel costs, sales staff compensation costs including stock-based compensation expense, consulting fees, public relations agency fees, website costs and sales commissions paid to full-time staff and outside consultants. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ ​ December 31, 2022 ​ Total Sales ​ December 31, 2021 ​ Total Sales ​ Change ​ (Decrease) ​ Selling and Marketing ​ $ 8,078,538 68 % $ 6,118,929 46 % $ 1,959,609 32 % ​ Selling and marketing costs for the year ended December 31, 2022, increased by $1,959,609 or 32%, as compared to the same period in 2021.
Selling and marketing expenses consist of trade show costs, advertising, sales samples, travel costs, sales staff compensation costs including stock-based compensation expense, consulting fees, public relations agency fees, website costs and sales commissions paid to full-time staff and outside consultants. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ ​ December 31, 2022 ​ Total Sales ​ December 31, 2021 ​ Total Sales ​ Change ​ (Decrease) ​ Selling and Marketing ​ $ 8,078,538 68 % $ 6,118,929 46 % $ 1,959,609 32 % ​ Selling and marketing expenses for the year ended December 31, 2022, increased by $1,959,609 or 32%, as compared to the same period in 2021.
General and administrative costs include professional fees, investor relations (IR) costs, salaries and related stock compensation, travel costs, office and rental costs. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ ​ December 31, 2022 ​ Total Sales ​ December 31, 2021 ​ Total Sales ​ Change ​ (Decrease) ​ General and Administrative ​ $ 21,038,562 178 % $ 22,502,833 171 % $ (1,464,271) (7) % ​ General and administrative costs for the year ended December 31, 2022 decreased by $1,464,271 or 7%, as compared to the same period in 2021.
General and administrative expenses include professional fees, investor relations (IR) costs, salaries and related stock compensation, travel costs, office and rental costs. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ ​ December 31, 2022 ​ Total Sales ​ December 31, 2021 ​ Total Sales ​ Change ​ (Decrease) ​ General and Administrative ​ $ 21,038,562 178 % $ 22,502,833 171 % $ (1,464,271) (7) % ​ General and administrative expenses for the year ended December 31, 2022 decreased by $1,464,271 or 7%, as compared to the same period in 2021.
To date, all such contracts have been less than one calendar year in duration. Product Warranty Warranty obligations are generally incurred in connection with the sale of our products. The warranty period for these products is generally one year and up to 18 months for certain distributors. Customers may also purchase an additional twelve (12) month extended warranty.
To date, all such contracts have been less than one calendar year in duration. Product Warranty Warranty obligations are generally incurred in connection with the sale of our products. The warranty period for these products is generally one year and up to eighteen (18) months for certain distributors. Customers may also purchase an additional twelve (12) month extended warranty.
The overall increase in other income was primarily the result of an increase of $1,342,068 in investment income resulting from the recent rise in interest rates earned on the Company’s excess cash period over period; a $466,705 gain recorded for an employee 44 ​ Table of Contents retention credit refund claim that was filed with the IRS on November 10, 2022; and a decrease of $94,371 in income and other taxes, partially offset by an increase of $37,393 in foreign exchange losses.
The overall increase in other income was primarily the result of an increase of $1,342,068 in investment income resulting from the recent rise in interest rates earned on the Company’s excess cash period-over-period; a $466,705 gain recorded for an employee 46 ​ Table of Contents retention credit refund claim that was filed with the IRS on November 10, 2022; and a decrease of $94,371 in income and other taxes, partially offset by an increase of $37,393 in foreign exchange losses.
There was a decrease in total sales for the year ended December 31, 2022, from those in 2021 of $1,329,051 or 10%.
There was a decrease in total sales for the year ended December 31, 2022, from those achieved in 2021 of $1,329,051 or 10%.
With respect to our Smart Glasses and AR products, we are focused on the enterprise, industrial, medical and commercial markets.
With respect to our Smart Glasses and AR products, we are focused on the enterprise, defense, industrial, medical and commercial markets.
As of December 31, 2022 and 2021, deferred revenue associated with our expected returns was immaterial. The Company collects and remits sales taxes in certain jurisdictions and reports revenue net of any associated sales taxes. Revenue from engineering consulting and other services is recognized at the time the services are rendered.
As of December 31, 2023 and 2022, deferred revenue associated with our expected returns was immaterial. The Company collects and remits sales taxes in certain jurisdictions and reports revenue net of any associated sales taxes. Revenue from engineering consulting and other services is recognized at the time the services are rendered.
Software development expenses to determine technical 43 ​ Table of Contents feasibility before final development and ongoing maintenance are not capitalized and are included in research and development costs. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ ​ December 31, 2022 ​ Total Sales ​ December 31, 2021 ​ Total Sales ​ Change ​ (Decrease) ​ Research and Development ​ $ 12,676,688 107 % $ 11,674,954 89 % $ 1,001,734 9 % ​ Research and development costs for the year ended December 31, 2022, increased by $1,001,734 or 9%, as compared to the same period in 2021.
Software development expenses to determine 45 ​ Table of Contents technical feasibility before final development and ongoing maintenance are not capitalized and are included in research and development expenses. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ ​ December 31, 2022 ​ Total Sales ​ December 31, 2021 ​ Total Sales ​ Change ​ (Decrease) ​ Research and Development ​ $ 12,676,688 107 % $ 11,674,954 89 % $ 1,001,734 9 % ​ Research and development expenses for the year ended December 31, 2022, increased by $1,001,734 or 9%, as compared to the same period in 2021.
Cost of product revenues and engineering services are comprised of materials, components, labor, warranty costs, freight costs, manufacturing overhead, software royalties, and the non-cash depreciation for our tooling and manufacturing equipment and amortization of software development costs related to the production of our products and rendering of engineering services.
Cost of product revenues and engineering services are comprised of materials, components, labor, warranty costs, freight costs, manufacturing overhead, software royalties, the depreciation for our tooling and manufacturing equipment, and amortization of software development costs related to the production of our products and rendering of engineering services.
Recent Accounting Pronouncements Refer to Note 1 41 ​ Table of Contents Results of Operations for Fiscal Years Ended December 31, 2022 and December 31, 2021 The following table compares the Company’s consolidated statements of operations data for the years ended December 31, 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ Dollar % Increase ​ ​ 2022 ​ 2021 ​ Change ​ (Decrease) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales: ​ ​ ​ ​ Sales of Products ​ $ 10,505,763 ​ $ 12,784,600 ​ $ (2,278,837) (18) % Sales of Engineering Services ​ 1,330,119 ​ 380,333 ​ 949,786 250 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Sales ​ 11,835,882 ​ 13,164,933 ​ (1,329,051) (10) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of Sales: ​ ​ ​ ​ Cost of Sales - Products Sold ​ 8,737,852 ​ 9,709,268 ​ (971,416) (10) % Cost of Sales - Inventory Reserve for Obsolescence ​ 290,405 ​ 519,950 ​ (229,545) (44) % Cost of Sales - Depreciation and Amortization ​ 799,317 ​ 1,321,467 ​ (522,150) (40) % Cost of Sales - Engineering Services ​ 525,182 ​ 45,758 ​ 479,424 1,048 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Cost of Sales ​ 10,352,756 ​ 11,596,443 ​ (1,243,687) (11) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit ​ 1,483,126 ​ 1,568,490 ​ (85,364) (5) % Gross Profit % ​ 13 % 12 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Expenses: ​ ​ ​ ​ Research and Development ​ 12,676,688 ​ 11,674,954 ​ 1,001,734 9 % Selling and Marketing ​ 8,078,538 ​ 6,118,929 ​ 1,959,609 32 % General and Administrative ​ 21,038,562 ​ 22,502,833 ​ (1,464,271) (7) % Depreciation and Amortization ​ 1,788,584 ​ 988,104 ​ 800,480 81 % Loss on Fixed Asset Disposal ​ 35,350 ​ 183,614 ​ (148,264) (81) % Impairment of Patents and Trademarks ​ 97,675 ​ 80,163 ​ 17,512 22 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss from Operations ​ (42,232,271) ​ (39,980,107) ​ (2,252,164) 6 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other Income (Expense): ​ ​ ​ ​ Investment Income ​ 1,395,579 ​ 53,511 ​ 1,342,068 2,508 % Income and Other Taxes ​ (212,997) ​ (307,368) ​ 94,371 (31) % Foreign Exchange Loss ​ (180,589) ​ (143,196) ​ (37,393) 26 % Employee Retention Credit Refund ​ 466,705 ​ — ​ 466,705 NM ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Other Income (Expense), Net ​ 1,468,698 ​ (397,053) ​ 1,865,751 (470) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss ​ $ (40,763,573) ​ $ (40,377,160) ​ $ (386,413) 1 % ​ 42 ​ Table of Contents Sales.
There were no provisions for income taxes in 2023 or 2022. 43 ​ Table of Contents Results of Operations for Fiscal Years Ended December 31, 2022 and December 31, 2021 ​ The following table compares the Company’s consolidated statements of operations data for the years ended December 31, 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ Dollar % Increase ​ ​ 2022 ​ 2021 ​ Change ​ (Decrease) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales: ​ ​ ​ ​ Sales of Products ​ $ 10,505,763 ​ $ 12,784,600 ​ $ (2,278,837) (18) % Sales of Engineering Services ​ 1,330,119 ​ 380,333 ​ 949,786 250 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Sales ​ 11,835,882 ​ 13,164,933 ​ (1,329,051) (10) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of Sales: ​ ​ ​ ​ Cost of Sales - Products Sold ​ 8,737,852 ​ 9,709,268 ​ (971,416) (10) % Cost of Sales - Inventory Reserve for Obsolescence ​ 290,405 ​ 519,950 ​ (229,545) (44) % Cost of Sales - Depreciation and Amortization ​ 799,317 ​ 1,321,467 ​ (522,150) (40) % Cost of Sales - Engineering Services ​ 525,182 ​ 45,758 ​ 479,424 1,048 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Cost of Sales ​ 10,352,756 ​ 11,596,443 ​ (1,243,687) (11) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit ​ 1,483,126 ​ 1,568,490 ​ (85,364) (5) % Gross Profit % ​ 13 % 12 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Expenses: ​ ​ ​ ​ Research and Development ​ 12,676,688 ​ 11,674,954 ​ 1,001,734 9 % Selling and Marketing ​ 8,078,538 ​ 6,118,929 ​ 1,959,609 32 % General and Administrative ​ 21,038,562 ​ 22,502,833 ​ (1,464,271) (7) % Depreciation and Amortization ​ 1,788,584 ​ 988,104 ​ 800,480 81 % Loss on Fixed Asset Disposal ​ 35,350 ​ 183,614 ​ (148,264) (81) % Impairment of Patents and Trademarks ​ 97,675 ​ 80,163 ​ 17,512 22 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss from Operations ​ (42,232,271) ​ (39,980,107) ​ (2,252,164) 6 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other Income (Expense): ​ ​ ​ ​ Investment Income ​ 1,395,579 ​ 53,511 ​ 1,342,068 2,508 % Income and Other Taxes ​ (212,997) ​ (307,368) ​ 94,371 (31) % Foreign Exchange Loss ​ (180,589) ​ (143,196) ​ (37,393) 26 % Employee Retention Credit Refund ​ 466,705 ​ — ​ 466,705 NM ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Other Income (Expense), Net ​ 1,468,698 ​ (397,053) ​ 1,865,751 (470) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss ​ $ (40,763,573) ​ $ (40,377,160) ​ $ (386,413) 1 % ​ 44 ​ Table of Contents ​ Sales.
We consolidate VIEs when we are the primary beneficiary. We are the primary beneficiary of a VIE when we have the power to direct activities that most significantly affect the economic performance of the VIE and have the obligation to absorb the majority of their losses or benefits.
We are the primary beneficiary of a VIE when we have the power to direct activities that most significantly affect the economic performance of the VIE and have the obligation to absorb the majority of their losses or benefits.
The Company accounts for its longer-term development contracts, which to date have all been firm fixed-priced contracts, on 39 ​ Table of Contents the percentage-of-completion method, whereby income is recognized as work on contracts progresses, but estimated losses on contracts in progress are charged to operations immediately. The percentage-of-completion is determined using the cost-to-cost method.
The Company accounts for its longer-term development contracts, which to date have all been firm fixed-priced contracts, on the percentage-of-completion method, whereby income is recognized as work on contracts progresses, but estimated losses on contracts in progress are charged to operations immediately. The percentage-of-completion is determined using the cost-to-cost method.
Total other income was $1,468,698 for the year ended December 31, 2022, as compared to other expense of $397,053 in the same period in 2021, an increase of $1,865,851.
Total other income was $1,468,698 for the year ended December 31, 2022, as compared to other expense of $397,053 in the same period in 2021, an increase of $1,865,751.
The Company recognizes revenue from these product sales as performance obligations are satisfied and transfer of control to the customer has occurred, typically upon physical shipment. Revenue is recognized in the amount that the Company expects to receive in exchange from the sale of our products.
Product sales represent the majority of the Company’s revenue. The Company recognizes revenue from these product sales as performance obligations are satisfied and transfer of control to the customer has occurred, typically upon physical shipment. Revenue is recognized in the amount that the Company expects to receive in exchange from the sale of our products.
Our research and development costs consist primarily of compensation costs for personnel, related stock-based compensation expenses, third-party services, purchase of research supplies and materials, and consulting fees related to research and development.
Our research and development expenses consist primarily of compensation costs for personnel, related stock-based compensation expenses, third-party services, purchases of research supplies and materials, and consulting fees related to research and development.
The fair value of options granted under this program were calculated by using a Monte Carlo simulation for the equity market condition tranches and the Black-Scholes-Merton option pricing method for the performance-based tranches. The equity market condition awards are expensed over their derived service periods, which is an output of the Monte Carlo model.
The fair 38 ​ Table of Contents value of options granted under this program was calculated by using a Monte Carlo simulation for the equity market condition tranches and the Black-Scholes-Merton option pricing method for the performance-based tranches. The equity market condition awards are expensed over their derived service periods, which is an output of the Monte Carlo model.
We believe our technology, intellectual property portfolio and position in the marketplace give us a leadership position in AR and Smart Glasses products, waveguide optics, micro LEDs and display engine technology.
We believe our technology, intellectual property portfolio and position in the marketplace give us a leadership position in AR and Smart Glasses products, waveguide optics, microLEDs and display engine technology.
The critical accounting policies, judgments and estimates that we believe have the most significant effect on our financial statements are: ● Valuation of inventories; 37 ​ Table of Contents ● Variable interest entities; ● Business combinations: ● Carrying value of long-lived assets, goodwill and other intangible assets; ● Software development costs; ● Revenue recognition; ● Product warranty; ● Stock-based compensation; and ● Income taxes.
The critical accounting policies, judgments and estimates that we believe have the most significant effect on our financial statements are: ● Valuation of inventories; 35 ​ Table of Contents ● Going Concern ● Variable interest entities; ● Carrying value of long-lived assets, goodwill and other intangible assets; ● Software development costs; ● Revenue recognition; ● Product warranty; ● Stock-based compensation; and ● Income taxes.
Our research and development costs consist primarily of compensation costs for personnel, related stock-based compensation expenses, third-party services, purchase of research supplies and materials, and consulting fees related to research and development.
Our research and development expenses consist primarily of compensation costs for personnel, including non-cash stock-based compensation expenses, third-party services, purchases of research supplies and materials, and consulting fees related to research and development.
The write-down and obsolescence provision for finished goods and components totaled $290,405, $519,950 and $1,273,835 for the years ended December 31, 2022, 2021 and 2020, respectively. These provisions are included in Cost of Sales on the Consolidated Statements of Operations.
The write-down and obsolescence provision for finished goods and components totaled $4,358,062, $290,405 and $519,950 for the years ended December 31, 2023, 2022 and 2021, respectively. These provisions are included in Cost of Sales on the Consolidated Statements of Operations.
Manufacturing overhead costs, not already added in Cost of Sales, decreased by $184,545 or 8% for the year ended December 31, 2022 over the 2021 comparable period to 19% as a percentage of total sales as compared to 18% in 2021.
Manufacturing overhead costs, not already added in Cost of Sales, decreased by $817,194 or 34% for the year ended December 31, 2022 over the 2021 comparable period to 13% as a percentage of total sales as compared to 18% in 2021.
Our current liabilities are comprised principally of accounts payable, accrued expenses, licensing fee commitments, and operating lease right-of-use liabilities. ​ Summary of Cash Flow: ​ The following table summarizes our select cash flows for the years ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ December 31, ​ 2022 2021 2020 Net Cash Provided by (used in) ​ ​ ​ Operating Activities ​ (24,521,082) ​ (26,980,411) ​ (13,964,053) Investing Activities ​ (21,170,816) ​ (4,852,452) ​ (1,485,513) Financing Activities ​ (1,948,032) ​ 115,967,228 ​ 40,912,983 ​ During the year ended December 31, 2022, we used $24,521,082 of cash for operating activities.
Our current liabilities are comprised principally of accounts payable, accrued expenses, licensing fee commitments, and operating lease right-of-use liabilities. ​ Summary of Cash Flow: ​ The following table summarizes our select cash flows for the years ended: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ December 31, ​ 2023 2022 2021 Net Cash Provided by (used in) ​ ​ ​ Operating Activities ​ (26,277,824) ​ (24,521,082) ​ (26,980,411) Investing Activities ​ (19,280,966) ​ (21,170,816) ​ (4,852,452) Financing Activities ​ (449,561) ​ (1,948,032) ​ 115,967,228 ​ During the year ended December 31, 2023, we used $26,277,824 of cash for operating activities.
The following table reflects the components of our cost of goods sold: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ ​ December 31, 2022 ​ Total Sales ​ December 31, 2021 ​ Total Sales ​ Change ​ (Decrease) ​ Product Cost of Sales ​ $ 6,815,981 58 % $ 7,832,397 59 % $ (1,016,416) (13) % Manufacturing Overhead - Unapplied ​ 2,212,276 19 % 2,396,821 18 % (184,545) (8) % Depreciation and Amortization ​ 799,317 7 % 1,321,467 10 % (522,150) (40) % Engineering Services Cost of Sales ​ 525,182 4 % 45,758 0 % 479,424 1,048 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Cost of Sales ​ ​ 10,352,756 87 % ​ 11,596,443 88 % ​ (1,243,687) (11) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit ​ $ 1,483,126 ​ 13 % $ 1,568,490 12 % $ (85,364) (5) % ​ For the year ended December 31, 2022, gross profit from total sales was $1,483,126 or 13% as compared to $1,568,490 or 12% in the same period in 2021.
The following table reflects the components of our cost of goods sold: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ ​ December 31, 2022 ​ Total Sales ​ December 31, 2021 ​ Total Sales ​ Change ​ (Decrease) ​ Product Cost of Sales ​ $ 7,448,630 63 % $ 7,832,397 59 % $ (383,767) (5) % Manufacturing Overhead - Unapplied ​ 1,579,627 13 % 2,396,821 18 % (817,194) (34) % Depreciation and Amortization ​ 799,317 7 % 1,321,467 10 % (522,150) (40) % Engineering Services Cost of Sales ​ 525,756 4 % 45,758 0 % 479,424 1,048 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Cost of Sales ​ ​ 10,352,756 87 % ​ 11,596,443 88 % ​ (1,243,687) (11) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit ​ $ 1,483,126 ​ 13 % $ 1,568,490 12 % $ (85,364) (5) % ​ For the year ended December 31, 2022 gross profit from total sales was $1,483,126 or 13% as compared to $1,568,490, or 12% in the same period in 2021.
In the event that it should be determined that all or part of a deferred tax asset in the future is more likely than not to be realized, an adjustment (reduction) of the valuation allowance would increase income to be recognized in the period such determination was made. 40 ​ Table of Contents In addition, the calculation of our deferred taxes involves dealing with uncertainties in the application of complex tax regulations.
In the event that it should be determined that all or part of a deferred tax asset in the future is more likely than not to be realized, an adjustment (reduction) of the valuation allowance would increase income to be recognized in the period such determination was made.
Provision for Income Taxes . There were no provisions for income taxes in 2022 or 2021. Liquidity and Capital Resources ​ Capital Resources: As of December 31, 2022, we had cash and cash equivalents of $72,563,943, a decrease of $47,639,930 from $120,203,873 as of December 31, 2021.
Provision for Income Taxes . There were no provisions for income taxes in 2022 or 2021. Liquidity and Capital Resources ​ Capital Resources: As of December 31, 2023, we had cash and cash equivalents of $26,555,592, a decrease of $46,008,351 from $72,563,943 as of December 31, 2022.
For the year ended December 31, 2021, we used a total of $26,980,411 in cash for operating activities.
For the year ended December 31, 2022, we used a total of $24,521,082 in cash for operating activities.
For the year ended December 31, 2021, we used a total of $4,852,452 in cash for investing activities.
For the year ended December 31, 2022, we used a total of $21,170,816 in cash for investing activities.
For the years ended December 31, 2022 and 2021, we recorded a loss on fixed asset disposal of $35,350 and $183,614, respectively, upon the retirement of certain tooling and manufacturing equipment assets no longer in use. No loss on fixed asset disposal charges on tooling and equipment were recorded in 2020.
For the years ended December 31, 2023, 2022 and 2021, we recorded a loss on fixed asset disposal of nil, $35,350, and $183,614, respectively, upon the retirement of certain tooling and manufacturing equipment assets no longer in use. We perform a valuation of our patents and trademark assets when events or circumstances indicate their carrying amounts may be unrecoverable.
During the year ended December 31, 2022, we used $1,948,032 in net cash from financing activities, which included $2,005,744 for share repurchases under our Share Buyback Program that was announced on March 2, 2022, and partially offset by $57,712 in proceeds from the exercise of stock options.
During the year ended December 31, 2023, we used $449,561 in net cash from financing activities, which included $21,196 received for stock option exercises, which was offset by $470,757 expended for share repurchases under our Share Buyback Program that expired on March 2, 2023. For the year ended December 31, 2022, we used $1,948,032 in net cash for financing activities.
Selling and marketing costs consist of trade show costs, advertising, sales samples, travel costs, sales staff compensation costs including stock-based compensation expense, consulting fees, public relations agency fees, website costs and sales commissions paid to full-time staff and outside consultants. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ ​ December 31, 2021 ​ Total Sales ​ December 31, 2020 ​ Total Sales ​ Change ​ (Decrease) ​ Selling and Marketing ​ $ 6,118,929 46 % $ 4,039,772 35 % $ 2,079,157 51 % ​ Selling and marketing costs for the year ended December 31, 2021, increased by $2,079,157 or 51% as compared to 2020.
Selling and marketing expenses consist of trade show costs, advertising, sales samples, travel costs, sales staff compensation costs including stock-based compensation expense, consulting fees, public relations agency fees, website costs and sales commissions paid to full-time staff and outside consultants. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ ​ December 31, 2023 ​ Total Sales ​ December 31, 2022 ​ Total Sales ​ Change ​ (Decrease) ​ Selling and Marketing ​ $ 12,711,800 105 % $ 8,078,538 68 % $ 4,633,262 57 % ​ Selling and marketing expenses for the year ended December 31, 2023, increased by $4,633,262 or 57%, compared to the comparable period in 2022.
There was an increase in total sales for the year ended December 31, 2021 from those in 2020 of $1,583,437 or 14%.
There was an increase in total sales for the year ended December 31, 2023, from those achieved in 2022 of $293,257, or 2%.
The value of the remaining intellectual property, such as patents and trademarks, was valued (net of accumulated amortization) at $2,220,094 as of December 31, 2022, because management believes that this value is recoverable.
For the years ended December 31, 2023, 2022 and 2021, there was an impairment charge of $41,869, $97,675 and $80,163, respectively. The value of the remaining intellectual property, such as patents and trademarks, was valued (net of accumulated amortization) at $2,627,018 as of December 31, 2023, because management believes that this value is recoverable.
As a result, we recognize liabilities for uncertain tax positions based on the two-step process prescribed by GAAP.
In addition, the calculation of our deferred taxes involves dealing with uncertainties in the application of complex tax regulations. As a result, we recognize liabilities for uncertain tax positions based on the two-step process prescribed by GAAP.
The Company’s cash requirements are primarily for funding operating losses, working capital, research and development, capital expenditures, and license fee commitments.
The Company’s cash requirements are primarily for funding operating losses, working capital, research and development, capital expenditures, and license fee commitments. Our operations have historically been financed primarily through net proceeds from the sale of our equity securities.
For the year ended December 31, 2021, we received $115,967,228 in proceeds from financing activities, primarily from sales of our equity securities. 48 ​ Table of Contents As of December 31, 2022, the Company does not have any current or long-term debt obligations outstanding other than licensing fee commitments totaling $11,500,000 related to the Atomistic Agreements described in Note 7 of the consolidated financial statements.
As of December 31, 2023, the Company does not have any current or long-term debt obligations outstanding other than licensing fee commitments totaling $1,000,000 related to the Atomistic Agreements described in Note 7 of the consolidated financial statements.
This program is in effect for one year, does not obligate the Company to acquire any particular amount of common stock and may be suspended or discontinued at any time at the Company’s sole discretion. ​ Equity Compensation Plan Information The following table provides information about our equity compensation plan as of December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Weighted ​ ​ ​ Securities to ​ Average ​ ​ ​ ​ be Issued ​ Exercise Price ​ Number of ​ ​ Upon Exercise ​ of ​ Securities ​ ​ of Outstanding ​ Outstanding ​ Remaining ​ ​ Options, ​ Options, ​ Available for ​ ​ Warrants and ​ Warrants and ​ Future Issuance Plan Category ​ Rights ​ Rights ​ (1) Equity compensation plans approved by security holders 8,589,673 ​ $ 15.34 1,495,760 Equity compensation plans not approved by security holders — ​ — — Total 8,589,673 ​ $ 15.34 1,495,760 (1) The amount appearing under “Number of securities remaining available for future issuance” includes shares available under our 2014 Equity Incentive Plan.
Unregistered Sales of Equity Securities and Use of Proceeds Sales of Unregistered Securities - none ​ Purchase of Equity Securities - none ​ ​ ​ ​ ​ Equity Compensation Plan Information The following table provides information about our equity compensation plan as of December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of Weighted ​ ​ ​ Securities to ​ Average ​ ​ ​ ​ be Issued ​ Exercise Price ​ Number of ​ ​ Upon Exercise ​ of ​ Securities ​ ​ of Outstanding ​ Outstanding ​ Remaining ​ ​ Options, ​ Options, ​ Available for ​ ​ Warrants and ​ Warrants and ​ Future Issuance Plan Category ​ Rights ​ Rights ​ (1) Equity compensation plans approved by security holders 8,695,308 ​ $ 12.64 3,849,804 Equity compensation plans not approved by security holders — ​ — — Total 8,695,308 ​ $ 12.64 3,849,804 (1) The amount appearing under “Number of securities remaining available for future issuance” includes shares available under the Company’s 2023 Equity Incentive Plan (the “2023 Plan”).
During the year ended December 31, 2022, we used $21,170,816 of cash for investing activities, which included $16,500,000, in payments made towards our $30,000,000 technology license fee commitment (as discussed in Note 7), $2,300,000 for the purchase price for the Moviynt acquisition (as discussed in Note 2), $1,723,622 for purchases of manufacturing equipment and product mold tooling; $499,031 in patent and trademark expenditures; and a further investment of $125,000 in the purchase of software operating license upgrades for our smart glasses platform.
During the year ended December 31, 2023, we used $19,280,966 of cash for investing activities, which included $10,500,000 in further payments made towards our technology license fee commitment with Atomistic, as discussed in Note 7, $5,323,483 for purchases of manufacturing equipment and leasehold improvement expenditures primarily related to our waveguide expansion project; a $2,500,000 investment in preferred shares of Atomistic, as discussed in Note 2; $632,483 in patent and trademark expenditures; a further investment of $125,000 in the purchase of software operating license upgrades for our smart glasses platform; and an additional $200,000 of investments in private corporations as discussed in Note 9.
Software development expenses to determine technical feasibility before final development and ongoing maintenance are not capitalized and are included in research and development costs. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ ​ December 31, 2021 ​ Total Sales ​ December 31, 2020 ​ Total Sales ​ Change ​ (Decrease) ​ Research and Development ​ $ 11,674,954 89 % $ 7,568,074 65 % $ 4,106,880 54 % ​ Research and development costs for the year ended December 31, 2021, increased by $4,106,880 or 54% as compared to 2020.
Software development expenses to determine technical feasibility before final development and ongoing maintenance are not capitalized and are included in research and development expenses. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ ​ December 31, 2023 ​ Total Sales ​ December 31, 2022 ​ Total Sales ​ Change ​ (Decrease) ​ Research and Development ​ $ 12,339,534 102 % $ 12,676,688 107 % $ (337,154) (3) % ​ Research and development expenses for the year ended December 31, 2023, decreased by $337,154, or 3%, compared to the comparable period in 2022.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market for our Common Stock Our common stock is listed on the NASDAQ Capital Market under the symbol “VUZI”.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Holders of Record As of April 15, 2024, there were 64 holders of record of our common stock.
Net changes in working capital items were $2,544,394 for the year ended December 31, 2022, with the largest factors resulting from a $2,052,376 increase in trade accounts receivables and other accrued receivables and a decrease of $591,784 in net trade payables and accrued expenses, partially offset by a $98,988 decrease in inventory and vendor prepayments.
Net changes in working capital items were $1,882,446 for the year ended December 31, 2023, with the largest factors resulting from a $1,480,923 increase in trade accounts receivable, net of reserve, and accrued revenue in excess of billings; a $1,495,653 decrease in inventory and vendor prepayments; and a $1,104,787 decrease in trade accounts payable and accrued expenses.
General and administrative costs include professional fees, investor relations (IR) costs, salaries and related stock compensation, travel costs, office and rental costs. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ ​ December 31, 2021 ​ Total Sales ​ December 31, 2020 ​ Total Sales ​ Change ​ (Decrease) ​ General and Administrative ​ $ 22,502,833 171 % $ 6,915,213 60 % $ 15,587,620 225 % ​ General and administrative costs for the year ended December 31, 2021, increased by $15,587,620 or 225% as compared 2020.
General and administrative expenses include professional fees, investor relations (IR) costs, salaries and related stock compensation, travel costs, office and rental costs. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ ​ December 31, 2023 ​ Total Sales ​ December 31, 2022 ​ Total Sales ​ Change ​ (Decrease) ​ General and Administrative ​ $ 18,592,185 153 % $ 21,038,562 178 % $ (2,446,377) (12) % ​ General and administrative expenses for the year ended December 31, 2023 decreased by $2,446,377, or 12% compared to the comparable period in 2022.
As of December 31, 2022, we had current assets of $91,241,241 as compared to current liabilities of $15,277,358 which resulted in a positive working capital position of $75,963,883. As of December 31, 2021, we had a working capital position of $132,994,189.
As of December 31, 2023, we had current assets of $41,500,411 as compared to current liabilities of $5,216,152, which resulted in a positive working capital position of $36,284,259. As of December 31, 2022, we had a working capital position of $75,354,727.
Revenue Recognition The Company adopted the guidance on Revenue from Contracts with Customers under FASB ASC Topic 606, “Revenue from Contracts with Customers”, as of January 1, 2018. Product sales represent the majority of the Company’s revenue.
The unamortized software development costs remaining were valued (net of accumulated amortization) at $361,111 as of December 31, 2023. Management believes that this value is recoverable. Revenue Recognition The Company adopted the guidance on Revenue from Contracts with Customers under FASB ASC Topic 606, “Revenue from Contracts with Customers”, as of January 1, 2018.
Software Development Costs The Company capitalizes the costs of obtaining and developing its software once technological feasibility has been determined by management or of purchased software solutions when placed into service. Such costs are accumulated and capitalized. These projects could take several years to complete. The capitalized costs are then amortized over 3 years on a straight-line basis.
Such costs are accumulated and capitalized. These projects could take several years to complete. The capitalized costs are then amortized over 3 years on a straight-line basis. Unsuccessful or discontinued software projects are written off and expensed in the fiscal period where the application is abandoned or discontinued.
Costs to acquire a business may include, but are not limited to, fees for accounting, legal and valuation services, and are expensed as incurred in the Consolidated Statements of Income. 38 ​ Table of Contents Variable Interest Entities We determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have other variable interests is considered a variable interest entity (VIE).
It presumes that a Company will continue normal business operations into the future. ​ Variable Interest Entities We determine at the inception of each arrangement whether an entity in which we have made an investment or in which we have other variable interests is considered a variable interest entity (VIE). We consolidate VIEs when we are the primary beneficiary.
The following table reflects the major components of our sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ ​ December 31, 2021 ​ Total Sales ​ December 31, 2020 ​ Total Sales ​ Change ​ (Decrease) ​ Sales of Smart Glasses ​ $ 12,784,600 97 % $ 10,081,209 87 % $ 2,703,391 27 % Sales of Engineering Services ​ 380,333 3 % 1,500,287 13 % (1,119,954) (75) % Total Sales ​ $ 13,164,933 100 % $ 11,581,496 100 % $ 1,583,437 14 % ​ Sales of Smart Glasses products rose by $2,703,391 or 27% in the year ended December 31, 2021, primarily as a result of continued growth of our M400 model and M4000 Smart Glasses sales, as compared to the same period in 2020.
The following table reflects the major components of our sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended % of Year Ended % of Dollar % Increase ​ ​ ​ December 31, 2023 ​ Total Sales ​ December 31, 2022 ​ Total Sales ​ Change ​ (Decrease) ​ Sales of Products ​ $ 10,760,352 89 % $ 10,505,763 89 % $ 254,589 2 % Sales of Engineering Services ​ 1,368,787 11 % 1,330,119 11 % 38,668 3 % Total Sales ​ $ 12,129,139 100 % $ 11,835,882 100 % $ 293,257 2 % ​ Sales of products increased by 2% for the year ended December 31, 2023, compared to the same period in 2022.
Other Income (Expense), Net . Total other expense, net was $397,053 for the year ended December 31, 2021 as compared to income of $1,175,292 in the period in 2020.
The increase in this expense is primarily due to the amortization of our technology license related to the Atomistic Agreements, which began on May 12, 2022. Other Income (Expense), Net . Total other income was $2,152,462 for the year ended December 31, 2023, as compared to $1,468,698 in the same period in 2022, an increase of $683,764.
As of December 31, 2022, our principal sources of liquidity consisted of cash and cash equivalents of $72,563,943. ​ Contractual Obligations The following is a summary of our contractual payment obligations as of December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than ​ ​ ​ ​ ​ ​ More than Contractual Obligations ​ Total ​ 1 Year ​ 1-3 Years ​ 3-5 Years ​ 5 Years Operating Lease Obligations $ 1,021,753 $ — $ 1,021,753 — — Licensing Fees Commitment ​ ​ 11,500,000 ​ 11,500,000 ​ — — — Open Purchase Obligations ​ 8,082,184 ​ 8,082,184 ​ — — — ​ ​
However, management can make no assurance that the Company will be able to raise additional capital, reduce expenses sufficiently, or enter into a strategic transaction on terms acceptable to the Company, or at all. ​ Contractual Obligations The following is a summary of our contractual payment obligations as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than ​ ​ ​ ​ ​ ​ More than Contractual Obligations ​ Total ​ 1 Year ​ 1-3 Years ​ 3-5 Years ​ 5 Years Operating Lease Obligations $ 324,102 $ 191,120 $ 132,982 — — Licensing Fees Commitment ​ ​ 1,000,000 ​ 1,000,000 ​ — — — Open Purchase Obligations ​ 3,569,012 ​ 3,569,012 ​ — — — ​ ​
Removed
Company Stock Performance The following graph shows a five-year comparison of cumulative total shareholder return for the Company, the NASDAQ US Benchmark TR Index and the S&P 500 Information Technology index.
Added
A substantially greater number of holders of the Company’s common stock are in “street name” or beneficial holders whose shares are held by banks, brokers and other financial institutions. Issuer Purchases of Equity Securities We did not purchase equity securities that are registered under Section 12 of the Exchange Act during the three months ended December 31, 2023.
Removed
The graph assumes $100 was invested in each of the Company’s common stock, the NASDAQ Composite Index and the S&P 500 Information 34 ​ Table of Contents Technology index on December 31, 2017. Data points on the graph are annual. Note that historical price performance is not necessarily indicative of future performance.
Added
The Company’s 2023 Plan was approved by the stockholders of the Company on June 15, 2023. The Company no longer issues any options under its prior 2014 Plan. The 2023 Plan no longer contains an “evergreen provision”. Refer to Note 14 for further details. Item 6 . [Reserved] ​ ​ 34 ​ Table of Contents Item 7 .
Removed
Holders of Record As of March 1, 2023, there were 61 holders of record of our common stock. Dividends We have not historically and currently do not pay dividends on our outstanding common stock.
Added
Going Concern For all annual and interim periods, management will assess going concern uncertainty in our consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in U.S.
Removed
The declaration of any future dividends and, if declared, the amount of any such dividends, will be subject to our actual future earnings, capital requirements, regulatory restrictions, any applicable contractual restrictions and at the discretion of our Board of Directors.
Added
GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions.
Removed
Our Board of Directors may take into account such matters as general business conditions, our financial condition and results of operations, our capital requirements, our prospects and such other factors as our Board of Directors may deem relevant.
Added
These assumptions including among other factors, the expected timing and nature of our programs and projected cash expenditures, our ability to delay or curtail these expenditures or programs and our ability to raise additional capital, if necessary, to the extent management has the proper authority to execute them and considers it probable that those implementations can be achieved within the look-forward period.
Removed
Shares of Series A Preferred stock were entitled to receive dividends at a rate of 6% per year, compounded quarterly and payable in cash or in kind, at our discretion. On January 28, 2021, the holder converted all of its shares of Series A Preferred Stock into 4,962,600 shares of common stock.
Added
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of liabilities in the normal course of business.
Removed
The shares of Series A Preferred were retired and cannot be reissued.
Added
These consolidated financial statements do not include any adjustments to the 36 ​ Table of Contents specific amounts and classifications of assets and liabilities, which might be necessary should we be unable to continue as a going concern.
Removed
On the same date, the Company and the holder entered into a Dividend Settlement Agreement pursuant to which the holder agreed to accept $10,000,000 in cash in full payment of all accrued Series A Preferred Stock dividends in the approximate amount of $10,800,000. 35 ​ Table of Contents Issuer Purchases of Equity Securities We did not purchase equity securities that are registered under Section 12 of the Exchange Act during the year ended December 31, 2022.
Added
The Company incurred net losses of $50,149,077 for the year ended December 31, 2023, $40,763,573 for the year ended December 31, 2022, and $40,377,160 for the year ended December 31, 2021.
Removed
Unregistered Sales of Equity Securities and use of Proceeds Sales of Unregistered Securities - none ​ Purchase of Equity Securities: ​ ​ ​ ​ ​ Period Total number of shares purchased (1) Average price paid per share (1) Total number of shares purchased under the Company's Share Buyback Program (1) Maximum dollar value that may yet be purchased (1) March 30 - 31, 2022 36,685 $ 6.84 36,685 $ 24,748,906 November 29 – December 31, 2022 ​ 427,987 ​ $ 4.10 ​ 427,987 ​ $ 22,994,256 ​ (1) On March 2, 2022, our Board of Directors approved the repurchase by the Company of up to an aggregate of $25 million of our common stock by open market or privately negotiated transactions under the Share Buyback Program.
Added
The Company had net cash outflows from operations of $26,277,824 for the year ended December 31, 2023, $24,521,082 for the year ended December 31, 2022, and $26,980,411 for the year ended December 31, 2021, respectively. As of December 31, 2023, the Company had an accumulated deficit of $293,984,793.
Removed
The 2014 Plan (as amended) has an “evergreen provision”, under which the maximum number of shares of common stock that may be issued under the 2014 Plan automatically increases each time the Company issues additional shares of common stock so that the total number of shares issuable thereunder at all times equals 20% of the then outstanding shares of common stock, unless in any case the Board of Directors adopts a resolution providing that the number of shares issuable under the 2014 Plan not be so increased.
Added
The Company’s cash outflows for investing activities was $19,280,966 for the year ended December 31, 2023, $21,170,816 for the year ended December 31, 2022, and $4,852,452 for the year ended December 31, 2021. ​ These factors initially raise substantial doubt about the Company’s ability to continue as a going concern.
Removed
Refer to Note 14 for further details. Item 6 . [Reserved] ​ ​ 36 ​ Table of Contents Item 7 .
Added
Management’s plans to alleviate the conditions that raise substantial doubt include operational improvements being implemented and the curtailment of certain development programs, both of which the Company expects to preserve cash. ​ The Financial Accounting Standards Board (FASB) issued Accounting Standards Update No.
Removed
Business Combinations The Company applied the acquisition method of accounting for business acquisitions for its business acquisition, described in further detail in Note 2. Under the acquisition method, identifiable assets acquired, liabilities assumed and consideration transferred are measured at their acquisition-date fair value.
Added
(ASU) 2014- 15, Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. As a result, management is primarily responsible for assessing if there is a going concern issue when issuing an entity’s financial statements.
Removed
The Company used an income approach to determine the fair values, described in further detail in Note 2. We relied upon the use of reports from third-party valuation specialists to assist in the estimation of fair values. Purchase price allocations are subject to revision within the measurement period, not to exceed one year from the date of acquisition.
Added
The going concern assumption underlies all GAAP financial reporting and therefore requires and assumes that the financial statements have been prepared on a going concern basis.
Removed
We perform a valuation of our patents and trademark assets when events or circumstances indicate their carrying amounts may be unrecoverable. For the years ended December 31, 2022, 2021 and 2020, there was an impairment charge of $97,675, $80,163 and $73,532, respectively.
Added
We perform a valuation of our goodwill and other intangible assets for impairment at least annually, or more frequently if events or changes in circumstances indicate a potential impairment trigger.
Removed
Unsuccessful or discontinued software projects are written off and expensed in the fiscal period where the application is abandoned or discontinued. The unamortized software development costs remaining were valued (net of accumulated amortization) at $500,000 as of December 31, 2022. Management believes that this value is recoverable.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur investment policy generally directs our investment managers to select investments to achieve the following goals: principal preservation, adequate liquidity, and return. 49 ​ Table of Contents We are exposed to changes in foreign currency exchange rates primarily through the translation of our foreign subsidiary’s financial positions, results of operations, and transaction gains and losses as a result of non-U.S. dollar denominated cash flows related to business activities in Asia and the United Kingdom, and re-measurement of U.S. dollars to the functional currency of our foreign subsidiaries.
Biggest changeWe are exposed to changes in foreign currency exchange rates primarily through the translation of our foreign subsidiary’s financial positions, results of operations, and transaction gains and losses as a result of non-U.S. dollar denominated cash flows related to business activities in Asia and Europe, and re-measurement of U.S. dollars to the functional currency of our foreign subsidiaries.
We are also exposed to the effects of exchange rates in the purchase of certain raw materials whose price is in U.S. dollars but the price on future purchases is subject to change based on the relationship of the Japanese Yen to the U.S. Dollar. We do not currently hedge our foreign currency exchange rate risk.
We are also exposed to the effects of exchange rates in the purchase of certain raw materials whose price is in U.S. dollars but the price on future purchases is subject to change based on the relationship of the Japanese Yen/Euro to the U.S. Dollar. We do not currently hedge our foreign currency exchange rate risk.
Added
Our investment policy generally directs our investment managers to select investments to achieve the following goals: principal preservation, adequate liquidity, and return.

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