UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, ~~2024~~2025


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-35955

Vuzix Corporation

(Exact name of registrant as specified in its charter)


Delaware		04-3392453
(State of incorporation)		(I.R.S. employer identification no.)
25 Hendrix Road
West Henrietta, New York		14586
(Address of principal executive office)		(Zip code)

(585) 359-5900

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001	VUZI	Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act:

None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ◻ No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ◻ No þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company in Rule 12b-2 of the Exchange Act.

Large accelerated filer ◻

Accelerated filer ◻

Non-accelerated filer þ

Smaller reporting company ☑

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☑

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates as of June 30, ~~2024~~2025 was approximately $81189,~~700~~368,000 (based on the closing price of the common stock of $12.3592 per share on that date, as reported on the NASDAQ Capital Market and, for purposes of this computation only, the assumption that all of the registrant’s directors and executive officers are affiliates and that beneficial holders of 10% or more of the outstanding common stock are affiliates).

As of March 1312, ~~2025~~2026, there were 7683,~~242~~158,~~415~~258 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of this Form 10-K incorporates by reference portions of the registrant’s proxy statement for its ~~2025~~2026 annual meeting of stockholders.

Table of Contents

TABLE OF CONTENTS

		Page
Item 1	Business	1
Item 1A	Risk Factors	13
Item 1B	Unresolved Staff Comments	2724
Item 1C	Cybersecurity	2724
Item 2	Properties	2925
Item 3	Legal Proceedings	2926
Item 4	Mine Safety Disclosures	2926
Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2926
Item 6	[Reserved]	3027
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3027
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	4542
Item 8	Financial Statements and Supplementary Data	4543
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	4543
Item 9A	Controls and Procedures	4643
Item 9B	Other Information	4744
Item 9C	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	4744
Item 10	Directors, Executive Officers and Corporate Governance	4744
Item 11	Executive Compensation	4744
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	4745
Item 13	Certain Relationships and Related Transactions, and Director Independence	4745
Item 14	Principal Accountant Fees and Services	4845
Item 15	Exhibits and Financial Statement Schedules	4946

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FORWARD-LOOKING STATEMENTS

This annual report includes forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on our management’s beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business.” Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements concerning:

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trends in our operating expenses, including personnel costs, research and development expense, sales and marketing expense, and general and administrative expense;

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the effect of competitors and competition in our markets;

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our wearable display products and their market acceptance and future potential;

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our ability to develop, timely introduce, and effectively manage the introduction of new products and services or improve our existing products and services;

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expected technological advances by us or by third parties and our ability to leverage them;

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our ability to attract and retain customers;

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our ability to accurately forecast demand and adequately manage inventory;

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our ability to deliver an adequate supply of product to meet demand;

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our ability to maintain and promote our brand and expand brand awareness;

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our ability to detect, prevent, or fix defects in our products;

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our reliance on third-party suppliers and manufacturers, as well as logistics providers and our limited control over such parties;

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trends in revenue, costs of revenue, and gross margin and our possible or assumed future results of operations;

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our ability to attract and retain highly skilled employees;

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the impact of foreign currency exchange rates;

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the impact of further pandemics like COVID-19 on our business and our response to it;

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the effect of future regulations; and

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general market, political, economic and business conditions.

All statements in this annual report that are not historical facts are forward-looking statements. We may, in some cases, use terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions that convey uncertainty of future events or outcomes to identify forward-looking statements.

Forward-looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made, and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, except as may be required by applicable law. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.

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Part 1

Item 1. Business

Company Overview

Incorporated in Delaware in 1997, Vuzix Corporation ("“Vuzix"” or "the “Company"”) ~~is a leading designer~~designs, ~~manufacturer~~manufactures, and ~~marketer~~markets ~~of Artificial Intelligence (~~AI)-~~powered~~enabled ~~Smart~~smart ~~Glasses~~glasses, ~~Waveguides~~waveguides, and ~~Augmented~~augmented ~~Reality~~reality (“AR”) display technologies. Our ~~solutions~~products ~~serve~~and ~~the~~solutions support enterprise, medical, defense, and security, and select consumer ~~markets~~applications, ~~offering~~with ~~cutting-edge~~a ~~wearable~~focus ~~computing~~on ~~and~~hands-free ~~display~~computing ~~technologies that enhance productivity~~ and ~~operational~~near-eye ~~efficiency~~visualization.

Our product ~~lineup~~offerings ~~includes~~include near-eye displays ~~(NEDs)~~, heads-up displays (“HUDs”), and wearable computing devices that provide ~~users with~~ a ~~high-quality,~~ portable viewing experience. These smart display systems—worn like eyeglasses or attached to a head-mounted frame—~~typically~~may ~~include~~incorporate cameras, sensors, and onboard ~~computing~~processing ~~that~~to ~~allow~~enable users to view, ~~record~~capture, and interact with ~~video and~~ digital content, including internet-based applications, cloud-based AI assistants, and real-time AR overlays. ~~Our~~We also offer proprietary waveguide optics and display engines, ~~which~~designed ~~can~~for ~~power~~integration into both Vuzix-branded ~~Smart~~smart ~~Glasses~~glasses and third-party ~~Original~~original ~~Design~~design ~~Manufacturers~~manufacturer (“ODM”) and ~~Original~~original ~~Equipment~~equipment ~~Manufacturers~~manufacturer (“OEM”) devices~~, set us apart in the AR industry~~.

Historically, ~~most~~many ARvirtual reality (“VR”) and ~~AI-enabled~~AR wearable displays have been ~~bulky~~larger, goggle-~~like~~style headsets ~~that limit widespread adoption~~. Vuzix has developed thin, ~~fully~~ see-through waveguides that integrate miniature display engines into ~~the~~eyewear-style ~~temples~~form offactors, ~~the~~reducing ~~glasses,~~system ~~significantly~~size ~~reducing~~and weight ~~and~~relative ~~form~~to ~~factor~~headset designs. ~~Our~~Certain ~~Smart~~Vuzix ~~Glasses~~smart glasses are designed for ~~all-day~~extended ~~use,~~wear ~~with~~and ~~some~~operate ~~models~~without ~~compact enough to fit in a pocket or purse. Unlike many competing products, Vuzix Smart Glasses require no~~ external cabling or tethering to a separate computing device or battery pack.

Our waveguide optics and display engines ~~offer~~are designed to support key ~~advantages~~attributes ~~over~~valued ~~other~~in see-through wearable displays, including high contrast and ~~traditional~~brightness ~~optics~~for ~~that~~a ~~occlude~~range ~~the~~of ~~wearer’s~~lighting ~~view~~conditions; power efficiency intended to support longer operating time; compact, ~~including:~~lightweight designs intended to improve comfort and usability; compatibility with prescription lens integration; and reduced forward light leakage (“eye glow”), which can be an important consideration in wearable display products.

●In ~~Higher~~addition ~~contrast~~to ~~and~~selling ~~brightness~~Vuzix-branded smart glasses, ~~making~~we ~~them~~provide ~~ideal~~custom optical display solutions and engineering services for ~~outdoor~~ODMs and ~~enterprise~~OEMs. These customers may use our waveguide technology and display engines to develop integrated, AR-enabled wearable displays for commercial, industrial, defense, and consumer applications. We also maintain in-house waveguide manufacturing capabilities that can support partners seeking a production path for waveguide-based optics.

●Through ~~Greater~~this ~~power~~ODM/OEM ~~efficiency~~strategy, ~~extending~~we ~~battery~~offer ~~life~~waveguide ~~for~~manufacturing ~~all~~processes intended to support scalable production and cost-~~day~~competitive ~~operation~~configurable display engine and waveguide solutions aligned to partner requirements; and reference designs that may be adapted and branded by ODM and OEM customers.

●We ~~Lightweight~~have built an intellectual property portfolio over more than 28 years in wearable display technology, including patents and ~~compact~~know-how ~~design~~related to waveguide optics and nano-imprinting, ~~enhancing~~microdisplay ~~comfort~~engine designs, AR computing interfaces, and ~~usability~~ergonomic wearable form factors. We believe our technology and manufacturing capabilities provide competitive differentiation in high-performance wearable display solutions.

●We ~~Seamless~~believe ~~prescription~~compact ~~lens~~display ~~integration,~~engines ~~allowing~~and ~~our~~waveguide ~~Smart~~optics ~~Glasses~~are toimportant ~~maintain~~enablers ~~the~~of ~~look~~next-generation AI- and ~~feel~~AR-enabled ofsmart ~~conventional~~glasses, supporting eyewear-style designs while enabling interactive and connected capabilities. Our primary growth opportunities include enterprise hands-free workflows and remote collaboration; medical use cases such as assisted visualization and telemedicine; defense and security applications including training and situational awareness; and select consumer applications.

● Advanced eye-glow reduction technology, minimizing unwanted forward light leakage—a major concern in the industry.

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.

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. 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.

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●To ~~White-labeled~~support ~~AI/AR~~these ~~Smart~~markets, ~~Glasses~~we ~~reference~~continue ~~designs~~to ~~that~~develop ~~ODMs~~and expand our software ecosystem and ~~OEMs~~partner ~~can~~network, ~~brand~~including value-added resellers, system integrators, and ~~commercialize~~application developers. We also leverage Moviynt, our internal software solutions development team, to support solution development and customer deployments.

● Our proprietary waveguide manufacturing processes ensure scalability and cost efficiency, allowing us to produce high-performance optics at market-competitive prices.

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.

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. These technologies are advancing rapidly, allowing us to develop near-eye displays that closely resemble traditional eyeglasses while maintaining cutting-edge computing and interactive capabilities.

Our primary growth opportunities span the following markets and use cases:

● Enterprise – Hands-free data visualization, workflow optimization, and remote collaboration.

● Medical – Surgical assistance, telemedicine, and augmented patient care.

● Defense & Security – Situational awareness, training, and mission-critical AR applications.

● Consumer Electronics – AI-driven personal assistants, navigation, and real-time information overlays.

To support these markets, we continue to expand our software ecosystem, working with value-added resellers (VARs), system integrators, and application developers, including Moviynt, our internal software solutions development team. This broad network of partners and enterprise customers enhances our reach and accelerates market adoption of AR-powered Smart Glasses.

Our History

Historically, we have ~~focused~~served on three primary markets: ~~the~~(i) ~~consumer~~enterprise ~~markets~~smart ~~for VR~~glasses, ~~entertainment,~~(ii) ~~and~~rugged ~~mobile~~wearable ~~video;~~display ~~Smart Glasses~~ products for ~~enterprise;~~defense applications, and ~~rugged~~(iii) ~~mobile~~select ~~displays~~consumer ~~for~~uses ~~defense~~including ~~markets~~VR, entertainment, and mobile video. We introduced our first head-mounted display (“HMD”) products ~~for~~more VRthan ~~over~~28 25 years ago and we have since offered ~~numerous~~multiple product ~~models~~generations ~~and versions~~ with ~~ever-advancing~~progressively expanded features and capabilities ~~that~~across ~~have served~~ these ~~three~~ markets. As near-eye display technology ~~has evolved~~matured, we ~~transitioned~~shifted ~~towards~~our focus away from VR and video viewers toward enterprise~~-focused~~ ~~Smart~~smart ~~Glasses~~glasses, leveraging our waveguide optics and available microdisplays to develop lightweight, hands-free wearable computing solutions ~~that~~designed ~~function~~for aseyewear-style ~~wearable~~form ~~displays~~factors ~~with~~suitable ~~the~~for ~~look~~extended ~~and feel of fashion forward all-day wearable solutions~~wear.

Overall Strategy

Our goal is to establish and maintain a ~~leadership~~competitive position as a worldwide supplier of waveguides for AI/AR ~~Smart~~smart ~~Glasses~~glasses and wearable smart displays for both our ~~own~~products ~~product needs~~ and third-party ODMs and OEMs. We ~~strive~~seek to beadvance anthe ~~innovator~~design inof ~~designing~~smart wearable display devices and ~~computers as well as~~ waveguide optics that can enable hands-free enterprise productivity applications such as, “see-what-I -see” remote viewing, and AI and AR applications. We seek to generate revenue and ultimately profitable growth through the continued introduction of ~~market~~new ~~leading~~ technologies, including AI/AR ~~Smart~~smart ~~Glasses~~glasses, waveguides and display engines, ~~software~~and ~~applications~~related ~~and~~software ~~solutions~~applications.

To strengthen our position in wearable display products for AI/AR and hands-free computing, as well as waveguides and display engines for OEMs and ODMs, we seek to:

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develop innovative products based on our technology for enterprise, medical, and defense and security markets;

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expand waveguide production and optimization by improving manufacturing efficiency, reducing costs, and maintaining proprietary process protections;

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establish mass production and supply partnerships with ODMs/OEMs to support adoption and sale of next-generation AI/AR smart glasses and wearable computing solutions;

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offer waveguide products as standard or custom solutions to meet customer design requirements;

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expand licensing and technology partnerships enabling third parties to incorporate and white-label our smart glasses and optical technologies;

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develop microdisplay engine products utilizing available third-party displays;

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expand our technology and product capabilities;

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support third-party and in-house software development for our products, including distribution of applications through our sales and distribution channels;

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enhance and protect our intellectual property portfolio;

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leverage third-party technology and strategic relationships; and

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attract and retain qualified personnel.

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ToWe ~~broaden~~believe the continued introduction of new products and related optical components in our ~~position~~target asmarkets ais ~~leading~~important ~~provider~~to ofour ~~wearable~~growth. ~~display~~Our products ~~for~~tend ~~AI/AR~~to have life cycles of less than five years, which requires ongoing investment in research and ~~hands~~development and next-~~free~~generation ~~computing~~product evolution. To support this work, aswe ~~well~~maintain asteams ~~waveguides~~of engineers, product designers, and ~~display~~optical ~~engines~~specialists ~~for~~who ~~OEMs~~work in-house and ~~ODMs~~with external consultants, weODM/OEM ~~seek~~partners, ~~to:~~and other technology developers.

● 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.

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. To support this innovation pipeline, we have built a highly skilled team of engineers, product designers, and optical specialists who work both in-house and collaboratively with external consultants, ODM/OEM partners, and technology developers.

Our primary development efforts are focused on:

● waveguide optics and scalable manufacturing processes to ~~enhance~~improve optical performance, manufacturability, brightness, clarity, and cost efficiency for ~~high~~higher-volume production;

●

projection and microdisplay engines;

● ~~next-generation~~industrial ~~electronic~~design ~~designs that minimize power consumption, extend battery life,~~ and ~~enable~~user ~~lightweight,~~experience ~~ergonomic wearable displays~~optimization;

● ~~embedded~~electronic ~~firmware~~designs ~~and AI-powered software~~ that ~~enhances~~reduce ARpower ~~visualization~~consumption, ~~voice~~extend ~~interaction,~~battery ~~real-time translation~~life, and ~~contextual~~enable ~~information~~lightweight, ~~overlays~~ergonomic wearable displays; and

● ~~industrial~~embedded ~~design~~firmware and ~~user~~AI-enabled ~~experience~~software ~~optimization,~~to ~~ensuring~~support ~~Vuzix~~AR ~~smart~~visualization, ~~glasses~~voice ~~meet~~interaction, ~~the~~real-time ~~needs~~translation, ofand ~~our~~contextual ~~users~~information overlays.

We expect to continue our research and development expenditures in the future and may increase them as revenues grow. In addition to in-house development, we evaluate, acquire, and license technologies that align with our roadmap.

We expect to continue our research and development expenditure levels in the future and perhaps increase them as our revenues grow. In addition to in-house development, we actively evaluate, acquire, and license cutting-edge technologies that align with our strategic roadmap.

The Market

The mobile phone has evolved into a powerful, location-aware computing device, reshaping how people interact with ~~their~~the world. Mobile technology is ~~now~~widely ~~essential~~used in work and daily life ~~around the globe~~. ~~The~~Continued growth in mobile computing is ~~creating~~increasing ~~a growing~~ demand for ~~more efficient~~ hands-free solutions. We believe ~~that~~ interactive AI and AR content, ~~Edge~~edge ~~Computing~~computing, and the internet of things (“IoT”) will ~~further~~continue ~~transform~~to influence 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~~.

Most mobile displays are direct-view screens designed to be handheld and relatively small for portability. Our products are designed to provide hands-free, virtual large-screen viewing experiences in eyewear-style form factors. These systems may be “see-through” or “see-around,” allowing users to remain aware of and interact with their surroundings, and may be monocular or binocular.

Our business has primarily focused on the enterprise, industrial, medical, and defense markets. We believe demand for head-worn displays in these markets is driven by:

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continued growth in mobile computing;

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rapid adoption of AI;

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increasing use of AR/AI applications in workflows where hands-free access to information can improve efficiency and safety; and

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expansion of IoT and connected devices that increase the value of timely, real-time data for productivity and decision-making.

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Current mobile display technology is almost universally based upon direct view screens. These displays are designed to be handheld and small to make portability easy. 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. They may contain one (monocular) or two (binocular) displays.

Our business for the last several years has primarily focused on the enterprise, industrial, medical, and defense markets. As the market for AI and AR technology grows, we believe our near-eye display technologies will play a key role in enhancing user experiences and driving widespread adoption. 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.

As the market for AI and AR technology grows, we believe our near-eye display technologies and products will play a key role in enhancing user experiences and driving widespread adoption.

Target Markets

Vuzix develops AI- and AR-enabled smart glasses and optical components for enterprise, defense, medical, security, and select consumer applications. Our wearable computing solutions, waveguides, and display engines also support ODM and OEM partnerships, enabling third parties to incorporate our technologies into their products.

Vuzix develops AI and AR-powered Smart Glasses and optical components for enterprise, defense, medical, security, and consumer applications. Our wearable computing solutions, waveguides, and display engines also support ODM and OEM partnerships, expanding their adoption across industries. Our target markets are:

Enterprise

Vuzix smart glasses support hands-free workflows in industries such as manufacturing, logistics, and field service by enabling access to guided work instructions, remote assistance, and real-time data without requiring handheld devices. When integrated with enterprise software and connected systems, smart glasses can improve workflow execution in environments where hands-free operation supports efficiency and safety.

Vuzix Smart Glasses enhance efficiency and accuracy across industries such as manufacturing, logistics, and field service. Workers can access real-time data, including AI, follow guided instructions, and collaborate remotely without using handheld devices. By integrating with enterprise software and IoT systems, Smart Glasses streamline workflows, reduce errors, and improve safety while increasing productivity and lowering operational costs.Defense

Vuzix designs and supplies domestically manufactured waveguides and display engines for military applications where see-through displays may be used in training, situational awareness, and mission workflows. As defense programs incorporating wearable displays progress through development and fielding phases, we believe there may be opportunities for growth in this sector.

Medical

Vuzix smart glasses can support remote collaboration, hands-free access to information, and telemedicine workflows in clinical and care settings. In certain procedures and care environments, smart glasses may also be used to support visualization, training, and remote consultation.

Healthcare professionals use Vuzix Smart Glasses for remote surgical collaboration, hands-free access to medical data, and enhanced telemedicine. Surgeons benefit from real-time expert support and training, while hospitals and senior care facilities use the technology for virtual patient monitoring and remote consultations. In orthopedic procedures, Smart Glasses assist with implant alignment, showcasing the growing role of AR in medicine.

Security & First Responders

Law enforcement, security teams, and emergency responders may use smart glasses for hands-free access to alerts and situational information, as well as video capture and streaming. These capabilities can support operational awareness and documentation in time-sensitive environments.

Law enforcement, security teams, and emergency responders can use Vuzix Smart Glasses for facial recognition, real-time alerts, and AI-driven analytics. Officers and first responders can access critical data hands-free while staying fully engaged, improving decision-making and response times in high-risk scenarios.

Defense

Vuzix designs and supplies domestically manufactured waveguides and display engines for advanced military applications. Our lightweight, high-resolution, see-through AR technology supports situational awareness, training, and battlefield command systems. As new defense projects incorporating AR and wearable displays move from R&D to full-scale production, Vuzix expects growth in this sector.

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Consumer

AI-enabled smart glasses may support hands-free access to functions such as language translation, navigation, health-related applications, and notifications. We believe Vuzix may participate in select consumer opportunities primarily through ODM/OEM partnerships that enable brands to introduce AI-enabled smart eyewear products.

We feel that AI-enhanced AR Smart Glasses are poised to replace traditional handheld devices, offering hands-free access to language translation, navigation, health tracking, and notifications. As AI platforms like ChatGPT, Gemini, Grok, and Meta AI evolve, demand for sleek, prescription-ready smart eyewear is expected to grow. We believe that Vuzix is positioned to help drive this market through its ODM/OEM partnerships, enabling tech brands to introduce AI-driven Smart Glasses to consumers.

Products

We develop, manufacture, and sell AI~~/AR~~- ~~Smart Glasses~~ and ~~optical~~AR-enabled ~~waveguides~~smart ~~for enterprise~~glasses, ~~medical,~~waveguide ~~defense~~optics, and ~~consumer~~related ~~applications~~display engines for our target markets. Our ~~Smart~~smart ~~Glasses~~glasses lineup includes both monocular and binocular models intended ~~tailored~~ to ~~meet~~address ~~market-specific~~a ~~needs~~range of use cases and deployment requirements. Additionally, our waveguide optics and display engines support both Vuzix-branded products and external ODM/OEM customers.

M400 and M4000 Smart Glasses (M Series)

The M400 and M4000 are ~~industrial-grade~~ monocular Smart Glasses designed for enterprise, industrial, medical, and commercial use. The M400 features an occluded nHD OLED display, while the M4000 incorporates a see-through waveguide display ~~for~~to ~~more~~support ~~immersive~~see-through ARdisplay ~~applications~~use cases. These hands-free wearable products integrate an Android-based computing platform, voice control, high-resolution camera, audio, sensors, and wireless connectivity. Included Pre-installed apps enable video streaming, barcode scanning, and calendar integration, with optional subscription-based connectors for platforms like Zoom. These Smart Glasses can enhance workflows, provide AI-driven solutions, and unlock new opportunities across industries such as healthcare, logistics, retail, and remote support.

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apps enable video streaming, barcode scanning, and calendar integration, with optional connectors for platforms like Zoom. These Smart Glasses are used in workflows across industries such as healthcare, logistics, retail, and remote support.

Vuzix Blade® Smart Glasses

The Blade 2 combines a monocular full color waveguide display with a lightweight eyeglasses-style form factor. It features stereo audio, an autofocus HD camera, voice control, wireless connectivity, and a ~~modern processor for enhanced performance~~CPU. The see-through waveguide display projects information like a heads-up display, making it useful for applications such as messaging, ~~social media~~ notifications, navigation, work instructions, and ~~biometrics~~other information overlays. The Blade OS supports voice commands and cloud-based AI platforms, allowing users to access ~~critical~~ information hands-free while keeping their phones in their pockets.

Vuzix Shield™ Smart Glasses

The Shield is our first binocular AR Smart Glasses featuring microLED displays. Designed for enterprise applications, it offers ~~more~~a ~~power~~binocular, ~~and~~see-through ~~performance~~display ~~than the M400 series~~architecture. The Shield combines Vuzix’ proprietary waveguide optics with microLED stereo displays to deliver a fully transparent, high-resolution 3D heads-up display. Encased in lightweight, prescription-ready safety glasses, it also includes stereo HD cameras, making it a ~~powerful~~ hands-free AR tool for various industries.

Vuzix Ultralite Z100 Smart Glasses

The Z100 Smart Glasses are a lightweight, enterprise-focused solution that pairs ~~seamlessly~~ via Bluetooth with Android and iOS devices. Designed for extended wear, ~~the~~they ~~38-gram glasses~~ provide a transparent monochrome waveguide display powered by a custom microdisplay engine. With up to 48a ~~hours~~two-day ofextended battery life, they deliver ~~AI-driven~~ information hands-free, support ~~streamlining~~notifications ~~workflows~~ and ~~enhancing~~workflow ~~productivity~~information access. The Z100 also serves as a scalable white-label platform for ODM/OEM partners and enterprise customization.

WeVuzix ~~feel~~Ultralite ~~our~~Pro ~~innovative Smart Glasses represent the forefront of AR~~ and ~~AI-powered~~Ultralite ~~wearables,~~Audio ~~providing~~OEM ~~hands-free computing solutions across multiple markets while paving the way for broader adoption of smart eyewear.~~Platforms

At the CES 2025 trade show, we introduced the Ultralite Pro OEM Platform and Ultralite Audio OEM Platform, two smart glasses reference designs developed in partnership with Quanta Computer. These models expand the Company’s portfolio for ODM and OEM smart glasses customers and are intended to serve as reference platforms that may be adapted and branded by partners.

The Ultralite Pro combines dual full-color projectors with our ultra-slim binocular waveguide optics to deliver a see-through AR experience in a stylish, lightweight eyewear-style form factor. The platform supports immersive applications for hands-free productivity.

The Ultralite Audio OEM Platform builds on the Ultralite Z100 model by adding audio with integrated dual speakers and a noise-canceling microphone. Acting as an intelligent wearable accessory, it offers capabilities such as voice assistants and real-time language translation. These Smart Glasses are a lightweight, enterprise-focused solution that pairs via Bluetooth with Android and iOS devices and can provide up to two days of battery life.

LX1 Smart Glasses

The LX1 smart glasses, first introduced in December 2025, are designed for hands-free warehouse and logistics work. Featuring a monocular OLED color HD display and an 8-core processor, the LX1 supports barcode scanning and the presentation of workflow information such as pick lists, inventory data, and shipment details, including in environments where voice-driven operation may be beneficial. With voice interaction, visual guidance, multilingual onboarding, a modular mount, environmental durability features, NFC tap-to-pair, and a full-shift battery, the LX1 is

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designed for extended operation. The LX1 supports enterprise applications, including remote assistance (“see-what-I-see”) workflows, which may be used for training, quality control, and inspections.

Mobilium® Logistics Mobility Software

In 2022, we acquired Moviynt®, awhich ~~boutique-specialized software firm that~~ is aan ~~US-based~~ SAP Certified ERP platform software solution provider, tothat ~~support~~supports Smart Glasses and ~~hand-held~~handheld mobile phones and scanners used in logistics, warehousing and manufacturing applications. Moviynt has developed a logistics mobility software platform, Mobilium®, which ~~eliminates traditional middleware and~~ is ~~device~~designed ~~agnostic.~~to ~~Moviynt’s~~reduce ~~SAP~~or ~~studio~~eliminate ~~product~~the isneed ~~highly~~for ~~configurable~~traditional ~~and~~middleware ~~allows customers to customize~~ and ~~optimize~~is ~~specific~~device ~~mobile workflows for a given use case~~agnostic. ~~Moviynt’s~~The ~~core~~product ~~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~~. This~~ ~~technology~~and is ~~unique~~designed into ~~that~~operate itwithout ~~plugs~~additional ~~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. 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~~We ofmake available standard applications that are ~~optimized~~compatible ~~for use~~ with ~~the growing lineup of~~ Vuzix AR Smart Glasses ~~are~~through ~~included~~device-installed onsoftware ~~the~~and ~~devices or 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. These standard applications are designed to be ~~simple~~easy to ~~get started and easy-to-~~use, and we believe ~~can~~help ~~immediately~~demonstrate ~~provide some of the fundamental benefits of Smart Glasses to~~ novice and expert ~~users~~use ~~alike~~cases. We also have an app store on our website where users can download and purchase Smart Glasses applications, including third-party apps. 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-standard ~~common~~ revenue share model, with the publisher generally receiving ~~approximately~~the ~~70%~~majority of the ~~subscriptions~~subscription revenue collected.

Vuzix also resells a variety of other applications, including its internally developed “connector” applications, to enable third party applications like Zoom, Teams 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~~may ~~productivity~~support ~~and~~remote ~~customer~~assistance ~~satisfaction~~workflows by sharing information between field technicians and remote support experts. In some cases, these applications ~~will~~are beoffered free to the user and in other cases we ~~will~~ charge monthly or annual subscription fees.

We ~~feel~~believe ~~that~~our ~~Vuzix~~smart ~~Smart~~glasses ~~Glasses~~products, ~~and~~ waveguide technologies, ~~are~~and ~~leading~~software ~~innovations~~ecosystem insupport AIhands-~~powered~~free ~~wearable~~ computing. Byuse ~~leveraging~~cases ~~advanced optics, compact form factors, and seamless enterprise integration, Vuzix is driving the adoption of AR solutions~~ across enterprise, healthcare, defense and security, and select consumer markets.

~~OEM~~Engineering Services and ODM/OEM Products

Waveguide Optics and Display Engines

We offer waveguide optics and related coupling optics ~~combined~~that ~~for~~can ~~use~~be integrated with compact display engines from third parties to form a see-through display module. ~~Waveguides~~Waveguide-based display modules require a compatible display engine ~~built~~designed for the ~~purpose of the~~ intended ~~design.~~optical ~~Vuzix~~architecture ~~offers~~and ~~proprietary waveguide optics designed to integrate with compact third-party display engines, forming high-~~performance, ~~see-through AR display modules~~requirements. Our waveguide optical design reference kits, which include display projectors, waveguides, and supporting electronics, are provided to select ODMs and OEMs to facilitate evaluation, prototyping, and product development.

Our waveguide technology, combined with ~~advanced~~microdisplay ~~micro-display~~ projectors, is ~~engineered~~ designed to ~~meet~~support ~~next-generation AR~~ performance requirements for see-through wearable displays, ~~delivering~~including:

• high-brightness, full-color ~~micro-displays~~display capability for ~~clear~~a ~~visibility~~range inof ~~any~~lighting ~~environment~~conditions;

• compact, ~~lightweight~~ optics ~~that~~intended ~~enhance~~to ~~wearability~~support ~~for~~wearable ~~all-day~~form ~~use~~factors; and

• image clarity and resolution to support AI/AR applications.

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~~•superior~~We ~~image~~believe ~~clarity~~our waveguides, when coupled with appropriate third-party display engine technologies, address key performance parameters for next generation AR products. Our strategy for addressing the broader mass market includes developing partnerships with select consumer electronics and ~~resolution~~software companies, ~~optimizing~~as ~~user~~well ~~experience~~as with their ODMs or OEMs. We believe manufacturing scale and being cost-competitve, together with improvements in ~~AI/AR~~display ~~applications~~engine efficiency, are important factors for broader adoption of waveguide-based smart glasses. The best ways to capitalize on our waveguides include pairing them with full color microdisplays or projectors capable of high brightness across target use environments.

WeEngineering ~~believe~~Services our waveguides coupled with appropriate third-party display engine technologies address the critical performance parameters for next generation AR products to be brought to market. Our strategy for addressing the broader mass market includes developing partnerships with both select consumer electronic and ~~software~~Related companies as well as with their ODMs or OEMs. 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. The best ways to capitalize on our waveguides is to have extremely efficient full color micro-displays or projectors capable of high brightness for use in any conditions.Products

~~Engineering~~Vuzix ~~Services~~provides engineering services and ODM/OEM component solutions to select partners seeking to integrate waveguide optics and wearable display technologies into their products. We focus on developing long-term ODM/OEM relationships, including supply contracts, rather than traditional "work-for-hire" contracts. We have engaged with potential partners across consumer and enterprise markets regarding the use of our waveguide and display technologies. We can offer our ODM/OEM customers support from prototype development to production, including technical consulting, engineering data, and application support. Our business strategy is to commercialize our waveguide technologies and products to enable select ODMs and OEMs to integrate and embed our technologies and products consistent with their capabilities and timeline for bringing products to market.

Vuzix ~~provides~~serves ~~engineering~~defense ~~services~~ and ~~ODM/OEM~~security ~~component~~markets ~~solutions~~with tocustomized ~~select partners seeking to integrate~~ waveguide optics and ~~wearable~~ display ~~technologies~~engine ~~into~~solutions ~~their~~tailored ~~products.~~for ~~We focus on developing long~~mission-~~term~~critical ~~ODM/OEM~~applications. We ~~relationships,~~have ~~including~~provided ~~supply~~prototype ~~contracts,~~products ~~rather~~and ~~than~~engineering ~~traditional~~services ~~"work-for-hire"~~to ~~contracts.~~defense Tocontractors ~~date,~~and weintegrators ~~have~~evaluating awaveguides ~~developed~~and adisplay ~~strong~~engines ~~reputation~~ for ~~innovation,~~head-mounted ~~attracting~~systems. ~~interest~~These ~~from~~efforts ~~leading~~are ~~consumer~~typically ~~and~~multi-year ~~mobile~~development ~~electronics firms~~programs. We ~~can~~may ~~offer~~experience ~~our~~program ~~ODM/OEM~~transitions ~~customers comprehensive support,~~ from ~~prototype~~ development to production, ~~including~~over ~~technical~~time; ~~consulting~~however, ~~engineering~~the ~~data,~~timing and ~~application~~scale ~~support.~~of ~~Our~~any ~~business~~such ~~strategy~~transitions iscan be uncertain and are subject to ~~commercialize~~customer ~~our~~funding, ~~waveguide~~program ~~technologies~~requirements, and ~~products~~procurement todecisions. Because ~~permit~~Vuzix ~~select~~is ~~ODMs~~a ~~and~~domestic ~~OEMs~~manufacturer toof ~~integrate~~optics and ~~embed~~display ~~our~~engines, ~~technologies~~we ~~and~~believe ~~products~~Vuzix inmay abe ~~way~~well ~~that~~positioned ~~best~~for ~~matches~~certain ~~their~~U.S. ~~unique~~defense ~~capabilities~~applications ~~and~~where ~~timeline~~domestic ~~for~~supply ~~bringing~~is ~~their~~a ~~products~~procurement ~~to market~~consideration.

Defense and Security Products

Vuzix serves defense and security markets with its customized high-performance waveguide optics and display engine solutions tailored for mission-critical applications. Multiple defense contractors are integrating Vuzix waveguides and display engines into their head-mounted systems on a trial basis and purchasing our engineering services and prototype products. These are typically multi-year development projects. We expect several projects to soon transition from R&D to production, indicating long-term growth potential. And since Vuzix is a domestic manufacturer of optics and display engines and as most U.S. defense companies prefer domestically manufactured optics, Vuzix is an attractive strategic partner.

Technology

Investing in research and development is key to maintaining our ~~competitive~~technology ~~advantage~~and product capabilities. We aim to continuously enhance our ~~products~~product offerings through internal development and partnerships with third-party suppliers. Our proprietary technologies, including advanced optics, micro-projection display engines, and specialized software, support ~~provide~~our aproduct ~~strong~~and ~~market~~ODM/OEM ~~position~~offerings. We also leverage trade secrets and nanoimprinting expertise to develop ~~cutting-edge~~ diffractive waveguide optics.

Major core technologies that we employ in our products include:

●

See-Through Waveguides:

We hold numerous patents and pending applications for passive, dynamic, and diffractive optics-based waveguides, which enable compact, ~~high-performance~~ AI/AR Smart Glasses. Our goal is to create AI/AR-based displays that resemble everyday sunglasses in comfort, size, and weight.

Recent advancements include our Incognito™ technology, which minimizes forward light leakage, ~~and~~including ~~enhances optical performance~~ in ~~low~~lower-light ~~environments~~operating conditions. In addition, our waveguides now support integrated prescription vision correction, allowing users to incorporate their ~~exact~~vision prescription ~~seamlessly~~into certain configurations while maintaining a natural eyewear ~~look~~appearance. Our production process currently supports prescription ranges of +2D to -8D diopters, with plans to expand further.

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●

Nanoimprinting:

We continue to refine nanoimprinting techniques to produce ultra-thin waveguides, asincluding ~~thin~~waveguides aswith thicknesses down to approximately 0.35 mm, ~~essential~~which may be important for lightweight and ~~fashionable~~eyewear-style Smart Glasses. Our expertise spans tool design, custom grating software, high-index polymers, precision lithography, and automated quality control, ~~ensuring~~supporting high-volume production with ~~superior~~ optical clarity.

● ~~Micro-Display~~Microdisplay Optics:

Optical components are a major cost factor in wearable displays. We have developed thin, lightweight optics that integrate with ultra-compact ~~micro-displays~~microdisplays, reducing bulk while maintaining high-resolution AR visuals. These innovations are intended to allow our Smart Glasses to resemble traditional eyewear while delivering immersive digital experiences.

●

Custom Display Engines:

We are advancing ~~micro-display~~microdisplay projection technology, developing high-brightness, full-color display engines optimized for waveguides. We collaborate with multiple industry partners to deliver both monochrome and full color ~~micro-display~~microdisplay solutions, ensuring power efficiency, clarity, and seamless integration into compact Smart Glasses.

Product Development

Continuous innovation and product expansion drive our growth, with product life cycles typically lasting less than five years. Our team of in-house engineers and external consultants focuses on:

●

Waveguide optics and manufacturing;

● Projection engines and ~~micro-displays~~microdisplays, including ODM/OEM reference designs and platforms;

●

Ergonomic designs and utility;

●

Low-power electronics and firmware; and

●

Wearable computing software and UI/UX design.

We plan to increase R&D investments as revenues grow and will continue licensing and acquiring technologies to accelerate development. By combining ~~cutting-edge~~advanced optics, microdisplay technology, and advanced manufacturing, Vuzix remains at the forefront of AI/AR Smart Glasses innovation.

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. We seek to achieve these objectives through the education and training of our engineering staff and the adoption of appropriate systems, policies and procedures for the creation, identification, and protection of intellectual property.

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. We file and prosecute our patent applications in pursuit of the most extensive fields of protection possible including, where appropriate, the application of the relevant technology to the broader display industry.

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We believe that our intellectual property portfolio, coupled with our supplier relationships and accumulated experience in the near-eye display field, gives us an advantage over potential competitors. 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. 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. To protect our technologies, we have developed a patent portfolio which currently consists of ~~246~~306 issued U.S. and foreign patents and ~~180~~202 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. Our U.S. and foreign patents expire on various dates with the capacity to remain enforceable through at least ~~June~~March of ~~2043~~2050. In addition to our various patents, we have 810 registered U.S. trademarks and 8285 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. We compete against both direct view display technology in smart phones and tablets and other wearable display technology. 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.

Competition – Binocular Wearable Display and VR Products

Vuzix AR Smart Glasses competitors include binocular wearable displays and virtual reality systems, using ~~micro-displays~~microdisplays or smaller flat panels. 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~~TCL, Huawei and many others. Some of these firms have discontinued their efforts while others continue to introduce new products ~~that continue to be~~ focused ason 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. VR systems are either standalone devices or require a wire to be connected to a PC or game console to operate.

Competition – AR Glasses

In the AR or mixed reality (XR) markets, there are currently fewer competitors with much of this market ~~currently~~ aimed at the high-end user and research markets. Companies with products in this area include or have included Microsoft Corporation, Sony Corporation, Epson, Lenovo, Magic Leap, Snap, Meta, Xreal, ~~TLC~~TCL, Rokid, and Apple. Today, many of these products have relatively bulky goggle style HMDs and are typically tethered to an external controller. 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. 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~~pilot program tests and smaller rollouts in enterprise markets rather than broad commercial volume purchases. Although we believe sales of these devices have seen limited large-scale adoption beyond pilot programs, demand is increasing in industries such as healthcare, logistics, security, and field services. Vuzix offers superior form factors, optics, and AI integrations, positioning its products as compelling alternatives.

Several Japanese electronics companies including Hitachi, Murata Manufacturing Co., Sony Corporation, WESTUNITIS, and Olympus have or had announced monocular smart glasses systems for industry and many have exited the business over the last three years. 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

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Several Japanese electronics companies including Hitachi, Murata Manufacturing Co., Sony Corporation, WESTUNITIS, and Olympus announced monocular smart glasses systems for the enterprise market and many have exited the business over the last three years. 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 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. 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. Vuzix competes or has competed with such companies as Lumus, Snap’s WaveOptics, Digilens, AAC Technologies’ Dispelix, and multiple emerging Chinese manufacturers such as Goertek, Goolton, Crystal Optech, Optiark, and Xiaomi.

We believe our waveguides provide several competitive advantages including: (i) cost-effective, scalable volume manufacturing; (ii) higher brightness and display clarity with nominimal forward light glow (Incognito technology); (iii) thinner, lighter optics with wider field-of-view (FOV); (iv) better light efficiency and durability; and (v) our ability to quickly develop customizable designs for ODM and OEM customers.

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.

In the Smart Glasses and AI/AR markets, our primary focus is on the enterprise sector, where we collaborate with software firms and resellers to support industry-specific applications. We maintain a VAR network across key verticals such as warehousing, field service, and healthcare, enabling these partners to provide tailored software and support solutions. Our subsidiary, Moviynt, provides software solutions to support Smart Glasses and handheld scanning devices in logistics. Additionally, our in-house sales team manages key enterprise accounts and distributors, and we sell direct via online stores and various Vuzix operated web stores in the U.S., Europe and Japan. 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. 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. 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 our North American (West Coast) and Tokyo sales offices.

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~~16 hours a day.

For our ODM and OEM customers, we primarily supply waveguides, display engines, and Smart Glasses platforms for integration into branded products. These ODM/OEM customer partnerships typically involve design cycles of 6 to 24 months, depending on product complexity. Given the technical nature of these components, our sales, technical, and executive teams work closely with customers throughout the evaluation and integration process.

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To strengthen relationships and gain market insights, our teams regularly engage with customers worldwide and participate in key industry trade shows and conferences.

Marketing

Our marketing efforts focus on brand awareness, lead generation, and industry engagement. Our marketing and sales teams, along with external agencies, manage product positioning, advertising, PR, and marketing communications. We also employ marketing services firms to help prepare brochures, packaging, tradeshow messaging and advertising campaigns, focused on customers in our target markets. Most of our finished products today are currently sold under the Vuzix brand name. 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 use strategic marketing efforts to drive awareness and adoption of Vuzix Smart Glasses, waveguides, and white-label display solutions. Public relations and product videos remain a key part of our outreach, and we continue to provide product samples to key industry influencers.

Manufacturing

We manufacture our products using a combination of in-house production and third-party contract manufacturing services. We procure components from suppliers, use 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. We believe that maintaining production in-house at our current volume levels provides better cost control, quality assurance, and operational flexibility compared to outsourcing to third parties.

Vuzix manufactures all its waveguide optics in a dedicated, state-of-the-art cleanroom facility adjacent to our headquarters in West Henrietta, New York. This facility can support high-volume production, at reduced manufacturing costs, and allows us to implement advanced waveguide processing techniques for next-generation designs. For the foreseeable future, all waveguide manufacturing will remain at this facility.

WeIn ~~evaluate~~April ~~contract~~2025, ~~manufacturers~~Vuzix ~~and~~acquired ~~component~~an ~~suppliers~~advanced onwaveguide anR&D ~~ongoing~~facility ~~basis~~in Milpitas, ~~including~~California. ~~whether~~The orfacility, ~~not~~previously tooperated ~~utilize~~by ~~new~~a orglobal ~~alternative~~technology ~~contract~~leader ~~manufacturers~~known orfor ~~component~~its ~~suppliers~~extensive work in software, AI, and ~~will~~augmented bereality, ~~working~~now ~~with~~serves ~~our~~as ~~new~~a ~~investor~~key waveguide tools development and ~~partner~~innovation ~~Quanta~~hub ~~Computer~~for Vuzix and its ODM/OEM customers’ next-generation AI-driven smart glasses. The facility, which features state-of-the-art equipment, includes an advanced ion milling machine, which offers superior precision, advanced tool development capabilities, and batch-processing, enables Vuzix to ~~potentially~~further ~~provide~~innovate ~~such~~and ~~services~~scale its waveguide development capabilities, ~~among~~a ~~others.~~critical component for next-generation AI/AR smart glasses.

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. 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 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. Our contract manufacturers procure raw materials in volumes consistent with our forecasts, manufacture and/or assemble the products

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We evaluate contract manufacturers and ~~perform~~component ~~tests~~suppliers ~~according~~on an ongoing basis, including whether or not to ~~our~~utilize ~~specifications.~~new Inor ~~some~~alternative ~~cases,~~contract wemanufacturers ~~procure~~or ~~specific~~component ~~components~~suppliers and ~~either~~will ~~sell~~be ~~them~~working orwith ~~consign~~our ~~them~~investor and partner Quanta Computer to ~~our~~potentially ~~contract~~provide ~~manufacturers~~such services, among others. The new LX1 is our first smart glasses product to be made by them for us.

~~While~~We wecurrently dosource ~~not~~microdisplays ~~manufacture~~from ~~our~~Sony ~~raw components~~Corporation, ~~other~~Jade ~~than~~Bird ~~waveguides~~Display, weand doTexas ~~own~~Instruments ~~the~~and ~~tooling~~regularly ~~that~~and actively evaluate new suppliers of compact display engines to enhance AI/AR Smart Glasses performance. Our relationship with these microdisplay suppliers is ~~used~~generally on a purchase order basis and none have a contractual obligation to ~~make~~provide adequate supply or acceptable pricing to us on a long-term basis, nor do we have any contractual obligation to purchase microdisplays from them. We generally procure our ~~custom~~other non-microdisplay components. ~~Most~~and ofproducts ~~such~~from ~~tooling~~our isvendors ~~located~~on ~~primarily~~a inpurchase ~~China~~order basis without any long-term commitments. ~~Some~~Many of ~~our~~the ~~accessory~~raw components used in our products are ~~sourced~~standard ~~from~~for ~~third~~the ~~parties~~consumer aselectronics ~~finished~~and ~~goods~~computer industry. We ~~typically~~provide ~~have~~forecasts ~~them~~that ~~print~~can allow our ~~Vuzix~~contract ~~brand~~manufacturers ~~name~~to onstock ~~these~~component ~~products~~parts ifand ~~they~~other ~~are~~materials ~~co-branded~~and plan capacity. ~~Such~~Our ~~third-party~~contract manufacturers procure raw materials in volumes consistent with our forecasts, manufacture and/or assemble the products ~~represented~~and ~~less~~perform ~~than~~tests 3%according ofto our ~~sales~~specifications. inIn ~~last~~some ~~three~~cases, ~~fiscal~~we ~~years~~procure specific components and either sell them or consign them to our contract manufacturers.

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 in China. 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. Such third-party products represented less than 3% of our sales in the last three fiscal years.

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. 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. 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~~2025, the Company had 7688 ~~employees globally. A small percentage of the U.S. and non-U.S. employees are~~ full-time oremployees ~~part-time~~and contractors 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. 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. We consider our relations with our employees to be very good. 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 will also provide to any person without charge, upon request, a copy of any of the foregoing materials. 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.

History - Corporate

We were incorporated in Delaware in 1997 as VR Acquisition Corp. In 1997, we acquired substantially all of the assets of Forte Technologies, Inc. (Forte), which was engaged in the manufacture and sale of Virtual Reality headsets and the development of related technologies. 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.

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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.

History - Corporate

We were incorporated in Delaware in 1997 as VR Acquisition Corp. In 1997, we acquired substantially all the assets of Forte Technologies, Inc. (Forte), which was engaged in the manufacture and sale of Virtual Reality headsets and the development of related technologies. Forte was originally owned and controlled by Kopin Corporation, one of our prior microdisplay 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.

Item 1A. Risk Factors

An investment in our securities involves a high degree of risk. An investor should carefully consider the risks described below, together with all of the other information included in this annual report, before making an investment decision. Our business, financial condition or results of operations could suffer as a result of these risks. In that case, the market value of our securities could decline, and an investor may lose all or part of his or her investment.

Summary of Risk Factors:

●	We have incurred net losses since our inception and may continue to incur losses.

● We operate in a highly competitive and complex market and the size, resources and brand name of some of our competitors may allow them to compete more effectively than we can, which could result in a loss of our market share and a decrease in our revenue ~~and profitability~~.

●	We depend on advances in technology by other companies and if those advances do not materialize or are not accessible to us, some of our anticipated new products could be delayed or cancelled.

●	Our products could infringe on the intellectual property rights of others.

●	If we lose our rights under our third-party technology licenses, our operations could be adversely affected.

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 $7332,~~538~~273,~~157~~128 for the year ended December 31, ~~2024~~2025; $5073,~~149~~538,~~077~~157 for the year ended December 31, ~~2023~~2024, and $4050,~~763~~149,~~573~~077 for the year ended December 31, ~~2022~~2023. We have an accumulated deficit of $~~367~~399,~~522~~858,~~950~~410 as of December 31, ~~2024~~2025.

We may not achieve or maintain profitability in the future. We will need to increase sales in order to achieve and maintain profitability. In addition, we expect that our expenses relating to product development and research, sales and marketing, as well as our general and administrative costs, may increase as our business grows. If we do not achieve and maintain profitability, our financial condition will ~~ultimately~~ be materially and adversely affected, and we would ~~eventually~~ be required to raise additional capital. 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 operate in a highly competitive and complex market and believe our future success depends in part on our ability to effectively manage the growth and increased complexity of our business.

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;

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We operate in a highly competitive and complex market and believe our future success depends in part on our ability to effectively manage the growth and increased complexity of our business.

The following factors could present difficulties for us:

●

Managing our ongoing research and development efforts associated with the development of new products based on emerging and innovative technologies;

●

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 product quality issues to minimize higher-than-expected warranty claims or returns that could harm our business and operating results;

●

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.

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. 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. We compete against established, well-known diversified consumer electronics manufacturers including Samsung Electronics Co., Sony Corporation, Meta, LG Electronics (LGE), HTC, TCL, 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~~including ~~our~~software products and cloud services with their products, well-established supply and distribution systems, strong worldwide brand recognition and greater financial, marketing, research and development and other resources than we do.

Moreover, smartphones, tablets, and new wearable devices with ever-expanding video display screens, including foldable and expandable screens, and ever-increasing computing power have significantly improved the mobile personal computing experience. In the future, 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. Further, our current and prospective competitors may consolidate with each other or acquire companies that will allow them to develop products that better compete with our products, which would intensify the competition that we face and may also disrupt or lead to termination of our distribution, technology, software, and/or content partnerships. Increased competition may result in pricing pressures and ~~reduced profit margins and may impede our ability to increase the sales of our products, any one of which could substantially harm our business and results of operations.~~

Our lack of long-term purchase orders and commitments from our customers may lead to a rapid decline in our sales.

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. In addition, our current customers may decide not to purchase products from us for any reason. If those customers do not continue to purchase our products, our sales volume could decline rapidly with little or no warning.

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Wereduced ~~cannot~~profit ~~currently~~margins ~~rely~~and onmay ~~long-term~~impede ~~purchase~~our ~~orders~~ability ~~or commitments~~ to ~~protect~~increase ~~us from~~ the ~~negative~~sales ~~financial effects~~ of ~~a decline in demand for~~ our products., Weany ~~typically~~one ~~plan our production and inventory levels based on internal forecasts~~ of ~~customer demand,~~ which ~~are~~could ~~highly unpredictable and can fluctuate~~ substantially. ~~The~~harm ~~uncertainty of product orders makes it difficult for us to forecast~~ our ~~sales~~business and ~~allocate~~results our resources in a manner consistent with our actual sales. 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~~operations.

AsOur alack ~~result~~ of ~~these~~long-term ~~and~~purchase ~~other~~orders ~~factors,~~or ~~investors~~binding ~~should~~commitments ~~not~~from ~~rely~~customers oncould ~~our~~result ~~revenues~~in ~~and~~significant ~~our~~volatility ~~operating~~and ~~results~~a ~~for~~rapid ~~any~~decline ~~one~~in ~~quarter or year as being indicative of~~ our ~~future~~sales ~~revenues~~and or operating results.

We ~~depend~~generally ondo ~~advances~~not inreceive ~~technology~~long-term bypurchase orders or other ~~companies~~binding ~~and~~commitments iffrom ~~those~~customers ~~advances~~for doour ~~not~~Vuzix ~~materialize~~branded products. Instead, ~~some~~customers oftypically ~~our~~issue ~~anticipated~~purchase ~~new~~orders ~~products~~at ~~could~~their discretion, often shortly before the requested shipment date. These purchase orders may be ~~delayed~~canceled, reduced, or ~~cancelled~~delayed by customers, in many cases without penalty and on relatively short notice. In addition, our customers may decide to discontinue purchasing our products at any time and for any reason.

WeBecause ~~rely~~we oncannot ~~and will continue to~~ rely on ~~technologies (including micro~~long-~~displays,~~term ~~mobile~~purchase ~~computing~~orders ~~electronics~~or ~~and~~contractual ~~operating~~commitments, ~~systems)~~we ~~that~~have ~~are~~limited ~~developed~~visibility ~~and~~into ~~produced~~future bydemand ~~other~~and ~~companies.~~are ~~The~~not ~~commercial~~protected ~~success~~from ofsudden ~~certain~~declines ofin ~~our~~customer ~~planned~~orders. ~~future~~As ~~products~~a ~~will~~result, ~~depend~~our insales ~~part~~volume onmay ~~advances~~decline inrapidly ~~these~~with ~~and~~little ~~other~~or ~~technologies~~no bywarning ~~other~~if ~~companies.~~customers ~~We may~~reduce, ~~from time to time~~delay, ~~contract~~or ~~with~~cancel ~~and~~orders ~~support~~or ~~companies~~choose ~~developing~~not ~~key technologies in order~~ to ~~accelerate~~continue ~~the~~purchasing ~~development of them for~~ our ~~specific uses~~products. ~~Such activities might not result in useful technologies or components for us.~~

IfWe ~~micro-display-~~plan our production schedules, inventory levels, and resource allocation based ~~personal~~primarily ~~displays~~on internal forecasts of customer demand. These forecasts are inherently uncertain and subject to significant fluctuation. Inaccurate demand forecasts may result in excess or ~~near-eye~~insufficient ~~displays~~inventory, doinefficient ~~not~~use ~~gain~~of ~~greater~~capital, ~~acceptance~~and operational challenges. Furthermore, our operating expenses and investments in ~~the~~capital ~~market~~equipment ~~for~~and ~~head~~new ~~worn~~product development are based in part on expectations of future sales. If actual demand does not align with these expectations, we may be unable to reduce costs or ~~mobile~~adjust ~~displays~~our operations in a timely manner, which could adversely affect our ~~business~~gross ~~strategy~~margins, ~~may~~operating ~~fail~~results, and financial condition.

~~The~~We ~~mobile~~depend ~~display market is dominated by displays larger than one inch, most of which are currently based~~ on ~~direct~~advances ~~view~~in ~~liquid~~certain ~~crystal display (LCD) and organic light emitting display (OLED)~~ technology. Aby ~~number~~other ~~of large established global~~ companies ~~have made~~ and ~~continue~~if tothose ~~make~~advances ~~substantial~~do ~~investments~~not inmaterialize, ~~and~~some ~~are conducting research to improve characteristics~~ of, ~~handheld~~our ~~direct~~anticipated ~~view~~new ~~LCDs~~products ~~and~~could ~~OLED~~be ~~displays.~~delayed ~~Advances in direct view LCD and OLED technology, microLED~~ or other technologies, including foldable and stretchable displays may overcome current market limitations and permit them to remain or become more attractive technologies for personal viewing applications, which could limit the potential market for our near-eye display and computing technology and cause our business strategy to failcancelled.

~~There~~We rely on and will continue to rely on technologies (including microdisplays, mobile computing electronics and operating systems) that are adeveloped ~~number~~and ofproduced ~~competing~~by ~~providers~~other companies. The commercial success of ~~micro-display-based~~certain ~~personal~~of ~~display~~our ~~technology,~~planned ~~including~~future ~~smart~~products ~~glasses,~~will depend in part on advances in these and weother technologies by other companies. We may, ~~fail~~from time to ~~capture~~time, acontract ~~substantial~~with ~~portion~~and ofsupport companies developing key technologies in order to accelerate the ~~personal~~development ~~wearable~~of ~~display~~them ~~market~~for our specific uses. Such activities might not result in useful technologies or components for us.

InIf ~~addition to competing with direct view displays, we also compete with micro~~microdisplay-~~display-~~based personal ~~and~~displays ~~wearable~~or ~~display technologies that have been developed by many other companies. Numerous other start~~near-upeye ~~companies~~displays ~~have~~do ~~announced~~not ~~their~~gain ~~intentions to offer smart glasses and AI/AR products. Most of our competitors have~~ greater ~~financial,~~acceptance ~~marketing, distribution and technical resources than we do. Moreover, our competitors may succeed~~ in ~~developing~~the ~~new~~market ~~micro-display-based~~for ~~personal~~head ~~display~~worn ~~technologies and near-eye display products that are more affordable~~ or ~~have~~mobile ~~more desirable features than our technology. If our products are unable to capture a reasonable portion of the smart wearable display market~~displays, our business strategy may fail.

~~Our~~The ~~products~~mobile ~~may~~display ~~experience~~market ~~declining~~is ~~unit~~dominated ~~prices~~by displays larger than one inch, most of which are currently based on direct view liquid crystal display (LCD) and weorganic light emitting display (OLED) technology. A number of large established global companies have made and continue to make substantial investments in, and are conducting research to improve characteristics of, handheld direct view LCDs and OLED displays. Advances in direct view LCD and OLED technology, microLED or other technologies, including foldable and stretchable displays may ~~not~~overcome betheir ~~able~~current market limitations and permit them to ~~offset~~remain ~~that~~or ~~decline~~become more attractive technologies for most personal viewing applications, which, along with ~~production~~general ~~cost~~public ~~decreases~~acceptability orof ~~higher~~wearing ~~unit~~smart ~~sales~~glasses, could limit the potential market for our near-eye display and wearable computing technology and cause our business strategy to fail.

InThere ~~the~~are ~~markets~~a innumber ~~which~~of wecompeting ~~compete,~~providers ~~prices~~ of ~~established~~microdisplay-based ~~consumer electronics displays,~~ personal ~~computers,~~display ~~and mobile products tend to decline significantly over time or as new enhanced versions are introduced~~technology, ~~frequently~~including ~~every~~smart ~~12 to 24 months. In order to maintain adequate product profit margins over the long term~~glasses, ~~we believe that we will need to continuously develop product enhancements~~ and ~~new technologies that will either slow price declines of our products or reduce the cost of producing and delivering our products. 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. If we fail to docapture ~~so,~~a ~~our~~substantial ~~results~~portion of ~~operations~~the ~~will~~personal bewearable ~~materially~~display ~~and adversely affected~~market.

In addition to competing with direct view displays, we also compete with microdisplay-based personal and wearable display technologies that have been developed by many other companies. Numerous other 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 microdisplay-based personal display technologies, optics, and near-eye display products that are more affordable or have

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more desirable features than our technology. 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.

In the markets in which we compete, prices of established consumer electronics displays, personal computers, and mobile products tend to decline significantly over time or as new enhanced versions are introduced, frequently every 12 to 24 months. In order to maintain adequate product profit margins over the long term, we believe that we will need to continuously develop product enhancements and new technologies that will either slow price declines of our products or reduce the cost of producing and delivering our products. 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. If we fail to do so, our results of operations will be materially and adversely affected.

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.

~~With~~Our 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~~rely ~~with~~on ~~these platforms and enable~~ access to ~~and~~third ~~use~~party ~~of these~~ platforms ~~with our products. Our product strategy includes current~~ and ~~future products designed for use with third-party platforms or~~ software, ~~such~~including asmobile ~~iPhone,~~operating ~~Android phones~~systems, ~~Google~~and ~~Assistant~~AI and ~~Amazon~~voice ~~Alexa.~~assistant ~~Our business in these categories relies on our access to the platforms of third parties~~ecosystems, some of ~~whom~~which are ~~our~~controlled by competitors. ~~Platform~~These platform owners ~~who are competitors~~ may limit, ordelay, ~~decline~~deny, ~~access~~or tocondition ~~their~~our ~~platforms~~access, ~~and~~retain ~~in any case have a~~ competitive ~~advantage~~advantages in ~~designing~~integration ~~products for their own platforms~~ and ~~may produce products that work better~~performance, or ~~are~~introduce ~~perceived~~competing toproducts ~~work~~that ~~better,~~function ~~than~~more ~~our~~effectively ~~products~~on intheir ~~connection with those~~ platforms. WeOur ~~may~~ability ~~not~~to belaunch ~~successful in launching~~ products, ~~for~~maintain ~~those~~compatibility, ~~platforms~~and establish or ~~software~~sustain ~~applications~~platform ~~and/or~~relationships we may ~~not~~ be ~~successful~~adversely inaffected ~~establishing~~by ~~strong~~changes ~~relationships~~to ~~with~~platform ~~the~~technologies, ~~new~~policies, ~~platform~~ or ~~software owners~~terms, ~~which~~including ~~could~~the ~~negatively~~imposition ~~impact~~of ~~our~~licensing ~~ability~~or toroyalty ~~develop~~fees. ~~and~~Any ~~produce~~loss ~~high-quality~~of ~~products~~access, onunfavorable achanges, ~~timely~~or ~~basis~~delays ~~for~~in ~~those platforms and software applications. If we are unable to access~~ third- party platforms or technologies, orcould ifresult ~~our~~in ~~access~~increased ~~is withdrawn~~costs, ~~denied~~reduced margins, orexcess isinventory, ~~not~~customer ~~available~~support ~~on terms acceptable to us~~issues, or ifotherwise ~~the~~materially ~~platforms~~harm orour ~~technologies~~business, ~~are~~financial ~~delayed or change without notice to us~~condition, ~~our business~~ and operating results ~~could be adversely affected~~.

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. In addition, the third-party platforms or technologies used to interact with our product portfolio can be delayed in production or can change without prior notice to us, which can result in our having excess inventory, lower margins, or customer support issues.

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~~which ~~software~~ is ~~generally~~subject ~~licensed~~to ~~by its authors or other third parties under open-source~~ licenses. ~~Some~~that ofmay ~~these~~impose ~~licenses~~obligations, ~~contain~~including requirements ~~that~~to wedisclose ~~make available~~ source code ~~for modifications~~ or ~~derivative~~to ~~works we create based upon the open-source software, and that we~~ license ~~such modifications or~~ derivative works under ~~the~~specified terms. ofIn aaddition, ~~particular~~software ~~open-source~~we license orfrom ~~other license granting~~ third parties ~~certain~~may ~~rights~~contain ~~of further use. Additionally, if a third-party software provider has incorporated~~ open-source ~~software~~components ~~into software~~ that wecould ~~license~~trigger ~~from~~similar ~~such~~obligations ~~provider,~~with werespect ~~could be required~~ to ~~disclose any of~~ our ~~source~~proprietary ~~code that incorporates or is a modification of our licensed~~ software. If anwe ~~author~~fail orto ~~other~~comply ~~third-party~~with ~~who~~applicable ~~distributes~~ open -source ~~software~~license ~~that~~requirements, we ~~use~~could orbe ~~license~~subject ~~were~~ to ~~allege~~claims ~~that~~of weinfringement ~~had~~or ~~not~~breach ~~complied with the conditions~~ of ~~the applicable~~ license, wewhich could beresult ~~required~~in ~~to incur~~ significant legal expenses, ~~defending against those allegations and could be subject to significant~~ damages, ~~enjoined~~injunctive ~~from~~relief ~~offering~~limiting ~~or selling~~ our ~~products~~ability ~~that~~to ~~contained~~distribute ~~the~~affected ~~open source software~~products, ~~and~~or berequirements ~~required~~ to ~~comply~~make ~~with~~our ~~the~~proprietary ~~foregoing~~software ~~conditions~~publicly available. Any of ~~the~~these ~~foregoing~~outcomes could ~~disrupt~~adversely ~~and~~affect ~~harm~~ our business, ~~and~~ financial condition, and results of operations.

Our operating results may be adversely impacted by worldwide political, economic, public health uncertainties, wars and specific conditions in the markets we address.

Any worsening of global economic, financial, political, social, 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 cannot predict the timing, strength, or duration of any future economic slowdown or subsequent economic recovery, or such impact on the wearable display industry.

Due to our significant level of international operations, including the use of foreign suppliers and contract manufactures, we are subject to international operational, financial, legal, political and public health risks which could harm our operating results.

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,

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~~New~~Due ~~York.~~to ~~Additionally,~~our wesignificant ~~use~~level ~~our~~of ~~West~~international ~~Henrietta~~operations, ~~New~~including ~~York facility for~~ the ~~production~~use of ~~waveguides~~foreign ~~and~~suppliers ~~their related display engines~~ and ~~intend~~contract ~~to do so for some time. In the future~~manufacturers, ~~our~~we ~~mature~~are ~~products~~subject ~~could~~to ~~have~~international ~~their final assembly performed outside the United States~~operational, ~~including at facilities owned by our new strategic partner Quanta Computer. Accordingly~~financial, ~~a substantial part of our operations~~legal, ~~including~~political ~~manufacturing~~and ofpublic ~~certain~~health ~~components~~risks ~~used~~which ~~in our products,~~ could beharm ~~outside of the United States and many of~~ our ~~customers~~operating ~~and suppliers have some or all of their operations in countries other than the United States~~results. ~~Risks associated with our doing business outside of the United States include:~~

●We ~~compliance~~source ~~burdens~~components from third party suppliers, utilize contract manufacturers for certain assemblies, and ~~costs~~conduct ~~with~~specific amanufacturing ~~wide~~activities ~~variety~~in West Henrietta, New York. In the future, final assembly of certain products may be performed outside the United States, including at facilities operated by our new strategic partner, Quanta Computer. A substantial portion of our operations, suppliers, and customers are located outside the United States, exposing us to risks related to compliance with foreign laws and regulations, ~~particularly~~trade ~~labor~~and tax uncertainties, ~~environmental~~economic ~~and~~instability, ~~other~~public ~~laws~~health events, currency fluctuations, and ~~regulations~~extended ~~that~~accounts ~~govern~~receivable collection cycles. Any of these risks could disrupt our operations, inadversely ~~those~~affect ~~countries;~~our financial condition, and limit our ability to grow internationally.

●Cybersecurity ~~legal~~incidents ~~uncertainties~~or ~~regarding~~failures ~~foreign~~of ~~taxes,~~our ~~tariffs,~~information ~~border~~technology ~~taxes~~systems, ~~quotas,~~or ~~export~~those ~~controls~~of third parties, ~~export~~could ~~licenses~~adversely affect our business, ~~import~~results ~~controls~~of operations, and ~~other~~financial ~~trade barriers;~~condition.

●We ~~economic~~are ~~instability~~subject to ongoing cybersecurity risks, including threats to our information technology (“IT”) infrastructure, products, and ~~high~~data, ~~levels~~as ofwell ~~inflation~~as into the ~~countries~~systems of ~~our~~customers, suppliers, subcontractors, and other third parties with whom we conduct business. We rely extensively on electronic systems to operate our business, manage data, and transact with customers, ~~particularly~~vendors, inand ~~the~~subsidiaries. ~~Asia-Pacific~~These ~~region~~systems contain sensitive and proprietary information, ~~causing~~including ~~delays~~personal ordata, ~~reductions~~regulated ininformation, ~~orders~~intellectual ~~for~~property, ~~their~~trade ~~products~~secrets, and ~~therefore~~financial ~~our sales;~~information.

●Cybersecurity ~~political~~threats are increasingly frequent, sophisticated, and evolving, and include attempts to gain unauthorized access to systems or ~~public~~data, ~~health~~disrupt ~~instability~~operations, introduce malicious code, or otherwise compromise the confidentiality, integrity, or availability of information. These threats may originate from a variety of sources, including ~~global~~cybercriminals, ~~pandemics~~nation state actors, ~~such~~hacktivists, asinsiders, ~~COVID-19~~and other third parties, inand may be exacerbated by geopolitical developments, the ~~countries~~continued inuse ~~which~~of ~~our~~legacy ~~suppliers~~systems, ~~operate;~~the discovery of previously unknown vulnerabilities, and the increasing use of artificial intelligence by threat actors.

●We ~~changes~~may experience disruptions to our own IT systems or ~~volatility~~those of third parties due to cyberattacks, system failures, or other security incidents, whether on premises or in ~~currency~~cloud-based ~~exchange~~environments. ~~rates;~~In some cases, we rely on the cybersecurity safeguards of third parties, over whom we have limited visibility or control, and failure of those safeguards could result in operational disruptions, loss of data, or the compromise of sensitive information.

●Cybersecurity ~~difficulties~~related laws and regulations are complex and continue to evolve, which may increase compliance costs, require additional investments, subject us to enhanced regulatory scrutiny, or result in ~~collecting~~enforcement ~~accounts~~actions ~~receivable~~or disclosure obligations. Notwithstanding measures we have implemented, no system is completely secure, and ~~longer~~vulnerabilities ~~accounts~~may ~~receivable~~not ~~payment~~be ~~cycles~~identified or mitigated in a timely manner.

~~Any~~A ofsuccessful ~~these~~cybersecurity ~~factors~~incident or prolonged system disruption could ~~harm~~result ~~our~~in ~~own~~operational interruptions, ~~our~~production ~~suppliers’~~delays, ~~and~~loss, ~~our~~theft, or misuse of sensitive information or intellectual property, financial losses, regulatory penalties, litigation, reputational harm, or loss of customers’. ~~international~~Any ~~operations~~such ~~and~~event ~~businesses~~could ~~and~~have ~~impair~~a material adverse effect on our ~~and/~~business, results of operations, financial condition, or ~~their~~liquidity. ~~ability~~The toimpact ~~continue~~of ~~expanding~~any ~~into~~future ~~international~~cybersecurity ~~markets~~incident cannot be predicted with certainty.

~~Cybersecurity~~We ~~risks~~may ~~could~~lose ~~adversely~~the ~~affect~~services ~~our~~of ~~business~~key management personnel and ~~disrupt~~may ~~our~~not ~~operations~~be able to attract and retain other necessary personnel.

~~The~~Changes ~~threats~~in toour ~~network~~management ~~and~~could ~~data~~have ~~security~~an ~~are~~adverse ~~increasingly~~effect ~~diverse~~on ~~and sophisticated. Despite~~ our ~~efforts~~business and, ~~processes~~in ~~to prevent breaches~~particular, while our ~~devices,~~staff asis ~~well~~relatively assmall ~~our~~with ~~servers,~~88 ~~computer~~employees ~~systems,~~ and ~~those~~full-time ofcontractors ~~third~~globally, ~~parties that~~ we ~~use in our operations~~ are ~~vulnerable~~dependent toupon ~~cybersecurity~~the ~~risks,~~active ~~including~~participation ~~cyber-attacks such as viruses and worms, phishing attacks, denial-~~of~~-service~~ ~~attacks,~~several ~~physical~~key ormanagement ~~electronic break-ins~~personnel, ~~employee~~including ~~theft~~Paul ~~or misuse~~Travers, ~~and similar disruptions from unauthorized tampering with~~ our ~~servers~~President and ~~computer~~Chief ~~systems~~Executive orOfficer. ~~those~~Mr. ~~of third parties that we use in our operations~~Travers, ~~which~~the ~~could~~Company’s ~~lead to interruptions~~founder, ~~delays,~~is ~~loss of~~ critical ~~data, unauthorized access~~ to ~~user~~the ~~data,~~strategic ~~and~~direction ~~loss of our customer~~ and ~~consumer~~overall ~~confidence.~~management ~~In addition, we may be the target~~ of ~~email~~our ~~scams that attempt to acquire personal information or~~ Company ~~assets.~~as ~~Despite~~well ~~our~~as ~~efforts to create security barriers to such threats, we may not be able to entirely mitigate these risks. Any cyber-attack that attempts to obtain~~ our orresearch ~~our users’ data~~ and ~~assets,~~development ~~disrupt~~process. ~~our~~The ~~service,~~loss ~~or otherwise access our systems, or those~~ of ~~third~~Mr. ~~parties~~Travers ~~we use, if successful,~~ could adversely affect our business, ~~operating~~financial ~~results~~condition, and ~~financial~~operating ~~condition,~~results. beWe ~~expensive~~do tonot ~~remedy,~~carry ~~and~~key ~~damage~~person ~~our~~life ~~reputation.~~insurance Inon ~~addition,~~ any ~~such~~of ~~breaches~~our ~~may~~senior ~~result~~management inor ~~negative~~other ~~publicity,~~key ~~adversely~~personnel. ~~affect~~Our ~~our~~Executive ~~brand,~~Vice ~~decrease~~President ~~demand~~and ~~for~~Chief ~~our~~Financial ~~products~~Officer, ~~and~~Grant ~~services~~Russell, ~~and~~a ~~adversely~~Canadian ~~affect~~citizen, ~~our~~currently ~~operating~~has ~~results~~his ~~and~~principal ~~financial condition.~~

Our business and financial performance may be adversely affected by cyber-attacks on information technology infrastructure and products, as well as changes in cybersecurity and if our information technology security systems were infiltrated and confidential and/or proprietary information were taken, we could be subject to fines, lawsuits and loss of customers.

Significantly larger organizations with much greater resources than us have been the victim of cybercrimes. We routinely receive emails probing our Internet security, and our Internet security systems have detected outside organizations attempting to install Trojan virus software packages in our systems. We rely on our electronic information systems to perform routine transactions to run our business. We transact business over the Internet with customers, vendors

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~~and~~residence 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 routinely receive security patches from software providers for the software we use. Our primary concerns are inappropriate access to personnel information~~Vancouver, ~~any~~Canada ~~information~~and ~~covered~~a ~~under~~second ~~the~~residence ~~International Traffic~~ in ~~Arms~~West ~~Regulation~~Henrietta, ~~product~~New ~~designs and manufacturing information, financial information and our intellectual property, trade secrets and know-how~~York. ~~Our~~If ~~business~~he ~~may~~becomes beunable ~~impacted~~to bytravel ~~disruptions~~ to ~~our~~and ~~own~~work orin ~~third-party~~the ~~information~~United ~~technology (IT) infrastructure~~States, ~~which~~his ~~could~~ability ~~result~~to ~~from,~~perform ~~among~~some ~~other causes, cyberattacks on or failures~~ of ~~such~~his ~~infrastructure~~duties orcould ~~compromises~~be tomaterially ~~its~~adversely ~~physical security~~affected.

Our future success depends on our ability to attract and retain highly skilled technical and managerial personnel. Competition for such talent is intense, and our ability to recruit and retain employees and contractors depends in part on offering competitive compensation and benefits. We compete with companies that have significantly greater financial and other resources and may be more attractive to prospective personnel. As a result, we may be required to increase compensation, incentive awards, equity-based compensation, and other benefits, which could increase our operating expenses and adversely affect our results of operations. If we are unable to attract, retain, and motivate qualified personnel, our business, financial condition, and results of operations could be materially adversely affected.

Cybersecurity threats are continuously evolving and include, but are not limited to, both attacks on our IT infrastructure and attacks on the IT infrastructure of our customers, suppliers, subcontractors and other third parties with whom we do business routinely, both on premises and in the cloud, attempting to gain unauthorized access to our confidential, proprietary, or otherwise protected information, classified information, or information relating to our employees, customers and other third parties, or to disrupt our systems or the systems of third parties. We are also exposed to the risk of insider threat attacks. Any such attacks could disrupt our systems or those of third parties, impact business operations, result in the unauthorized release of confidential, proprietary, or otherwise protected information, and corrupt our data or that of third parties. The threats we face are continuous and evolving and vary in degree of severity and sophistication. These threats include advanced persistent threats from highly organized adversaries, including but not limited to cyber criminals, nation states and so-called hacktivists, particularly those adverse to the security interests of the U.S. and its allies, which target us and other defense contractors. These types of threats are related to the geopolitical environment and have, therefore, grown in number due to recent geopolitical conflicts. In addition, as a result of the rapid pace of technological change, we and our customers, suppliers, subcontractors and other third parties with whom we conduct business continue to rely on legacy systems and software, which can be more vulnerable to cyber threats and attacks. Moreover, we, like other companies, are seeing an unprecedented number of previously unknown vulnerabilities, for which there are no known mitigations, being revealed by new attacks. Further, the sophistication, availability and use of artificial intelligence by threat actors present an increased level of risk. Due to the evolving threat landscape, we have experienced and expect to continue to experience more frequent and increasingly advanced cyber-attacks. In addition, changes in domestic and international cybersecurity-related laws and regulations have expanded cybersecurity-related compliance requirements, and cybersecurity regulatory enforcement activity has grown. 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. We continue to make investments and adopt measures designed to enhance our protection, detection, response, and recovery capabilities, and to mitigate potential risks to our technology, products, services and operations from potential cybersecurity threats, as well as to comply with evolving regulations. However, given the unpredictability, nature and scope of cyber-attacks, it is possible that we are unable to defend against all cyber-attacks, that potential vulnerabilities could go undetected and persist in the environment for an extended period, or that we may otherwise be unable to mitigate customer losses and other potential consequences of these attacks. In some cases, we must rely on the safeguards put in place by our customers, suppliers, subcontractors and other third parties to protect against and report cyber threats and attacks. We could potentially be subject to production downtimes, operational delays, other detrimental impacts on our operations or ability to provide products and services to our customers, the compromise of confidential information, intellectual property or otherwise protected information, misappropriation, destruction or corruption of data, security breaches, other manipulation or improper use of our or third-party systems, networks or products, financial losses from remedial actions, loss of business, or potential liability, penalties, fines and/or damage to our reputation. Any of these could have a material adverse effect on our competitive position, results of operations, financial condition or liquidity. Due to the evolving nature of such risks, the impact of any potential incident cannot be predicted.

We may lose the services of key management personnel and may not be able to attract and retain other necessary personnel.

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

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Officer. Mr. Travers is critical to the strategic direction and overall management of our Company as well as our research and development process. The loss of Mr. Travers could adversely affect our business, financial condition, and operating results. We do not carry key person life insurance on any of our senior management or other key personnel. Our Executive Vice President and Chief Financial Officer, Grant Russell, a Canadian citizen, currently has his principal residence in Vancouver, Canada and a second residence in West Henrietta, New York. If he becomes unable to travel to and work in the United States, his ability to perform some of his duties could be materially adversely affected.

We need to hire and retain highly skilled technical personnel as employees and independent contractors in order to develop our products and grow our business. The competition for highly skilled technical, managerial, and other personnel is at times intense. Our human capital and labor issues related to recruiting and retention success is substantially dependent upon our ability to offer competitive salaries and benefits to our employees. We must compete with companies that possess greater financial and other resources than we do and that may be more attractive to potential employees and contractors. 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. If we fail to attract and retain the technical and managerial personnel required to be successful, our business, operating results and financial condition could be materially adversely affected.

Operational Risks

The design, tooling and manufacture of waveguides encompasses several complex processes, and several steps of our production processes are dependent upon certain critical machines and tools which could result in delivery interruptions, which could adversely affect our operating results.

Our product technology and manufacturing processes are evolving, which can result in production challenges and difficulties. We may be unable to produce our products in sufficient quantity and quality to maintain existing customers and attract new customers. In addition, we may experience manufacturing problems which could result in delays in ~~delivery~~delivering of orders or product introductions. We currently do not have full equipment redundancy in our manufacturing facility or tooling. If we experience any significant disruption in the operation of our manufacturing facility or a serious failure of a critical piece of equipment or tooling, we may be unable to supply products to our customers in a timely manner. Interruptions in our manufacturing could be caused by equipment problems, the introduction of new equipment into the manufacturing process or delays in the delivery of new manufacturing equipment. Lead-time for delivery, installation, testing, repair and maintenance of manufacturing equipment can be extensive. We have experienced production interruptions in the past and no assurance can be given that we will not lose potential sales or be able to meet production orders due to future production interruptions in our manufacturing lines.

Our waveguide and display engine products sales to third parties are subject to lengthy OEM development periods.

We intend to sell ~~some~~certain of our waveguides, ~~as components~~ and in some cases, related display engines with ~~micro-displays~~microdisplays, as components to ODMs/OEMs ~~with~~for ~~the~~incorporation ~~objective that they then incorporate them~~ into ~~products~~their ~~they sell~~products. To date, ~~this~~these ~~business~~sales ~~has~~have not been a material contributor to our ~~overall~~ revenues, ~~but~~and itthere ~~could~~can be no assurance they will become so in the future. ~~These~~ODMs ~~types~~and ofOEMs ~~customers~~ determine ~~during~~whether ~~their product development phase~~ and when ~~and~~to ~~whether they will~~ incorporate our products ~~into~~during their ~~solutions.~~development ~~The~~cycles, ~~time~~which ~~elapsed~~can ~~between~~be ~~initial~~lengthy ~~sampling~~and ofunpredictable. ~~our~~The ~~products~~period bybetween ~~ODMs/OEMs,~~initial ~~the~~product ~~custom~~sampling, ~~design~~customization ~~of our products~~ to meet specific ~~product~~customer requirements, qualification, and ~~the~~ ultimate incorporation ~~of our products~~ into ~~their~~an ODM~~/OEM~~ ~~products~~or ~~can~~OEM beproduct ~~significant,~~may ~~often~~extend ~~with~~from ~~a duration of between~~ six months to two years or ~~even~~ longer. If our products fail to meet ~~our~~customer ~~eventual customers’~~ cost, performance, reliability, or technical requirements, or if ~~unexpected~~unanticipated technical challenges arise induring ~~the~~ integration, ofcustomers ~~our~~may ~~products~~delay, ~~into their overall products~~limit, ~~our~~or ~~operating~~abandon ~~results~~adoption ~~could~~of beour ~~significantly~~products. ~~and~~Prolonged ~~adversely~~development ~~affected.~~cycles, ~~Long~~ delays in ~~achieving~~ customer qualification, ~~and~~or ~~incorporation~~failure ofto ~~our~~achieve ~~products~~design ~~also~~wins could materially and adversely affect our ~~business~~operating results, financial condition, and prospects.

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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. Instead, we purchase them from third-party suppliers or rely on third-party independent contractors for these integrated circuit chip sets and other critical components, some of which are customized or custom made for us. We also may use third parties to assemble all or portions of our products. Some of these third-party contractors and suppliers are small companies with limited financial resources. In addition, any partial or full government-mandated shutdowns resulting from health epidemics like COVID-19 may cause supply chain disruptions. 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 may be unable to find, if and when needed, a replacement third-party contractor or supplier on reasonable terms or in a timely manner. Any interruption in our ability to manufacture and distribute our products could cause our business to be unsuccessful.

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. 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. Since our distributors and VARs would act as intermediaries between us and the end user customers or resellers, we would be required to rely on our distributors to accurately report inventory levels and production forecasts. 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.

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.18

Our ability to meet customer demand depends, in part, on our ability to obtain timely and adequate delivery of components for our products. All of the components that go into the manufacturing of our smart glasses products and accessories, other than waveguide optics, are sourced from third-party suppliers. The availability of certain of the components that we require to produce our AR Smart Glasses and other near-eye display products may decrease.

Some of the key components used to manufacture our products come from a limited or single source of supply, or by a supplier that could potentially become a competitor. Our contract manufacturers generally purchase these components on our behalf from approved suppliers. We are subject to the risk of shortages and long lead times in the supply of these components and the risk that our suppliers discontinue or modify components used in our products. In addition, the lead times associated with certain components are lengthy and preclude rapid changes in quantities and delivery schedules. Further, the electronic components we utilize can go end-of-life due to technological changes, which can require us to invest in implementation costs of alternatives and the potential for the forced obsolescence of other related items. 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.

Our relationship with these source companies generally is on a purchase order basis and these firms do not have a contractual obligation to provide adequate supply or acceptable pricing to us on a long-term basis. These firms could discontinue sourcing components for us at any time. 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

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~~disruption~~Our ofreliance ~~our~~on ~~inventory~~third ~~flow~~party suppliers, aincluding ~~decrease~~sole insource ~~sales~~suppliers, ~~and~~for ~~the~~critical ~~possible~~components ~~need to re-design our products. Any such event could disrupt our operations~~ and ~~have~~manufacturing anexposes ~~adverse~~us ~~effect~~to onsupply ~~our business~~disruptions, ~~financial~~cost ~~condition~~increases, ~~and~~long ~~results~~lead ~~of operations. Several new LCOS~~times, ~~alternative OLED, as well as microLED suppliers have begun offering micro-displays suitable for use in our products. With new tooling~~ and ~~electronics~~component obsolescence, any ~~one~~ of ~~these~~which ~~alternative displays~~ could bematerially ~~incorporated~~and ~~into~~adversely ~~our~~affect ~~products but~~ our ~~costs of production could be higher~~business, ~~they~~financial ~~may offer less performance~~condition, and, asresults aof ~~result, may make our products too costly and less desirable~~operations.

We do not manufacture the integrated circuit chip sets, microprocessors, wireless chips, optics, microdisplays, backlights, some projection engines, printed circuit boards, or other electronic components used in our products. Instead, we depend on third party suppliers and independent contractors, including contract manufacturers, to source, manufacture, and assemble all or portions of our products. Many of these components are customized or custom made for us, and certain key components are sourced from a limited number of suppliers or from a single supplier, some of which may have limited financial resources or could potentially become competitors. Our supplier relationships are generally governed by purchase orders rather than long-term supply agreements, and these suppliers have no contractual obligation to provide components in sufficient quantities or at acceptable prices on a long term basis.

Our ability to meet customer demand depends on the timely and adequate delivery of these components. We are subject to risks of supply shortages, long lead times, changes or discontinuation of components, and end of life obsolescence due to technological changes, which may require product redesigns, increased costs, or the forced obsolescence of related inventory. In addition, lengthy component lead times limit our ability to rapidly adjust production quantities or delivery schedules. We have experienced component end of life issues in the past and expect to encounter additional shortages and supply constraints in the future, making component availability unpredictable.

If any of our suppliers or contractors are unable or unwilling to supply required components, experience production disruptions, discontinue their relationship with us, or are affected by events such as government mandated shutdowns related to health epidemics, we may be unable to manufacture and sell our products until suitable replacement suppliers are identified. We may be unable to secure replacement suppliers on reasonable terms or in a timely manner, if at all. While alternative display technologies and suppliers may be available, incorporating such alternatives could require new tooling and electronics, increase production costs, reduce performance, and make our products less competitive or less desirable. Any interruption or disruption in our supply chain could result in delayed product deliveries, increased costs, reduced sales, or an inability to meet customer demand, which could materially and adversely affect our business, financial condition, and results of operations.

Our facilities and information systems and those of our key suppliers could be damaged as a result of disasters or unpredictable events, which could have an adverse effect on our business operations.

We operate the majority of our business from one campus location in West Henrietta, New York (a suburb of Rochester). We also rely on third-party manufacturing plants in the United States and Asia and third-party logistics, sales and marketing facilities in Japan and Europe, and in other parts of the world to provide key components for our products and services. If major disasters such as earthquakes, pandemics, fires, floods, wars, terrorist attacks, computer viruses, transportation disasters or other events occur in any of these locations, or our information systems or communications network or those of any of our key component suppliers breaks down or operates improperly as a result of such events, our facilities or those of our key suppliers may be seriously damaged, and we may have to stop or delay production and shipment of our products. We may also incur expenses relating to such damages. If production or shipment of our products or components is stopped or delayed or if we incur any increased expenses as a result of damage to our facilities, our business, operating results and financial condition could be materially adversely affected.

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. The payment of dividends on our common stock will depend on earnings, financial condition, and other business and economic factors affecting us at such time as our Board of Directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on a stockholders’ investment will only occur if our stock price appreciates.

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Our stock price may be volatile in the future.

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, software applications (including AI), consumer electronics, semiconductor and display markets, changes in our operating results estimates by financial analysts or other events or factors. In addition, the public stock markets ~~recently~~ have recently experienced high price and trading volatility. The risks ~~related~~relating to ~~rising~~ inflation, ~~rising~~ interest rates and the imposition of tariffs could have a material impact on our revenues and costs. ~~This~~These ~~volatility~~matters ~~has~~can significantly ~~affected~~affect the market prices and price volatility 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.

Our amended and restated bylaws include a clause that provides that the Court of Chancery of the State of Delaware will be the exclusive forum for certain types of actions that may be brought against us. 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.

21Additional stock offerings in the future may dilute the existing stockholders’ percentage ownership of our Company.

Given our capital plans, needs and expectations, we may issue additional shares of common stock, preferred stock or securities convertible or exercisable for shares of common stock, including convertible preferred stock, convertible notes, warrants, and equity incentive awards. The issuance of additional securities in the future will dilute the percentage ownership of the then existing stockholders.

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Additional stock offerings in the future may dilute then existing stockholders’ percentage ownership of our Company.

Given our capital plans, needs and expectations, we may issue additional shares of common stock, preferred stock or securities convertible or exercisable for shares of common stock, including convertible preferred stock, convertible notes, stock options or warrants. The issuance of additional securities in the future will dilute the percentage ownership of the then existing stockholders.

If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our operating results could be adversely affected.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report on Form 10-K. The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from other sources. 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. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in the price of our common stock.

Our results of operations may suffer if we are not able to successfully manage our increasing exposure to foreign exchange rate risks.

A majority of our sales and cost of components are denominated in U.S. dollars. As our business grows, both our sales and production costs may increasingly be denominated in other currencies. 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 majority of our current expenditures are incurred in U.S. dollars and many of our components come from countries that currently peg their currency against the U.S. dollar. If the pegged exchange rates change adversely or are allowed to float up, additional U.S. dollars will be required to fund our purchases of these components.

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Although we do not currently enter into currency option contracts or engage in other hedging activities, we may do so in the future. There is no assurance that we will undertake any such hedging activities or that, if we do so, they will be successful in reducing the risks to us of our exposure to foreign currency fluctuations.

Legal and Regulatory Risks

Our business and products are subject to extensive government regulation, and wefailure ~~may~~to ~~incur~~comply ~~additional~~with ~~compliance~~applicable ~~costs~~laws orand regulations, ifor wechanges ~~fail~~in tosuch ~~comply~~laws ~~with~~and ~~applicable~~ regulations, ~~may~~could ~~incur~~adversely ~~fines~~affect orour bebusiness, ~~forced~~financial tocondition, ~~suspend~~and orresults ~~cease~~of operations.

InOur ~~our~~ current ~~business~~operations and asour weexpansion ~~expand~~ into new markets and product categories, wesubject ~~must~~us ~~comply~~to ~~with~~ a wide ~~variety~~array of domestic and international laws, regulations, standards, and other requirements governing, among other things, electrical safety, wireless emissions, health and safety, e-commerce, cybersecurity, consumer protection, and export and import ~~requirements,~~controls. ~~hazardous~~Compliance ~~materials~~with ~~usage,~~these ~~product-related~~requirements ~~energy~~is ~~consumption~~often complex, ~~packaging~~costly, ~~recycling~~ and ~~environmental~~time ~~matters. Compliance with these laws~~consuming, ~~regulations, standards~~ and ~~other~~such requirements may bediffer ~~onerous~~significantly ~~and~~across ~~expensive~~jurisdictions, ~~and they may be inconsistent from jurisdiction to jurisdiction (~~including ~~from~~between ~~country to country)~~countries, ~~further~~ increasing the ~~cost~~difficulty ~~of compliance~~ and ~~conducting~~expense ~~business activities. Our products may require regulatory approvals or satisfaction~~ of ~~other regulatory concerns in the various jurisdictions in which they are manufactured, sold or both~~compliance. ~~These requirements create procurement and design challenges that require us to incur additional costs identifying suppliers and manufacturers who~~

22Our products may require regulatory approvals, certifications, or satisfaction of other regulatory conditions in the jurisdictions in which they are manufactured, sold, or both. These requirements can create procurement, manufacturing, and design challenges and may require us to incur additional costs to identify and qualify suppliers and manufacturers capable of producing compliant materials, components, and products. If we fail to comply with applicable laws, regulations, or standards, we may be subject to fines, penalties, product recalls, reputational harm, restrictions on sales, or, in severe cases, suspension or cessation of operations in certain jurisdictions. Any such outcomes could have a material adverse effect on our business, financial condition, and results of operations.

Changes in existing laws or regulations, or the adoption of new laws or regulations, could require us to significantly alter our manufacturing processes, product designs, or supply chain, or could substantially increase our costs of doing business. If regulatory changes materially increase our manufacturing costs or require significant product redesigns, our margins, competitiveness, and operating results could be adversely affected.

Our products must comply with regulations governing electromagnetic radiation, including those administered by the U.S. Federal Communications Commission (FCC), in order to be sold in the United States, as well as comparable requirements of regulatory authorities in the European Union, Japan, China, and other jurisdictions. Our AI/AR smart glasses products include wireless radios and receivers, which are subject to additional testing and certification requirements. Any failure to obtain or maintain required approvals could delay product launches, restrict sales, or require costly modifications.

Our business is subject to environmental, hazardous substance, and product recycling regulations, which could increase our costs, disrupt our operations, and adversely affect our business and financial condition.

We are subject to environmental laws and regulations related to the use of toxic, volatile, or otherwise hazardous substances in third party components incorporated into our products, including the Restriction of Certain Hazardous Substances (RoHS) Directive and the EU Waste Electrical and Electronic Equipment (WEEE) Directive, as well as similar laws and regulations in China, Japan, and other jurisdictions. These regulations restrict or regulate the use of certain substances, including lead, and impose obligations related to product recycling, collection, and treatment. Similar laws may be enacted or expanded in additional jurisdictions, including the United States, subjecting us to further compliance obligations.

Although we maintain policies and procedures intended to promote compliance with applicable environmental and product related laws and regulations by our employees, contractors, manufacturers, and suppliers, we cannot guarantee that such parties will comply with all applicable requirements. Non-compliance by our suppliers or contract manufacturers could require us to re-engineer products, substitute components, or disrupt manufacturing or logistics, which could result in additional costs, delays, or supply interruptions.

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~~can~~The ~~obtain~~WEEE ~~and~~Directive ~~produce compliant materials, parts~~ and ~~products.~~similar ~~Failure~~regulations torequire ~~comply~~producers ~~with~~of ~~such~~electronic ~~requirements~~goods ~~can subject us~~ to ~~liability,~~bear ~~additional~~responsibility ~~costs~~for ~~and~~the ~~reputational harm and~~collection, ~~in extreme cases~~recycling, ~~force~~and ustreatment toof ~~recall~~covered products. orChanges ~~prevent us from selling our products~~ in ~~certain~~interpretation ~~jurisdictions. If there is a new regulation,~~ or ~~change~~enforcement toof anthese ~~existing~~requirements ~~regulation,~~could ~~that~~increase ~~significantly increases~~ our compliance costs ofor ~~manufacturing~~impose oradditional ~~causes~~obligations. usFailure to ~~significantly~~comply ~~alter~~with ~~the~~these ~~way~~or ~~that~~similar welaws, ~~manufacture~~whether ~~our~~past, ~~products~~present, ~~this~~or ~~would~~future, ~~have~~could aresult ~~material~~in ~~adverse~~reduced ~~effect~~product onsales, ~~our~~inventory ~~business~~write-offs, ~~financial~~reputational ~~condition~~damage, ~~and results of operations. Additionally~~fines, ~~while we have implemented policies and procedures designed to ensure compliance with applicable laws and regulations~~penalties, ~~there~~or ~~can~~other ~~be no assurance that our employees~~sanctions, ~~contractors~~any ~~and~~of ~~agents~~which ~~will~~could ~~not~~materially ~~violate~~harm ~~such laws and regulations or~~ our ~~policies~~business and ~~procedures~~financial condition.

~~Our~~While ~~products~~our ~~must~~historical ~~comply~~expenditures ~~with~~for ~~certain~~environmental ~~requirements~~compliance ofhave ~~the~~not ~~U.S.~~had ~~Federal~~a ~~Communications~~material ~~Commission~~impact ~~(FCC)~~on ~~regulating~~our ~~electromagnetic~~results ~~radiation in order to be sold in the United States and with comparable requirements~~ of ~~the~~operations ~~regulatory~~or ~~authorities~~cash ~~of the EU~~flows, ~~Japan,~~we ~~China~~expect ~~and~~that ~~other~~ongoing ~~jurisdictions in order to be sold in those jurisdictions. Our AI/AR smart glasses products include wireless radios~~ and ~~receivers~~future ~~which require additional emission testing. We are also subject to various~~ environmental laws and ~~governmental~~ regulations ~~related~~will continue to ~~toxic,~~affect ~~volatile, and other hazardous chemicals used in the third-party components incorporated into~~ our products, ~~including the Restriction of Certain Hazardous Substances Directive, or RoHS~~ and ~~the~~operations ~~EU Waste Electrical~~ and ~~Electronic~~may ~~Equipment~~result ~~Directive,~~in oradditional ~~the WEEE Directive~~costs, asincreased ~~well~~penalties asfor ~~the implementing legislation of the EU member states~~non-compliance, ~~such~~or ~~Directive~~requirements ~~which~~to ~~restricts~~modify ~~the~~product ~~distribution~~content ofor ~~products~~manufacturing ~~within~~processes. ~~the~~Any ~~EU that exceed very low maximum concentration amounts~~ of ~~certain~~these ~~substances,~~developments ~~including~~could ~~lead. Similar laws and regulations~~ have ~~been~~a ~~passed~~material oradverse ~~are~~effect ~~pending~~on inour ~~China~~business, ~~Japan,~~financial ~~and numerous countries around the world and may be enacted in other regions~~condition, ~~including in the United States,~~ and weresults ~~are,~~of ~~or may in the future be, subject to these laws and regulations~~operations.

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. Any inability by us to comply with regulations in the future could result in the imposition of fines or in the suspension or cessation of our operations or sales in the applicable jurisdictions. Any such inability by us to comply with regulations may also result in our not being permitted, or limit our ability, to ship our products which would adversely affect our revenue and ability to achieve or maintain profitability.

Although we have policies and procedures in place requiring our contract manufacturers and major component suppliers to comply with the supply chain transparency requirements, such as RoHS Directive, we cannot provide assurance that our manufacturers and suppliers consistently comply with these requirements. In addition, if there are changes to these or other laws (or their interpretation) or if new related laws are passed in other jurisdictions, we may be required to re-engineer our products to use components compatible with these regulations. This re-engineering and component substitution could result in additional costs to us or disrupt our operations or logistics.

The WEEE Directive requires electronic goods producers to be responsible for the collection, recycling and treatment of such products. Changes in interpretation of the Directive may cause us to incur costs or have additional regulatory requirements to meet in the future in order to comply with this Directive, or with any similar laws adopted in other jurisdictions. Our failure to comply with past, present and future similar laws could result in reduced sales of our products, substantial product inventory write-offs, reputational damage, penalties and other sanctions, which could harm our business and financial condition. We also expect that our products will be affected by new environmental laws and regulations on an ongoing basis. To date, our expenditures for environmental compliance have not had a material impact on our results of operations or cash flows and, although we cannot predict the future impact of such laws or regulations, they will likely result in additional costs and may increase penalties associated with violations or require us to change the content of our products or how they are manufactured, which could have a material adverse effect on our business and financial condition.

Regulations related to conflict minerals may cause us to incur additional expenses and could limit the supply and increase the costs of certain materials used in the manufacturing of our products.

As a public company, we are subject to requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, that require us to determine, disclose and report whether or not our products contain conflict minerals. These requirements could adversely affect the sourcing, availability and pricing of the materials used in the manufacture of components used in our products. In addition, we have and will continue to incur additional costs to comply with the disclosure requirements, including costs related to conducting diligence procedures to determine the sources of conflict minerals that may be used in, or necessary for the production of, our products and, if applicable, potential changes to products, processes or sources of supply as a consequence of such verification activities. 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, as well as our contract manufacturers breaching their local labor laws.

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the materials used in the manufacture of components used in our products. In addition, we have and will continue to incur additional costs to comply with the disclosure requirements, including costs related to conducting diligence procedures to determine the sources of conflict minerals that may be used in, or necessary for the production of, our products and, if applicable, potential changes to products, processes or sources of supply as a consequence of such verification activities. 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.

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. 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. In addition, changes in such laws could result in increased regulatory requirements and compliance costs which could adversely affect our business, financial condition and results of operations.

As a U.S. company we may be held liable for the corrupt actions taken by directors, officers, employees, agents, or other strategic or local partners or representatives. 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.

The U.S. and various foreign governments have imposed controls, export license requirements and restrictions on the import or export of some technologies. Our products are subject to U.S. export controls, including the Commerce Department’s Export Administration Regulations and various economic and trade sanctions regulations established by the Treasury Department’s Office of Foreign Assets ~~Controls~~Control, and exports of our products must be made in compliance with these laws. Furthermore, U.S. export control laws and economic sanctions prohibit the provision of products and services to countries, governments, and persons targeted by U.S. sanctions. Even though we take precautions to prevent our products from being provided to targets of U.S. sanctions, our products, including our firmware updates, could be provided to those targets or provided by our customers despite such precautions. Any such provision could have negative consequences, including government investigations, penalties and reputational harm. Our failure to obtain required ~~import or export approval for our products could harm our international and domestic sales and adversely affect our revenue.~~

Changes in trade policy in the United States and other countries, including changes in trade agreements and the imposition of tariffs and the resulting consequences, may have adverse impacts on our business, results of operations and financial condition.22

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. 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. We cannot predict future trade policy, the terms of any renegotiated trade agreements or treaties, or tariffs and their impact on our business. 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.

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import or export approval for our products could harm our international and domestic sales and adversely affect our revenue.

The current 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. 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. We cannot predict future trade policy, the terms of any renegotiated trade agreements or treaties, or tariffs and their impact on our business. 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.

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. Any cybersecurity breaches or our actual or perceived failure to comply with such legal obligations by us, or by our third-party service providers or partners, could harm our business.

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. While our privacy policies currently prohibit such activities, our third-party service providers or partners may engage in such activity without our knowledge or consent. If we or our third-party service providers were to experience a breach, disruption or failure of systems compromising our customers’ data, or if one of our third-party service providers or partners were to access our customers’ personal data without our authorization, our brand and reputation could be adversely affected, use of our products could decrease and we could be exposed to a risk of loss, litigation and regulatory proceedings.

Our products could infringe on the intellectual property rights of others.

Companies in the consumer electronics, wireless communications, semiconductor, IT and display industries steadfastly pursue and protect intellectual property rights, often times resulting in considerable and costly litigation to determine the validity of patents and claims by third parties of infringement of patents or other intellectual property rights. Our products could be found to infringe on the intellectual property rights of others. Other companies may hold or obtain patents or inventions or other proprietary rights in technology necessary for our business. Periodically, other companies inquire about our products and technology in their attempts to assess whether we violate their intellectual property rights. If we are forced to defend against infringement claims, we may face costly litigation, diversion of technical and management personnel, and product shipment delays, even if the allegations of infringement are unwarranted. If there is a successful claim of infringement against us and we are unable to develop non-infringing technology or license the infringed or similar technology on a timely basis, or if we are required to cease using one or more of our business or product names due to a successful trademark infringement claim against us, it could adversely affect our business.

Our intellectual property rights and proprietary rights may not adequately protect our products.

Our commercial success will depend substantially on our ability to obtain patents and other intellectual property rights and maintain adequate legal protection for our products in the United States and other countries. 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. 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. We do not know whether any of our patent applications will result in the issuance of any patents. Even if patents are issued, they may not be sufficient to protect our products, services, technologies, or designs. Our existing and future patents may not be sufficiently broad to prevent others from developing competing products, services technologies, or designs. Intellectual property protection and patent rights outside of the United States are even less predictable. As a result, the validity and enforceability of patents cannot be predicted with certainty.

We rely in part on unpatented proprietary technology, and others may independently develop the same or similar technology or otherwise obtain access to our unpatented technology. 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.23

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~~Human~~by ~~Capital~~valid ~~Resources~~and enforceable patents, trademarks, copyrights or other intellectual property rights, or are effectively maintained as trade secrets. As of the date of this filing, we have 306 issued U.S. and foreign patents and 202 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, processes or designs in a timely fashion, or at all. We do not know whether any of our patent applications will result in the issuance of any patents. Even if patents are issued, they may not be sufficient to protect our products, services, technologies, or designs. Our existing and future patents may not be sufficiently broad to prevent others from developing competing products, services technologies, or designs. Intellectual property protection and patent rights outside of the United States are even less predictable. As a result, the validity and enforceability of patents cannot be predicted with certainty.

AsWe ofrely ~~December~~in ~~31,~~part ~~2024,~~on ~~our~~unpatented ~~consolidated~~proprietary ~~business~~technology, ~~employed~~and 76others ~~individuals.~~may Aindependently ~~small~~develop ~~percentage of~~ the ~~U.S.~~same ~~and~~or ~~non-U.S.~~similar ~~employees~~technology ~~are full-time~~ or ~~part-time~~otherwise ~~contractors.~~obtain ~~None~~access ofto our ~~employees~~unpatented ~~are covered by a collective bargaining agreement~~technology. ~~Our~~We ~~management~~require ~~and professional~~ employees ~~have significant prior experience in optical design~~, ~~mechanical design~~contractors, ~~software~~consultants, ~~electronics~~advisors, ~~manufacturing,~~suppliers and ~~other~~strategic ~~related~~partners ~~technologies.~~to ~~Our~~enter ~~employees~~into ~~are~~confidentiality ~~in the U.S., Europe~~ and ~~Japan~~intellectual ~~and~~property ~~the~~assignment ~~laws~~agreements ~~regarding~~(as ~~employee~~appropriate), ~~relationships~~but ~~are~~these ~~different~~agreements bymay ~~jurisdiction.~~not ~~Some~~provide ~~non-U.S.~~sufficient ~~employees~~protection ~~are~~for ~~full-time contractors. We have policies both in the workplace and in~~ our ~~hiring~~trade ~~to prevent discrimination based on gender~~secrets, ~~race,~~know-how ~~ethnicity, nationality, religion,~~ or ~~sexual~~other ~~orientation.~~proprietary ~~We also take affirmative action to employ and advance veterans in employment~~information. ~~We consider relations with our employees to be very good.~~

We have adopted a Code of Business Conduct and Ethics regarding the standards of conduct of our directors, officers and employees. The code is reviewed and updated periodically by our Board of Directors and is available on our website at www.vuzix.com.

Environmental, Social & Governance (ESG) Initiatives

We strive to create and maintain a working environment that fosters honesty and hard work and rewards all of our employees’ hard work. We endeavor to make Vuzix a place in which people are proud to be associated. 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. 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.

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. We continually evaluate how we provide organizational training, formalize Company values, and revitalize recruitment strategy.

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● 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. Our policies prohibit an employee from being alone in our production facilities or in unsupervised areas of our facilities.

Environmental Responsibility

● We are committed to protecting the natural environment and our community by complying with all applicable legal and regulatory requirements. 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. Our clean room facility emissions are less than permitting and reporting thresholds, and we track emissions monthly to verify compliance with the regulations.

● We look for ways to reduce energy consumption in our facilities.

● We make and sell products that are generally considered more environmentally friendly than alternative computing devices and in most of their actual use by customers reduce their travel needs, either locally or across the world with their remote presence capabilities, and consume significantly less power or raw materials to manufacture than are typically used or required for laptop or tablet computers.

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. To this end, we promote an ethical organizational culture and encourage all employees to raise questions or concerns about actual or potential ethical issues and Company policies and to offer suggestions about how we can make our organization better. We have a Whistleblower Ethics Hotline that includes global telephone access and online access. 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.

Item 1B. Unresolved Staff Comments

None.

Item 1C. Cybersecurity

AsWe maintain a ~~Company~~cybersecurity ~~selling~~risk ~~some~~management ~~products~~program ~~and~~designed ~~performing~~to ~~engineering~~identify, ~~services~~assess, ~~for~~and ~~defense~~manage ~~applications,~~risks wefrom ~~may~~cybersecurity bethreats ~~the~~to ~~target~~our ofinformation ~~cyber-attacks~~technology ~~from~~systems, aproducts, ~~variety~~services, ofand ~~threat~~supply ~~actors~~chain. ~~Cybersecurity~~As ~~threats~~a ~~include~~company ~~attacks~~that ~~on,~~sells orproducts ~~other~~and ~~attempts~~performs toengineering ~~infiltrate,~~services ~~our~~for ~~information~~defense ~~technology~~applications, ~~(IT)~~we ~~infrastructure~~recognize ~~and~~that ~~the~~our ITbusiness ~~infrastructure~~may ofbe ~~our~~subject ~~customers,~~to ~~suppliers,~~cybersecurity ~~subcontractors~~threats ~~and~~from ~~other~~a ~~third~~variety ~~parties~~of threat actors, ~~attempting~~including tothose ~~gain~~seeking unauthorized access to ~~our~~ confidential, ~~or other~~ proprietary ~~information~~, classified ~~information~~, ~~or information relating to our employees~~employee, ~~customers~~customer, ~~and~~or ~~other~~ third-party ~~parties~~information, or attempting to disrupt our systems or the systems of our customers, suppliers, subcontractors, and other -third parties. Cybersecurity 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.

~~Table~~Our ofcybersecurity ~~Contents~~risk management program is integrated into our enterprise risk management processes and is designed to address risks associated with both our internal systems and our products and services, including risks that may arise after product delivery or when our products are incorporated into third-party systems or infrastructure.

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. 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.

Our enterprise cybersecurity program ~~aligns~~has been designed to align, as much as reasonably possible, with the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF) standards, among others. The program includes processes and controls for the deployment of new IT systems by the Company and controls over new and existing system operations. We, or third parties we contract with, monitor and conduct regular testing of these controls and systems, including vulnerability management through active discovery and testing to regularly assess patching and configuration status. In addition, we require our employees to complete annual cybersecurity training, and we regularly conduct simulated phishing and cyber-related communications.

~~Incident Response.~~

Our cybersecurity program includes monitoring for potential security threats that may lead to vulnerabilities. We evaluate and assign severity levels to incidents, escalate and engage an incident response team based on severity, and manage and mitigate the related risks. Incidents are reported internally to members of senior management and/or the Board of Directors as appropriate based on severity and incident type and are also analyzed for external reporting requirements. Our incident response process is also designed to coordinate functions to enable continuity of essential business operation in the event of a cyber crisis.24

~~Third Party Service Providers.~~

WeTable ~~engage third party service providers to expand the capabilities and capacity~~ of our cybersecurity program, including for design, monitoring and testing of the program’s risk prevention and protection measures, and process execution including incident detection, investigation, analysis and response, eradication, and recovery. Our main external service provider is US-based and utilizes a 24 x 7 x 365 Service Operation Center (SOC).Contents

To supplement our internal capabilities, we engage third-party service providers to support aspects of our cybersecurity program, including monitoring, testing, and incident response activities. Our primary external cybersecurity service provider is based in the United States and operates a 24x7x365 security operations center.

We periodically assess and evaluate the effectiveness of our cybersecurity controls, policies, and processes, including compliance with applicable regulatory requirements and identification of potential risk areas and improvement opportunities. Findings from these assessments are used to inform enhancements to our cybersecurity program.

Incident Response

Our cybersecurity program includes processes for monitoring, detecting, and responding to cybersecurity incidents. Potential incidents are evaluated and assigned severity levels, and an incident response team is engaged based on the nature and severity of the incident. Our incident response processes are designed to manage and mitigate cybersecurity risks and to support continuity of essential business operations in the event of a cybersecurity incident.

Cybersecurity incidents are reported internally to senior management and, when appropriate based on severity and incident type, to the Board of Directors. Incidents are also evaluated for potential external reporting obligations.

Third-Party Service Providers.

We engage third party service providers to expand the capabilities and capacity of our cybersecurity program, including for design, monitoring and testing of the program’s risk prevention and protection measures, and process execution including incident detection, investigation, analysis and response, eradication, and recovery. Our main external service provider is US-based and utilizes a 24x7x365 Service Operation Center (SOC).

Program Assessment.

We regularly evaluate and seek to improve and mature our cybersecurity processes. Our cybersecurity program is regularly assessed through management self-evaluation and ongoing monitoring procedures to evaluate our program effectiveness, including assessments associated with internal controls over financial reporting as well as vulnerability management through active discovery and testing to validate patching and configuration. As cybersecurity threats are continuously evolving, we also periodically engage with third parties to perform maturity assessments of our program to identify potential risk areas and improvement opportunities. This includes assessment of our overall program, policies and processes, compliance with regulatory requirements and an overall assessment of key vulnerabilities. We use these assessments to supplement our own evaluation of the overall health of our program and target improvement areas.

Board Oversight and Management’s Role

Our Board of Directors has primary oversight responsibility for ~~enterprise~~ cybersecurity risks as part of its oversight of enterprise risk management. The Audit Committee ~~also~~ considers ~~enterprise~~ cybersecurity risks in connection with its financial and compliance risk oversight ~~role~~responsibilities. 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.

~~Table~~Management is responsible for the day-to-day oversight and operation of ~~Contents~~the Company’s cybersecurity program. The CFO periodically reports to the Board of Directors regarding the status of the cybersecurity program and provides the Board with the results of periodic third-party assessments of the program. Cybersecurity risks are also included in the Company’s annual enterprise risk assessment presented to the Board of Directors.

~~Cybersecurity risks are also included with the Company’s annual business risk assessment which is provided to the Board of Directors.~~

For more information on risks related to cybersecurity, see Item IA. "Risk Factors” of this Form 10-K.

Item 2. Properties

We lease approximately 39,000 square feet as our main facility at 25 Hendrix Road, West Henrietta, New York, 14586 (a suburb of Rochester). This facility houses our headquarters office, R&D and manufacturing space under an operating lease for the facility that we began occupying in October 2015. 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 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. 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.

In 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.25

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operating lease for the facility that we began occupying in October 2015. 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 $675,000 per year. The lease at 25 Hendrix Road has an original five-year term with an option by the Company to renew for two additional three-year terms at pre-agreed lease rates. On September 23, 2025, the Company executed lease renewal agreements for both its current properties located in West Henrietta, New York extending the current lease terms to November 30, 2027. 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, 2027.

In April 2025, Vuzix leased a facility located in Milpitas, California upon the purchase of advanced waveguide R&D equipment operating in that space. The lease for this space is on a month-to-month basis at a cost of $35,000 per month.

In Okayama and Kyoto, Japan, we rent office space of 1,000 square feet and 100 square feet, respectively, at a cost of approximately $38,000 per year. These leases are on a month-to-month basis.

Item 3. Legal Proceedings

We are ~~not~~involved ~~currently~~in ~~involved~~various lawsuits and claims arising in ~~any~~the ~~actual~~ordinary orcourse ~~pending~~of ~~legal~~business, ~~proceedings~~including oractions ~~litigation~~with ~~that~~respect to intellectual property, employment, and contractual matters. In connection with these matters, we ~~consider~~assess, on a regular basis, the probability and range of possible loss based upon the developments in these matters. A liability is recorded in the consolidated financial statements if it is believed to be ~~material~~probable that a loss has been incurred and the amount of the loss can be reasonably estimated. Because litigation is inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and werequires judgments about future events. We regularly review outstanding legal matters to determine the adequacy of the liabilities accrued and related disclosures in consideration of many factors, which include, but are not ~~aware~~limited to, past history, scientific and other evidence, and the specifics and status of ~~any~~each ~~such~~matter. We may change our estimates if our assessment of the various factors changes and the amount of ultimate loss may differ from our estimates, resulting in a material ~~proceedings~~effect ~~contemplated~~on byour business, financial condition, results of operations, and/or ~~against~~cash usflows. With respect to these matters, based upon management’s current knowledge, the Company believes that the amount or ~~involving~~range ~~our~~of ~~property~~any reasonably possible loss, if any, will not, either individually or in the aggregate, have a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company is not currently party to, nor is its property subject to, any material legal proceedings.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is listed on the Nasdaq Capital Market under the symbol “VUZI.”

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Holders of Record

As of March 1312, ~~2025~~2026, there were 8950 holders of record of our common stock. 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~~2025.

Unregistered Sales of Equity Securities and Use of Proceeds

Sales of Unregistered Securities - none

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Purchase of Equity Securities - none

Equity Compensation Plan Information

The following table provides information about our equity compensation plan as of December 31, ~~2024~~2025.


	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	106,~~367~~078,~~990~~999	$	123.4137	12,~~031~~795,~~737~~108
Equity compensation plans not approved by security holders	—		—	—
Total	106,~~367~~078,~~990~~999	$	123.4137	12,~~031~~795,~~737~~108

(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 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. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this annual report. In addition to historical information, the following discussion and analysis includes forward looking statements that involve risks, uncertainties and assumptions. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in “Risk Factors” and elsewhere in this annual report. 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, AI powered Smart Glasses, Waveguides, and Augmented Reality (AR) technologies. Our wearable display devices are worn like eyeglasses or attach to a head worn mount. 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. Our wearable display products integrate micro-display technology with our advanced optics to produce compact high-resolution display engines, less than half an inch diagonally, which when viewed through our Smart Glasses products create virtual images that appear comparable in size to that of a computer monitor or a large-screen television.

With respect to our Smart Glasses and AI/AR products, we are focused on the enterprise, defense, industrial, medical and commercial markets. All of the mobile display and mobile electronics markets in which we compete have been subject to rapid technological change over the last decade including the rapid adoption of tablets, larger screen sizes and display resolutions along with declining prices on mobile phones and other computing devices, and as a result we must continue to improve our products’ performance and lower our costs. 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.27

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worn like eyeglasses or attach to a head worn mount. 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. Our wearable display products integrate microdisplay 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 or a large-screen television.

With respect to our Smart Glasses and AI/AR products, we are focused on the enterprise, defense, medical, security, and select consumer applications. All of the mobile display and mobile electronics markets in which we compete have been subject to rapid technological change over the last decade including the rapid adoption of tablets, larger screen sizes and display resolutions along with declining prices on mobile phones and other computing devices, and as a result we must continue to improve our products’ performance and lower our costs. 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.

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. The preparation of these statements in conformity with generally accepted accounting principles requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements, including the statement of operations, balance sheet, cash flow and related notes. We continually evaluate our estimates used in the preparation of our consolidated financial statements, including those related to ~~revenue~~valuation ~~recognition~~of inventories, ~~bad~~going ~~debt~~concern, ~~inventories,~~variable ~~warranty~~interest ~~reserves~~entities, ~~product~~investments ~~warranty~~in equity securities, carrying value of long-lived assets, ~~derivatives~~goodwill and other intangible assets, software development costs, revenue recognition, product warranty, valuation of stock-based compensation ~~awards~~, and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not apparent from other sources. Since we cannot determine future events and their impact with certainty, the actual results may differ from our estimates. Such differences could be material to the consolidated financial statements.

We believe that our application of accounting policies, and the estimates inherently required therein, are reasonable. We periodically re-evaluate these accounting policies and estimates and make adjustments when facts and circumstances dictate a change. Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

Our accounting policies are more fully described in the notes to our consolidated financial statements included in this annual report on Form 10-K. 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~~concern;

●

Evaluation of Liabilities to Equity and Derivatives

●

Variable interest entities;

●

Investments in equity securities;

●

Carrying value of long-lived assets, goodwill and other intangible assets;

●

Software development costs;

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●

Revenue recognition;

●

Product warranty;

●

Stock-based compensation; and

●

Income taxes.

Valuation of Inventories

Inventory is stated at the lower of cost or net realizable value, with cost determined on a weighted average first-in, first-out method. Inventory includes purchased parts and components, work-in-process and finished goods. Provisions for excess, obsolete or slow-moving inventory are recorded after periodic evaluation of historical sales, current economic trends, forecasted sales, estimated product life cycles and estimated inventory levels. Purchasing practices, electronic component obsolescence, accuracy of sales and production forecasts, introduction of new products, product life cycles, product support and foreign regulations governing hazardous materials are factors that contribute to inventory valuation risks. 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. The accounting estimate related to the valuation of inventories is considered a “critical accounting estimate” because it is susceptible to changes from period-to-period due to the requirement for management to make estimates relative to each of the underlying factors, ranging from purchasing to sales, production, and after-sale support. If actual demand, market conditions or product life cycles differ from estimates, inventory adjustments to net realizable values could result in a reduction to the carrying value of inventory, an increase in inventory write-offs and a decrease to gross margins.

The increase to our obsolescence provision for finished goods and components totaled $503,400, $4,167,917, and $4,358,062 for the years ended December 31, 2025, 2024, and 2023, respectively. These additional obsolescence provisions are included in Cost of Sales in the Consolidated Statements of Operations.

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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. The accounting estimate related to valuation of inventories is considered a “critical accounting estimate” because it is susceptible to changes from period-to-period due to the requirement for management to make estimates relative to each of the underlying factors, ranging from purchasing to sales, production, and after-sale support. If actual demand, market conditions or product life cycles differ from estimates, inventory adjustments to net realizable values would result in a reduction to the carrying value of inventory, an increase in inventory write-offs and a decrease to gross margins.

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.

Going Concern

For all annual and interim periods, management ~~will~~assesses ~~assess~~our going concern uncertainty in our consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in U.S. GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions. 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.

~~The~~In ~~accompanying~~accordance ~~consolidated~~with ~~financial~~ASC ~~statements~~Subtopic ~~have~~205-40, Presentation ~~been~~of ~~prepared~~Financial ~~assuming~~Statements ~~that~~— ~~the~~Going ~~Company~~Concern, ~~will~~management ~~continue~~is asrequired ato ~~going~~evaluate ~~concern.~~whether ~~This~~conditions ~~basis~~or ofevents, ~~accounting~~considered ~~contemplates the recovery of our assets and the satisfaction of liabilities~~ in the ~~normal~~aggregate, ~~course~~raise ofsubstantial ~~business.~~doubt ~~These~~about ~~consolidated financial statements do not include any adjustments to~~ the ~~specific~~Company’s ~~amounts~~ability ~~and classifications of assets and liabilities, which might be necessary should we be unable~~ to continue as a going concern. ~~The~~within ~~Company~~one ~~incurred net losses for the~~ year ~~ended~~after ~~December 31, 2024 of $73,538,157; $50,149,077 for~~ the ~~year~~date ~~ended~~that ~~December 31, 2023; and $40,763,573 for~~ the ~~year~~financial ~~ended~~statements ~~December~~are ~~31, 2022~~issued. The ~~Company~~going ~~had~~concern ~~net~~assumption ~~cash~~underlies ~~outflows~~all ~~from~~U.S. ~~operations~~GAAP offinancial ~~$23,739,372~~reporting ~~for~~and ~~the~~presumes ~~year~~that ~~ended December 31, 2024; $26,277,824 for~~ the ~~year~~Company ~~ended~~will ~~December~~continue ~~31,~~normal ~~2023;~~business ~~and~~operations ~~$24,521,082~~into ~~for~~ the foreseeable ~~year~~future, ~~ended~~unless ~~December~~such ~~31,~~conditions ~~2022.~~or Asevents ofraise ~~December~~substantial ~~31,~~doubt ~~2024,~~about the Company’s ~~had~~ability anto ~~accumulated~~continue ~~deficit~~as ofa ~~$367,522,950~~going concern.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of liabilities in the normal course of business. 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

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as a going concern. The Company incurred net losses for the year ended December 31, 2025 of $32,273,128; $73,538,157 for the year ended December 31, 2024; and $50,149,077 for the year ended December 31, 2023. The Company had net cash outflows from operations of $18,789,272 for the year ended December 31, 2025; $23,739,372 for the year ended December 31, 2024; and $26,277,824 for the year ended December 31, 2023. As of December 31, 2025, the Company had an accumulated deficit of $399,858,410.

The ongoing losses and accumulated deficit initially raise substantial doubt about the Company’s ability to continue as a going concern. 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~~Evaluation ~~Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. (ASU) 2014-15, Presentation~~ of ~~Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. As a result~~Liabilities, ~~management~~Equity ~~is primarily responsible for assessing if there is a going concern issue when issuing an entity’s financial statements. The going concern assumption underlies all GAAP financial reporting~~ and ~~therefore requires and assumes that the financial statements have been prepared on a going concern basis. It presumes that a Company will continue normal business operations into the future.~~Derivatives

The Company evaluates whether financial instruments issued by the Company should be classified as liabilities, mezzanine equity, or permanent equity and whether such instruments contain features that meet the definition of a derivative. This evaluation requires judgment and consideration of the instrument’s contractual terms and applicable accounting guidance, including an assessment of redemption features and settlement provisions.

32Instruments classified as liabilities are recorded at fair value, with changes in fair value recognized in earnings. Mezzanine equity is initially recorded at issuance date fair value and subsequently adjusted to its redemption value when it is probable that the instrument will become redeemable. Instruments classified as equity are not subsequently remeasured. Changes in these classifications or valuations could materially affect the Company’s financial position and results of operations.

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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. 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. If we are not the primary beneficiary in a VIE, we account for the investment or other variable interests in a VIE in accordance with other applicable GAAP. 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.

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. 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. As of December 31, 2025 and 2024, we had $300,000 and $650,000 of investments in equity securities. For the year ended December 31, 2025, we recorded an impairment loss of $400,000 on these investments.

Carrying Value of Long-Lived Assets, Goodwill and Other Intangible 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. If this review indicates that the carrying value of the asset will not be recovered as determined based on projected undiscounted cash flows related to the asset over its remaining life, the carrying value of the asset is reduced to its estimated fair value. 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~~2025 and ~~2023~~2024, there were no indicators of impairment present. 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. 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.30

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. 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. 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. 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.

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ended December 31, 2025, 2024, and 2023, we recorded a loss on fixed asset disposal of $106,898, $27,654, and nil, 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. For the years ended December 31, 2025 and 2024 there were nil in impairment charges and for the year ended December 31, 2023 there was an impairment charge of $41,869 to patents and trademarks. The carrying value of the remaining intellectual property, such as patents and trademarks, was valued (net of accumulated amortization) at $3,359,066 as of December 31, 2025, because management believes that this value is recoverable.

Software Development Costs

The Company capitalizes the costs of obtaining and developing its software once technological feasibility has been determined by management or of purchased software solutions when placed into service. Such costs are accumulated and capitalized. These projects could take several years to complete. The capitalized costs are then amortized over 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. The unamortized software development costs remaining were valued (net of accumulated amortization) at $27,778 as of December 31, 2025. 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. Product sales represent the majority of the Company’s revenue. The Company recognizes revenue from these product sales as performance obligations are satisfied and transfer of control to the customer has occurred~~, typically upon physical shipment~~. Revenue is recognized in the amount that the Company expects to receive in exchange ~~from~~for the sale of our products. FOB shipping point is our standard shipping term and revenue is recognized as our products ship to customers, as control is transferred at that time. All of our standard product sales include a 30-day money back guarantee and expected returns are estimated at each reporting period date and a portion of revenue is deferred for all estimated returns. As of December 31, ~~2024~~2025 and ~~2023~~2024, 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. The Company accounts for its longer-term development contracts, which to date have all been firm fixed-priced contracts, on the percentage-of-completion method, whereby income is recognized as work on contracts progresses, but estimated losses on contracts in progress are charged to operations immediately. The percentage-of-completion is determined using the cost-to-cost method. To date, all such contracts have been less than one calendar year in duration.

Product Warranty

Warranty obligations are generally incurred in connection with the sale of our products. The warranty period for these products is generally one year and up to eighteen (18) months for certain distributors. Customers may also purchase an additional twelve (12) month extended warranty. Warranty costs are accrued, to the extent that they are not recoverable from third-party manufacturers, for the estimated cost to repair or replace products for the balance of the warranty periods. We provide for the costs of expected future warranty claims at the time of product shipment or over-builds to cover replacements. The adequacy of the provision is assessed at each quarter end and is based on historical experience and projected factors of warranty claims and costs. The costs incurred to provide for these warranty obligations are estimated and recorded as an accrued liability at the time of sale. Future warranty costs are estimated based on historical performance rates and related costs to repair given products. The accounting estimate related to product warranty is considered a “critical accounting estimate” because judgment is exercised in determining future estimated warranty costs. Should actual performance rates or repair costs differ from estimates, revision to the estimated warranty liability would be required.

~~Stock-Based Compensation Expense~~31

Our Board of Directors approves grants of stock awards and options to employees to purchase our common stock. Stock-based compensation expense is recorded based upon the estimated fair value of the stock option or stock award at the date of grant. The Company uses the Black-Scholes-Merton option pricing model to estimate the fair value of stock options granted pursuant to ASC Topic 718. The application of this pricing model involves assumptions that are judgmental and sensitive in the determination of compensation expense. The fair value of our common stock on the date of each option grant is determined based on the most recent quoted sales price on our primary trading stock exchange, currently the NASDAQ Capital Market. For stock options awards under the Company's LTIP (Long-term Incentive Plan), options vest upon the achievement of certain equity market conditions and performance-based milestones. 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, which are currently considered probable of achievement, are expensed over their respective implicit service periods. 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.

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based on historical performance rates and related costs to repair given products. The accounting estimate related to product warranty is considered a “critical accounting estimate” because judgment is exercised in determining future estimated warranty costs. Should actual performance rates or repair costs differ from estimates, revision to the estimated warranty liability would be required. As of December 31, 2025 and 2024, there were $55,637 and $46,078 in accrued warranty obligations.

Stock-Based Compensation Expense

Our Board of Directors approves grants of stock awards, including restricted stock units (“RSUs) and performance stock units (“PSUs”) and options to employees and independent directors to purchase our common stock. Stock-based compensation expense is recorded based upon the estimated fair value of the stock option or stock award at the date of grant. The Company uses the Black-Scholes-Merton option pricing model to estimate the fair value of stock options granted pursuant to ASC Topic 718. The application of this pricing model involves assumptions that are judgmental and sensitive in the determination of compensation expense. The fair value of our common stock, including PSUs and RSUs, on the date of each equity grant is determined based on the most recent quoted sales price on our primary trading stock exchange, currently the NASDAQ Capital Market. For PSUs, the determination of the probabilities of the underlying performance targets being achievable is judgmental and affects the amount compensation expense recognized. For the years ended December 31, 2025, 2024, and 2023, the Company recorded total stock-based compensation expense related to stock options, stock awards, RSUs and PSUs but excluding awards under the Company’s former LTIP of $4,149,950, $5,928,198, and $4,566,253, respectively.

Income Taxes

We have historically incurred operating losses from both a financial reporting and tax return standpoint. We provide deferred income tax assets and liabilities based on the estimated future tax effects of differences between the financial and tax bases of assets and liabilities based upon currently enacted tax laws. Any future recorded value of our deferred tax assets will be dependent upon our ability to generate taxable income in the jurisdictions in which we operate. 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. The accounting estimate related to income taxes is considered a “critical accounting estimate” because judgment is exercised in estimating future taxable income, including prudent and feasible tax planning strategies, and in assessing the need for any valuation allowance. To date, we have determined a 100% valuation allowance is required and accordingly no deferred tax asset has been reflected in our consolidated financial statements. In the event that itwe ~~should~~determine ~~be determined~~ that all or part of a deferred tax asset in the future is more likely than not to be realized, an adjustment (reduction) of the valuation allowance would increase income to be recognized in the period such determination was made.

In addition, the calculation of our deferred taxes involves dealing with uncertainties in the application of complex tax regulations. As a result, we recognize liabilities for uncertain tax positions based on the two-step process prescribed by GAAP. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires us to determine the probability of various possible outcomes. 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. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in the period. The Company currently has no uncertain tax positions.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our financial condition, financial statements, revenues or expenses.

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Recent Accounting Pronouncements

Refer to Note 1

35Results of Operations for Fiscal Years Ended December 31, 2025 and December 31, 2024

The following table compares the Company’s consolidated statements of operations data for the years ended December 31, 2025 and 2024.

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		Year Ended December 31,
								Dollar			% Increase
		2025			2024			Change			(Decrease)

Sales:
Sales of Products		$	4,676,632		$	4,487,202		$	189,430		4	%
Sales of Engineering Services			1,603,979			1,267,354			336,625		27	%

Total Sales			6,280,611			5,754,556			526,055		9	%

Cost of Sales:
Cost of Sales - Products Sold			5,490,103			6,007,200			(517,097)		(9)	%
Cost of Sales - Inventory Reserve for Obsolescence			503,400			4,167,917			(3,664,517)		(88)	%
Cost of Sales - Depreciation and Amortization			677,931			734,456			(56,525)		(8)	%
Cost of Sales - Engineering Services			671,571			444,653			226,918		51	%

Total Cost of Sales			7,343,005			11,354,226			(4,011,221)		(35)	%

Gross Loss			(1,062,394)			(5,599,670)			4,537,276		(81)	%
Gross Loss %			(17)	%		(97)	%

Operating Expenses:
Research and Development			12,625,556			9,626,452			2,999,104		31	%
Selling and Marketing			5,478,596			8,191,427			(2,712,831)		(33)	%
General and Administrative			11,631,818			17,230,293			(5,598,475)		(32)	%
Depreciation and Amortization			1,602,632			2,994,643			(1,392,011)		(46)	%
Loss on Fixed Asset Disposal			106,898			27,654			79,244		287	%
Impairment on Intangible Asset and Equity Investment			—			30,301,355			(30,301,355)		(100)	%

Loss from Operations			(32,507,894)			(73,971,494)			41,463,600		(56)	%

Other Income (Expense):
Investment Income			672,276			591,319			80,957		14	%
Other Taxes			23,054			59,335			(36,281)		(61)	%
Foreign Exchange Loss			(60,564)			(217,317)			156,753		(72)	%
Impairment Loss on Equity Investment			(400,000)			—			(400,000)		NM

Total Other Income, Net			234,766			433,337			(198,571)		(46)	%

Net Loss		$	(32,273,128)		$	(73,538,157)		$	41,265,029		(56)	%

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	%

Table of Contents

Sales. There was aan ~~decrease~~increase in total sales for the year ended December 31, ~~2024~~2025, compared to ~~2023~~2024 of $6526,~~374~~055,~~583,~~ or 539%. The following table reflects the major components of our sales:


	Year Ended		% of		Year Ended		% of		Dollar		% Increase
	December 31, ~~2024~~2025		Total Sales		December 31, ~~2023~~2024		Total Sales		Change		(Decrease)
Sales of Products	$	4,~~487~~676,~~202~~632	7874	%	$	104,~~760~~487,~~352~~202	8978	%	$	(6189,~~273,150)~~430	~~(58)~~4	%
Sales of Engineering Services		1,~~267~~603,~~354~~979	2226	%		1,~~368~~267,~~787~~354	1122	%		~~(101~~336,~~433)~~625	~~(7)~~27	%
Total Sales	$	56,~~754~~280,~~556~~611	100	%	$	125,~~129~~754,~~139~~556	100	%	$	(6526,~~374,583)~~055	~~(53)~~9	%

Sales of products ~~decreased~~increased by 584% for the year ended December 31, ~~2024~~2025, compared to ~~2023~~2024. ~~Reduced~~Increased smart glasses revenue was the primary driver of this ~~decrease~~increase as unit sales of our M400 product ~~decreased~~increased ~~substantially~~ compared to the previous year~~, when two major distributors placed significant stocking orders in the first half of 2023~~.

Sales of engineering services and OEM products for the year ended December 31, ~~2024~~2025, ~~was~~were $1,~~267~~603,~~354~~979, as compared to $1,~~368~~267,~~787~~354 in ~~2023~~2024, aan ~~decrease~~increase of 727%.

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 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. The following table reflects the components of our cost of ~~goods sold~~sales:


	Year Ended		% of		Year Ended		% of		Dollar		% Increase
	December 31, ~~2024~~2025		Total Sales		December 31, ~~2023~~2024		Total Sales		Change		(Decrease)
Product Cost of Sales	$	3,~~887~~269,~~820~~267	6852	%	$	73,~~224~~887,~~107~~820	6068	%	$	(3618,~~336,287~~553)	(4616)	%
Inventory Reserve for Obsolescence		4503,~~167,917~~400	728	%		4,~~358~~167,~~062~~917	3672	%		(~~190~~3,~~145~~664,517)	(488)	%
Manufacturing Overhead - Unapplied		2,~~119~~220,~~380~~836	3735	%		12,~~615~~119,~~172~~380	1337	%		~~504~~101,~~208~~456	315	%
Depreciation and Amortization		~~734~~677,~~456~~931	1311	%		~~886~~734,~~117~~456	713	%		(~~151~~56,~~661~~525)	(178)	%
Engineering Services Cost of Sales		~~444~~671,~~653~~571	811	%		~~680~~444,~~411~~653	68	%		~~(235~~226,~~758)~~918	~~(35)~~51	%

Total Cost of Sales		117,~~354~~343,~~226~~005	~~197~~117	%		1411,~~763~~354,~~869~~226	~~122~~197	%		(34,~~409~~011,~~643~~221)	(2335)	%

Gross Profit (Loss)	$	(5,599,670)	(97)	%	$	(2,634,730)	(22)	%	$	(2,964,940)	113	%
Gross Loss	$	(1,062,394)	(17)	%	$	(5,599,670)	(97)	%	$	4,537,276	(81)	%

For the year ended December 31, ~~2024~~2025, there was a gross loss from total sales of $51,~~599~~062,~~670~~394, or 9717% of total sales as compared to a gross loss of $25,~~634~~599,~~730~~670, or 2297% in ~~2023~~2024.

In addition to its normal Reserve for Obsolescence provision, the Company reserved as of December 31, ~~2024~~2025 additional provisions for expected surplus component parts and obsolescence in excess of its currently planned existing product builds in ~~2025 and into~~ 2026 on most of its existing smart ~~glasses~~glass product models in anticipation of the planned introduction of newer models ~~by 2026~~, which would logically replace the existing models when introduced. The disposal value of the excess components that could not be used in future models is unknown, so a 100% obsolescence provision has been accrued. During the year ended December 31, ~~2024~~2025, the Company ~~wrote-off~~recorded an additional obsolescence provision for gross inventory of $4503,~~167,917~~400 and converted into finished goods or physically disposed of $12,~~998~~379,~~893~~787 of inventory that was fully provisioned for in the previous year. ~~The~~During ~~total obsolescence provisions totaled $7,944,575 and $5,775,551 for~~ the ~~years~~year ended December 31, 2024, ~~and~~the ~~2023,~~Company ~~respectively.~~recorded ~~The~~an ~~changes~~obsolescence toprovision ~~these~~for ~~provisions~~gross ~~are~~inventory ~~included~~of in$4,167,917 ~~Cost~~and disposed of ~~Sales~~$1,998,893 onof ~~the~~inventory ~~Consolidated~~that ~~Statements~~was offully ~~Operations~~provisioned for.

Unapplied manufacturing overhead costs, not already added ininto product cost of sales, increased by $~~504~~101,~~208~~456, or 315% for the year ended December 31, ~~2024~~2025 ~~over~~compared ~~2023~~to ~~and~~2024. ~~increased~~However, it decreased as a percentage of total sales to 3735% as compared to 1337% in ~~2023~~2024 due to ~~lower~~increased ~~quarterly~~ product revenue. The increase in the net dollar amount of these unapplied overhead costs in the current period versus the prior period was primarily driven by a further decrease in actual production levels during the 2025 period ~~and~~compared to the ~~temporary~~same ~~cessation~~period ofin ~~M400~~2024, ~~smart~~as ~~glasses~~the ~~production~~Company inhas ~~the~~sufficient ~~second~~finished ~~half~~goods ofon ~~2024~~hand to meet currently expected demand for current Smart Glasses models for the foreseeable future.

Depreciation and Amortization expense, not included in cost of sales or research and development, decreased by $~~151~~56,~~661,~~525 or 178% for the year ended December 31, ~~2024~~2025 versus ~~2023, due to the full amortization and depreciation of certain manufacturing assets~~2024.

Table of Contents

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. 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~~2025

Total Sales

December 31, ~~2023~~2024

Total Sales

Change

(Decrease)

Research and Development Expenses

711,~~840~~774,~~491~~608

~~136~~187

107,~~611~~840,~~176~~491

87136

(23,~~770~~934,~~685)~~117

~~(26)~~50

Related Stock-based Compensation (non-cash)

1850,~~785,961~~948

3114

1,~~728~~785,~~358~~961

1431

57(935,~~603~~013)

3(52)

Total Research and Development Costs

912,~~626~~625,~~452~~556

~~167~~201

129,~~339~~626,~~534~~452

~~102~~167

(2,~~713~~999,~~082)~~104

~~(22)~~31

Research and development expenses for the year ended December 31, ~~2024,~~2025 ~~decreased~~increased by $2,~~713~~999,~~082~~104, or 2231% compared to ~~2023~~2024. This ~~decrease~~increase was largely due to a $12,~~565~~551,~~823~~651 ~~decrease~~increase in ~~salary~~external development costs on our new LX1 smart glasses, which we did not begin selling until early 2026, and ~~benefits~~waveguide ~~related~~products; ~~expenses~~a ~~due~~$668,291 increase of depreciation related to ~~headcount~~under-utilized ~~decreases~~new manufacturing equipment still being optimized and placed into service, which were still being built in the comparable period; a $1354,~~004,415~~544 ~~decrease~~increase in ~~external~~rent ~~development~~utilities ~~costs~~expenses ~~due~~related to ~~the~~our ~~suspension~~new California-based waveguide research and development facility that first opened in spring of ~~work~~2026; ona $170,165 increase in salary and benefits related expenses; a ~~specific~~$92,997 ~~future~~increase ~~smart~~in ~~glasses~~recruiting ~~product~~expenses; and a $8167,~~450~~502 ~~decrease~~increase in ~~supplies~~travel expenses; partially offset by a $57935,~~603~~013 ~~increase~~decrease in non-cash stock-based compensation ~~primarily driven by the voluntary salary reduction program~~expense.

Selling and Marketing. 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~~2025		Total Sales		December 31, ~~2023~~2024		Total Sales		Change		(Decrease)
Selling and Marketing Expenses	$	64,~~953~~690,~~169~~931	~~121~~75	%	$	116,~~632~~953,~~032~~169	96121	%	$	(42,~~678~~262,~~863~~238)	(4033)	%
Related Stock-based Compensation (non-cash)		1787,~~238,258~~665	2212	%		1,~~079~~238,~~768~~258	921	%		~~158~~(450,~~490~~593)	15(36)	%
Total Selling and Marketing	$	85,~~191~~478,~~427~~596	~~142~~87	%	$	128,~~711~~191,~~800~~427	~~105~~142	%	$	(42,~~520~~712,~~373~~831)	(3633)	%

Selling and marketing expenses for the year ended December 31, ~~2024,~~2025 decreased by $42,~~520~~712,~~373~~831, or 3633% compared to ~~2023~~2024. This decrease was largely due to a $1,176,686 decrease in bad debt expense, which was net of a $1199,~~618,667~~323 inrecovery ~~advertising~~of ~~and~~previously ~~tradeshow~~written-off ~~expenses~~bad debt; a $1784,~~587,781~~542 decrease in cash salary and benefits related expenses driven by headcount decreases; a ~~decrease of~~ $~~605~~450,~~000~~593 decrease in ~~our~~non-cash ~~allowance~~stock-based ~~for~~compensation ~~credit losses~~expense; a ~~decrease of~~ $~~456~~158,~~338~~289 decrease in ~~travel~~external ~~related~~contractor expenses; a $~~235~~126,~~660~~524 decrease in ~~external~~computer ~~consulting~~software subscriptions expenses; and a decrease of $~~133~~124,~~906~~753 ~~decrease~~ in ~~computer~~advertising and ~~software~~tradeshow ~~subscription~~ expenses; partially offset by aan increase of $~~158~~39,~~490~~844 ~~increase~~ in ~~non-cash~~travel ~~stock-based~~related ~~compensation primarily driven by the voluntary salary reduction program~~expenses.

Table of Contents

General and Administrative. 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~~2025		Total Sales		December 31, ~~2023~~2024		Total Sales		Change		(Decrease)
General and Administrative Expenses	$	8,~~933~~205,~~952~~903	~~155~~131	%	$	8,933,~~458~~952	74155	%	$	~~494~~(728,049)	0(8)	%
Related Stock-based Compensation (non-cash)		83,~~296~~425,~~341~~915	~~144~~55	%		98,~~658~~296,~~727~~341	80144	%		(14,~~362~~870,~~386~~426)	(1459)	%
Total General and Administrative	$	1711,~~230~~631,~~293~~818	~~299~~185	%	$	1817,~~592~~230,~~185~~293	~~153~~299	%	$	(15,~~361~~598,~~892~~475)	(732)	%

38General and administrative expenses for the year ended December 31, 2025, decreased by $5,598,475, or 32%, compared to 2024. The decrease was largely due to a $4,870,426 decrease in non-cash stock-based compensation expense related to our 2024 cash salary reduction program in exchange for equity, which ended on April 30, 2025, and the termination of the Company’s original LTIP, which was cancelled on June 16, 2025; a $290,594 decrease in accounting and auditing fees; a $240,796 decrease in legal expenses; and a $92,537 decrease in insurance premiums.

Depreciation and Amortization. Depreciation and amortization expense, not included in cost of sales or research and development, for the year ended December 31, 2025 was $1,602,632, compared to $2,994,643 in 2024 or a decrease of $1,392,011. This decrease was primarily due to a significant decrease in amortization expense related to our Atomistic technology license, which was written off as of June 30, 2024.

Other Income (Expense), Net. Total other income was $234,766 for the year ended December 31, 2025, compared to other income of $433,337 in 2024, a decrease of $198,571. The overall decrease in other income was primarily the result of a $400,000 impairment charge on equity investments; a decrease of $36,281 in foreign tax refunds; partially offset by a decrease of $156,753 in foreign exchange losses and a $80,957 increase in investment income earned on excess cash on hand.

Provision for Income Taxes. There were no provisions for income taxes in 2025 or 2024.

Table of Contents

~~General~~Results ~~and~~of ~~administrative~~Operations ~~expenses~~ for ~~the~~Fiscal ~~year~~Years ~~ended~~Ended December 31, 2024, ~~decreased by $1,361,892, or 7% compared to 2023. This decrease was largely due to a $1,362,386 decrease in non-cash stock-based compensation; a decrease of $1,106,231 in salary~~ and ~~benefits related expenses due to headcount reductions; a decrease of $204~~December 31,~~038~~ in external consulting expenses; a decrease of $201,672 in insurance premiums; a decrease of $47,838 in recruitment and hiring expenses; and a decrease of $72,870 in travel expenses; largely offset by an increase of $977,798 in investor relations expenses; an increase of $437,453 in legal expenses; and an increase of $350,453 in additional accounting and auditing fees related to the finalization of the 2023 ~~audit.~~

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. This decrease was due to a significant decrease in amortization expense related to our Atomistic technology license, which was written-off as of June 30, 2024; partially offset by increases in depreciation related to leasehold improvements being put into service this year related to our new waveguide manufacturing facility.

Impairment on Intangible Asset and Equity Investment. For the year ended December 31, 2024 there was a total impairment charge on an intangible and an equity investment of $30,301,355. On July 1, 2024, Atomistic exercised its option to terminate its previously granted license related to certain microLED technologies it was developing, and as a result of the termination of the granted license, which was effective June 30, 2024, the Company determined that the technology license asset of $24,335,554, net book value as of June 30, 2024, was impaired as the Company no longer has exclusive licensing rights to the technology. In addition, in connection with the Atomistic agreements, the Company recorded an additional impairment charge in the amount of $181,676 in August for the issuance of 174,688 shares of common stock at a fair market value of $1.04 per share to the Founders of Atomistic for the achievement of certain technological milestones. The Company had a related equity interest in Atomistic, a private French company, and determined that at this time, the Company is unable to reasonably estimate a value to its future value and therefore recorded a full impairment of its investment in Atomistic resulting in a write-down charge of $5,784,125 for the period ended June 30, 2024.

~~Other~~The ~~Income~~following ~~(Expense),~~table ~~Net.~~compares ~~Total~~the ~~other~~Company’s ~~income~~consolidated ~~was~~statements ~~$433,337~~of operations data for the ~~year~~years ended December 31, 2024, compared to other income of $2,152,462 in 2023, a decrease of $1,719,125. 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.

Provision for Income Taxes. There were no provisions for income taxes in 2024 or 2023.

Table of Contents


		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 Loss			(5,599,670)			(2,634,730)			(2,964,940)		113	%
Gross 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			—			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	%

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.~~37


	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	%

Table of Contents

Sales. There was ana ~~increase~~decrease in total sales for the year ended December 31, ~~2023~~2024, ~~from~~compared ~~those~~to ~~achieved~~2023 ~~in 2022~~ of $~~293~~6,~~257~~374,583, or 253%. The following table reflects the major components of our sales:


	Year Ended		% of		Year Ended		% of		Dollar		% Increase
	December 31, ~~2023~~2024		Total Sales		December 31, ~~2022~~2023		Total Sales		Change		(Decrease)
Sales of Products	$	104,~~760~~487,~~352~~202	8978	%	$	10,~~505~~760,~~763~~352	89	%	$	~~254~~(6,~~589~~273,150)	2(58)	%
Sales of Engineering Services		1,~~368~~267,~~787~~354	1122	%		1,~~330~~368,~~119~~787	11	%		38(101,~~668~~433)	3(7)	%
Total Sales	$	125,~~129~~754,~~139~~556	100	%	$	1112,~~835~~129,~~882~~139	100	%	$	~~293~~(6,~~257~~374,583)	2(53)	%

Sales of products ~~increased~~decreased by 258% for the year ended December 31, ~~2023~~2024, compared to ~~the same period in 2022~~2023. ~~Smart~~Reduced smart glasses revenue was the primary driver of this ~~increase~~decrease as unit sales of our M400 product ~~increased~~decreased substantially compared to the previous year, when two major distributors placed significant stocking orders in the first half of 2023.

Sales of engineering services for the year ended December 31, ~~2023~~2024, were $1,~~368~~267,~~787~~354, as compared to $1,~~330~~368,~~119~~787 in ~~the same period of 2022~~2023, ana ~~increase~~decrease of 37%.


	Year Ended		% of		Year Ended		% of		Dollar		% Increase
	December 31, ~~2023~~2024		Total Sales		December 31, ~~2022~~2023		Total Sales		Change		(Decrease)
Product Cost of Sales	$	73,~~224~~887,~~107~~820	6068	%	$	7,~~158~~224,~~225~~107	60	%	$	65(3,~~882~~336,287)	1(46)	%
Inventory Reserve for Obsolescence		4,~~358~~167,~~062~~917	3672	%		~~290~~4,~~405~~358,062	236	%		4(190,~~067,657~~145)	~~1,401~~(4)	%
Manufacturing Overhead - Unapplied		12,~~615~~119,~~172~~380	1337	%		1,~~579~~615,~~627~~172	13	%		35504,~~545~~208	231	%
Depreciation and Amortization		~~886~~734,~~117~~456	713	%		~~799~~886,~~317~~117	7	%		86(151,~~800~~661)	11(17)	%
Engineering Services Cost of Sales		~~680~~444,~~411~~653	68	%		~~525~~680,~~182~~411	46	%		~~155~~(235,~~229~~758)	30(35)	%

Total Cost of Sales		1411,~~763~~354,~~869~~226	~~122~~197	%		1014,~~352~~763,~~756~~869	87122	%		4(3,~~411~~409,~~113~~643)	43(23)	%

Gross Profit (Loss)	$	(2,634,730)	(22)	%	$	1,483,126	13	%	$	(4,117,856)	(278)	%
Gross Loss	$	(5,599,670)	(97)	%	$	(2,634,730)	(22)	%	$	(2,964,940)	113	%

For the year ended December 31, ~~2023~~2024, there was a gross loss from total sales ~~was~~of $25,~~634~~599,~~730~~670, or ~~(22)~~97% of total sales as compared to a gross ~~profit~~loss of $12,~~483~~634,~~126~~730, or 1322% in ~~the same period in 2022. Product Cost of Sales was $7,224,107, or 60% of total sales in~~ 2023 ~~as compared to $7,158,225, or 60% of 2022 total sales~~.

In addition to its normal Reserve for Obsolescence provision, the Company reserved as of December 31, ~~2023~~2024 additional provisions for expected surplus component parts and obsolescence in excess of its currently planned existing product builds in ~~2024~~2025 and into ~~2025~~2026 on most of its existing smart ~~glass~~glasses product models in anticipation of the planned introduction of newer models by 2026, which would logically replace the existing models when introduced. The disposal value of the excess components that could not be used in future models iswas unknown, so a 100% obsolescence provision ~~has~~was ~~been~~ accrued. ~~The~~During ~~total~~the ~~reserve~~year ~~write-down~~ended ~~recorded at~~ December 31, ~~2023 was $2~~2024,~~700,000~~ ~~and~~ the Company ~~increased~~recorded ~~its~~an ~~standard~~obsolescence ~~reserve~~provision byfor gross inventory of $4,167,917 and disposed of $1,~~658~~998,~~000~~893 of inventory that was fully provisioned for in the previous year. The ~~write-down~~total ~~and~~ obsolescence provisions totaled $57,~~775~~944,~~551~~575 and $15,~~417~~775,~~489~~551 for the years ended December 31, ~~2023~~2024 and ~~2022~~2023, respectively. ~~These~~The changes to these provisions ~~were~~are included in Cost of Sales on the Consolidated Statements of Operations.

~~Manufacturing~~Unapplied manufacturing overhead costs, not already added in ~~Cost~~product cost of ~~Sales or ending inventory~~sales, increased by $35504,~~545~~208, or 231% for the year ended December 31, ~~2023~~2024 over ~~the~~2023 ~~2022~~and ~~comparable~~increased ~~period to 13%~~ as a percentage of total sales to 37% as compared to 13% in ~~2022~~2023 due to lower quarterly product revenue. The increase in the net dollar amount of these unapplied overhead costs in the current period versus the prior period was primarily driven by a decrease in actual production levels during the period and the temporary cessation of M400 smart glasses production in the second half of 2024.

Depreciation and amortization expense increased by $86,800, or 11% for the year ended December 31, 2023, over the 2022 comparable period to 7% as a percentage of total sales as compared to 7% in 2022. The increase was due to depreciation on capitalized equipment for our new waveguide facility that was placed into service in the fourth quarter of 2023.

Depreciation and Amortization included in cost of sales decreased by $151,661, or 17% for the year ended December 31, 2024 versus 2023, due to the full amortization and depreciation of certain manufacturing assets.

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	Year Ended		% of		Year Ended		% of		Dollar		% Increase
	December 31, ~~2023~~2024		Total Sales		December 31, ~~2022~~2023		Total Sales		Change		(Decrease)
Research and Development Expenses	$	107,~~611~~840,~~176~~491	87136	%	$	10,~~841~~611,~~011~~176	9287	%	$	(~~229~~2,~~835~~770,685)	(226)	%
Related Stock-based Compensation (non-cash)		1,~~728~~785,~~358~~961	1431	%		1,~~835~~728,~~677~~358	1614	%		~~(107~~57,~~319)~~603	~~(6)~~3	%
Total Research and Development	$	12,339,534	102	%	$	12,676,688	107	%	$	(337,154)	(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, ~~2023~~2024, decreased by $~~337~~2,~~154~~713,082, or 322%, compared to ~~the comparable period in 2022~~2023. This decrease was largely due to a $~~923~~1,~~933~~565,823 ~~reduction~~decrease in ~~external~~salary ~~development expenses~~ and ~~consultant~~benefits related expenses; ~~and~~due ato ~~decrease~~headcount ofdecreases; a $~~136~~1,~~186~~004,415 decrease in ~~recruiting~~external ~~and~~development ~~hiring~~costs ~~expenses;~~due ~~partially~~to ~~offset~~the bysuspension anof ~~increase~~work ofon a specific future smart glasses product; and a $~~789~~81,~~186~~450 decrease in ~~salary~~supplies ~~and~~expenses; ~~benefits~~partially ~~related~~offset ~~expenses,~~by ~~including~~a $~~422~~57,~~051~~603 increase in ~~severance~~non-~~related~~cash ~~expenses~~stock-based ~~for~~compensation ~~staff~~primarily ~~reductions~~driven ~~which~~by ~~took~~the ~~place~~voluntary insalary ~~early~~reduction ~~January 2024~~program.



	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. This increase was largely due to a $2,117,503 increase in salary, commissions and benefits related expenses driven by headcount increases, including $265,101 in severance related expenses for staff reductions which took place in early January 2024; a reserve for bad debt of $1,574,000; an increase of $610,845 in advertising and tradeshow expenses; an increase of $322,071 in travel related expenses; and an increase of $167,794 in consulting fees; partially offset by a decrease of $121,835 in website development and maintenance costs; and a decrease of $101,001 in recruiting and hiring expenses for new hires in the latter part of 2022.



		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. This decrease was largely due to a decrease of $1,618,667 in advertising and tradeshow expenses; a $1,587,781 decrease in salary and benefits related expenses driven by headcount decreases; a decrease of $605,000 in our allowance for credit losses; a decrease of $456,338 in travel related expenses; a $235,660 decrease in external consulting expenses; and a $133,906 decrease in computer and software subscription expenses; partially offset by a $158,490 increase in non-cash stock-based compensation primarily driven by the voluntary salary reduction program.



	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. This decrease was largely due to a decrease of $2,877,423 in non-cash



		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)	%

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General and administrative expenses for the year ended December 31, 2024, decreased by $1,361,892, or 7% compared to 2023. This decrease was largely due to a $1,362,386 decrease in non-cash stock-based compensation; a decrease of $~~210~~1,~~678~~106,231 in ~~external~~salary ~~accounting, advisory~~ and ~~tax~~benefits ~~services~~related expenses due to headcount reductions; a decrease of $~~199~~204,~~456~~038 in ~~shareholder~~external ~~and~~consulting ~~IR related~~ expenses; a decrease of $91201,~~254~~672 in insurance premiums; a decrease of $47,838 in ~~supplies~~recruitment and ~~consumables~~hiring expenses; and a decrease of $5672,~~807~~870 ~~decrease~~ in ~~recruiting~~travel ~~and hiring~~ expenses; ~~partially~~largely offset by an increase of $~~281~~977,~~363~~798 in ~~various~~investor ~~consulting~~relations ~~fees~~expenses; an increase of $~~128~~437,~~949~~453 in ~~travel~~legal ~~related~~ expenses; and an increase of $88350,~~804~~453 in ~~insurance~~additional ~~premiums~~accounting and auditing fees related to the finalization of the 2023 audit.

Depreciation and Amortization. Depreciation and amortization expense, not included in cost of sales, for the year ended December 31, ~~2023~~2024, was $32,~~844~~994,~~428~~643, compared to $13,~~788~~844,~~584~~428 in ~~the~~2023 ~~comparable~~or ~~period~~a indecrease ~~2022, an increase~~ of $2849,~~055,844~~785. ~~The~~This ~~increase~~decrease inwas ~~this~~due ~~expense~~to isa ~~primarily~~significant ~~due~~decrease toin ~~the~~ amortization ofexpense related to our Atomistic technology license, which was written off as of June 30, 2024; partially offset by increases in depreciation related to ~~the~~leasehold ~~Atomistic~~improvements ~~Agreements,~~being ~~which~~put ~~began~~into onservice ~~May~~this ~~12,~~year ~~2022~~related to our new waveguide manufacturing facility.

~~Other~~Impairment ~~Income~~on ~~(Expense),~~Intangible ~~Net.~~Asset ~~Total~~and ~~other~~Equity ~~income~~Investment. For ~~was $2,152,462 for~~ the year ended December 31, ~~2023,~~2024 asthere ~~compared~~was toa ~~$1,468,698~~total inimpairment ~~the~~charge ~~same~~on ~~period~~an inintangible ~~2022,~~and an ~~increase~~equity investment of $~~683~~30,~~764~~301,355. ~~This~~On ~~overall~~July ~~increase~~1, 2024, Atomistic exercised its option to terminate its previously granted license related to certain microLED technologies it was ~~primarily~~developing, ~~the~~and as a result of anthe ~~increase~~termination of the granted license, which was effective June 30, 2024, the Company determined that the technology license asset of $~~823~~24,~~647~~335,554, innet ~~investment~~book ~~income~~value ~~resulting~~as ~~from~~of June 30, 2024, was impaired as the ~~rise~~Company no longer has exclusive licensing rights to the technology. In addition, in ~~interest~~connection ~~rates~~with ~~earned~~the onAtomistic agreements, the Company’s ~~excess~~recorded ~~cash~~an ~~period-over-period;~~additional ~~and~~impairment ~~decrease~~charge in the amount of $~~136~~181,~~527~~676 in ~~foreign~~August ~~exchange~~for ~~losses;~~the ~~partially~~issuance ~~offset~~of by174,688 shares of common stock at a fair market value of $~~258,434~~1.04 ~~reduction~~per share to the founders of Atomistic for the achievement of certain technological milestones. The Company had a related equity interest in ~~government~~Atomistic, ~~and~~a ~~utility~~private ~~incentives~~French company, ~~primarily~~and ~~related~~determined tothat the ~~employee~~Company ~~retention~~was ~~refunds~~unable ~~received~~to reasonably estimate its future value and therefore recorded a full impairment of its investment in ~~2022~~Atomistic resulting in a write-down charge of $5,784,125 for the period ended June 30, 2024.

~~Provision for Income Taxes. There were no provisions for income taxes in 2023 or 2022.~~

Other Income (Expense), Net. 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 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.

Provision for Income Taxes. There were no provisions for income taxes in 2024 or 2023.

Liquidity and Capital Resources

Capital Resources: As of December 31, ~~2024~~2025, we had cash and cash equivalents of $1821,~~186~~150,~~506~~213, aan ~~decrease~~increase of $82,~~369~~963,~~086~~707 from $2618,~~555~~186,~~592~~506 as of December 31, ~~2023~~2024.

As of December 31, ~~2024~~2025, we had current assets of $2627,~~722~~195,~~490~~727 as compared to current liabilities of $24,~~112~~888,~~273~~202, which resulted in a positive working capital position of $2422,~~610~~307,~~217~~525. As of December 31, ~~2023~~2024, we had a working capital position of $3624,~~284~~610,~~259~~217. Our current liabilities are comprised principally of accounts payable, accrued expenses, and operating lease right-of-use liabilities.

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Summary of Cash Flow:

The following table summarizes our select cash flows for the years ended:


	December 31,		December 31,		December 31,
	~~2024~~2025		~~2023~~2024		~~2022~~2023
Net Cash Provided by (used in)
Operating Activities		(2318,~~739~~789,~~372~~272)		(2623,~~277~~739,~~824~~372)		(2426,~~521~~277,~~082~~824)
Investing Activities		(2,~~919~~618,~~949~~270)		(192,~~280~~919,~~966~~949)		(2119,~~170~~280,~~816~~966)
Financing Activities		1824,~~290~~371,~~235~~250		~~(449~~18,~~561)~~290,235		(1449,~~948,032~~561)

During the year ended December 31, ~~2024~~2025 we used $2318,~~739~~789,~~372~~272 of cash for operating activities. Net changes in working capital items were $13,~~171~~993,~~047~~328 for the year ended December 31, ~~2024~~2025, with the largest factors resulting from a $2,~~503~~237,~~100~~067 decrease in ~~trade~~inventory ~~accounts payables~~ and ~~accrued~~vendor ~~expenses~~prepayments; a $~~941~~2,~~149~~028,448 ~~decrease~~increase in trade accounts payables and ~~other~~accrued ~~receivables~~expenses; and a $~~271~~257,~~399~~699 ~~decrease~~increase in ~~other~~trade ~~prepaid~~accounts ~~expenses~~and other receivables. For the year ended December 31, ~~2023~~2024, we used ~~a total of~~ $2623,~~277~~739,~~824~~372 in cash for operating activities.

During the year ended December 31, ~~2024~~2025, we used $2,~~919~~618,~~949~~270 of cash for investing activities, which included: $12,~~358~~013,~~991~~454 in manufacturing equipment and tooling primarily for our new waveguide manufacturing facility; $1554,~~000~~816 in patent and trademark expenditures, and $50,000 ~~final~~of ~~payment~~additional ~~made~~investment ~~towards~~in ~~our~~a ~~technology~~private ~~license~~corporation ~~fee~~(see ~~commitment~~Note ~~with~~8 ~~Atomistic;~~in ~~and~~the ~~$560,958~~Consolidated inFinancial ~~patent~~Statements ~~and~~for ~~trademark~~further ~~expenditures~~details). For the year ended December 31, ~~2023~~2024, we used ~~a total of~~ $192,~~280~~919,~~966~~949 in cash for investing activities.

During the year ended December 31, ~~2024~~2025, we received $1824,~~290~~371,~~235~~250 ~~was~~from ~~provided by~~ financing activities, ~~related~~which toincluded: i$14,286,816 in net proceeds from sales of common stock under our “at the market” (“ATM”) program; $10,000,000 in proceeds from the sale of ~~common~~our ~~stock~~Series B Convertible Preferred Stock to Quanta, under aour ~~securities~~Securities ~~purchase~~Purchased agreement (“SPA”) with ~~Quanta~~them; ~~Computer~~and ~~Inc.~~$106,843 ~~entered~~of ~~into~~proceeds onfrom ~~September~~stock 3option exercises; partially offset by $22,409 ~~2024~~in ~~(see~~Series ~~Note~~B 11Preferred ~~for~~Stock ~~further~~dividend ~~details)~~payments. ~~and~~For ~~ii)~~the ~~$8,290,235~~year ofended ~~net~~December ~~proceeds~~31, 2024, we received $18,290,235 from ~~sales~~financing of activities.

43As of December 31, 2025, the Company does not have any current or long-term debt obligations outstanding.

The Company incurred net losses for the year ended December 31, 2025 of $32,273,128; $73,538,157 for the year ended December 31, 2024; and $50,149,077 for the year ended December 31, 2023. The Company had net cash outflows from operations of $18,789,272 for the year ended December 31, 2025; $23,739,372 for the year ended December 31, 2024; and $26,277,824 for the year ended December 31, 2023. As of December 31, 2025, the Company had an accumulated deficit of $399,858,410.

The Company’s cash requirements going forward are primarily for funding operating losses, research and development, working capital, and capital expenditures. Our cash requirements related to funding operating losses depend upon numerous factors, including new product development activities, research and development costs, our ability to commercialize our products, our products’ timely market acceptance, selling prices and gross margins, and other factors. Historically, the Company has met its cash needs primarily through the sale of equity securities. 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.

~~Table~~These historical financial factors initially raise doubt about the Company’s ability to continue as a going concern. Management intends to take actions necessary to continue as a going concern, as discussed herein. Management’s plans to alleviate the conditions that raise doubt include raising further capital and the implementation of ~~Contents~~operational improvements and the curtailment of certain development programs, both of which the Company expects will preserve cash.

common stock under our ATM program in the fourth quarter of 2024 (see Note 11 for further details). 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 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. 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. 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. The higher cash outflows totaling $32,500,000 for investments in the years ending December 31, 2023 and 2022 were mainly for the Company’s exclusive technology license and equity investment in microLED technology via Atomistic. The Company decided not to renew its technology license with Atomistic on June 30, 2024 and the license was terminated on July 1, 2024 by Atomistic. As a result, the Company has no further contractual requirements to pay further licensing development fees to Atomistic.

~~Our~~Management’s ~~cash~~plans ~~requirements~~concerning ~~related~~these tomatters ~~funding~~and ~~operating~~managing ~~losses depend upon numerous factors, including new product development activities,~~ our ~~ability~~liquidity ~~to commercialize our products~~include, ~~our~~among ~~products’ timely market acceptance, selling prices and gross margins, and~~ other factors. Historically, the Company has met its cash needs primarily through the sale of equity securities. 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.things:

These historical financial factors initially raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s management intends to continue to take actions necessary to continue as a going concern, as discussed herein. Management’s plans to alleviate the conditions that raise substantial doubt include the implementation of operational improvements and the curtailment of certain development programs, both of which the Company expects will preserve cash.

Management’s plans and actions completed to date concerning our liquidity include, among other things:

•On September 13, 2024, the Company received $10,000,000 under the closing of the first tranche under a Securities Purchase Agreement for the sale of up to $20,000,000 in common stock and Series B Preferred Stock with Quanta Computer Inc. Under the first closing, the Company sold $10,000,000 of common stock. The second and third tranches, which are subject to achievement of specific milestones, will each be for the sale of $5,000,000 of Series B Preferred Stock. The 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;

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~~•The~~● ~~expected~~Reductions ~~margin~~in ~~contribution~~our ~~upon~~cash ~~the~~annual ~~commencement~~operating ofexpenses ~~volume~~across ~~manufacturing~~all ~~and~~operating ~~sales~~areas, ofincluding ~~waveguides~~in ~~from~~the ~~our~~areas ~~new~~of ~~waveguide~~Research ~~manufacturing~~and ~~plant~~Development, ~~particularly~~Sales toand ~~OEM~~Marketing and ~~ODM~~General ~~customers~~and ~~such as Quanta~~Administrative;

~~•Continued~~● ~~pursuit~~Delaying ofor ~~further~~curtailing ~~licensing~~discretionary and ~~strategic~~non-essential ~~opportunities~~capital ~~around~~expenditures ~~our~~not ~~waveguide~~related ~~technologies~~to ~~with~~near-term ~~potential~~product ~~ODMs/OEMs,~~and ~~which~~manufacturing ~~would~~needs ~~include~~and reducing other investing activities for the ~~receipt~~remainder of ~~upfront~~our ~~licensing~~2026 ~~fees~~ and ~~on-going~~2027 ~~supply~~fiscal ~~agreements~~years; ~~and~~

~~•Reduction~~● inThe ~~our~~expected ~~existing~~margin ~~products’~~contribution ~~selling~~upon ~~prices~~the ~~and~~commencement ~~higher~~of volume ~~discount~~manufacturing ~~levels~~and tosales ~~turn~~of aswaveguides ~~much~~from of our ~~inventory~~new ofwaveguide ~~finished~~manufacturing ~~products~~plant, ~~into~~particularly ~~cash~~to ~~and~~OEM ~~pursue~~customers; ~~external manufacturers for Vuzix non-waveguide production needs.~~and

~~The~~● ~~Company~~Continued ~~has~~pursuit ~~historically raised capital through the sale~~ of ~~equity~~licensing ~~securities.~~and ~~The~~strategic ~~Company~~opportunities ~~has~~around ~~entered~~our ~~into~~waveguide atechnologies ~~sales agreement~~ with anpotential ~~investment bank for the issuance and sale of up to $50~~OEMs,~~000,000~~ ofwhich ~~our~~would ~~common~~include ~~stock that may be issued and sold from time to time in an “at~~ the ~~market”~~receipt ~~(ATM)~~of ~~offering.~~upfront ~~The~~licensing ~~Company~~fees ~~raised $8.2 million in the quarter ended December 31, 2024~~ and ~~$1.3~~on-going ~~million~~supply ~~to date in 2025 under that ATM~~agreements.

The Company has historically raised capital through the sale of equity securities. The Company filed a Registration Statement on Form S-3 that became effective in May 2024, which includes a sales agreement prospectus 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 under a sales agreement with an investment bank in an “at the market” offering. Since May 2024, the Company has raised $28,250,484, net of broker expenses, including $14,286,816, in the year ended December 31, 2025 and $5,784,193 to date in 2026, under this sales agreement.

Management monitors the capital markets on an ongoing basis and may consider raising capital if favorable market conditions develop. If the Company’s actual results are less than projected or the Company needs to raise capital for additional liquidity, the Company may be required to pursue additional equity financings, further curtail expenses, or enter into one or more strategic transactions. However, management can make no assurance that the Company will be able to successfully complete any of the forementioned pursuits on terms acceptable to the Company, or at all.

As a result of management’s plan above, our current amount of cash on hand, and our historical ability to raise capital, management has concluded that substantial doubt of our ability to continue as a going concern has been alleviated.

Contractual Obligations

The following is a summary of our contractual payment obligations as of December 31, ~~2024~~2025:

Less than

More than

Contractual Obligations

Total

1 Year

1-3 Years

3-5 Years

5 Years

Operating Lease Obligations

~~511~~1,~~980~~087,103

~~511~~567,~~980~~184

—519,919

—

Open Purchase Obligations

13,~~061~~278,~~429~~002

—

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We invest our excess cash in short-term highly rated corporate debt instruments or commercial paper, which bear lower levels of relative risk. We believe that the effect, if any, of reasonably possible near-term changes in interest rates on our financial position, results of operations and cash flows should not be material to our cash flows or income. It is possible that interest rate movements would increase our unrecognized gain or loss on interest rate securities. Our portfolio of marketable debt securities is subject to interest rate risk although our intent is to hold securities until maturity. The credit rating of our investments may be affected by the underlying financial health of the guarantors of our investments. Our investment policy generally directs our investment managers to select investments to achieve the following goals: principal preservation, adequate liquidity, and return.

We are exposed to changes in foreign currency exchange rates primarily through the translation of our foreign subsidiary’s financial positions, results of operations, and transaction gains and losses as a result of non-U.S. dollar denominated cash flows related to business activities in Asia and Europe, and re-measurement of U.S. dollars to the functional currency of our foreign subsidiaries. We are also exposed to the effects of exchange rates in the purchase of certain raw materials whose price is in U.S. dollars but the price on future purchases is subject to change based on the relationship of the Japanese Yen/Euro to the U.S. Dollar. We do not currently hedge our foreign currency exchange rate ~~risk. We estimate that any market risk associated with our international operations is unlikely to have a material adverse effect on our business, financial condition or results of operation.~~

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risk. We estimate that any market risk associated with our international operations is unlikely to have a material adverse effect on our business, financial condition or results of operation.

Item 8. Financial Statements and Supplementary Data

The information required by this item is incorporated herein by reference to pages 57 through 84 of this annual report and is indexed under Item 15(a)(1) and (2).

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

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Item 9A. Controls and Procedures

The information contained in this section covers management’s evaluation of our disclosure controls and procedures and our assessment of our internal control over financial reporting as of December 31, ~~2024~~2025.

(a) Evaluation of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report as required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures are those controls and other procedures that are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is properly recorded, processed, summarized, and reported, within the time periods specified by the rules and forms promulgated by the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is properly accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As a result of this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, ~~2024~~2025, our disclosure controls and procedures were effective.

(b) Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate “internal control over financial reporting,” as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Our system of internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with US GAAP.

Our internal control over financial reporting includes those policies and procedures that:

●

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

●

provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and Board of Directors; and

●

provide reasonable assurance regarding prevention or timely detection of unauthorized use, acquisition, or disposition of our assets that could have a material effect on the consolidated financial statements.

Under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation and the effectiveness of our internal control over financial reporting as of December 31, 2024, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013 framework). Based on that evaluation, our management concluded that, as of December 31, 2024, that our internal control over financial reporting was effective.43

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this Annual Report on Form 10-K.

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Under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2025, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission (c“COSO”) ~~Limitations~~ in Internal Control-Integrated Framework (2013 framework). Based on ~~the~~that ~~Effectiveness~~evaluation, our management concluded that, as of ~~Controls~~December 31, 2025, that our internal control over financial reporting was effective.

Because of its inherent limitations, internal control over financial reporting, no matter how well-conceived or operated, can only provide reasonable assurance, not absolute assurance, that the objectives of the control system are met. Such controls may not prevent or detect every misstatement. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

(d) Change in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three months ended December 31, ~~2024~~2025 that has materially affected, or is likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

~~None~~During the quarter ended December 31, 2025, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

The information required by this item will be presented in our definitive proxy statement not later than 120 days after the end of the fiscal year covered by this annual report and is incorporated in this annual report by reference thereto, except, however, the section entitled “Compensation Committee Report” shall not be deemed to be “soliciting material” or to be filed with the Securities and Exchange Commission or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act of 1934, as amended.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

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Item 14. Principal Accountant Fees and Services

4845

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PART IV

Item 15. Exhibits and Financial Statement ~~Schedulesf~~Schedules

(a)The following documents are filed as part of this report

(1) Financial Statements

		Page
		Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 317)		5448
Consolidated Balance Sheets — As of December 31, 2024 and 2023		56
Consolidated Balance Sheets — As of December 31, 2025 and 2024		50
Consolidated Statements of Changes in Stockholders’ Equity — For the Years Ended December 31, 2024, 2023 and 2022		57
Consolidated Statements of Changes in Stockholders’ Equity — For the Years Ended December 31, 2025, 2024 and 2023		51
Consolidated Statements of Operations — For the Years Ended December 31, 2024, 2023 and 2022		58
Consolidated Statements of Operations — For the Years Ended December 31, 2025, 2024 and 2023		52
Consolidated Statements of Cash Flows — For the Years Ended December 31, 2024, 2023 and 2022		59
Consolidated Statements of Cash Flows — For the Years Ended December 31, 2025, 2024 and 2023		53
Notes to Consolidated Financial Statements		6054

(2) Financial Statement Schedules

Financial statement schedules have been omitted because of the absence of conditions under which they are required or because the required information is included in the consolidated financial statements or the notes thereto.

(3) Exhibits

A list of exhibits filed with this annual report is set forth in the Exhibit Index and is incorporated in this Item 15(a)(3) by reference.

4946

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VUZIX CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page
		Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 317)		5448
Consolidated Balance Sheets — As of December 31, 2024 and 2023		56
Consolidated Balance Sheets — As of December 31, 2025 and 2024		50
Consolidated Statements of Changes in Stockholders’ Equity — For the Years Ended December 31, 2024, 2023 and 2022		57
Consolidated Statements of Changes in Stockholders’ Equity — For the Years Ended December 31, 2025, 2024 and 2023		51
Consolidated Statements of Operations — For the Years Ended December 31, 2024, 2023 and 2022		58
Consolidated Statements of Operations — For the Years Ended December 31, 2025, 2024 and 2023		52
Consolidated Statements of Cash Flows — For the Years Ended December 31, 2024, 2023 and 2022		59
Consolidated Statements of Cash Flows — For the Years Ended December 31, 2025, 2024 and 2023		53
Notes to Consolidated Financial Statements		6054

5347

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Vuzix Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Vuzix Corporation and its subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders' equity and cash flows for each the three years in the period ended December 31, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

~~Basis~~We have audited the accompanying consolidated balance sheet of Vuzix Corporation as of December 31, 2025, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for ~~Opinion~~the year ended December 31, 2025, and the related notes to the consolidated financial statements (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Vuzix Corporation as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

WeBasis conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for ~~the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.~~Opinion

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

~~Critical~~These ~~Audit Matters~~financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to Vuzix Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

~~Estimate~~We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Vuzix Corporation is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for ~~excess~~the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, ~~obsolete~~we ~~and~~express ~~slow-moving~~no ~~inventory~~such ~~reserve~~opinion.

~~Critical Audit Matter Description~~

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion.

As discussed in Notes 1 and 3 to the consolidated financial statements, inventories are stated at the lower of cost or net realizable value using the weighted average first-in, first-out method. The Company records provisions for excess, obsolete or slow-moving inventory based on changes in customer demand, technology developments or other economic factors. The Company’s products have product life cycles that range on average from two to three years. At both the product introduction and product discontinuation stage, there is a higher degree of risk of inventory obsolescence. The excess, obsolete or slow-moving reserve serves to reduce the Company’s inventory balance through a charge to cost of sales – products sold.

Other Matter

~~Table~~The financial statements of ~~Contents~~Vuzix Corporation as of December 31, 2024 and each of the 2 years in the period ended December 31, 2024 were audited by Freed Maxick, P.C. On August 1, 2025, Freed Maxick, P.C. joined with WithumSmith+Brown, PC., Freed Maxick, P.C. expressed an unmodified opinion on those statements dated March 13, 2025.

The Company’s reserve for excess, obsolete or slow-moving inventory is based upon estimates of the evaluation of changes in customer demand, technology developments, and expected future product sales, which can be difficult to forecast. If the actual realization of excess, obsolete, and slow-moving inventory does not meet the Company’s assumptions future inventory adjustments would result in a decrease in gross profit. Due to the magnitude of the inventory, and the subjectivity involved in estimating the reserve, we identified the evaluation of the reserve as a critical audit matter, which required a high degree of auditor judgment.

Critical Audit Matters

~~How the Critical Audit Matter Was Addressed in the Audit~~

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Addressing the matter involved performing subjective procedures and evaluating audit evidence in connecting with forming our overall opinion on the financial statements. The primary procedures we performed include, performing a retrospective review of prior year-estimates used to identify potential bias of management judgments; obtaining an understanding of the process and assumptions used by management to develop the reserve for excess, obsolete and slow-moving inventory; and testing management’s calculation of the reserve for excess, obsolete, and slow-moving inventory by: testing the completeness and accuracy of the source information used, testing the mathematical accuracy of management’s calculations, and evaluating the reasonableness and consistency of methodology and assumptions applied by management.

~~/s/ Freed~~Estimate ~~Maxick~~for ~~P.C. (f/ka~~excess, ~~Freed~~obsolete ~~Maxick~~and ~~CPAs,~~slow-moving ~~P.C.)~~inventory reserve

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WeCritical ~~have~~Audit ~~served~~Matter ~~as the Company's auditor since 2014.~~Description

~~Buffalo~~As discussed in Notes 1 and 3 to the consolidated financial statements, ~~New~~the ~~York~~Company records provisions for excess, obsolete or slow-moving inventory based on changes in customer demand, technology developments or other economic factors. The Company’s products have product life cycles that range on average from two to three years. At both the product introduction and product discontinuation stage, there is a higher degree of risk of inventory obsolescence. The provision for obsolete and excess inventory is evaluated for adequacy at each quarter end. The estimate of the provision for obsolete and excess inventory is partially based on expected future product sales, which are difficult to forecast for certain products.

~~March~~The 13excess, ~~2025~~obsolete or slow-moving reserve serves to reduce the Company’s inventory balance through a charge to cost of sales on the statement of operations. The Company’s reserve for excess, obsolete or slow-moving inventory is based upon estimates of the evaluation of changes in customer demand, technology developments, and expected future product sales, which can be difficult to forecast. If the actual realization of excess, obsolete, and slow-moving inventory does not meet the Company’s assumptions future inventory adjustments could result in a decrease or increase in gross profit in future periods. Due to the magnitude of the inventory, and the subjectivity involved in estimating the reserve we identified the evaluation of the reserve as a critical audit matter, which required a high degree of auditor judgment.

How the Critical Audit Matter Was Addressed in the Audit

55Addressing the matter involved performing subjective procedures and evaluating audit evidence in connecting with forming our overall opinion on the financial statements. The primary procedures we performed include, performing a retrospective review of prior year-estimates used to identify potential bias of management judgments; obtaining an understanding of the process and assumptions used by management to develop the reserve for excess, obsolete and slow-moving inventory; and testing management’s calculation of the reserve for excess, obsolete, and slow-moving inventory by: testing the completeness and accuracy of the source information used, testing the mathematical accuracy of management’s calculations, and evaluating the reasonableness and consistency of methodology and assumptions applied by management.

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~~VUZIX~~/s/ ~~CORPORATION~~WithumSmith+Brown, PC

~~CONSOLIDATED BALANCE SHEETS~~

We have served as Vuzix Corporation’s auditor since 2014.


	December 31,		December 31,
	2024		2023
ASSETS
Current Assets
Cash and Cash Equivalents	$	18,186,506	$	26,555,592
Accounts Receivable, net of allowance for credit losses of $89,000 at December 31, 2024 and $1,574,000 at December 31, 2023.		1,609,718		3,827,686
Accrued Revenues in Excess of Billings		673,498		165,771
Utility Improvement Refund		—		208,271
Inventories, Net		4,813,226		9,000,430
Manufacturing Vendor Prepayments		372,081		403,801
Prepaid Expenses and Other Assets		1,067,461		1,338,860

Total Current Assets		26,722,490		41,500,411

Long-Term Assets
Fixed Assets, Net		7,584,284		8,072,830
Operating Lease Right-of-Use Asset		494,236		301,185
Patents and Trademarks, Net		2,998,760		2,627,018
Technology Licenses, Net		761,043		26,851,001
Cost Method Investment in Atomistic		—		5,784,126
Other Assets, Net		844,445		1,011,111

Total Assets	$	39,405,258	$	86,147,681

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable	$	538,221	$	1,570,630
Unearned Revenue		125,901		18,839
Accrued Expenses		945,752		2,416,443
Licensing Fees Commitment		—		1,000,000
Income and Other Taxes Payable		8,163		46,727
Operating Lease Right-of-Use Liability		494,236		163,513

Total Current Liabilities		2,112,273		5,216,152

Long-Term Liabilities
Operating Lease Right-of-Use Liability		—		137,672

Total Liabilities		2,112,273		5,353,824

Stockholders' Equity
Common Stock - $0.001 Par Value, 100,000,000 shares authorized; 76,553,694 shares issued and 75,974,022 shares outstanding as of December 31, 2024 and 65,304,780 shares issued and 64,725,108 shares outstanding as of December 31, 2023.		76,553		65,304
Additional Paid-in Capital		407,215,883		377,189,847
Accumulated Deficit		(367,522,950)		(293,984,793)
Treasury Stock, at cost, 579,672 shares as of December 31, 2024 and 2023.		(2,476,501)		(2,476,501)

Total Stockholders' Equity		37,292,985		80,793,857

Total Liabilities and Stockholders' Equity	$	39,405,258	$	86,147,681

Rochester, New York

~~The~~March ~~accompanying~~12, ~~notes are an integral part of these consolidated financial statements.~~2026

PCAOB ID Number 100

~~Table of Contents~~

~~VUZIX CORPORATION~~

~~CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY~~49

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	Common Stock			Additional		Accumulated		Treasury Stock
	Shares	Amount		Paid-In Capital		Deficit		Shares	Amount		Total
Balance - December 31, 2021	63,672,268	$	63,672	$	346,736,397	$	(203,072,143)	—	$	—	$	143,727,926
Stock-Based Compensation Expense	(3,017)		(3)		14,473,433		—	—		—		14,473,430
Stock Option Exercises	114,528		114		57,586		—	—		—		57,700
Purchases of Treasury Stock	—		—		—		—	(464,672)		(2,005,744)		(2,005,744)
2022 Net Loss	—		—		—		(40,763,573)	—		—		(40,763,573)
Balance - December 31, 2022	63,783,779	$	63,783	$	361,267,416	$	(243,835,716)	(464,672)	$	(2,005,744)	$	115,489,739
Stock-Based Compensation Expense	96,525		97		12,618,533		—	—		—		12,618,630
Stock Option Exercises	26,976		27		21,169		—	—		—		21,196
Stock Issued under Atomistic Stock Purchase Agreement	1,397,500		1,398		3,282,728		—	—		—		3,284,126
Purchases of Treasury Stock	—		—		—		—	(115,000)		(470,757)		(470,757)
2023 Net Loss	—		—		—		(50,149,077)	—		—		(50,149,077)
Balance - December 31, 2023	65,304,780	$	65,305	$	377,189,846	$	(293,984,793)	(579,672)	$	(2,476,501)	$	80,793,857
Stock-Based Compensation Expense	1,006,723		1,007		11,564,369		—	—		—		11,565,376
Stock Option Exercises	115,765		116		110,644		—	—		—		110,760
Stock Issued under Atomistic Stock Purchase Agreement	174,688		175		181,500		—	—		—		181,675
Stock Issued under Quanta Securities Purchase Agreement	7,692,307		7,692		9,992,308		—	—		—		10,000,000
Proceeds from ATM Program, Net	2,259,431		2,259		8,177,216		—	—		—		8,179,475
2024 Net Loss	—		—		—		(73,538,157)	—		—		(73,538,157)
Balance - December 31, 2024	76,553,694	$	76,553	$	407,215,883	$	(367,522,950)	(579,672)	$	(2,476,501)	$	37,292,985

VUZIX CORPORATION

CONSOLIDATED BALANCE SHEETS

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


		December 31,			December 31,
		2025			2024
ASSETS
Current Assets
Cash and Cash Equivalents		$	21,150,213		$	18,186,506
Accounts Receivable, net of allowance for credit losses of $46,000 at December 31, 2025 and $89,000 at December 31, 2024			1,627,635			1,609,718
Accrued Revenues in Excess of Billings			533,665			673,498
Other Receivables			379,615			—
Inventories, Net			2,188,750			4,813,226
Manufacturing Vendor Prepayments			256,090			372,081
Prepaid Expenses and Other Assets			1,059,759			1,067,461

Total Current Assets			27,195,727			26,722,490

Long-Term Assets
Fixed Assets, Net			7,626,238			7,584,284
Operating Lease Right-of-Use Assets, Net			1,003,025			494,236
Patents and Trademarks, Net			3,359,066			2,998,760
Technology Licenses, Net			559,973			761,043
Other Assets, Net			327,778			844,445

Total Assets		$	40,071,807		$	39,405,258

LIABILITIES, MEZZANINE EQUITY, AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable		$	685,010		$	538,221
Unearned Revenue			62,361			125,901
Accrued Expenses			3,590,407			945,752
Other Taxes Payable			49,513			8,163
Operating Lease Right-of-Use Liabilities			500,911			494,236

Total Current Liabilities			4,888,202			2,112,273

Long-Term Liabilities
Operating Lease Right-of-Use Liability			502,114			—

Total Liabilities			5,390,316			2,112,273

Mezzanine Equity
Preferred Stock - $0.001 Par Value, 5,000,000 Shares Authorized; 419,959 and zero Shares of Series B Preferred Stock Issued and Outstanding as of December 31, 2025 and December 31, 2024			10,000,000			—

Stockholders' Equity
Common Stock - $0.001 Par Value, 200,000,000 shares authorized; 81,679,367 shares issued and 81,099,695 shares outstanding as of December 31, 2025 and 100,000,000 shares authorized; 76,553,694 shares issued and 75,974,022 shares outstanding as of December 31, 2024			81,680			76,553
Additional Paid-in Capital			426,934,722			407,215,883
Accumulated Deficit			(399,858,410)			(367,522,950)
Treasury Stock, at cost, 579,672 shares as of December 31, 2025 and December 31, 2024			(2,476,501)			(2,476,501)

Total Stockholders' Equity			24,681,491			37,292,985

Total Liabilities, Mezzanine Equity, and Stockholders' Equity		$	40,071,807		$	39,405,258

57The accompanying notes are an integral part of these consolidated financial statements.

~~Table of Contents~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~50

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	For Years Ended December 31,

	2024		2023		2022
Sales:
Sales of Products	$	4,487,202	$	10,760,352	$	10,505,763
Sales of Engineering Services		1,267,354		1,368,787		1,330,119

Total Sales		5,754,556		12,129,139		11,835,882

Cost of Sales:
Cost of Sales - Products Sold		6,007,200		8,839,279		8,737,852
Cost of Sales - Inventory Reserve for Obsolescence		4,167,917		4,358,062		290,405
Cost of Sales - Depreciation and Amortization		734,456		886,117		799,317
Cost of Sales - Engineering Services		444,653		680,411		525,182

Total Cost of Sales		11,354,226		14,763,869		10,352,756

Gross Profit (Loss)		(5,599,670)		(2,634,730)		1,483,126

Operating Expenses:
Research and Development		9,626,452		12,339,534		12,676,688
Selling and Marketing		8,191,427		12,711,800		8,078,538
General and Administrative		17,230,293		18,592,185		21,038,562
Depreciation and Amortization		2,994,643		3,844,428		1,788,584
Loss on Goodwill and Other Intangible Asset Impairment		—		2,136,993		—
Loss on Fixed Asset Disposal		27,654		—		35,350
Impairment on Intangible Asset and Equity Investment		30,301,355		—		—
Impairment of Patents and Trademarks		—		41,869		97,675

Total Operating Expenses		68,371,824		49,666,809		43,715,397

Loss From Operations		(73,971,494)		(52,301,539)		(42,232,271)

Other Income (Expense):
Investment Income		591,319		2,219,226		1,395,579
Other Taxes		59,335		(230,973)		(212,997)
Foreign Exchange Gain (Loss)		(217,317)		(44,062)		(180,589)
Utility Improvement Refund/Employee Retention Credit Refund		—		208,271		466,705

Total Other Income, Net		433,337		2,152,462		1,468,698

Loss Before Provision for Income Taxes		(73,538,157)		(50,149,077)		(40,763,573)
Provision for Income Taxes		—		—		—

Net Loss	$	(73,538,157)	$	(50,149,077)	$	(40,763,573)

Basic and Diluted Net Loss per Common Share	$	(1.08)	$	(0.79)	$	(0.64)
Weighted-average Shares Outstanding - Basic and Diluted		67,836,002		63,432,422		63,708,986

VUZIX CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

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


	Series B Preferred Stock			Common Stock			Additional		Accumulated		Treasury Stock
	Shares	Amount		Shares	Amount		Paid-In Capital		Deficit		Shares	Amount		Total
Balance - December 31, 2022	—	$	—	63,783,779	$	63,783	$	361,267,416	$	(243,835,716)	(464,672)	$	(2,005,744)	$	115,489,739
Stock-Based Compensation Expense	—		—	96,525		97		12,618,533		—	—		—		12,618,630
Stock Option Exercises	—		—	26,976		27		21,169		—	—		—		21,196
Stock Issued under Atomistic Stock Purchase Agreement	—		—	1,397,500		1,398		3,282,728		—	—		—		3,284,126
Purchases of Treasury Stock	—		—	—		—		—		—	(115,000)		(470,757)		(470,757)
2023 Net Loss	—		—	—		—		—		(50,149,077)	—		—		(50,149,077)
Balance - December 31, 2023	—	$	—	65,304,780	$	65,305	$	377,189,846	$	(293,984,793)	(579,672)	$	(2,476,501)	$	80,793,857
Stock-Based Compensation Expense	—		—	1,006,723		1,007		11,564,369		—	—		—		11,565,376
Stock Option Exercises	—		—	115,765		116		110,644		—	—		—		110,760
Stock Issued under Atomistic Stock Purchase Agreement	—		—	174,688		175		181,500		—	—		—		181,675
Stock Issued under Quanta Securities Purchase Agreement	—		—	7,692,307		7,692		9,992,308		—	—		—		10,000,000
Proceeds from ATM Program, Net	—		—	2,259,431		2,259		8,177,216		—	—		—		8,179,475
2024 Net Loss	—		—	—		—		—		(73,538,157)	—		—		(73,538,157)
Balance - December 31, 2024	—	$	—	76,553,694	$	76,553	$	407,215,883	$	(367,522,950)	(579,672)	$	(2,476,501)	$	37,292,985
Stock-Based Compensation Expense	—		—	473,382		473		5,329,833		—	—		—		5,330,306
Stock Option Exercises	—		—	112,815		113		106,730		—	—		—		106,843
Preferred Stock Issued under Quanta Securities Purchase Agreement	419,959		10,000,000	—		—		—		—	—		—		—
Preferred Stock Dividends	—		—	—		—		—		(62,332)	—		—		(62,332)
Proceeds from ATM Program, Net	—		—	4,539,476		4,540		14,282,276		—	—		—		14,286,816
2025 Net Loss	—		—	—		—		—		(32,273,128)	—		—		(32,273,128)
Balance - December 31, 2025	419,959	$	10,000,000	81,679,367	$	81,680	$	426,934,722	$	(399,858,410)	(579,672)	$	(2,476,501)	$	24,681,491

~~Table of Contents~~

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

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~


	Twelve Months Ended December 31,

	2024		2023			2022

Cash Flows Used In Operating Activities
Net Loss	$	(73,538,157)	$	(50,149,077)	$	(40,763,573)
Non-Cash Adjustments
Depreciation and Amortization		3,930,169		4,931,692		2,587,901
Stock-Based Compensation		11,565,374		12,711,084		15,775,553
Impairment of Patents and Trademarks		—		41,869		97,675
Loss on Fixed Asset Disposal		27,654		—		35,350
Allowance for Credit Losses		977,363		1,574,000		—
Inventory Reserves for Obsolescence		4,167,917		4,358,062		290,405
Impairment on Intangible Assets and Equity Investments		30,301,355		2,136,993		—
(Increase) Decrease in Operating Assets
Accounts Receivable		1,240,605		(1,842,715)		(1,316,542)
Accrued Revenues in Excess of Billings		(507,727)		103,358		(269,129)
Utility Improvement Refund/Employee Retention Credit Receivable		208,271		258,434		(466,705)
Inventories		19,287		(2,090,523)		593,608
Manufacturing Vendor Prepayments		31,720		594,870		(494,620)
Prepaid Expenses and Other Assets		271,399		167,837		(95,244)
Increase (Decrease) in Operating Liabilities
Accounts Payable		(1,032,409)		358,883		(843,015)
Accrued Expenses		(1,470,691)		745,904		251,231
Unearned Revenue		107,062		(10,225)		1,268
Income and Other Taxes Payable		(38,564)		(168,270)		94,755

Net Cash Flows Used in Operating Activities		(23,739,372)		(26,277,824)		(24,521,082)

Cash Flows Used in Investing Activities
Purchases of Fixed Assets		(1,358,991)		(5,323,483)		(1,723,622)
Investments in Patents and Trademarks		(560,958)		(632,483)		(499,031)
Investments in Licenses		(1,000,000)		(10,500,000)		(16,523,163)
Business Acquisition, net of cash acquired		—		—		(2,300,000)
Investments in Software Development		—		(125,000)		(125,000)
Investment in Atomistic		—		(2,500,000)		—
Investments in Other Assets		—		(200,000)		—

Net Cash Flows Used in Investing Activities		(2,919,949)		(19,280,966)		(21,170,816)

Cash Flows Provided by (Used in) Financing Activities
Proceeds from Quanta Securities Purchase Agreement		10,000,000
Proceeds from Exercise of Stock Options		110,760		21,196		57,712
Proceeds from ATM Program, Net		8,179,475		—		—
Purchases of Treasury Stock		—		(470,757)		(2,005,744)

Net Cash Flows Provided by (Used in) Financing Activities		18,290,235		(449,561)		(1,948,032)

Net Decrease in Cash and Cash Equivalents		(8,369,086)		(46,008,351)		(47,639,930)
Cash and Cash Equivalents - Beginning of Period		26,555,592		72,563,943		120,203,873

Cash and Cash Equivalents - End of Period	$	18,186,506	$	26,555,592	$	72,563,943

Supplemental Disclosures
Non-Cash Investment in Licenses		—		1,000,000		11,500,000
Investment in Atomistic - Equity issued		181,675		3,284,126		—
Depreciation and Amortization included in Research and Development Expense		201,070		201,147		—
Stock-Based Compensation Expense - Expensed less Previously Issued		—		92,454		61,824

Table of Contents

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

CONSOLIDATED STATEMENTS OF OPERATIONS

Table of Contents


	For Years Ended December 31,

	2025		2024		2023
Sales:
Sales of Products	$	4,676,632	$	4,487,202	$	10,760,352
Sales of Engineering Services		1,603,979		1,267,354		1,368,787

Total Sales		6,280,611		5,754,556		12,129,139

Cost of Sales:
Cost of Sales - Products Sold		5,490,103		6,007,200		8,839,279
Cost of Sales - Inventory Reserve for Obsolescence		503,400		4,167,917		4,358,062
Cost of Sales - Depreciation and Amortization		677,931		734,456		886,117
Cost of Sales - Engineering Services		671,571		444,653		680,411

Total Cost of Sales		7,343,005		11,354,226		14,763,869

Gross Loss		(1,062,394)		(5,599,670)		(2,634,730)

Operating Expenses:
Research and Development		12,625,556		9,626,452		12,339,534
Selling and Marketing		5,478,596		8,191,427		12,711,800
General and Administrative		11,631,818		17,230,293		18,592,185
Depreciation and Amortization		1,602,632		2,994,643		3,844,428
Loss on Goodwill and Other Intangible Asset Impairment		—		—		2,136,993
Loss on Fixed Asset Disposal		106,898		27,654		—
Impairment on Intangible Asset and Equity Investment		—		30,301,355		—
Impairment of Patents and Trademarks		—		—		41,869

Total Operating Expenses		31,445,500		68,371,824		49,666,809

Loss From Operations		(32,507,894)		(73,971,494)

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