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What changed in Vuzix Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Vuzix Corp's 2023 and 2024 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 2024 report.

+317 added−400 removedSource: 10-K (2025-03-13) vs 10-K (2024-04-15)

Top changes in Vuzix Corp's 2024 10-K

317 paragraphs added · 400 removed · 218 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

61 edited+65 added−132 removed5 unchanged
Biggest changeTo 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.
Biggest changeWe seek to generate revenue and ultimately profitable growth through the continued introduction of market leading technologies, including AI/AR Smart Glasses, waveguides and display engines, software applications and solutions. 2 ​ Table of Contents To broaden our position as a leading provider of wearable display products for AI/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; ● expand waveguide production and optimization by enhancing manufacturing efficiencies, reducing costs, and maintaining proprietary process protections to ensure competitive market positioning; ● establish mass production partnerships with leading ODMs/OEMs to accelerate the adoption of next-generation AI/AR Smart Glasses and wearable computing solutions; ● sell our waveguide products to ODMs and OEMs as a standard product or on a custom order basis to meet their design requirements; ● expand licensing and technology partnerships, allowing third-party companies to incorporate and white-label our smart glasses and optical technologies into their branded product lines; ● develop new microdisplay engine products utilizing third-party displays; ● extend our innovative and proprietary technology leadership; ● develop, promote and enhance the development of third-party software and our own that can take advantage of our products, including offering apps and software through our own “app store”; ● enhance and protect our intellectual property portfolio; ● leverage third-party technology and marketing strategic relationships; and ● attract and retain highly qualified personnel.
Our general practice is to file patent applications for our technology in the United States, Europe, Japan, and in additional countries, including Canada and China, for inventions which we believe have the greatest potential.
Our general practice is to file patent applications for our technology in the United States, Europe, Japan, and additional countries, including Canada and China, for inventions which we believe have the greatest potential.
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.
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, and nominating committees and our code of ethics, corporate governance guidelines and whistleblower policy.
We believe that the principal competitive factors in the personal display industry include image size, image quality, image resolution, power efficiency, manufacturing cost, weight and dimension, feature implementation, AR capabilities, ergonomics, style, hands-free capabilities and, lastly, the interactive capabilities of the overall display system.
We believe that the principal competitive factors in the personal display industry include image size, image quality, image resolution, power efficiency, manufacturing cost, weight and dimension, feature implementation, AI and AR capabilities, ergonomics, style, hands-free capabilities and, lastly, the interactive capabilities of the overall display system.
For warehousing, we have contracted with a third-party fulfillment center based in the UK and the Netherlands to service our customers in the EMEA. We also currently serve other APAC customers through North American (West Coast) and Tokyo sales offices.
For warehousing, we have contracted with a third-party fulfillment center based in the Netherlands to service our customers in EMEA. We also currently serve other APAC customers through North American (West Coast) and Tokyo sales offices.
App Store for Smart Glasses We also have an app store on our website where users can download and purchase Smart Glasses applications, including third-party apps.
We also have an app store on our website where users can download and purchase Smart Glasses applications, including third-party apps.
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
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. 12 ​ Table of Contents Reference in this report to “Vuzix”, the “Company”, “we,” “us,” “our” and similar words refer to Vuzix Corporation and its wholly-owned subsidiary.
To protect our rights in these areas, we require all employees and, where appropriate, contractors, consultants, advisors and collaborators, to enter into confidentiality, invention assignment, and non-competition agreements with us. Our technologies enable us to provide low-cost, small form factor, high-resolution wearable display products.
To protect our rights in these areas, we require all employees and, where appropriate, contractors, consultants, advisors and collaborators, to enter into confidentiality, invention assignment, and non-competition agreements with us. Our technologies enable us to provide lower cost, small form factor, high resolution wearable display products.
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.
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 17, “Geographic and Other Financial Information” in the notes to our consolidated financial statements.
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.
There is competition in all types of smart glasses 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.
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.
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 9 ​ Table of Contents 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 introduced our first HMD products over 25 years ago and we have offered numerous product models and versions with ever-advancing features and capabilities that have served these three markets.
We introduced our first HMD products for VR over 25 years ago and we have offered numerous product models and versions with ever-advancing features and capabilities that have served these three markets.
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.
We continue to foster the development of an ecosystem of third-party developers to offer applications and demo 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.
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.
To protect our technologies, we have developed a patent portfolio which currently consists of 246 issued U.S. and foreign patents and 180 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.
As we manufacture our waveguides and display engines in higher volumes at reduced costs and capitalize on our waveguide manufacturing expertise, we believe that our products will be increasingly well-positioned to compete with other see-through optics and displays, particularly as demand expands for sophisticated mobile computing devices offering higher resolution and better image quality for AR/XR and Smart Glasses applications.
As we manufacture our waveguides and capitalize on our waveguide manufacturing expertise in higher volumes, and at reduced per unit costs, we believe that our products will be increasingly well-positioned to compete with other see-through optics and displays, particularly as demand expands for sophisticated mobile computing devices offering higher resolution and better image quality for AI/AR and smart glasses applications.
We also believe our copyrights, trademarks, and patents are critical to our success and we intend to maintain and protect these. We also rely on proprietary technology, trade secrets, and know-how, including manufacturing processes and procedures, which are not patented.
We also believe our copyrights, trademarks, and patents are critical to our success and we intend to maintain and protect these. We also rely on proprietary technology, trade secrets, and know-how, including manufacturing processes and procedures, which are 8 ​ Table of Contents not patented.
Our History Historically, we have focused on three markets: the consumer markets for VR, entertainment and mobile video; Smart Glasses products for enterprise; and night-vision display electronics and rugged mobile displays for defense markets.
Our History Historically, we have focused on three markets: the consumer markets for VR, entertainment, and mobile video; Smart Glasses products for enterprise; and rugged mobile displays for defense markets.
Our relationship with these micro-display suppliers is generally on a purchase order basis and none have a contractual obligation to provide adequate supply or acceptable pricing to us on a long-term basis, nor do we have any contractual obligation to purchase micro-displays from them. We have operated this way for over a decade with these suppliers.
Our relationship with these micro-display suppliers is generally on a purchase order basis and none have a contractual obligation to provide adequate supply or acceptable pricing to us on a long-term basis, nor do we have any contractual obligation to purchase micro-displays from them.
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.
Our business strategy is to commercialize our waveguide 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.
For our Smart Glasses, we continue to foster an ecosystem with application developers from around the world. We also have our own hosted application store where our Smart Glasses customers can download and purchase applications and software developer kits.
For our Smart Glasses, we continue to foster an ecosystem with application developers from around the world. We also have our own hosted application store where our Smart Glasses customers can download and purchase applications and software developer kits. We also sell our products internationally, mainly in Japan and Europe.
This technology is unique in that it plugs directly into the customer’s SAP environment and does not require any new hardware, middleware or intermediate servers to process warehouse and logistics related transactions such as cycle counts and picks and transfers on the shop floor.
This technology is unique in that it plugs directly into the customer’s SAP environment and does not require any new hardware, middleware or intermediate servers to process warehouse and logistics-related transactions such as cycle counts and picks and transfers on the shop floor. Moviynt’s technology is also being made compatible with other ERP systems.
We 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 the demand for head-worn displays in these markets is being driven by the following: ● the continued growth of mobile computing devices; ● the exploding use of AI with its potential to change how most people live, work and play; ● the growing use of AR/AI applications that will drive the need for head-worn display solutions to replace the need to hold up handheld devices to use the applications; and ● the expansion of IoT that enables the exchange of information among smart connected devices to improve timeliness and visibility where real-time data improves productivity and decision-making.
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.
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 some of the fundamental benefits of Smart Glasses to novice and expert users alike.
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.
These displays are designed to be handheld and small to make portability easy. Our products provide hands-free virtual large screens that are interactive and fit into conventional eyeglass form factors. These AR-based displays can deliver a large-screen virtual experience, and they are designed to be "see-through" or "see-around" and allow the user to still see and interact with their surroundings.
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.
Overall Strategy Our goal is to establish and maintain a leadership position as a worldwide supplier of waveguides for AI/AR Smart Glasses and wearable displays for our own product needs and third-party ODMs and OEMs.
While we do not manufacture our components, other than waveguides, we do own the tooling that is used to make our custom components. Some of our accessory products are sourced from third parties as finished goods. We typically have them print our Vuzix brand name on these products if they are co-branded.
While we do not manufacture our raw components, other than waveguides, we do own the tooling that is used to make our custom components. Most of such tooling is located primarily in China. Some of our accessory products are sourced from third parties as finished goods.
We are currently working with multiple partners on microLED engines, both monochrome and color, and have delivered preliminary evaluation systems to select partners and potential OEM customers. 10 ​ Table of Contents Patents and Other Intellectual Property We have an intellectual property policy which has as its objectives: (i) the development of new intellectual property to further our position in personal display technology; and (ii) the maintenance and protection of our valuable trade secrets and know-how.
Patents and Other Intellectual Property We have an intellectual property policy which has as its objectives: (i) the development of new intellectual property to further our position in personal display technology; and (ii) the maintenance and protection of our valuable trade secrets and know-how.
Moviynt’s SAP studio product is highly configurable and allows customers to customize and optimize specific mobile workflows for a given use case. Moviynt’s core technology and architecture consists of a certified SAP gateway module, IOS and Android client and mobile apps that run on a wide range of handhelds and wearables.
Moviynt’s core technology and architecture consists of a certified SAP gateway module, iOS and Android client and mobile apps that run on a wide range of handhelds and wearables.
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 Americas and 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 our ODM and OEM customers, we primarily supply waveguides, display engines, and Smart Glasses platforms for integration into branded products.
We believe that our strong Company culture is a key enabler of our success. The values of accountability, integrity, teamwork, agility, and innovation are central to our culture and how we operate and work together. We take proactive steps to ensure that this culture continues to permeate throughout our organization.
This commitment directly shapes our approach to fostering a culture of inclusion and diversity and ensuring employees can reach their potential. We believe that our strong Company culture is a key enabler of our success. The values of accountability, integrity, teamwork, agility, and innovation are central to our culture and how we operate and work together.
In regard to sales of custom products and waveguides to our OEM customers, we believe that the backlog metric is currently of limited utility in predicting future sales because all these OEM customers operate on a ship-to-order basis. Therefore, we believe at this time that backlog information is not material to the understanding of our business.
Most purchase orders we receive are subject to rescheduling or cancellation by the customer with no or limited penalties. With regard to sales of custom products and waveguides to our ODM/OEM customers, we believe that the backlog metric is currently of limited utility in predicting future sales because all these ODM/OEM customers operate on a ship-to-order basis.
Applications for Smart Glasses Dozens of standard applications that are optimized for use with the growing lineup of Vuzix AR Smart Glasses are included on the devices and available for download from the Vuzix App Store. Many of these applications are similar to what is available to the customer with modern smart phones.
The Mobilium software solution can now work with Vuzix smart glasses, mobile phones, and industry standard smart barcode data collection terminals. Applications for Smart Glasses Dozens of standard applications that are optimized for use with the growing lineup of Vuzix AR Smart Glasses are included on the devices or available for download from the Vuzix App Store.
Item 1. Business Company Overview Incorporated in Delaware in 1997, Vuzix Corporation ("Vuzix” or "the Company”) is a leading designer, manufacturer and marketer of Smart Glasses and Augmented Reality (AR) technologies and products for the enterprise, medical, defense and consumer markets.
Item 1. Business Company Overview Incorporated in Delaware in 1997, Vuzix Corporation ("Vuzix" or "the Company") is a leading designer, manufacturer, and marketer of Artificial Intelligence (AI)-powered Smart Glasses, Waveguides, and Augmented Reality (AR) technologies. Our solutions serve the enterprise, medical, defense, security, and select consumer markets, offering cutting-edge wearable computing and display technologies that enhance productivity and operational efficiency.
Such third-party products represented less than 5% of our sales in last three fiscal years. 14 ​ Table of Contents Our manufacturing is not currently subject to seasonal variations, but in the future, depending upon our customers’ product mix, we may be affected by seasonal fluctuations which could affect working capital demands.
Our manufacturing is not currently subject to seasonal variations, but in the future, depending upon our customers’ product mix, we may be affected by seasonal fluctuations which could affect working capital demands. Backlog There is a relatively short cycle between order and shipment of our product sales.
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.
We believe that interactive AR content, Edge Computing, and internet of things (“IoT”) will further transform how digital content and intelligence is delivered and experienced through head worn displays, including the enabling of new experiences that cannot be experienced in any other way. 3 ​ Table of Contents Current mobile display technology is almost universally based upon direct view screens.
Competition – Binocular Wearable Display Products Vuzix AR Smart Glasses competitors include binocular wearable displays and virtual reality systems, using micro-displays or smaller flat panels. Examples of such companies include or have included Carl Zeiss, Seiko Epson (Epson), Sony Corporation, Microsoft Corporation, Avegant Corp., Meta (formerly Oculus/Facebook), HTC Corporation, Razer Inc., HP, Lenovo and many others.
Examples of such companies include or have included Carl Zeiss, Seiko Epson (Epson), Sony Corporation, Microsoft Corporation, Apple, Avegant Corp., Meta (formerly Oculus/Facebook), HTC Corporation, Razer Inc., HP, Lenovo, Snap, Xreal, TLC, Huawei and many others.
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.
We procure components from suppliers, contract manufacturers for electronic circuit board and cable assemblies, and perform final product assembly at our West Henrietta, New York facility. This facility enables efficient, cost-effective production, with the capability to manufacture thousands of units annually. We are experienced in the successful production of our products in moderate volumes.
Many of the raw materials used in our components are standard to the consumer electronics and computer industry. We provide forecasts that allow our contract manufacturers to stock component parts and other materials and plan capacity. Our contract manufacturers procure raw materials in volumes consistent with our forecasts, manufacture and/or assemble the products and perform tests according to our specifications.
We generally procure our other non-micro-display components and products from our vendors on a purchase order basis without any long-term commitments. Many of the raw components used in our products are standard to the consumer electronics and computer industry. We provide forecasts that can allow our contract manufacturers to stock component parts and other materials and plan capacity.
We believe that the continued introduction of innovative products in our target markets is essential to our growth. Our products tend to have life cycles that span less than 5 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.
We believe that the continued introduction of innovative products and components in our target markets is essential to our growth. Our products tend to have life cycles that span less than 5 years, necessitating ongoing investment in research, development, and next-generation product evolution.
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.
We currently undertake specific marketing activities as needed, including, but not limited to: ● product reviews, case studies and promotions in relevant trade publications; ● white papers, targeted emails and customer success stories; ● social media, website content, and targeted digital advertising; ● public relations and media outreach; and ● trade shows and industry conferences.
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.
We strive to be an innovator in designing wearable display devices and computers as well as waveguide optics that can enable hands-free enterprise productivity applications, see-what-I see remote viewing, and AI and AR applications.
We believe that our monocular products match or exceed the display products currently offered by our competitors. Competition – Waveguides and Display Engines There are a limited number of manufacturers of waveguide optics, all targeted at OEM producers of AR and smart glasses.
We believe that our monocular products match or exceed the display products currently offered by our competitors. Competition – Waveguides and Display Engines The waveguide and display engine market is growing and evolving rapidly as more companies develop AI/AR-enabled smart glasses.
We consider our relations with our employees to be very good.
We take proactive steps to ensure that this culture continues to permeate throughout our organization. We consider our relations with our employees to be very good.
Despite their size, VR headsets from companies like Meta and Sony have been selling in the millions of units, primarily for game applications. VR systems are either standalone devices or require a wire to be 11 ​ Table of Contents connected to a PC to operate.
Some of these firms have discontinued their efforts while others continue to introduce new products that continue to be focused as either video viewers or VR goggles. Despite their size, VR headsets from companies like Meta and Sony have been selling in the millions of units, primarily for game applications.
Competition – Monocular Smart Glasses and Wearable Display Products Although several companies produce monocular wearable displays, we believe that the market opportunity for these products, other than night vision products, has been limited primarily to trial tests and smaller rollouts in enterprise markets rather than broad commercial volume purchases.
Competitors include or have included: Google (formerly Google Glass), RealWear, Lumus, Kopin, Optinvent, Brother, Garmin, BAE Systems, and Rockwell Collins. We believe that the market opportunity for these products has been limited primarily to trial tests and smaller rollouts in enterprise markets rather than broad commercial volume purchases.
Competitors The near-eye wearable computer or personal display and mobile device industry in which we operate is highly competitive and evolving rapidly. We compete against both direct view display technology in smart phones and tablets and wearable display technology.
We compete against both direct view display technology in smart phones and tablets and other wearable display technology.
In Japan, we have a branch sales and service office and a small warehouse in Tokyo. We have a wholly-owned subsidiary, Vuzix (Europe) Limited, through which we conduct our business in the EU and Middle Eastern markets. We maintain small European sales offices in Oxford, England and Munich, Germany that are staffed by full-time sales consultants or employees.
In Japan, we have a branch sales and service office and a small warehouse. We had maintained through most of 2024 small European sales offices in Oxford, England and Munich, Germany, but have since closed these locations and instead use remote full-time sales consultants or employees within Europe.
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.
Vuzix Shield™ Smart Glasses The Shield is our first binocular AR Smart Glasses featuring microLED displays. Designed for enterprise applications, it offers more power and performance than the M400 series. The Shield combines Vuzix’ proprietary waveguide optics with microLED stereo displays to deliver a fully transparent, high-resolution 3D heads-up display.
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.
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 and will be working with our new investor and partner Quanta Computer to potentially provide such services, among others.
Our U.S. and foreign patents expire on various dates with the capacity to remain enforceable through at least September of 2043.
Our U.S. and foreign patents expire on various dates with the capacity to remain enforceable through at least June of 2043. In addition to our various patents, we have 8 registered U.S. trademarks and 82 trademark registrations worldwide. Competitors The near-eye wearable computer and mobile personal display device industry in which we operate is highly competitive and evolving rapidly.
Vuzix also resells a variety of other applications, including Vuzix Remote Assist (VRA), which provides remote telepresence capabilities, otherwise known as “see-what-I-see” video collaboration and work instructions, amongst other features. VRA enables an operator, mechanic, field technician or consultant to communicate in a hands-free manner with a remote expert to drive “just-in-time” video support of a process or repair.
Vuzix also resells a variety of other applications, including its internally developed “connector” applications, to enable third party applications like Zoom and others, which provide remote telepresence capabilities, otherwise known as “see-what-I-see” video collaboration and work instructions, amongst other features. These applications increase productivity and customer satisfaction by sharing information between field technicians and remote support experts.
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. 6 ​ Table of Contents ​ Mobilium® Logistics Mobility Software We acquired Moviynt®, a US-based SAP Certified ERP platform software solution provider, to support hand-held mobile phones and scanners used in logistics, warehousing and manufacturing applications in November 2022.
We feel our innovative Smart Glasses represent the forefront of AR and AI-powered wearables, providing hands-free computing solutions across multiple markets while paving the way for broader adoption of smart eyewear. 5 ​ Table of Contents Mobilium® Logistics Mobility Software In 2022, we acquired Moviynt®, a boutique-specialized software firm that is a US-based SAP Certified ERP platform software solution provider, to support Smart Glasses and hand-held mobile phones and scanners used in logistics, warehousing and manufacturing applications.
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.
By leveraging advanced optics, compact form factors, and seamless enterprise integration, Vuzix is driving the adoption of AR solutions across enterprise, healthcare, defense, and consumer markets. OEM Services and Products Waveguide Optics and Display Engines We offer waveguide optics and related coupling optics combined for use with compact display engines from third parties to form a see-through display module.
An OEM/ODM design cycle typically requires between 6 and 24 months, depending upon the uniqueness of the market, and the complexity of the end product.
These ODM/OEM customer partnerships typically involve design cycles of 6 to 24 months, depending on product complexity.
Human Capital As of December 31, 2023, the Company had approximately 94 employees globally. The Company is committed to attracting, developing, and retaining talent to enable our strategic vision. This commitment directly shapes our approach to fostering a culture of inclusion and diversity and ensuring employees can reach their potential.
Therefore, we believe at this time that backlog information is not material to the understanding of our business. Human Capital As of December 31, 2024, the Company had 76 employees globally. A small percentage of the U.S. and non-U.S. employees are full-time or part-time contractors. The Company is committed to attracting, developing, and retaining talent to enable our strategic vision.
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.
Vuzix has developed thin, fully see-through waveguides that integrate miniature display engines into the temples of the glasses, significantly reducing weight and form factor. Our Smart Glasses are designed for all-day use, with some models compact enough to fit in a pocket or purse.
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.
In some cases, these applications will be free to the user and in other cases we will charge monthly or annual subscription fees. We feel that Vuzix Smart Glasses and waveguide technologies are leading innovations in AI-powered wearable computing.
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.
Many of these goggles are using external view cameras to simulate an AR environment where the wearer can see the outside world and most are not currently using see-through waveguide optics. Competition – Monocular Smart Glasses The monocular smart glasses segment primarily serves enterprise, industrial, defense and security applications.
We currently purchase almost all of the micro-displays used in our products from Sony Corporation, Jade Bird Display and Texas Instruments.
We currently source micro-displays from Sony Corporation, Jade Bird Display, and Texas Instruments and regularly and actively evaluate new suppliers of compact display engines to enhance AI/AR Smart Glasses performance.
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.
Sales and Marketing Sales We sell our products and components globally through a mix of direct sales, value-added resellers (VARs), distributors, and select ODM and OEM partnerships. Our sales strategy varies based on the market segment and customer type.
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.
These smart display systems—worn like eyeglasses or attached to a head-mounted frame—typically include cameras, sensors, and onboard computing that allow users to view, record, and interact with video and digital content, including internet-based applications, cloud-based AI assistants, and real-time AR overlays.
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The Company’s products include head-mounted (or HMDs or heads-up displays or HUDs) smart personal display and wearable computing devices that offer users a portable high-quality viewing experience, provide solutions for mobility, wearable displays and augmented reality, as well as OEM waveguide optical components and display engines. Our wearable display devices are worn like eyeglasses or attach to a head-worn mount.
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Our product lineup includes near-eye displays (NEDs), heads-up displays (HUDs), and wearable computing devices that provide users with a high-quality, portable viewing experience.
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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.
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Our proprietary waveguide optics and display engines, which can power both Vuzix-branded Smart Glasses and third-party Original Design Manufacturers (“ODM”) and Original Equipment Manufacturers (“OEM”) devices, set us apart in the AR industry. Historically, most AR and AI-enabled wearable displays have been bulky, goggle-like headsets that limit widespread adoption.
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We also provide custom solutions and engineering services to third parties, including Original Equipment Manufacturers (“OEMs”) and Original Design Manufacturers (“ODMs”), of waveguides to enable fully-integrated wearable display systems, including HMDs to commercial, industrial, consumer and defense customers.
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Unlike many competing products, Vuzix Smart Glasses require no external cabling or tethering to a separate computing device or battery pack.
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We do not offer “work-for-hire” services per se but rather offer our engineering services for projects that we expect could result in advancing our technology and potentially lead to long-term supply or OEM relationships.
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Our waveguide optics and display engines offer key advantages over other see-through wearable displays and traditional optics that occlude the wearer’s view, including: ● Higher contrast and brightness, making them ideal for outdoor and enterprise use. ● Greater power efficiency, extending battery life for all-day operation. ● Lightweight and compact design, enhancing comfort and usability. ● Seamless prescription lens integration, allowing our Smart Glasses to maintain the look and feel of conventional eyewear. ● Advanced eye-glow reduction technology, minimizing unwanted forward light leakage—a major concern in the industry.
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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.
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Beyond developing and selling our own Vuzix-branded Smart Glasses, we are expanding our business model to provide custom optical display solutions and engineering services for ODMs and OEMs. These customers can leverage our waveguide technology to develop fully integrated AR-enabled wearable displays for commercial, industrial, defense, and consumer applications.
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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.
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Our in-house waveguide manufacturing capabilities can provide a turnkey production platform for companies looking to integrate AR technology into their branded products. This ODM/OEM strategy positions Vuzix as a leading supplier of next-generation AR optics, supporting major technology firms, defense contractors, and consumer electronics brands.
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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.
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Through this strategy, we offer: ● High-volume, cost-effective waveguide production for ODM/OEM customers. ● Customizable display engine and waveguide solutions tailored to unique partner requirements. 1 ​ Table of Contents ● White-labeled AI/AR Smart Glasses reference designs that ODMs and OEMs can brand and commercialize. ● Our proprietary waveguide manufacturing processes ensure scalability and cost efficiency, allowing us to produce high-performance optics at market-competitive prices.
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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.
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Vuzix has built a strong intellectual property portfolio spanning over 25 years of experience in wearable display technology. This includes patents covering waveguide optics and nano-imprinting techniques, custom micro-display engine designs, and advanced AR computing interfaces, and ergonomic wearable form factors.
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Our latest waveguide optics also support technology to minimize the forward light leakage, or eye glow, which is viewed as a market impediment by wearers and they also now allow for fully integrated prescription that have the same look and feel of conventional eye glasses even with the embedded waveguide.
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We believe our proprietary technology and manufacturing expertise creates a strong competitive advantage, ensuring continued leadership in high-performance AR display solutions. We believe our compact display engine technologies and waveguide optics are key enablers of next-generation AI and AR-powered Smart Glasses.
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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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

84 edited+5 added−26 removed110 unchanged
Biggest changeOur management and professional employees have significant prior experience in optical design, mechanical design, software, electronics, manufacturing, and other related technologies. Our employees are in the U.S., Europe and Japan and the laws regarding employee relationships are different by jurisdiction. Some non-US employees are full-time contractors. None of our employees are covered by a collective bargaining agreement.
Biggest changeA small percentage of the U.S. and non-U.S. employees are full-time or part-time contractors. None of our employees are covered by a collective bargaining agreement. Our management and professional employees have significant prior experience in optical design, mechanical design, software, electronics, manufacturing, and other related technologies.
Moreover, our expense levels and the amounts we invest in capital equipment and new product development costs are based in part on our expectations of future sales and, if our expectations regarding future sales are inaccurate, we may be unable to reduce costs in a timely manner to adjust for sales shortfalls.
Moreover, our expense levels and the amounts we invest in capital equipment and new product development are based in part on our expectations of future sales and, if our expectations regarding future sales are inaccurate, we may be unable to reduce costs in a timely manner to adjust for sales shortfalls.
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.
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 and wearable display technologies that have been developed by many other companies.
Any worsening of global economic, financial, or public health conditions, including global pandemics, such as COVID-19, could materially adversely affect (i) our ability to raise, or the terms of, needed capital; (ii) demand for our current and future products; and (iii) the supply of components for our products.
Any worsening of global economic, financial, or public health conditions, including global pandemics, such as COVID-19, could materially adversely affect (i) demand for our current and future products; (ii) our ability to raise, or the terms of, needed capital; and (iii) the supply of components for our products.
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 compete against established, well-known diversified consumer electronics manufacturers including Samsung Electronics Co., Sony Corporation, Meta, LG Electronics (LGE), HTC, and 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.
Despite our efforts and processes to prevent breaches, our devices, as well as our servers, computer systems, and those of third parties that we use in our operations are vulnerable to cybersecurity risks, including cyber-attacks such as viruses and worms, phishing attacks, denial-of-service attacks, physical or electronic break-ins, employee theft or misuse, and similar disruptions from unauthorized tampering with our servers and computer systems or those of third parties that we use in our operations, which could lead to interruptions, delays, loss of critical data, unauthorized access to user data, and loss of consumer confidence.
Despite our efforts and processes to prevent breaches, our devices, as well as our servers, computer systems, and those of third parties that we use in our operations are vulnerable to cybersecurity risks, including cyber-attacks such as viruses and worms, phishing attacks, denial-of-service attacks, physical or electronic break-ins, employee theft or misuse, and similar disruptions from unauthorized tampering with our servers and computer systems or those of third parties that we use in our operations, which could lead to interruptions, delays, loss of critical data, unauthorized access to user data, and loss of our customer and consumer confidence.
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.
The following factors could present difficulties to us: ● 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; 13 ​ Table of Contents ● 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; and ● 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.
Under some possible distributor relationships, we would not recognize revenue until the distributors sell the product to their end user customers and receive payment thereon; however, at this time we do not currently enter into these types of arrangements. Our distributor and VAR relationships may reduce our ability to forecast sales and increase risks to our business.
Under some possible future distributor relationships, we would not recognize revenue until the distributors sell the product to their end user customers and receive payment thereon; however, at this time we do not currently enter into these types of arrangements. Our VAR and distributor relationships may reduce our ability to forecast sales and increase risks to our business.
We operate in areas of the world that experience corruption by government officials to some degree and, in certain circumstances, compliance with anti-bribery and anticorruption laws may conflict with local customs and practices. Our global operations require us to import and export to and from several countries, which geographically expands our compliance obligations.
We operate in areas of the world that can experience corruption by government officials to some degree and, in certain circumstances, compliance with anti-bribery and anticorruption laws may conflict with local customs and practices. Our global operations require us to import and export to and from several countries, which geographically expands our compliance obligations.
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. The market for head-worn display devices, including AR and Smart Glasses, is highly competitive.
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. The market for head-worn display devices, including AR and AI Smart Glasses, is highly competitive.
Federal Communications Commission (FCC) regulating electromagnetic radiation in order to be sold in the United States and with comparable requirements of the regulatory authorities of the EU, Japan, China and other jurisdictions in order to be sold in those jurisdictions. Our AR smart glasses products include wireless radios and receivers which require additional emission testing.
Federal Communications Commission (FCC) regulating electromagnetic radiation in order to be sold in the United States and with comparable requirements of the regulatory authorities of the EU, Japan, China and other jurisdictions in order to be sold in those jurisdictions. Our AI/AR smart glasses products include wireless radios and receivers which require additional emission testing.
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.
To be competitive, we may have to increase the compensation, bonuses, stock options, stock awards, 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 routinely receive security patches from software providers for the software we use. Our primary concerns are inappropriate access to personnel information, information covered under the International Traffic in Arms Regulation, product designs and manufacturing information, financial information and our intellectual property, trade secrets and know-how.
We routinely receive security patches from software providers for the software we use. Our primary concerns are inappropriate access to personnel information, any information covered under the International Traffic in Arms Regulation, product designs and manufacturing information, financial information and our intellectual property, trade secrets and know-how.
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.
Given our manufacturing in some of 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.
While we take reasonable measures intended to protect the security, integrity and confidentiality of the personal information and other sensitive information we collect, store or transmit, we cannot guarantee that inadvertent or unauthorized use or disclosure will not occur, or that third parties will not gain unauthorized access to this information.
While we take reasonable measures intended to protect the security, integrity and confidentiality of any personal information and other sensitive information we collect, store or transmit, we cannot guarantee that inadvertent or unauthorized use or disclosure will not occur, or that third parties will not gain unauthorized access to this information.
We provide recurring Company-wide communication of our formal values: Integrity Team Customers Uphold Ethical Standards in Our Performance Treat Everyone with Respect Quality Customer Service Through Collaborative Success ​ Keep Our Commitments ​ Encourage Open Communication ​ Provide Industry Leading Products ​ Protect Our Intellectual Property ​ Promote Critical Thinking and Innovation ​ Maintain Confidentiality and Protect Customer Intellectual Property 30 ​ Table of Contents ​ For additional information, see "Item 1 – Business: Human Capital Resources” in this Form 10-K. ​ We strive to create a workplace based on the following principles and goals: Care for Our People ● We believe in upholding the principles of human rights, worker safety, and observing fair labor practices within our organization. ● We respect different viewpoints and perspectives, and ultimately individual thoughts create innovation and achieve better results.
We provide recurring Company-wide communication of our formal values: Integrity Team Customers Uphold Ethical Standards in Our Performance Treat Everyone with Respect Quality Customer Service Through Collaborative Success ​ Keep Our Commitments ​ Encourage Open Communication ​ Provide Industry Leading Products ​ Protect Our Intellectual Property ​ Promote Critical Thinking and Innovation ​ Maintain Confidentiality and Protect any Customer Intellectual Property ​ For additional information, see "Item 1 – Business: Human Capital Resources” in this Form 10-K. ​ We strive to create a workplace based on the following principles and goals: Care for Our People ● We believe in upholding the principles of human rights, worker safety, and observing fair labor practices within our organization. ● We respect different viewpoints and perspectives, and ultimately individual thoughts create innovation and achieve better results.
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.
In the future, 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.
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.
If those customers do not continue to purchase our products, our sales volume could decline rapidly with little or no warning. 14 ​ 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.
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.
Our dependence on sales to VARs, distributors, and other 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 AI/AR products and their accessories could involve such resellers taking inventory positions and reselling to multiple customers.
We maintain an environmental management system and a specific framework for implementing relevant sustainable practices. ● We ask our employees to help us contribute towards environmental sustainability by looking for opportunities to conserve energy, reduce consumption of natural resources, preserve air and water quality, manage waste properly, reuse and recycle, and reduce the use of toxic substances in our operations where possible, including, in particular, in our clean room and lab facilities.
We are developing an environmental management system and a specific framework for implementing relevant sustainable practices. ● We ask our employees to help us contribute towards environmental sustainability by looking for opportunities to conserve energy, reduce consumption of natural resources, preserve air and water quality, manage waste properly, reuse and recycle, and reduce the use of toxic substances in our operations where possible, including, in particular, in our clean room and lab facilities.
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.
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.
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.
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 20 ​ Table of Contents disruption of our inventory flow, a decrease in sales and the possible need to re-design our products.
Our products may require regulatory approvals or satisfaction of other regulatory concerns in the various jurisdictions in which they are manufactured, sold or both. These requirements create procurement and design challenges that require us to incur additional costs identifying suppliers and manufacturers who can obtain and produce compliant materials, parts and products.
Our products may require regulatory approvals or satisfaction of other regulatory concerns in the various jurisdictions in which they are manufactured, sold or both. These requirements create procurement and design challenges that require us to incur additional costs identifying suppliers and manufacturers who 22 ​ Table of Contents can obtain and produce compliant materials, parts and products.
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.
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. 21 ​ Table of Contents Additional stock offerings in the future may dilute then existing stockholders’ percentage ownership of our Company.
With the growth of mobile devices and personal voice assistants, cloud services and AI, the number of supporting platforms has grown, and with it the complexity and increased need for us to have business or contractual relationships with the platform owners in order to produce products compatible with these platforms and enable access to and use of these platforms with our products.
With the growth of mobile devices, cloud services and AI, the number of supporting platforms has grown, and with it the complexity and increased need for us to have business or contractual relationships with the platform owners in order to produce products compatible with these platforms and enable access to and use of these platforms with our products.
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.
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.
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.
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. Cybersecurity risks could adversely affect our business and disrupt our operations. The threats to network and data security are increasingly diverse and sophisticated.
We have an independent third party periodically test the Whistleblower Ethics Hotline. Supply Chain Responsibility 31 ​ Table of Contents ● We intend to request that our suppliers adhere to the RBA Code of Conduct or its equivalent by flowing this requirement through our commercial contracts.
We have an independent third party periodically test the Whistleblower Ethics Hotline. Supply Chain Responsibility ● We intend to request that our suppliers adhere to the RBA Code of Conduct or its equivalent by flowing this requirement through our commercial contracts.
Ethics & Corporate Responsibility ● We are committed to ensuring ethical organizational governance and embracing diversity and inclusion in the board room and throughout the organization. ● We are committed to observing fair, transparent, and accountable operating practices. ● We seek to create and foster a healthy, balanced, and ethical work environment for everyone in our organization.
Ethics & Corporate Responsibility ● We are committed to ensuring ethical organizational governance in the board room and throughout the organization. ● We are committed to observing fair, transparent, and accountable operating practices. ● We seek to create and foster a healthy, balanced, and ethical work environment for everyone in our organization.
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.
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. Our sales may decrease as a result of any appreciation of the U.S. dollar against these other currencies.
The trading price of our common stock has been subject to wide fluctuations in response to quarter-to-quarter variations in results of operations, announcements of technological innovations or new products introduced by us or our competitors, general conditions in the wireless communications, consumer electronics, semiconductor and display markets, changes in earnings estimates by analysts or other events or factors.
The trading price of our common stock has been subject to wide fluctuations in response to quarter-to-quarter variations in results of operations, announcements of technological innovations or new products introduced by us or our competitors, general conditions in the wearable, wireless communications, consumer electronics, semiconductor and display markets, changes in our operating results estimates by financial analysts or other events or factors.
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.
As of the date of this filing, we have 246 issued U.S. and foreign patents and 180 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 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.
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.
We transact business over the Internet with customers, vendors and our subsidiaries and have implemented security measures to protect against unauthorized access to this information. We have also implemented security policies that limit access via the Internet from the Company to the outside world based on the individual’s position in the Company.
We transact business over the Internet with customers, vendors 17 ​ Table of Contents and our subsidiaries and have implemented security measures to protect against unauthorized access to this information. We have also implemented security policies that limit access via the Internet from the Company to the outside world based on the individual’s position in the Company.
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.
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.
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.
Changes in our management could have an adverse effect on our business and, in particular, while our staff is relatively small with just under 70 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 18 ​ Table of Contents Officer. Mr.
We continually evaluate how we provide organizational training, formalize Company values, and revitalize recruitment strategy. ● We are committed to employee safety. We have installed safety protocols and monitoring systems. We have periodic audits by third parties to test our systems and perform preventative maintenance.
We continually evaluate how we provide organizational training, formalize Company values, and revitalize recruitment strategy. 26 ​ Table of Contents ● We are committed to employee safety. We have installed safety protocols and monitoring systems. We have periodic audits by third parties to test our systems and perform preventative maintenance.
If any of these third-party contractors or suppliers were unable or unwilling to supply these integrated circuit chip sets or other critical components to us, we would be unable to manufacture and sell our products until a suitable replacement supplier could be found.
If any of these third-party contractors or suppliers were unable or unwilling to supply these or other critical components to us, we would be unable to manufacture and sell our products until a suitable replacement supplier could be found.
We purchase product components from our suppliers and engage third-party contract manufacturing firms to perform electronic circuit board and cable assemblies. We assemble our finished products to our plant in West Henrietta, New York.
We purchase product components from our suppliers and engage third-party contract manufacturing firms to perform electronic circuit board and cable assemblies. We assemble our finished products in our plant in West Henrietta, 16 ​ Table of Contents New York.
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.
Financial and Market Risks ​ 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.
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.
While we anticipate many opportunities to reduce production costs over time, we may not be able to reduce our necessary component costs. We expect to attempt to offset the anticipated potential decrease in our average selling price by introducing new products, increasing our sales volumes or adjusting our product mix.
As we expand the number of platforms and software applications with which our products are compatible, we may not be successful in launching products for those platforms or software applications and/or we may not be successful in establishing strong relationships with the new platform or software owners, which could negatively impact our ability to develop and produce high-quality products on a timely basis for those platforms and software applications.
We may not be successful in launching products for those platforms or software applications and/or we may not be successful in establishing strong relationships with the new platform or software owners, which could negatively impact our ability to develop and produce high-quality products on a timely basis for those platforms and software applications.
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 being indicative of our future revenues or operating results.
These requirements could adversely affect the sourcing, availability and pricing of the materials used in the manufacture of components used in our products.
These requirements could adversely affect the sourcing, availability and pricing of 23 ​ Table of Contents the materials used in the manufacture of components used in our products.
We intend to sell some of our waveguide and display engines with micro-displays to OEMs with the objective that they then incorporate them into products they sell. To date, this business has not been a material contributor to our overall revenues, but it could become so in the future.
We intend to sell some of our waveguides as components and in some cases, related display engines with micro-displays, to ODMs/OEMs with the objective that they then incorporate them into products they sell. To date, this business has not been a material contributor to our overall revenues, but it could become so in the future.
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.
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. 25 ​ Table of Contents Human Capital Resources As of December 31, 2024, our consolidated business employed 76 individuals.
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.
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 $73,538,157 for the year ended December 31, 2024; $50,149,077 for the year ended December 31, 2023, and $40,763,573 for the year ended December 31, 2022.
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, including at facilities owned by our new strategic partner Quanta Computer.
We will also utilize third-party facility, environmental and legal consulting services, as necessary. These third-party consultants will be assisting us in creating an ESG materiality assessment from which we can develop a baseline assessment for monitoring our progress. Our progress in creating our ESG strategy and other related activities is reported to the Board of Directors.
These third-party consultants will be assisting us in creating an ESG materiality assessment from which we can develop a baseline assessment for monitoring our progress. Our progress in creating our ESG strategy and other related activities is reported to the Board of Directors.
The time elapsed between initial sampling of our products by OEMs, the custom design of our products to meet specific OEM product requirements, and the ultimate incorporation of our products into OEM products is significant, often with a duration of between one to two years or even longer.
The time elapsed between initial sampling of our products by ODMs/OEMs, the custom design of our products to meet specific product requirements, and the ultimate incorporation of our products into their ODM/OEM products can be significant, often with a duration of between six months to two years or even longer.
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 not be able to raise any necessary capital on commercially reasonable terms or at all. If we fail to achieve or maintain profitability, the market price of our common stock may decline.
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.
We have an accumulated deficit of $367,522,950 as of December 31, 2024. We may not achieve or maintain profitability in the future. We will need to increase sales in order to achieve and maintain profitability.
Our business depends in part on access to third-party platforms or technologies, and if the access is withdrawn, denied, or is not available on terms acceptable to us, or if the platforms or technologies change without notice to us, our business and operating results could be adversely affected.
If we fail to do so, our results of operations will be materially and adversely affected. 15 ​ Table of Contents Our business depends in part on access to third-party platforms or technologies, and if the access is withdrawn, denied, or is not available on terms acceptable to us, or if the platforms or technologies change without notice to us, our business and operating results could be adversely affected.
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.
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.
All of our customers issue purchase orders solely at their own discretion, often shortly before the requested date of shipment. Our customers are generally able to cancel orders (without penalty) or delay the delivery of products on relatively short notice. In addition, our current customers may decide not to purchase products from us for any reason.
All of our customers for our Vuzix branded products issue purchase orders solely at their own discretion, often shortly before the requested date of shipment. These customers are generally able to cancel orders (without penalty) or delay the delivery of products on relatively short notice.
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.
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 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.
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.
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.
The new U.S. government administration is currently altering its approach to international trade policy, including through the potential termination, of certain existing bilateral or multilateral trade agreements and treaties and the imposition of tariffs on a wide range of products and other goods from China, Canada, Mexico, and other countries in Europe and Asia.
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 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 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.
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 anti-bribery laws in other jurisdictions in which we operate.
If our products fail to meet our eventual OEM customers’ cost, performance or technical requirements or if unexpected technical challenges arise in the integration of our products into OEM consumer products, our operating results could be significantly and adversely affected. Long delays in achieving customer qualification and incorporation of our products also could adversely affect our business.
If our products fail to meet our eventual customers’ cost, performance or technical requirements or if unexpected technical challenges arise in the integration of our products into their overall products, our operating results could be significantly and adversely affected.
As such, if we or our intermediaries fail to comply with the requirements of the FCPA or similar legislation, governmental authorities in the United States and elsewhere could seek to impose substantial civil and/or criminal fines and penalties which could have a material adverse effect on our business, reputation, operating results and financial condition.
If we or our intermediaries fail to comply with such requirements or similar legislation, governmental authorities in the United States and elsewhere could seek to impose substantial civil and/or criminal fines and penalties which could have a material adverse effect on our business, reputation, operating results and financial condition. ​ We are subject to governmental export and import controls and economic sanctions laws that could subject us to liability and impair our ability to compete in international markets.
We may otherwise fail to navigate various new relationships, which could adversely affect our relationships with existing platform or software owners. Our access to third-party platforms may also require paying a royalty or licensing fee, which lowers our product margins or may otherwise be on terms that are not acceptable to us.
Our access to third-party platforms may also require paying a royalty or licensing fee, which lowers our product margins or may otherwise be on terms that are not acceptable to us.
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 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.
To the extent that trade tariffs and other restrictions imposed by the United States or other countries increase the price of, or limit the amount of, our products or components or materials used in our products imported into the United States or other countries, or create adverse tax consequences, the sales, cost or gross margin of our products may be adversely affected and the demand from our customers for products and services may be diminished.
To the extent that trade tariffs and other restrictions imposed by the United States or other countries increase the price of, or limit the amount of, our products or components or materials used in our products imported into the United States or other countries, or create adverse tax consequences, the sales, cost or gross margin of our products may be adversely affected and the demand from our customers for products and services may be diminished. 24 ​ Table of Contents We collect, store, process and use portions of our customers’ personally identifiable information and other data, which subjects us to governmental regulation and other legal obligations related to privacy, information security and data protection.
We expect the regulatory 21 ​ Table of Contents environment to continue to evolve, and staying apace with these regulatory changes could increase our operational and compliance expenditures and those of our suppliers, and lead to new or additional IT and product development expenses.
We expect the regulatory environment to continue to evolve, and staying apace with these regulatory changes could increase our operational and compliance expenditures and those of our suppliers, and lead to new or additional IT and product development expenses. We also face reputational, litigation and financial risks in relation to potential required disclosures and increased risk of enforcement.
Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, inventories, product warranty reserves, accounting for income taxes, and stock-based compensation expense.
Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, inventories, product warranty reserves, accounting for income taxes, going concern, carrying value of long-term and other intangible assets, software development costs, variable interest entities, and stock-based compensation expense.
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.
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.
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.
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.
In addition, the public stock markets recently have experienced high price and trading volatility. The risks related to rising inflation and rising interest rates could have a material impact on our revenues and costs. This volatility has significantly affected the market prices of securities of many technology companies for reasons frequently unrelated to the operating performance of the specific companies.
In addition, the public stock markets recently have experienced high price and trading volatility. The risks related to rising inflation, rising interest rates and the imposition of tariffs could have a material impact on our revenues and costs.
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.
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.
If micro-display-based personal displays or near-eye displays do not gain greater acceptance in the market for mobile displays, our business strategy may fail. The mobile display market is dominated by displays larger than one-inch, most of which are based on direct view liquid crystal display (LCD) and organic light emitting display (OLED) technology.
The mobile display market is dominated by displays larger than one inch, most of which are currently based on direct view liquid crystal display (LCD) and organic light emitting display (OLED) technology.
We have in the past experienced end-of-life issues and expect to see more shortages in the future. As such, the availability of these components may be unpredictable. We do not currently own or operate any manufacturing facilities for any types of micro-displays, one of the key components in our products.
We have in the past experienced end-of-life issues and expect to see more shortages in the future. As such, the availability of these components may be unpredictable.
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. To date, the market for smart glasses is in its early stages, with no single company achieving a dominant or leading position.
With the growing awareness of environmental and social issues, we are in the process of creating a more formalized ESG strategy. Our initial process for the strategy creation includes soon forming a cross-functional ESG team of leaders representing operations, human resources, supply chain, finance, marketing, and facilities departments.
Our initial process for the strategy creation includes soon forming a cross-functional ESG team of leaders representing operations, human resources, supply chain, finance, marketing, and facilities departments. We will also utilize third-party facility, environmental and legal consulting services, as necessary.
These broad market fluctuations may adversely affect the market price of our common stock. There is uncertainty regarding the exclusive forum clause in our amended and restated bylaws.
This volatility has significantly affected the market prices of securities of many technology companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock. There is uncertainty regarding the exclusive forum clause in our amended and restated bylaws.
OEMs determine during their product development phase whether they will incorporate our products.
These types of customers determine during their product development phase and when and whether they will incorporate our products into their solutions.
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.
Numerous other start-up companies have announced their intentions to offer smart glasses and AI/AR products. Most of our competitors have greater financial, marketing, distribution and technical resources than we do. Moreover, our competitors may succeed in developing new micro-display-based personal display technologies and near-eye display products that are more affordable or have more desirable features than our technology.
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.
If our products are unable to capture a reasonable portion of the smart wearable display market, our business strategy may fail. Our products may experience declining unit prices and we may not be able to offset that decline with production cost decreases or higher unit sales.
We are subject to governmental export and import controls and economic sanctions laws that could subject us to liability and impair our ability to compete in international markets. The U.S. and various foreign governments have imposed controls, export license requirements and restrictions on the import or export of some technologies.
The U.S. and various foreign governments have imposed controls, export license requirements and restrictions on the import or export of some technologies.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeCybersecurity threats also include attempts to infiltrate our products or services, including attacks targeting the security, confidentiality, integrity and/or availability of the hardware, software and information installed, stored or transmitted in our products, including after the purchase of those products and when they are incorporated into third-party products, facilities, or infrastructure.
Biggest changeCybersecurity threats also include attempts to infiltrate our products or services, including attacks targeting the security, confidentiality, integrity 27 ​ Table of Contents and/or availability of the hardware, software and information installed, stored or transmitted in our products, including after the purchase of those products and when they are incorporated into third-party products, facilities, or infrastructure. ​ Our Cybersecurity Program Our products and services are normally classified as EAR 99 (items not designated under the control) by the U.S. government, but our defense customers may ask us to make some alterations for the environments in which the products will be used.
The Chief Financial Officer regularly reports to the Board of Directors on the status of the Company’s cybersecurity program and provides the Board of Directors with the annual assessment by a third party on the Company’s cybersecurity program. Cybersecurity risks are also included with the Company’s annual business risk assessment which is provided to the Board of Directors.
The Chief Financial Officer regularly reports to the Board of Directors on the status of the Company’s cybersecurity program and provides the Board of Directors with the annual assessment by a third party on the Company’s cybersecurity program. 28 ​ Table of Contents Cybersecurity risks are also included with the Company’s annual business risk assessment which is provided to the Board of Directors.
Our main external service provider is US-based and utilizes a 24 x 7 x 365 Service Operation Center (SOC). Program Assessment. 32 ​ Table of Contents We regularly evaluate and seek to improve and mature our cybersecurity processes.
Our main external service provider is US-based and utilizes a 24 x 7 x 365 Service Operation Center (SOC). Program Assessment. We regularly evaluate and seek to improve and mature our cybersecurity processes.
Given the nature of our business and the cybersecurity risks we face, we have instituted a cybersecurity program for identifying, assessing, and managing cybersecurity risks, which include material risks from cybersecurity threats to our internal systems, our products, services and programs for customers, and our supply chain.
Moreover, our products sold for defense applications are integrated with our customers’ products. Given the nature of our business and the cybersecurity risks we face, we have instituted a cybersecurity program for identifying, assessing, and managing cybersecurity risks, which include material risks from cybersecurity threats to our internal systems, our products, services and programs for customers, and our supply chain.
Removed
Our Cybersecurity Program Our products and services are normally classified as EAR 99 (items not designated under the control) by the U.S. government, but our defense customers may ask us to make some alterations for the environments in which the products will be used. Moreover, our products sold for defense applications are integrated with our customers’ products.

Item 2. Properties

Properties — owned and leased real estate

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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.
Biggest changeIn Okayama and Kyoto, Japan, we rent offices of 1,000 square feet and 100 square feet, respectively, of office space at a cost of approximately $29,000 per year. These leases are on a month-to-month basis.
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.
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 total base rent contractual payment obligations under these operating leases are currently $726,000 per year.
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.
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 and expect to negotiate new lease renewals by November 30, 2025.
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.
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. On January 16, 2024, the Company exercised its second renewal term extending its current lease to November 30, 2025.
Removed
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

65 edited+29 added−22 removed56 unchanged
Biggest changeManagement’s plans concerning these matters and managing our liquidity include, among other things: ● We do not intend to increase our levels of investing activities for our 2024 fiscal year as compared to 2023, now that our waveguide plant expansion has been completed and the licensed fees payments under the Atomistic License have been substantially made. ● The continued sale of our existing M400, M4000, Blade 2 and Shield smart glasses finished goods and related component inventory, of which we have significant levels over the provisions we made; ● On January 17, 2024, the Company announced that it was cutting its cash annual operating expenses approximately $8,000,000 for 2024, in all operating areas by at least 20% from 2023, including Research and Development, Sales and Marketing and in General and Administration areas; ● Right-sized operations across all areas of the Company, including head-count freezes or reductions; ● The expected margin contribution upon the commencement of volume manufacturing and sales of waveguides from our new waveguide plant in 2024, particularly to OEM customer; ● Continued to pursue licensing and strategic opportunities around our waveguide technologies with potential OEMs, which would include the receipt of upfront licensing fees and on-going supply agreements; ● Implementation of a voluntary Company-wide payroll reduction program for all individuals with optional salary reductions of 10% to 30% depending upon the respective base salary level for the period running from May 1, 2024 to April 30, 2025.
Biggest changeThe Company expects that these milestones will be achieved in the first half of 2026; • Reductions in our cash annual operating expenses across all operating areas, representing a reduction of at least 20% as compared to 2023 levels vs. 2024 levels, including in the areas of Research and Development, Sales and Marketing and General and Administrative; • Right-sizing of operations across all areas of the Company, including headcount reductions and personnel hiring freezes; • Reduction in the rate of new product introductions and further leveraging of existing platforms to reduce new product development and engineering costs; • Delaying or curtailing discretionary and non-essential capital expenditures not related to near-term product and manufacturing needs, now that our waveguide manufacturing plant expansion has substantially been completed and the license fees payments under the Atomistic License have been completed; 44 ​ Table of Contents • The expected margin contribution upon the commencement of volume manufacturing and sales of waveguides from our new waveguide manufacturing plant, particularly to OEM and ODM customers such as Quanta; • Continued pursuit of further licensing and strategic opportunities around our waveguide technologies with potential ODMs/OEMs, which would include the receipt of upfront licensing fees and on-going supply agreements; and • Reduction in our existing products’ selling prices and higher volume discount levels to turn as much of our inventory of finished products into cash and pursue external manufacturers for Vuzix non-waveguide production needs.
The following table reflects the components of our cost of goods sold: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ December 31, 2023 Total Sales December 31, 2022 Total Sales Change (Decrease) ​ Product Cost of Sales ​ $ 7,224,107 60 % $ 7,158,225 60 % $ 65,882 1 % Inventory Reserve for Obsolescence ​ 4,358,062 36 % 290,405 2 % 4,067,657 1,401 % Manufacturing Overhead - Unapplied ​ 1,615,172 13 % 1,579,627 13 % 35,545 2 % Depreciation and Amortization ​ 886,117 7 % 799,317 7 % 86,800 11 % Engineering Services Cost of Sales ​ 680,411 6 % 525,182 4 % 155,229 30 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Cost of Sales ​ ​ 14,763,869 122 % ​ 10,352,756 87 % ​ 4,411,113 43 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit (Loss) ​ $ (2,634,730) ​ (22) % $ 1,483,126 13 % $ (4,117,856) (278) % ​ For the year ended December 31, 2023, gross loss from total sales was $2,634,730, or (22)% as compared to a gross profit of $1,483,126, or 13% in the same period in 2022.
The following table reflects the components of our cost of goods sold: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ December 31, 2023 Total Sales December 31, 2022 Total Sales Change (Decrease) ​ Product Cost of Sales ​ $ 7,224,107 60 % $ 7,158,225 60 % $ 65,882 1 % Inventory Reserve for Obsolescence ​ 4,358,062 36 % 290,405 2 % 4,067,657 1,401 % Manufacturing Overhead - Unapplied ​ 1,615,172 13 % 1,579,627 13 % 35,545 2 % Depreciation and Amortization ​ 886,117 7 % 799,317 7 % 86,800 11 % Engineering Services Cost of Sales ​ 680,411 6 % 525,182 4 % 155,229 30 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Cost of Sales ​ ​ 14,763,869 122 % ​ 10,352,756 87 % ​ 4,411,113 43 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit (Loss) ​ $ (2,634,730) ​ (22) % $ 1,483,126 13 % $ (4,117,856) (278) % ​ For the year ended December 31, 2023, gross loss from total sales was $2,634,730, or (22)% of total sales as compared to a gross profit of $1,483,126, or 13% in the same period in 2022.
This overall increase was primarily the result of an increase of $823,647 in investment income resulting from the recent rise in interest rates earned on the Company’s excess cash period-over-period; and decrease of $136,527 in foreign exchange losses; partially offset by a $258,434 reduction in government and utility incentives, primarily related to the employee retention refunds received in 2022.
This overall increase was primarily the result of an increase of $823,647 in investment income resulting from the rise in interest rates earned on the Company’s excess cash period-over-period; and decrease of $136,527 in foreign exchange losses; partially offset by a $258,434 reduction in government and utility incentives, primarily related to the employee retention refunds received in 2022.
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.
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 will preserve cash. ​ The Financial Accounting Standards Board (FASB) issued Accounting Standards Update No.
We re-evaluate these uncertain tax positions on a quarterly basis based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity.
We re-evaluate these uncertain tax positions on a quarterly basis based upon factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity.
Each reporting period we assess whether any changes in our interest or relationship with the entity affect our determination of whether the entity is a VIE and, if so, whether we are the primary beneficiary.
During each reporting period, we assess whether any changes in our interest or relationship with the entity affect our determination of whether the entity is a VIE and, if so, whether we are the primary beneficiary.
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.
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, 2024.
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.
These assumptions include, 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.
With respect to our Smart Glasses and AR products, we are focused on the enterprise, defense, industrial, medical and commercial markets.
With respect to our Smart Glasses and AI/AR products, we are focused on the enterprise, defense, industrial, medical and commercial markets.
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.
As of December 31, 2024 and 2023, 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.
We continually evaluate our estimates used in the preparation of our consolidated financial statements, including those related to revenue recognition, bad debts, inventories, warranty reserves, product warranty, carrying value of long-lived assets, derivatives, valuation of stock compensation awards, and income taxes.
We continually evaluate our estimates used in the preparation of our consolidated financial statements, including those related to revenue recognition, bad debt, inventories, warranty reserves, product warranty, carrying value of long-lived assets, derivatives, valuation of stock compensation awards, and income taxes.
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.
Such costs are accumulated and capitalized. These projects could take several years to complete. The capitalized costs are then amortized over three 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.
Recent Accounting Pronouncements Refer to Note 1 39 ​ Table of Contents Results of Operations for Fiscal Years Ended December 31, 2023 and December 31, 2022 The following table compares the Company’s consolidated statements of operations data for the years ended December 31, 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ Dollar % Increase ​ ​ 2023 ​ 2022 ​ Change ​ (Decrease) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales: ​ ​ ​ ​ Sales of Products ​ $ 10,760,352 ​ $ 10,505,763 ​ $ 254,589 2 % Sales of Engineering Services ​ 1,368,787 ​ 1,330,119 ​ 38,668 3 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Sales ​ 12,129,139 ​ 11,835,882 ​ 293,257 2 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of Sales: ​ ​ ​ ​ Cost of Sales - Products Sold ​ 8,839,279 ​ 8,737,852 ​ 101,427 1 % Cost of Sales - Inventory Reserve for Obsolescence ​ 4,358,062 ​ 290,405 ​ 4,067,657 1,401 % Cost of Sales - Depreciation and Amortization ​ 886,117 ​ 799,317 ​ 86,800 11 % Cost of Sales - Engineering Services ​ 680,411 ​ 525,182 ​ 155,229 30 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Cost of Sales ​ 14,763,869 ​ 10,352,756 ​ 4,411,113 43 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit (Loss) ​ (2,634,730) ​ 1,483,126 ​ (4,117,856) (278) % Gross Profit (Loss) % ​ (22) % 13 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Expenses: ​ ​ ​ ​ Research and Development ​ 12,339,534 ​ 12,676,688 ​ (337,154) (3) % Selling and Marketing ​ 12,711,800 ​ 8,078,538 ​ 4,633,262 57 % General and Administrative ​ 18,592,185 ​ 21,038,562 ​ (2,446,377) (12) % Depreciation and Amortization ​ 3,844,428 ​ 1,788,584 ​ 2,055,844 115 % Loss on Goodwill and Other Intangible Asset Impairment ​ 2,136,993 ​ — ​ 2,136,993 NM ​ Loss on Fixed Asset Disposal ​ — ​ 35,350 ​ (35,350) (100) % Impairment of Patents and Trademarks ​ 41,869 ​ 97,675 ​ (55,806) (57) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss from Operations ​ (52,301,539) ​ (42,232,271) ​ (10,069,268) 24 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other Income (Expense): ​ ​ ​ ​ Investment Income ​ 2,219,226 ​ 1,395,579 ​ 823,647 59 % Income and Other Taxes ​ (230,973) ​ (212,997) ​ (17,976) 8 % Foreign Exchange Loss ​ (44,062) ​ (180,589) ​ 136,527 (76) % Utility Improvement Refund/Employee Retention Credit Refund ​ 208,271 ​ 466,705 ​ (258,434) (55) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Other Income, Net ​ 2,152,462 ​ 1,468,698 ​ 683,764 47 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss ​ $ (50,149,077) ​ $ (40,763,573) ​ $ (9,385,504) 23 % ​ 40 ​ Table of Contents Sales.
There were no provisions for income taxes in 2024 or 2023. 39 ​ Table of Contents Results of Operations for Fiscal Years Ended December 31, 2023 and December 31, 2022 ​ The following table compares the Company’s consolidated statements of operations data for the years ended December 31, 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ Dollar % Increase ​ ​ 2023 ​ 2022 ​ Change ​ (Decrease) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales: ​ ​ ​ ​ Sales of Products ​ $ 10,760,352 ​ $ 10,505,763 ​ $ 254,589 2 % Sales of Engineering Services ​ 1,368,787 ​ 1,330,119 ​ 38,668 3 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Sales ​ 12,129,139 ​ 11,835,882 ​ 293,257 2 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of Sales: ​ ​ ​ ​ Cost of Sales - Products Sold ​ 8,839,279 ​ 8,737,852 ​ 101,427 1 % Cost of Sales - Inventory Reserve for Obsolescence ​ 4,358,062 ​ 290,405 ​ 4,067,657 1,401 % Cost of Sales - Depreciation and Amortization ​ 886,117 ​ 799,317 ​ 86,800 11 % Cost of Sales - Engineering Services ​ 680,411 ​ 525,182 ​ 155,229 30 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Cost of Sales ​ 14,763,869 ​ 10,352,756 ​ 4,411,113 43 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit (Loss) ​ (2,634,730) ​ 1,483,126 ​ (4,117,856) (278) % Gross Profit (Loss) % ​ (22) % 13 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Expenses: ​ ​ ​ ​ Research and Development ​ 12,339,534 ​ 12,676,688 ​ (337,154) (3) % Selling and Marketing ​ 12,711,800 ​ 8,078,538 ​ 4,633,262 57 % General and Administrative ​ 18,592,185 ​ 21,038,562 ​ (2,446,377) (12) % Depreciation and Amortization ​ 3,844,428 ​ 1,788,584 ​ 2,055,844 115 % Loss on Goodwill and Other Intangible Asset Impairment ​ 2,136,993 ​ — ​ 2,136,993 NM ​ Loss on Fixed Asset Disposal ​ — ​ 35,350 ​ (35,350) (100) % Impairment of Patents and Trademarks ​ 41,869 ​ 97,675 ​ (55,806) (57) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss from Operations ​ (52,301,539) ​ (42,232,271) ​ (10,069,268) 24 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other Income (Expense): ​ ​ ​ ​ Investment Income ​ 2,219,226 ​ 1,395,579 ​ 823,647 59 % Income and Other Taxes ​ (230,973) ​ (212,997) ​ (17,976) 8 % Foreign Exchange Loss ​ (44,062) ​ (180,589) ​ 136,527 (76) % Utility Improvement Refund/Employee Retention Credit Refund ​ 208,271 ​ 466,705 ​ (258,434) (55) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Other Income, Net ​ 2,152,462 ​ 1,468,698 ​ 683,764 47 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss ​ $ (50,149,077) ​ $ (40,763,573) ​ $ (9,385,504) 23 % ​ 40 ​ Table of Contents Sales.
We may experience significant catch-up or reversal of expense in the future in a period when any performance-based milestones first are determined to be probable of achievement or when any that are currently deemed probable are considered no longer probable. Income Taxes We have historically incurred operating losses from both a financial reporting and tax return standpoint.
We may experience significant catch-up or reversal of expense in the future in a period when any performance-based milestones first are determined to be probable of achievement or when any that are currently deemed probable are considered no longer probable. 34 ​ Table of Contents Income Taxes We have historically incurred operating losses from both a financial reporting and tax return standpoint.
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.
The fair 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.
Upon the achievement of any market condition milestone, any unrecognized expense to-date would be expensed immediately. The performance-based tranches, that are currently considered probable of achievement, are expensed over their respective implicit service periods.
Upon the achievement of any market condition milestone, any unrecognized expense to date would be expensed immediately. The performance-based tranches, which are currently considered probable of achievement, are expensed over their respective implicit service periods.
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 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.
These assets consist primarily of credit carry-forwards and net operating loss carry-forwards and the future tax effects of temporary differences between balances recorded for financial statement purposes and for tax return purposes. A valuation allowance is established for deferred tax assets in amounts for which realization is not considered more likely than not to occur.
These assets consist primarily of credit carryforwards and net operating loss carryforwards and the future tax effects of temporary differences between balances recorded for financial statement purposes and for tax return purposes. A valuation allowance is established for deferred tax assets in amounts for which realization is not considered more likely than not to occur.
Exposure to inventory valuation risks is managed by maintaining safety stocks, minimum purchase lots, managing product and end-of-life issues brought on by aging components or new product introductions, and by utilizing certain inventory minimization strategies such as vendor-managed inventories.
Exposure to inventory valuation risks is managed by maintaining safety stocks, minimum purchase lots, managing 31 ​ Table of Contents product and end-of-life issues brought on by aging components or new product introductions, and by utilizing certain inventory minimization strategies such as vendor-managed inventories.
Depreciation and Amortization. Depreciation and amortization expense, not included in cost of sales, for the year ended December 31, 2023, was $3,844,428, compared to $1,788,584 in the comparable period in 2022, an increase 42 ​ Table of Contents of $2,055,844.
Depreciation and Amortization. Depreciation and amortization expense, not included in cost of sales, for the year ended December 31, 2023, was $3,844,428, compared to $1,788,584 in the comparable period in 2022, an increase of $2,055,844.
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.
These consolidated financial statements do not include any adjustments to the specific amounts and classifications of assets and liabilities, which might be necessary should we be unable to continue as a going concern.
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.
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.
This decrease was largely due to a decrease of $2,464,799 in non-cash stock-based compensation; a decrease of $210,678 in external accounting, advisory and tax services expenses; a decrease of $199,456 in shareholder and IR related expenses; a $91,254 decrease in supplies and consumables expenses; and a $56,807 decrease in recruiting and hiring expenses; partially offset by an increase of $281,363 in various consulting fees; an increase of $128,949 in travel related expenses; and an increase of $88,804 in insurance premiums.
This decrease was largely due to a decrease of $2,877,423 in non-cash 42 ​ Table of Contents stock-based compensation; a decrease of $210,678 in external accounting, advisory and tax services expenses; a decrease of $199,456 in shareholder and IR related expenses; a $91,254 decrease in supplies and consumables expenses; and a $56,807 decrease in recruiting and hiring expenses; partially offset by an increase of $281,363 in various consulting fees; an increase of $128,949 in travel related expenses; and an increase of $88,804 in insurance premiums.
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.
The critical accounting policies, judgments and estimates that we believe have the most significant effect on our financial statements are: ● Valuation of inventories; ● Going Concern; ● Variable interest entities; ● Investments in equity securities; ● Carrying value of long-lived assets, goodwill and other intangible assets; ● Software development costs; ● Revenue recognition; ● Product warranty; ● Stock-based compensation; and ● Income taxes.
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.
For the years ended December 31, 2024, 2023, and 2022, we recorded a loss on fixed asset disposal of $27,654, nil, and $35,350, respectively, upon the retirement of certain tooling and manufacturing equipment assets no longer in use. We perform an evaluation of our patents and trademark assets when events or circumstances indicate their carrying amounts may be unrecoverable.
Cost of Sales and Gross Profit (Loss). Cost of product revenues and engineering services are comprised of materials, components, labor, warranty costs, freight costs, manufacturing overhead, software royalties, 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 the rendering of engineering services.
For there ending December 31, 2023, the Company took an impairment charge of $2,136,993 for the unamortized intangible assets and goodwill regarding its previous acquisition of Moviynt. 37 ​ Table of Contents 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.
For the year ended December 31, 2023, the Company recorded an impairment charge of $2,136,993 for the unamortized intangible assets and goodwill regarding its previous acquisition of Moviynt. 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.
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.
It presumes that a Company will continue normal business operations into the future. ​ 32 ​ 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).
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.
For the years ended December 31, 2024, 2023, and 2022, there was an impairment charge of nil, $41,869, and $97,675, respectively. The carrying value of the remaining intellectual property, such as patents and trademarks, was valued (net of accumulated amortization) at $2,998,760 as of December 31, 2024, because management believes that this value is recoverable.
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”).
Unregistered Sales of Equity Securities and Use of Proceeds Sales of Unregistered Securities - none ​ 29 ​ Table of Contents Purchase of Equity Securities - none ​ ​ ​ ​ ​ Equity Compensation Plan Information The following table provides information about our equity compensation plan as of December 31, 2024. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 10,367,990 ​ $ 12.41 1,031,737 Equity compensation plans not approved by security holders — ​ — — Total 10,367,990 ​ $ 12.41 1,031,737 (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”).
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.
The unamortized software development costs remaining were valued (net of accumulated amortization) at $194,445 as of December 31, 2024. Management believes that this value is recoverable. 33 ​ Table of Contents 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.
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 .
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”. Item 6 . [Reserved] ​ ​ Item 7 .
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.
The Company incurred net losses for the year ended December 31, 2024 of $73,538,157; $50,149,077 for the year ended December 31, 2023; and $40,763,573 for the year ended December 31, 2022.
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.
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 Expenses ​ $ 11,632,032 ​ 96 % $ 7,156,266 ​ 60 % $ 4,475,766 ​ 63 % Related Stock-based Compensation (non-cash) ​ ​ 1,079,768 ​ 9 % ​ 922,272 ​ 8 % ​ 157,496 ​ 17 % Total 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.
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.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Holders of Record As of March 13, 2025, there were 89 holders of record of our common stock.
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.
The write-off to our obsolescence provision for finished goods and components totaled $4,167,917, $4,358,062, and $290,405 for the years ended December 31, 2024, 2023, and 2022, respectively. These additional obsolescence provisions are included in Cost of Sales in the Consolidated Statements of Operations.
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.
Our current liabilities are comprised principally of accounts payable, accrued expenses, 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, ​ 2024 2023 2022 Net Cash Provided by (used in) ​ ​ ​ Operating Activities ​ (23,739,372) ​ (26,277,824) ​ (24,521,082) Investing Activities ​ (2,919,949) ​ (19,280,966) ​ (21,170,816) Financing Activities ​ 18,290,235 ​ (449,561) ​ (1,948,032) ​ During the year ended December 31, 2024 we used $23,739,372 of cash for operating activities.
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.
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 Expenses ​ $ 8,933,458 74 % $ 8,502,412 72 % $ 431,046 5 % Related Stock-based Compensation (non-cash) ​ ​ 9,658,727 80 % ​ 12,536,150 106 % ​ (2,877,423) (23) % Total 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.
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.
Provision for Income Taxes . There were no provisions for income taxes in 2023 or 2022. Liquidity and Capital Resources ​ Capital Resources: As of December 31, 2024, we had cash and cash equivalents of $18,186,506, a decrease of $8,369,086 from $26,555,592 as of December 31, 2023.
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.
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 Expenses ​ $ 10,611,176 87 % $ 10,841,011 92 % $ (229,835) (2) % Related Stock-based Compensation (non-cash) ​ ​ 1,728,358 14 % ​ 1,835,677 16 % ​ (107,319) (6) % Total 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.
See the discussion under “Forward Looking Statements” beginning on page 1 of this annual report. Overview We are engaged in the design, manufacture, marketing and sale of augmented reality wearable display devices also referred to as head mounted displays (or HMDs, but also known as near-eye displays), in the form of Smart Glasses and Augmented Reality (AR) glasses.
Overview We are engaged in the design, manufacture, marketing and sale of augmented reality wearable display devices also referred to as head mounted displays (or HMDs, but also known as near-eye displays), in the form of Smart Glasses, AI powered Smart Glasses, Waveguides, and Augmented Reality (AR) technologies.
Impairment losses are dependent on a number of factors such as general economic trends and major technology advances, and thus could be significantly different from historical results.
Impairment losses are dependent on a number of factors such as general economic trends and major technology advances, and thus could be significantly different from historical results. For the years ending December 31, 2024 and 2023, there were no indicators of impairment present.
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, 2023, we used $449,561 in net cash for financing activities. The Company’s cash requirements are primarily for funding operating losses, working capital, research and development and capital expenditures. Our operations have historically been financed primarily through net proceeds from the sale of our equity securities.
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.
The Company had net cash outflows from operations of $23,739,372 for the year ended December 31, 2024; $26,277,824 for the year ended December 31, 2023; and $24,521,082 for the year ended December 31, 2022. As of December 31, 2024, the Company had an accumulated deficit of $367,522,950.
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, 2023, we used a total of $26,277,824 in cash for operating activities.
For the year ended December 31, 2022, we used a total of $21,170,816 in cash for investing activities.
For the year ended December 31, 2023, we used a total of $19,280,966 in cash for investing activities.
The Company’s management intends to take actions necessary to continue as a going concern, as discussed below. The Company will need to grow its business significantly to become profitable and self-sustaining on a cash flow basis or it will be required to raise new equity and/or debt capital.
The Company will need to grow its business significantly to become profitable and self-sustaining on a cash flow basis or it will be required to cut its operating costs significantly or raise new equity and/or debt capital. ​ These historical financial factors initially raise substantial doubt about the Company’s ability to continue as a going concern.
Carrying Value of Long-Lived Assets If facts and circumstances indicate that a long-lived asset, including a products’ mold tooling and equipment, may be impaired, the carrying value is reviewed in accordance with FASB ASC Topic 360-10 Accounting for the Impairment or Disposal of Long-Lived Assets .
For equity securities without a readily determinable fair value, the investment is recorded at cost, less any impairment, plus or minus adjustments related to observable transactions for the same or similar securities, with unrealized gains and losses included in earnings. ​ Carrying Value of Long-Lived Assets If facts and circumstances indicate that a long-lived asset, including a products’ mold tooling and equipment, may be impaired, the carrying value is reviewed in accordance with FASB ASC Topic 360-10 Accounting for the Impairment or Disposal of Long-Lived Assets .
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.
We perform an evaluation 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. For the year ending December 31, 2024, the Company recorded an impairment charge of $30,301,355 for the unamortized technology license and equity investment in Atomistic.
Critical Accounting Policies and Significant Developments and Estimates The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements and related notes appearing elsewhere in this annual report.
We believe our technology, intellectual property portfolio and position in the marketplace give us a leadership position in AI/AR and Smart Glasses products, waveguide optics, microLEDs and display engine technology. 30 ​ Table of Contents Critical Accounting Policies and Significant Developments and Estimates The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements and related notes appearing elsewhere in this annual report.
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.
As of December 31, 2024, we had current assets of $26,722,490 as compared to current liabilities of $2,112,273, which resulted in a positive working capital position of $24,610,217. As of December 31, 2023, we had a working capital position of $36,284,259.
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.
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, 2024 Total Sales December 31, 2023 Total Sales Change (Decrease) ​ Selling and Marketing Expenses ​ $ 6,953,169 121 % $ 11,632,032 96 % $ (4,678,863) (40) % Related Stock-based Compensation (non-cash) ​ ​ 1,238,258 22 % ​ 1,079,768 9 % ​ 158,490 15 % Total Selling and Marketing ​ $ 8,191,427 142 % $ 12,711,800 105 % $ (4,520,373) (36) % ​ Selling and marketing expenses for the year ended December 31, 2024, decreased by $4,520,373, or 36% compared to 2023.
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%.
There was a decrease in total sales for the year ended December 31, 2024, compared to 2023 of $6,374,583, or 53%.
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.
The changes to these provisions are included in Cost of Sales on the Consolidated Statements of Operations. ​ Unapplied manufacturing overhead costs, not already added in product cost of sales, increased by $504,208, or 31% for the year ended December 31, 2024 over 2023 and increased as a percentage of total sales to 37% as compared to 13% in 2023 due to lower quarterly product revenue.
The Company has an accumulated deficit of $293,984,793 as of December 31, 2023. As of December 31, 2023, our principal sources of liquidity consisted of cash and cash equivalents of $26,555,592. The factors above do raise substantial doubt about the Company’s ability to continue as a going concern.
As of December 31, 2024, the Company had an accumulated deficit of $367,522,950. ​ The ongoing losses and accumulated deficit initially raise substantial doubt about the Company’s ability to continue as a going concern.
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.
Net changes in working capital items were $1,171,047 for the year ended December 31, 2024, with the largest factors resulting from a $2,503,100 decrease in trade accounts payables and accrued expenses; a $941,149 decrease in trade accounts and other receivables; and a $271,399 decrease in other prepaid expenses.
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.
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, 2024 Total Sales December 31, 2023 Total Sales Change (Decrease) ​ General and Administrative Expenses ​ $ 8,933,952 155 % $ 8,933,458 74 % $ 494 0 % Related Stock-based Compensation (non-cash) ​ ​ 8,296,341 144 % ​ 9,658,727 80 % ​ (1,362,386) (14) % Total General and Administrative ​ $ 17,230,293 299 % $ 18,592,185 153 % $ (1,361,892) (7) % ​ 38 ​ Table of Contents General and administrative expenses for the year ended December 31, 2024, decreased by $1,361,892, or 7% compared to 2023.
Depreciation and Amortization. Depreciation and amortization expense, not included in Cost of Sales, for the year ended December 31, 2022 was $1,788,584 as compared to $988,104 in the same period in 2021, an increase of $800,480.
Depreciation and Amortization. Depreciation and amortization expense, not included in cost of sales, for the year ended December 31, 2024, was $2,994,643, compared to $3,844,428 in 2023 or a decrease of $849,785.
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.
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, 2024 Total Sales December 31, 2023 Total Sales Change (Decrease) ​ Research and Development Expenses ​ $ 7,840,491 136 % $ 10,611,176 87 % $ (2,770,685) (26) % Related Stock-based Compensation (non-cash) ​ ​ 1,785,961 31 % ​ 1,728,358 14 % ​ 57,603 3 % Total Research and Development Costs ​ $ 9,626,452 167 % $ 12,339,534 102 % $ (2,713,082) (22) % ​ Research and development expenses for the year ended December 31, 2024, decreased by $2,713,082, or 22% compared to 2023.
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.
During the year ended December 31, 2024, we used $2,919,949 of cash for investing activities, which included: $1,358,991 in manufacturing equipment and tooling for our new waveguide manufacturing facility; $1,000,000 final payment made towards our technology license fee commitment with Atomistic; and $560,958 in patent and trademark expenditures.
The expected cash savings will be $1,200,000 and will result in the issuance of stock awards or stock options, at a rate of 150% or 200%, respectively, of the net cash wage reductions; ● Delayed or curtailed discretionary and non-essential capital expenditures not related to near-term new products; ● Reduced the rate of new product introductions and leveraged existing platforms to reduce new product development and engineering costs; ● Further reductions of the rate of research and development spending on new technologies, particularly the use of external contractors. ​ 48 ​ Table of Contents The Company has in the past sold equity securities and in early 2024 entered into a sales agreement with an investment banking firm for the issuance and sale of up to $50,000,000 of our common stock that may be issued and sold from time to time in an “at the market” offering.
The Company has historically raised capital through the sale of equity securities. The Company has entered into a sales agreement with an investment bank for the issuance and sale of up to $50,000,000 of our common stock that may be issued and sold from time to time in an “at the market” (ATM) offering.
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.
The Company’s cash outflows for investing activities were $2,919,949 for the year ended December 31, 2024; $19,280,966 for the year ended December 31, 2023; and $21,170,816 for the year ended December 31, 2022. The Company’s cash requirements going forward are primarily for funding operating losses, research and development, working capital and capital expenditures.
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.
Total other income was $433,337 for the year ended December 31, 2024, compared to other income of $2,152,462 in 2023, a decrease of $1,719,125.
The following table reflects the major components of our sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ ​ December 31, 2022 ​ Total Sales ​ December 31, 2021 ​ Total Sales ​ Change ​ (Decrease) ​ Sales of Products ​ $ 10,505,763 89 % $ 12,784,600 97 % $ (2,278,837) (18) % Sales of Engineering Services ​ 1,330,119 11 % 380,333 3 % 949,786 250 % Total Sales ​ $ 11,835,882 100 % $ 13,164,933 100 % $ (1,329,051) (10) % ​ Sales of products decreased by 18% for the year ended December 31, 2022, compared to the same period in 2021.
The following table reflects the major components of our sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended % of Year Ended % of Dollar % Increase ​ ​ ​ December 31, 2024 ​ Total Sales ​ December 31, 2023 ​ Total Sales ​ Change ​ (Decrease) ​ Sales of Products ​ $ 4,487,202 78 % $ 10,760,352 89 % $ (6,273,150) (58) % Sales of Engineering Services ​ 1,267,354 22 % 1,368,787 11 % (101,433) (7) % Total Sales ​ $ 5,754,556 100 % $ 12,129,139 100 % $ (6,374,583) (53) % ​ Sales of products decreased by 58% for the year ended December 31, 2024, compared to 2023.
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.
The overall decrease in other income was primarily the result of a decrease of $1,627,907 in investment income due to lower excess cash on-hand to invest; an increase of $173,255 in foreign exchange losses; partially offset by a decrease in income and other taxes of $290,308; and a decrease of $208,271 from a one-time utility improvement refund in 2023.
Removed
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.
Added
See the discussion under “Forward Looking Statements” beginning on page 1 of this annual report.
Removed
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.
Added
The Company had net cash outflows from operations of $23,739,372 for the year ended December 31, 2024; $26,277,824 for the year ended December 31, 2023; and $24,521,082 for the year ended December 31, 2022.
Removed
Smart glasses revenues declined primarily due to a combination of higher average sales discounts due to larger volume reseller sales, negative foreign exchange comparatives and to a lesser extent, a decrease in overall unit sales.
Added
Investments in Equity Investments ​ Investments in equity securities with a readily determinable fair value, not accounted for under the equity method, are recorded at that value with unrealized gains and losses included in earnings.
Removed
Sales of waveguides and display engines for our engineering services customers included in product sales rose by $394,150 for the year ended December 31, 2022, as compared to the same period in 2021. Sales of engineering services for the year ended December 31, 2022, were $1,330,119, as compared to $380,333 in the same period of 2021, an increase of 250%.
Added
Recent Accounting Pronouncements Refer to Note 1 35 ​ Table of Contents Results of Operations for Fiscal Years Ended December 31, 2024 and December 31, 2023 The following table compares the Company’s consolidated statements of operations data for the years ended December 31, 2024 and 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ ​ ​ ​ Dollar % Increase ​ ​ 2024 ​ 2023 ​ Change ​ (Decrease) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales: ​ ​ ​ ​ Sales of Products ​ $ 4,487,202 ​ $ 10,760,352 ​ $ (6,273,150) (58) % Sales of Engineering Services ​ 1,267,354 ​ 1,368,787 ​ (101,433) (7) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Sales ​ 5,754,556 ​ 12,129,139 ​ (6,374,583) (53) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of Sales: ​ ​ ​ ​ Cost of Sales - Products Sold ​ 6,007,200 ​ 8,839,279 ​ (2,832,079) (32) % Cost of Sales - Inventory Reserve for Obsolescence ​ 4,167,917 ​ 4,358,062 ​ (190,145) (4) % Cost of Sales - Depreciation and Amortization ​ 734,456 ​ 886,117 ​ (151,661) (17) % Cost of Sales - Engineering Services ​ 444,653 ​ 680,411 ​ (235,758) (35) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Cost of Sales ​ 11,354,226 ​ 14,763,869 ​ (3,409,643) (23) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit (Loss) ​ (5,599,670) ​ (2,634,730) ​ (2,964,940) 113 % Gross Profit (Loss) % ​ (97) % (22) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Expenses: ​ ​ ​ ​ Research and Development ​ 9,626,452 ​ 12,339,534 ​ (2,713,082) (22) % Selling and Marketing ​ 8,191,427 ​ 12,711,800 ​ (4,520,373) (36) % General and Administrative ​ 17,230,293 ​ 18,592,185 ​ (1,361,892) (7) % Depreciation and Amortization ​ 2,994,643 ​ 3,844,428 ​ (849,785) (22) % Loss on Goodwill and Other Intangible Asset Impairment ​ — ​ 2,136,993 ​ (2,136,993) (100) % Loss on Fixed Asset Disposal ​ 27,654 ​ — ​ 27,654 NM ​ Impairment on Intangible Asset and Equity Investment ​ 30,301,355 ​ — ​ 30,301,355 NM ​ Impairment of Patents and Trademarks ​ — ​ 41,869 ​ (41,869) (100) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss from Operations ​ (73,971,494) ​ (52,301,539) ​ (21,669,955) 41 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other Income (Expense): ​ ​ ​ ​ Investment Income ​ 591,319 ​ 2,219,226 ​ (1,627,907) (73) % Other Taxes ​ 59,335 ​ (230,973) ​ 290,308 (126) % Foreign Exchange Loss ​ (217,317) ​ (44,062) ​ (173,255) 393 % Utility Improvement Refund/Employee Retention Credit Refund ​ — ​ 208,271 ​ (208,271) (100) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Other Income, Net ​ 433,337 ​ 2,152,462 ​ (1,719,125) (80) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss ​ $ (73,538,157) ​ $ (50,149,077) ​ $ (23,389,080) 47 % ​ 36 ​ Table of Contents Sales.
Removed
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.
Added
Reduced smart glasses revenue was the primary driver of this decrease as unit sales of our M400 product decreased substantially compared to the previous year, when two major distributors placed significant stocking orders in the first half of 2023.
Removed
The decrease in the net dollar amount of these unapplied overhead costs in the current period versus the prior period is primarily due to more absorption of fixed costs being allocated directly to Product Cost of Sales and inventory.
Added
Sales of engineering services for the year ended December 31, 2024, was $1,267,354, as compared to $1,368,787 in 2023, a decrease of 7%. Cost of Sales and Gross Profit (Loss).
Removed
Depreciation and amortization expense decreased by $522,150, or 40% for the year ended December 31, 2022, over the 2021 comparable period to 7% as a percentage of total sales as compared to 10% in 2021. The decrease was due to some of our tooling and manufacturing equipment becoming fully-depreciated in the first half of 2022. Research and Development.
Added
The following table reflects the components of our cost of goods sold: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ % of ​ Year Ended ​ % of ​ Dollar ​ % Increase ​ ​ December 31, 2024 Total Sales December 31, 2023 Total Sales Change (Decrease) ​ Product Cost of Sales ​ $ 3,887,820 68 % $ 7,224,107 60 % $ (3,336,287) (46) % Inventory Reserve for Obsolescence ​ 4,167,917 72 % 4,358,062 36 % (190,145) (4) % Manufacturing Overhead - Unapplied ​ 2,119,380 37 % 1,615,172 13 % 504,208 31 % Depreciation and Amortization ​ 734,456 13 % 886,117 7 % (151,661) (17) % Engineering Services Cost of Sales ​ 444,653 8 % 680,411 6 % (235,758) (35) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Cost of Sales ​ ​ 11,354,226 197 % ​ 14,763,869 122 % ​ (3,409,643) (23) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit (Loss) ​ $ (5,599,670) ​ (97) % $ (2,634,730) (22) % $ (2,964,940) 113 % ​ For the year ended December 31, 2024, there was a gross loss from total sales of $5,599,670, or 97% of total sales as compared to a gross loss of $2,634,730, or 22% in 2023.
Removed
This increase was largely due to an increase of $557,165 in external development expenses related to our Next Generation Smart Glasses (Shield) and Blade 2.0; a $386,821 increase in salary and benefits expenses due to additional personnel; an increase of $78,920 in technology licensing fees; and an increase of $84,300 in recruitment and hiring fees, and partially offset by a decrease of $147,843 in supplies and consumables expense.

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