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Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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For the Quarterly Period Ended September 30, 2025

OR

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

​

Commission file number 001-35955

VUZIX CORPORATION

(Exact name of registrant as specified in its charter)

Delaware |  | 04-3392453
State or other jurisdiction of incorporation or organization |  | (I.R.S. Employer Identification No.)

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25 Hendrix Road, Suite A West Henrietta, New York |  | 14586
(Address of principal executive offices) |  | (Zip Code)

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Registrant’s telephone number, including area code: (585) 359-5900

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

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

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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 filing requirements for the past 90 days. Yes ☒ 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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ 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 an emerging growth company. See 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 | ☒
Smaller reporting company | ☒ | Emerging growth company | ☐ |  |

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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 is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 13, 2025, there were 80,126,486 shares of the registrant’s common stock outstanding.

​

​

​

​

Table of Contents

Vuzix Corporation

INDEX

​

|  | Page No.
Part I – Financial Information | 3
|  | ​
Item 1. | Consolidated Financial Statements (Unaudited): | 3
​ | Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 | 3
|  | ​
​ | Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Equity for the Three and Nine Months Ended September 30, 2025 and 2024 | 4
​ | Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2025 and 2024 | 5
​ | Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 | 6
​ | Notes to the Unaudited Consolidated Financial Statements | 7
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 21
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 33
Item 4. | Controls and Procedures | 33
Part II – Other Information | 34
Item 1. | Legal Proceedings | 34
Item 1A. | Risk Factors | 34
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 34
Item 3. | Defaults Upon Senior Securities | 34
Item 4. | Mine Safety Disclosure | 34
Item 5. | Other Information | 34
Item 6. | Exhibits | 35
Signatures | ​ | 36

​

​

​

2

Table of Contents

Part 1: FINANCIAL INFORMATION

Item 1: Consolidated Financial Statements

VUZIX CORPORATION

CONSOLIDATED BALANCE SHEETS

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | (Unaudited) |  | ​ | ​
​ | ​ | September 30, | ​ | December 31,
​ |  | 2025 |  | 2024
ASSETS |  | ​ |  |  | ​ |
Current Assets |  | ​ |  |  | ​ |
Cash and Cash Equivalents | ​ | $ | 22,608,529 | ​ | $ | 18,186,506
Accounts Receivable, net of allowance for credit losses of $46,000 at September 30, 2025 and $89,000 at December 31, 2024 | ​ |  | 1,025,534 | ​ |  | 1,609,718
Accrued Revenues in Excess of Billings | ​ |  | 430,089 | ​ |  | 673,498
Inventories, Net | ​ |  | 2,895,409 | ​ |  | 4,813,226
Manufacturing Vendor Prepayments | ​ |  | 155,813 | ​ |  | 372,081
Prepaid Expenses and Other Assets | ​ |  | 1,114,743 | ​ |  | 1,067,461
​ | ​ | ​ | ​ | ​ | ​ | ​
Total Current Assets | ​ |  | 28,230,117 | ​ |  | 26,722,490
​ | ​ | ​ | ​ | ​ | ​ | ​
Long-Term Assets | ​ |  |  | ​ |  |
Fixed Assets, Net | ​ |  | 8,495,806 | ​ |  | 7,584,284
Operating Lease Right-of-Use Assets, Net | ​ | ​ | 1,134,011 | ​ | ​ | 494,236
Patents and Trademarks, Net | ​ |  | 3,233,627 | ​ |  | 2,998,760
Technology Licenses, Net | ​ |  | 610,240 | ​ |  | 761,043
Other Assets, Net | ​ |  | 769,441 | ​ |  | 844,445
​ | ​ | ​ | ​ | ​ | ​ | ​
Total Assets | ​ | $ | 42,473,242 | ​ | $ | 39,405,258
​ | ​ | ​ | ​ | ​ | ​ | ​
LIABILITIES, MEZZANINE EQUITY, AND STOCKHOLDERS' EQUITY | ​ |  | ​ | ​ |  |
Current Liabilities | ​ |  |  | ​ |  |
Accounts Payable | ​ | $ | 1,071,078 | ​ | $ | 538,221
Unearned Revenue | ​ |  | 100,785 | ​ |  | 125,901
Accrued Expenses | ​ |  | 2,229,842 | ​ |  | 945,752
Other Taxes Payable | ​ |  | 52,055 | ​ |  | 8,163
Operating Lease Right-of-Use Liabilities | ​ | ​ | 500,911 | ​ | ​ | 494,236
​ | ​ | ​ | ​ | ​ | ​ | ​
Total Current Liabilities | ​ |  | 3,954,671 | ​ |  | 2,112,273
​ | ​ | ​ | ​ | ​ | ​ | ​
Long-Term Liabilities | ​ | ​ | ​ | ​ | ​ | ​
Operating Lease Right-of-Use Liability | ​ | ​ | 633,100 | ​ | ​ | —
​ | ​ | ​ | ​ | ​ | ​ | ​
Total Long-Term Liabilities | ​ | ​ | 633,100 | ​ | ​ | —
​ | ​ | ​ | ​ | ​ | ​ | ​
Total Liabilities | ​ |  | 4,587,771 | ​ |  | 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 September 30, 2025 and December 31, 2024 | ​ |  | 10,000,000 | ​ |  | —
​ | ​ | ​ | ​ | ​ | ​ | ​
Stockholders' Equity | ​ |  |  | ​ |  |
Common Stock - $0.001 Par Value, 200,000,000 shares authorized; 79,986,789 shares issued and 79,407,117 shares outstanding as of September 30, 2025 and 100,000,000 shares authorized; 76,553,694 shares issued and 75,974,022 shares outstanding as of December 31, 2024 | ​ |  | 79,987 | ​ |  | 76,553
Additional Paid-in Capital | ​ |  | 421,463,041 | ​ |  | 407,215,883
Accumulated Deficit | ​ |  | (391,181,056) | ​ |  | (367,522,950)
Treasury Stock, at cost, 579,672 shares as of September 30, 2025 and December 31, 2024 | ​ |  | (2,476,501) | ​ |  | (2,476,501)
​ | ​ | ​ | ​ | ​ | ​ | ​
Total Stockholders' Equity | ​ |  | 27,885,471 | ​ |  | 37,292,985
​ | ​ | ​ | ​ | ​ | ​ | ​
Total Liabilities, Mezzanine Equity, and Stockholders' Equity | ​ | $ | 42,473,242 | ​ | $ | 39,405,258

​

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

​

​

​

3

Table of Contents

VUZIX CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY

(Unaudited)

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Series B Preferred Stock | ​ | Common Stock | ​ | Additional | ​ | Accumulated | ​ | Treasury Stock | ​ | ​ | ​
​ |  | Shares |  | Amount |  | Shares |  | Amount |  | Paid-In Capital |  | Deficit |  | Shares |  | Amount |  | Total
Balance - July 1, 2025 | ​ | 189,717 | ​ | $ | 5,000,000 |  | 77,921,364 | ​ | $ | 77,921 | ​ | $ | 415,089,886 | ​ | $ | (383,826,831) | ​ | (579,672) | ​ | $ | (2,476,501) | ​ | $ | 28,864,475
Stock-Based Compensation Expense |  | — | ​ |  | — |  | 121,055 | ​ |  | 122 | ​ |  | 769,638 | ​ |  | — |  | — | ​ |  | — | ​ |  | 769,760
Stock Option Exercises |  | — | ​ |  | — |  | 41,250 | ​ |  | 41 | ​ |  | 54,821 | ​ |  | — |  | — | ​ |  | — | ​ |  | 54,863
Proceeds from ATM Program, Net |  | — | ​ |  | — |  | 1,903,120 | ​ |  | 1,903 | ​ |  | 5,548,696 | ​ |  | — |  | — | ​ |  | — | ​ |  | 5,550,599
Preferred Stock Issued under Quanta Securities Purchase Agreement |  | 230,242 | ​ |  | 5,000,000 |  | — | ​ |  | — | ​ |  | — | ​ |  | — |  | — | ​ |  | — | ​ |  | —
Net Loss |  | — | ​ |  | — |  | — | ​ |  | — | ​ |  | — | ​ |  | (7,354,225) |  | — | ​ |  | — | ​ |  | (7,354,225)
Balance - September 30, 2025 |  | 419,959 | ​ | $ | 10,000,000 |  | 79,986,789 | ​ | $ | 79,987 | ​ | $ | 421,463,041 | ​ | $ | (391,181,056) |  | (579,672) | ​ | $ | (2,476,501) | ​ | $ | 27,885,471

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Series B Preferred Stock | ​ | Common Stock | ​ | Additional | ​ | Accumulated | ​ | Treasury Stock | ​ | ​ | ​
​ |  | Shares |  | Amount |  | Shares |  | Amount |  | Paid-In Capital |  | Deficit |  | Shares |  | Amount |  | Total
Balance - January 1, 2025 | ​ | — | ​ | $ | — |  | 76,553,694 | ​ | $ | 76,553 | ​ | $ | 407,215,883 | ​ | $ | (367,522,950) | ​ | (579,672) | ​ | $ | (2,476,501) | ​ | $ | 37,292,985
Stock-Based Compensation Expense |  | — | ​ |  | — |  | 121,055 | ​ |  | 122 | ​ |  | 4,503,178 | ​ |  | — |  | — | ​ |  | — | ​ |  | 4,503,300
Stock Option Exercises |  | — | ​ |  | — |  | 105,185 | ​ |  | 105 | ​ |  | 106,738 | ​ |  | — |  | — | ​ |  | — | ​ |  | 106,843
Proceeds from ATM Program, Net |  | — | ​ |  | — |  | 3,206,855 | ​ |  | 3,206 | ​ |  | 9,637,242 | ​ |  | — |  | — | ​ |  | — | ​ |  | 9,640,449
Preferred Stock Issued under Quanta Securities Purchase Agreement |  | 419,959 | ​ |  | 10,000,000 |  | — | ​ |  | — | ​ |  | — | ​ |  | — |  | — | ​ |  | — | ​ |  | —
Net Loss |  | — | ​ |  | — |  | — | ​ |  | — | ​ |  | — | ​ |  | (23,658,106) |  | — | ​ |  | — | ​ |  | (23,658,106)
Balance - September 30, 2025 |  | 419,959 | ​ | $ | 10,000,000 |  | 79,986,789 | ​ | $ | 79,987 | ​ | $ | 421,463,041 | ​ | $ | (391,181,056) |  | (579,672) | ​ | $ | (2,476,501) | ​ | $ | 27,885,471

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Series B Preferred Stock | ​ | Common Stock | ​ | Additional | ​ | Accumulated | ​ | Treasury Stock | ​ | ​ | ​
​ |  | Shares |  | Amount |  | Shares |  | Amount |  | Paid-In Capital |  | Deficit |  | Shares |  | Amount |  | Total
Balance - July 1, 2024 | ​ | — | ​ | $ | — |  | 66,034,769 | ​ | $ | 66,034 | ​ | $ | 382,462,147 | ​ | $ | (344,644,568) | ​ | (579,672) | ​ | $ | (2,476,501) | ​ | $ | 35,407,112
Stock-Based Compensation Expense |  | — | ​ |  | — |  | 293,393 | ​ |  | 293 | ​ |  | 3,185,684 | ​ |  | — |  | — | ​ |  | — | ​ |  | 3,185,977
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
Net Loss |  | — | ​ |  | — | ​ | — | ​ |  | — | ​ |  | — | ​ |  | (9,222,279) |  | — | ​ |  | — | ​ |  | (9,222,279)
Balance - September 30, 2024 |  | — | ​ | $ | — |  | 74,195,157 | ​ | $ | 74,194 | ​ | $ | 395,821,639 | ​ | $ | (353,866,847) |  | (579,672) | ​ | $ | (2,476,501) | ​ | $ | 39,552,485

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Series B Preferred Stock | ​ | Common Stock | ​ | Additional | ​ | Accumulated | ​ | Treasury Stock | ​ | ​ | ​
​ |  | Shares |  | Amount |  | Shares |  | Amount |  | Paid-In Capital |  | Deficit |  | Shares |  | Amount |  | Total
Balance - January 1, 2024 | ​ | — | ​ | $ | — |  | 65,304,780 | ​ | $ | 65,304 | ​ | $ | 377,189,847 | ​ | $ | (293,984,793) | ​ | (579,672) | ​ | $ | (2,476,501) | ​ | $ | 80,793,857
Stock-Based Compensation Expense | ​ | ​ | ​ | ​ | ​ | ​ | 1,022,398 | ​ | ​ | 1,022 | ​ | ​ | 8,457,983 | ​ | ​ | — | ​ | — | ​ | ​ | — | ​ | ​ | 8,459,005
Stock Option Exercises |  | — | ​ |  | — |  | 984 | ​ |  | 1 | ​ |  | 1 | ​ |  | — |  | — | ​ |  | — | ​ |  | 2
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
Net Loss |  | — | ​ |  | — |  | — | ​ |  | — | ​ |  | — | ​ |  | (59,882,054) |  | — | ​ |  | — | ​ |  | (59,882,054)
Balance - September 30, 2024 |  | — | ​ | $ | — |  | 74,195,157 | ​ | $ | 74,194 | ​ | $ | 395,821,639 | ​ | $ | (353,866,847) |  | (579,672) | ​ | $ | (2,476,501) | ​ | $ | 39,552,485

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

​

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4

Table of Contents

VUZIX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended September 30, | ​ | Nine Months Ended September 30,
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2025 |  | 2024 |  | 2025 |  | 2024
Sales: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Sales of Products | ​ | $ | 896,274 | ​ | $ | 988,328 | ​ | $ | 3,265,657 | ​ | $ | 3,418,665
Sales of Engineering Services | ​ |  | 264,673 | ​ |  | 397,386 | ​ |  | 771,941 | ​ |  | 1,063,488
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total Sales | ​ |  | 1,160,947 | ​ |  | 1,385,714 | ​ |  | 4,037,598 | ​ |  | 4,482,153
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cost of Sales: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Cost of Sales - Products Sold | ​ |  | 1,240,310 | ​ |  | 1,395,939 | ​ |  | 4,468,385 | ​ |  | 4,270,983
Cost of Sales - Depreciation and Amortization | ​ | ​ | 180,927 | ​ | ​ | 181,807 | ​ | ​ | 525,144 | ​ | ​ | 545,422
Cost of Sales - Engineering Services | ​ |  | 151,017 | ​ |  | 67,816 | ​ |  | 481,861 | ​ |  | 311,993
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total Cost of Sales | ​ |  | 1,572,254 | ​ |  | 1,645,562 | ​ |  | 5,475,390 | ​ |  | 5,128,398
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Gross Loss | ​ |  | (411,307) | ​ |  | (259,848) | ​ |  | (1,437,792) | ​ |  | (646,245)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operating Expenses: | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  |
Research and Development | ​ |  | 2,935,971 | ​ |  | 2,333,798 | ​ |  | 8,112,684 | ​ |  | 7,406,913
Selling and Marketing | ​ |  | 1,147,194 | ​ |  | 1,766,246 | ​ |  | 4,037,649 | ​ |  | 6,245,411
General and Administrative | ​ |  | 2,575,087 | ​ |  | 4,347,013 | ​ |  | 9,292,659 | ​ |  | 12,941,336
Depreciation and Amortization | ​ |  | 424,335 | ​ |  | 410,697 | ​ |  | 1,242,828 | ​ |  | 2,569,413
Loss on Fixed Asset Disposal | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | 11,277
Impairment on Intangible Asset and Equity Investment | ​ |  | — | ​ |  | 181,676 | ​ |  | — | ​ |  | 30,301,355
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total Operating Expenses | ​ |  | 7,082,587 | ​ |  | 9,039,430 | ​ |  | 22,685,820 | ​ |  | 59,475,705
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loss From Operations | ​ |  | (7,493,894) | ​ |  | (9,299,278) | ​ |  | (24,123,612) | ​ |  | (60,121,950)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other Income (Expense): | ​ |  |  | ​ |  |  | ​ |  |  | ​ |  | ​
Investment Income | ​ |  | 156,760 | ​ |  | 95,234 | ​ |  | 460,998 | ​ |  | 453,657
Other Taxes | ​ |  | — | ​ |  | (44,706) | ​ |  | 22,372 | ​ |  | (62,547)
Foreign Exchange Gain (Loss) | ​ |  | (17,091) | ​ |  | 26,471 | ​ |  | (17,864) | ​ |  | (151,214)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total Other Income, Net | ​ |  | 139,669 | ​ |  | 76,999 | ​ |  | 465,506 | ​ |  | 239,896
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loss Before Provision for Income Taxes | ​ |  | (7,354,225) | ​ |  | (9,222,279) | ​ |  | (23,658,106) | ​ |  | (59,882,054)
Provision for Income Taxes | ​ |  | — | ​ |  | — | ​ |  | — | ​ |  | —
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net Loss | ​ |  | (7,354,225) | ​ |  | (9,222,279) | ​ |  | (23,658,106) | ​ |  | (59,882,054)
Preferred Stock Dividends | ​ |  | (21,177) | ​ |  | — | ​ |  | (24,670) | ​ |  | —
Loss Attributable to Common Shareholders | ​ | $ | (7,375,402) | ​ | $ | (9,222,279) | ​ | $ | (23,682,776) | ​ | $ | (59,882,054)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Basic and Diluted Net Loss per Common Share | ​ | $ | (0.09) | ​ | $ | (0.14) | ​ | $ | (0.31) | ​ | $ | (0.90)
Weighted-average Shares Outstanding - Basic and Diluted | ​ |  | 77,478,532 | ​ |  | 67,842,379 | ​ |  | 76,733,716 | ​ |  | 66,325,723

​

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

​

5

Table of Contents

VUZIX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended September 30,
​ |  | 2025 |  | 2024
​ | ​ | ​ | ​ | ​ | ​ | ​
Cash Flows Used In Operating Activities |  | ​ |  |  | ​ |
Net Loss | ​ | $ | (23,658,106) | ​ | $ | (59,882,054)
Non-Cash Adjustments | ​ |  |  | ​ |  |
Depreciation and Amortization | ​ |  | 2,342,483 | ​ |  | 3,265,636
Stock-Based Compensation | ​ |  | 4,496,088 | ​ |  | 8,459,005
Loss on Fixed Asset Disposal | ​ |  | — | ​ |  | 11,277
Allowance for Credit Losses | ​ |  | — | ​ |  | 540,000
Impairment on Intangible Assets and Equity Investments | ​ | ​ | — | ​ | ​ | 30,301,355
(Increase) Decrease in Operating Assets | ​ |  |  | ​ |  |
Accounts Receivable | ​ |  | 584,184 | ​ |  | 610,212
Accrued Revenues in Excess of Billings | ​ |  | 243,409 | ​ |  | (322,461)
Utility Improvement Refund | ​ | ​ | — | ​ | ​ | 208,271
Inventories | ​ |  | 1,917,817 | ​ |  | (825,303)
Manufacturing Vendor Prepayments | ​ |  | 216,268 | ​ |  | 95,133
Prepaid Expenses and Other Assets | ​ |  | (47,282) | ​ |  | 199,343
Increase (Decrease) in Operating Liabilities | ​ |  |  | ​ |  |
Accounts Payable | ​ |  | 32,857 | ​ |  | (911,358)
Accrued Expenses | ​ |  | 618,672 | ​ |  | (1,700,548)
Unearned Revenue | ​ |  | (25,116) | ​ |  | 149,044
Income and Other Taxes Payable | ​ |  | 43,891 | ​ |  | 85,251
​ | ​ | ​ | ​ | ​ | ​ | ​
Net Cash Flows Used in Operating Activities | ​ |  | (13,234,835) | ​ |  | (19,717,197)
​ | ​ | ​ | ​ | ​ | ​ | ​
Cash Flows Used in Investing Activities | ​ |  |  | ​ |  | ​
Purchases of Fixed Assets | ​ |  | (1,658,820) | ​ |  | (1,129,120)
Investments in Patents and Trademarks | ​ |  | (381,614) | ​ |  | (437,609)
Investments in Licenses | ​ |  | — | ​ |  | (1,000,000)
Investments in Other Assets | ​ |  | (50,000) | ​ |  | —
​ | ​ | ​ | ​ | ​ | ​ | ​
Net Cash Flows Used in Investing Activities | ​ |  | (2,090,434) | ​ |  | (2,566,729)
​ | ​ | ​ | ​ | ​ | ​ | ​
Cash Flows Provided by Financing Activities | ​ |  |  | ​ |  |
Proceeds from Sale of Preferred and Common Stock to Quanta | ​ | ​ | 10,000,000 | ​ | ​ | 10,000,000
Proceeds from Exercise of Stock Options | ​ |  | 106,843 | ​ |  | —
Proceeds from ATM Program, Net | ​ |  | 9,640,449 | ​ |  | —
​ | ​ | ​ | ​ | ​ | ​ | ​
Net Cash Flows Provided by Financing Activities | ​ |  | 19,747,292 | ​ |  | 10,000,000
​ | ​ | ​ | ​ | ​ | ​ | ​
Net Increase (Decrease) in Cash and Cash Equivalents | ​ |  | 4,422,023 | ​ |  | (12,283,926)
Cash and Cash Equivalents - Beginning of Period | ​ |  | 18,186,506 | ​ |  | 26,555,592
​ | ​ | ​ | ​ | ​ | ​ | ​
Cash and Cash Equivalents - End of Period | ​ | $ | 22,608,529 | ​ | $ | 14,271,666
​ | ​ | ​ | ​ | ​ | ​ | ​
Supplemental Disclosures | ​ |  |  | ​ |  | ​
Depreciation and Amortization included in Research and Development Expense | ​ | $ | 574,511 | ​ | $ | 150,801
Purchases of Fixed Assets included in Accounts Payable and Accrued Expenses | ​ | ​ | 1,165,418 | ​ | ​ | —

​

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

​

​

6

Table of Contents

VUZIX CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements of Vuzix Corporation (“the Company” or “Vuzix”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, the unaudited consolidated financial statements do not include all information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. The results of the Company’s operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the results of the Company’s operations for the full fiscal year or any other period.

The accompanying interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto of the Company as of and for the year ended December 31, 2024, as reported in the Company’s Annual Report on Form 10-K filed with the SEC on March 13, 2025.

​

Customer Concentrations

For the three months ended September 30, 2025, four customers represented 19%, 17%, 11%, and 11%, of total product revenue and four customers represented 39%, 32%, 16%, and 12%, of engineering services revenue. For the three months ended September 30, 2024, two customers represented 10%, each, of total product revenue and three customers represented 50%, 27%, and 19% of engineering services revenue.

For the nine months ended September 30, 2025, one customer represented 17% of total product revenue and four customers represented 29%, 25%, 23%, and 11% of engineering services revenue. For the nine months ended September 30, 2024, one customer represented 11% of total product revenue and two customers represented 71% and 17% of engineering services revenue.

As of September 30, 2025, four customers represented 25%, 18%, 16%, and 10% of accounts receivable. As of December 31, 2024, one customer represented 76% of accounts receivable.

Fair Value of Financial Instruments

​

The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, accounts payable, unearned revenue, accrued expenses, and income and other taxes payable. As of the consolidated balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented due to the short maturities of these instruments.

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 as a going concern.

​

The 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, management 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

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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.

​

Additional disclosure is required when there is substantial doubt about business continuity or substantial doubt that has not been alleviated by management’s mitigation plans. As required under applicable accounting standards, management has concluded that doubt may exist surrounding the Company's ability to meet its obligations within one year of the release of the financial statements.

​

The Company incurred net losses for the nine months ended September 30, 2025 of $23,658,106; $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 $13,234,835 for the nine months ended September 30, 2025; $23,739,372 for the year ended December 31, 2024; and $26,277,824 for the year ended December 31, 2023. As of September 30, 2025, the Company had an accumulated deficit of $391,181,056. The Company’s cash outflows for investing activities were $2,090,434 for the nine months ended September 30, 2025; $2,919,949 for the year ended December 31, 2024; and $19,280,966 for the year ended December 31, 2023.

​

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, 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.

​

These historical financial factors initially raise doubt about the Company’s ability to continue as a going concern. The Company’s 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 operational improvements and the curtailment of certain development programs, both of which the Company expects will preserve cash.

​

Management’s plans concerning these matters and managing our liquidity include, among other things:

| ● | Reductions in our cash annual operating expenses across all operating areas, including in the areas of Research and Development, Sales and Marketing and General and Administrative;

| ● | Delaying or curtailing discretionary and non-essential capital expenditures not related to near-term product and manufacturing needs and reducing other investing activities for the remainder of our 2025 and 2026 fiscal years;

| ● | The expected margin contribution upon the commencement of volume manufacturing and sales of waveguides from our new waveguide manufacturing plant, particularly to OEM customers; and

| ● | Continued pursuit of licensing and strategic opportunities around our waveguide technologies with potential OEMs, which would include the receipt of upfront licensing fees and on-going supply agreements.

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 $20,363,120, net of broker expenses, including $5,550,599 and $9,640,449, respectively, in the three and nine months ended September 30, 2025, 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.

​

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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 doubt of our ability to continue as a going concern has been alleviated.

​

Use of Estimates

​

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at year-end and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Segment Data, Geographic Information and Significant Customers

Operating segments are defined as components of an entity for which separate financial information is available and regularly reviewed by the chief operating decision maker (“CODM”). The Company’s CODM is its Chief Executive Officer. The Company is not organized by market and is managed and operated as one business. A single management team that reports to the CODM comprehensively manages the entire business. The Company does not operate any material separate lines of business or separate business entities and therefore manages its operations as a single operating segment and, therefore, a single reportable segment. Our CODM evaluates performance and makes operating decisions about allocating resources based on financial data presented on a consolidated basis, accompanied by information about revenue disaggregated by geographic region. Because our CODM evaluates financial performance on a consolidated basis, we have determined that we have a single operating segment composed of the consolidated financial results of Vuzix Corporation.

​

The CODM reviews financial information, presented on a consolidated basis, focusing on significant expenses and net loss/income for purposes of making operating decisions, allocating resources, and evaluating financial performance. The measure used by our CODM to assess performance and make operating decisions is net loss as reported on our consolidated statements of operations. Net loss is used by our CODM to identify underlying trends in the performance of our business and make comparisons with the financial performance of our competitors. The measure of segment assets is reported on the balance sheet as total consolidated assets. Our CODM also reviews total assets, as reported on our consolidated balance sheets, and purchases of fixed assets, as reported on our consolidated statements of cash flows.

​

Significant expenses regularly provided to and reviewed by the CODM are Cost of Sales, Research and Development, Total Compensation, General and Administrative, and Intangible Asset and Equity Investment Impairment. These segment items for the three and nine months ended September 30, 2025 and 2024 are:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended September 30, | ​ | Nine Months Ended September 30,
​ |  | 2025 |  | 2024 |  | 2025 |  | 2024
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Sales | ​ | $ | 1,160,947 | ​ | $ | 1,385,714 | ​ | $ | 4,037,598 | ​ | $ | 4,482,153
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Less expenses: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cost of Sales, excluding compensation | ​ | ​ | (1,161,854) | ​ | ​ | (1,200,502) | ​ | ​ | (4,219,187) | ​ | ​ | (3,813,394)
Research and Development, excluding compensation | ​ | ​ | (1,475,858) | ​ | ​ | (701,501) | ​ | ​ | (3,870,517) | ​ | ​ | (2,240,152)
General and Administrative, excluding compensation | ​ | ​ | (1,301,298) | ​ | ​ | (1,668,433) | ​ | ​ | (4,417,010) | ​ | ​ | (4,723,130)
Total Compensation | ​ | ​ | (4,043,040) | ​ | ​ | (5,892,772) | ​ | ​ | (13,212,176) | ​ | ​ | (18,619,455)
Intangible Asset and Equity Investment Impairment | ​ | ​ | — | ​ | ​ | (181,676) | ​ | ​ | — | ​ | ​ | (30,301,355)
Other segment items | ​ | ​ | (533,122) | ​ | ​ | (963,109) | ​ | ​ | (1,976,814) | ​ | ​ | (4,666,721)
​ | ​ | ​ | (8,515,172) | ​ | ​ | (10,607,993) | ​ | ​ | (27,695,704) | ​ | ​ | (64,364,207)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net Loss | ​ | $ | (7,354,225) | ​ | $ | (9,222,279) | ​ | $ | (23,658,106) | ​ | $ | (59,882,054)

​

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Other Segment Items:

| - | Selling and Marketing, excluding compensation expense;

| - | Depreciation and Amortization, not included in Cost of Sales; and

| - | Other Income.

Geographic Information

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended September 30,
​ | ​ | 2025 | ​ | ​ | ​ | ​ | 2024 | ​
​ |  | Revenue |  | % of Total |  | ​ | ​ |  | Revenue |  | % of Total |
U.S. | ​ | $ | 1,001,990 |  | 86 | % | ​ | U.S. | ​ | $ | 830,264 |  | 60 | %
Others | ​ |  | 158,957 |  | 14 | % | ​ | Others | ​ |  | 555,450 |  | 40 | %
Total Revenues | ​ | $ | 1,160,947 |  | 100 | % | ​ | Total Revenues | ​ | $ | 1,385,714 |  | 100 | %

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended September 30,
​ | ​ | 2025 | ​ | ​ | ​ | ​ | 2024 | ​
​ |  | Revenue |  | % of Total |  | ​ | ​ |  | Revenue |  | % of Total |
U.S. | ​ | $ | 2,470,637 |  | 61 | % | ​ | U.S. | ​ | $ | 2,234,932 |  | 50 | %
Netherlands | ​ |  | 574,023 |  | 14 | % | ​ | Poland | ​ |  | 1,005,280 |  | 22 | %
Others | ​ |  | 992,938 |  | 25 | % | ​ | Others | ​ |  | 1,241,941 |  | 28 | %
Total Revenues | ​ | $ | 4,037,598 |  | 100 | % | ​ | Total Revenues | ​ | $ | 4,482,153 |  | 100 | %

​

All long-lived assets are located in the U.S.

Recent Accounting Pronouncements

In December 2023, the FASB released Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which amends income tax disclosure requirements to enhance the transparency and decision usefulness for users of the consolidated financial statements. The standard will be effective for the Company beginning with its annual financial statements for the fiscal year ending December 31, 2025. The Company is currently evaluating the impact of this standard, if any, on its financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income (Topic 220): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires public entities to provide disaggregated disclosures of certain expense captions presented on the face of the income statement into specific categories within the notes to the consolidated financial statements. ASU 2024-03 is effective for the Company’s annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The ASU may be applied either on a prospective or retrospective basis. The Company is currently evaluating the impact of adoption of ASU 2024-03 on its financial statements and related disclosures.

In July 2024, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which amends ASC 326-20 to provide a practical expedient (for all entities) and an accounting policy election (for all entities, other than public business entities, that elect the practical expedient) related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. The standard is effective for annual reporting periods beginning after December 15, 2025, including interim periods, and allows for early adoption. The Company is currently evaluating the impact on its financial statements and related disclosures.

​

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Note 2 – Revenue Recognition and Contracts with Customers

Disaggregated Revenue

The Company’s total revenue was comprised of two major product lines: Smart Glasses Sales and Engineering Services. The following table summarizes the revenue recognized by major product line:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | Nine Months Ended
​ | ​ | September 30, | ​ | September 30,
​ |  | 2025 |  | 2024 |  | 2025 |  | 2024
Revenues |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Products Sales | ​ | $ | 896,274 | ​ | $ | 988,328 | ​ | $ | 3,265,657 | ​ | $ | 3,418,665
Engineering Services | ​ |  | 264,673 | ​ |  | 397,386 | ​ |  | 771,941 | ​ |  | 1,063,488
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total Revenue | ​ | $ | 1,160,947 | ​ | $ | 1,385,714 | ​ | $ | 4,037,598 | ​ | $ | 4,482,153

​

Significant Judgments

Under Topic 606 “Revenue from Contracts with Customers”, we use judgments that could potentially impact both the timing of our satisfaction of performance obligations and our determination of transaction prices used in determining revenue recognized by major product line. Such judgments include considerations in determining our transaction prices and when our performance obligations are satisfied for our standard product sales. For our Engineering Services, performance obligations are recognized over time using the input method, and the estimated costs to complete each project are considered significant judgments.

Performance Obligations

Revenues from our performance obligations are typically satisfied at a point-in-time for Smart Glasses, Waveguides and Display Engines, and our OEM Products, which are recognized when the customer obtains control and ownership, which is generally upon shipment. The Company considers shipping and handling activities performed to be fulfillment activities and not a separate performance obligation. The Company also records revenue for performance obligations relating to our Engineering Services over time by using the input method measuring progress toward satisfying the performance obligations. Satisfaction of our performance obligations related to our Engineering Services is measured by the Company’s costs incurred as a percentage of total expected costs to project completion, as the inputs of actual costs incurred by the Company are directly correlated with progress toward completing the contract. As such, the Company believes that our methodologies for recognizing revenue over time for our Engineering Services correlate directly with the transfer of control of the underlying assets to our customers.

Our standard product sales include a twelve (12) month assurance-type product warranty. In the case of certain OEM products and waveguide sales, some include a standard product warranty of up to eighteen (18) months to allow distribution channels to offer the end customer a full twelve (12) months of coverage. We offer an extended warranty to customers that extends the standard product warranty on product sales for an additional twelve (12) month period. All revenue related to extended product warranty sales is deferred and recognized over the extended warranty period. Our Engineering Services contracts vary from contract to contract but typically include payment terms of Net 30 days from the date of billing, subject to an agreed upon customer acceptance period.

As of September 30, 2025 and December 31, 2024, there were $62,700 and $109,725, respectively, in outstanding performance obligations remaining for extended warranties.

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The following table presents a summary of the Company’s sales by revenue recognition method as a percentage of total net sales for the three and nine months ended September 30, 2025 and 2024:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Three Months Ended September 30, |  | ​ | Nine Months Ended September 30, | ​
​ | ​ | 2025 |  | 2024 | ​ | ​ | 2025 |  | 2024 |
Point-in-Time |  | 77 | % | 71 | % | ​ | 81 | % | 76 | %
Over Time – Input Method |  | 23 | % | 29 | % | ​ | 19 | % | 24 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total |  | 100 | % | 100 | % | ​ | 100 | % | 100 | %

​

Remaining Performance Obligations

As of September 30, 2025, the Company had $2,044,911 of remaining performance obligations under two current waveguide development projects, including initial product production, which represents the remainder of transaction prices totaling $3,750,000 under these development projects, less revenue recognized under percentage of completion to date. The Company expects to recognize the remaining revenue related to this project based upon expected due dates, in the amounts of 13% in 2025 and 87% across 2026 and 2027. Revenues earned less amounts invoiced at September 30, 2025 and December 31, 2024 totaled $430,089 and $673,498, respectively.

As of September 30, 2024, the Company had $2,161,768 of remaining performance obligations under a current waveguide development project, which represented the remainder of transaction prices totaling $3,500,000 under this development agreement, less revenue recognized under percentage of completion to date.

As of September 30, 2025, the Company had no material outstanding performance obligations related to product sales, other than its standard and extended product warranties.

​

Note 3 – Loss Per Share

Basic loss per share is computed by dividing the loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution. During periods of net loss, all common stock equivalents are excluded from the diluted EPS calculation because they are anti-dilutive. Since the Company reported a net loss for the three and nine months ended September 30, 2025 and 2024, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive. As of September 30, 2025 and 2024, there were 10,664,321 and 10,653,332 common stock share equivalents potentially issuable from the exercise of stock options, vesting of Restricted Stock Units (“RSUs”) and Performance Stock Units (“PSUs”), and the conversion of preferred stock that could dilute basic earnings per share in the future.

​

Note 4 – Inventories, Net

Inventories are stated at the lower of cost and net realizable value, and consisted of the following:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, | ​ | December 31,
​ |  | 2025 |  | 2024
​ | ​ | ​ | ​ | ​ | ​ | ​
Purchased Parts and Components | ​ | $ | 6,551,621 | ​ | $ | 8,615,537
Work-in-Process | ​ |  | 246,222 | ​ |  | 264,715
Finished Goods | ​ |  | 2,422,101 | ​ |  | 3,877,549
Less: Reserve for Obsolescence | ​ |  | (6,324,535) | ​ |  | (7,944,575)
​ | ​ | ​ | ​ | ​ | ​ | ​
Inventories, Net | ​ | $ | 2,895,409 | ​ | $ | 4,813,226

​

​

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During the nine months ended September 30, 2025 and 2024, the Company disposed of $1,307,662 and nil of inventory that was fully provisioned for as obsolete in the previous year.

​

Note 5 – Fixed Assets

Fixed Assets consisted of the following:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, | ​ | December 31,
​ |  | 2025 |  | 2024
Tooling and Manufacturing Equipment | ​ | $ | 11,214,453 | ​ | $ | 8,313,749
Leasehold Improvements | ​ |  | 2,694,715 | ​ |  | 2,840,176
Computers and Purchased Software | ​ |  | 731,702 | ​ |  | 679,139
Furniture and Equipment | ​ |  | 2,478,888 | ​ |  | 2,478,888
​ | ​ |  | 17,119,758 | ​ |  | 14,311,952
Less: Accumulated Depreciation | ​ |  | (8,623,952) | ​ |  | (6,727,668)
Fixed Assets, Net | ​ | $ | 8,495,806 | ​ | $ | 7,584,284

​

As of September 30, 2025 and December 31, 2024, there were $2,381,810 and $4,913,005, respectively, of manufacturing fixed assets that are not yet placed into service and, therefore, are not currently being depreciated.

Total depreciation expense for fixed assets for the three months ended September 30, 2025 and 2024 was $372,241 and $364,771, respectively. Total depreciation expense for fixed assets for the nine months ended September 30, 2025 and 2024 was $1,096,081 and $886,813, respectively.

​

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Note 6 – Patents and Trademarks

The changes in the Company’s Patents and Trademarks for the nine months ended September 30, 2025 and the year ended December 31, 2024, were as follows:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, | ​ | December 31,
​ |  | 2025 |  | 2024
Patents and Trademarks | ​ | $ | 4,668,358 | ​ | $ | 4,286,743
Less: Accumulated Amortization | ​ |  | (1,434,731) | ​ |  | (1,287,983)
Patents and Trademarks, Net | ​ | $ | 3,233,627 | ​ | $ | 2,998,760

​

Total amortization expense for patents and trademarks for the three months ended September 30, 2025 and 2024 was $52,093 and $45,926, respectively. Total amortization expense for patents and trademarks for the nine months ended September 30, 2025 and 2024 was $146,747 and $129,266, respectively.

Note 7 – Technology Licenses, Net

​

The changes in the Company’s Technology Licenses for the nine months ended September 30, 2025 and the year ended December 31, 2024, were as follows:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, | ​ | December 31,
​ |  | 2025 |  | 2024
​ | ​ | ​ | ​ | ​ | ​ | ​
Licenses | ​ | $ | 2,443,356 | ​ | $ | 32,443,356
Write-Offs | ​ |  | — | ​ |  | (30,000,000)
Less: Accumulated Amortization | ​ |  | (1,833,116) | ​ |  | (1,682,313)
Licenses, Net | ​ | $ | 610,240 | ​ | $ | 761,043

​

Total amortization expense related to technology licenses for the three months ended September 30, 2025 and 2024 was $50,269 and $50,267, respectively. Total amortization expense related to technology licenses for the nine months ended September 30, 2025 and 2024 was $150,803 and $1,708,402, respectively.

​

On June 30, 2024, the Company decided to cease further funding of development activities with Atomistic SAS (“Atomistic”) under the license agreement dated December 16, 2022 among the Company, Atomistic, and Atomistic’s two principals (the “License Agreement”). The Company’s decision gave Atomistic the right under the License Agreement to terminate the Granted License (as defined under the License Agreement), which right Atomistic exercised on July 1, 2024. As a result of the termination of the Granted License, the Company determined that the technology license asset, with a net book value as of June 30, 2024 of $24,335,554, had been impaired as the Company no longer held exclusive licensing rights to the technology for its use.

​

Notwithstanding the termination of the Granted License, the Company will be entitled to certain License Royalties (as defined under the License Agreement) from Atomistic if Atomistic licenses the technology that was the subject of the Granted License.

​

​

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Note 8 - Other Assets

The Company’s Other Assets were as follows:

​

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, | ​ | December 31,
​ |  | 2025 |  | 2024
Investments (fair value not readily determinable) | ​ | $ | 650,000 | ​ | $ | 650,000
Additions | ​ | ​ | 50,000 | ​ | ​ | —
Total Investments (at cost) | ​ | ​ | 700,000 | ​ | ​ | 650,000
​ | ​ | ​ | ​ | ​ | ​ | ​
Software Development Costs | ​ | ​ | 1,000,000 | ​ | ​ | 1,000,000
Additions | ​ | ​ | — | ​ | ​ | —
Less: Accumulated Amortization | ​ | ​ | (930,559) | ​ | ​ | (805,555)
Software Development Costs, Net | ​ | ​ | 69,441 | ​ | ​ | 194,445
​ | ​ | ​ | ​ | ​ | ​ | ​
Total Other Assets | ​ | $ | 769,441 | ​ | $ | 844,445

​

The Company has investments in three corporations that are involved in the near-eye display, enterprise software, and micro display markets. All these investments represent small ownership levels ranging from approximately 1% to a maximum of 4%. Two of these companies are private corporations and one is a small public company. During the nine months ended September 30, 2025, the Company invested a further $50,000 in one of those private corporations.

​

Total amortization expense related to all software updates, included in cost of sales, for the three months ended September 30, 2025 and 2024 was $41,668 and $41,666, respectively. Total amortization expense related to all software updates, included in cost of sales, for the nine months ended September 30, 2025 and 2024 was $125,001 and $124,999, respectively.

​

Note 9 – Accrued Expenses

Accrued expenses consisted of the following:

​

​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, | ​ | December 31,
​ |  | 2025 |  | 2024
​ | ​ | ​ | ​ | ​ | ​ | ​
Accrued Wages and Related Costs | ​ | $ | 298,757 | ​ | $ | 417,266
Accrued Professional Services | ​ |  | 176,387 | ​ |  | 240,000
Accrued Warranty Obligations | ​ |  | 46,260 | ​ |  | 46,078
Other Accrued Expenses | ​ |  | 1,708,438 | ​ |  | 242,408
​ | ​ | ​ | ​ | ​ | ​ | ​
Total | ​ | $ | 2,229,842 | ​ | $ | 945,752

​

As of September 30, 2025, Other Accrued Expenses include $1,654,536 of new product development costs and tooling that have been expensed or capitalized, a portion of which will be amortized over future production of a specified number of units when the project is completed. This amortization is expected to commence late in the fourth quarter of 2025.

The Company has warranty obligations in connection with the sale of certain of its products. The warranty period for its products is generally twelve (12) months, unless the customer purchases an extended warranty for an additional twelve (12) months. The costs incurred to provide for these warranty obligations are estimated and recorded as an accrued liability at the time of sale. The Company estimates its future warranty costs based upon product-based historical performance rates and related costs to repair.

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The changes in the Company’s accrued warranty obligations for the nine months ended September 30, 2025, were as follows:

​

​ | ​ | ​ | ​
Accrued Warranty Obligations at December 31, 2024 | ​ | $ | 46,078
Reductions for Settling Warranties | ​ |  | (97,788)
Warranties Issued During Period | ​ |  | 97,970
​ | ​ | ​ | ​
Accrued Warranty Obligations at September 30, 2025 | ​ | $ | 46,260

​

​

Note 10 – Income Taxes

The Company’s effective income tax rate differs from the U.S. statutory rate primarily due to the valuation allowance recorded against deferred tax assets.

​

Note 11 – Mezzanine Equity and Stockholders’ Equity

Preferred Stock

The Board of Directors is authorized to establish and designate different series of preferred stock and to fix and determine their voting powers and other rights and terms. The Company has 5,000,000 authorized shares of preferred stock with a par value of $0.001 as of September 30, 2025 and December 31, 2024. Of this total, 49,626 shares are designated as Series A Preferred Stock and 800,000 shares are designated as Series B Convertible Preferred Stock (“Series B Preferred Stock”). There were nil shares of Series A Preferred Stock issued and outstanding on September 30, 2025 and December 31, 2024, and there were 419,959 and nil shares of Series B Preferred Stock issued and outstanding as of September 30, 2025 and December 31, 2024, respectively.

Each share of Series B Preferred Stock is convertible, at the option of the holder, into ten shares of common stock, subject to adjustment for stock splits, stock dividends, and similar transactions. The Company may, at its option at any time after notice, redeem the Series B Preferred Stock that is outstanding, subject to conversion rights of the holder. The Series B Preferred Stock does not entitle the holders to voting rights, except with respect to certain actions which will require the consent of the holders of 66 2/3% of the outstanding shares of Series B Preferred Stock, or as required by law.

The Series B Preferred Stock entitles the holders to cumulative dividends at the annual rate of 1.5% of the original issuance price, payable quarterly in cash. As of September 30, 2025, total accumulated and unpaid preferred dividends were $24,670. There were no accrued preferred dividends as of December 31, 2024.

Holders of the Series B Preferred Stock will have the right upon the occurrence of certain triggering events that are not all solely within the control of the Company, as defined in the certificate of designation, to require the Company to redeem all or part of their Series B Preferred Stock for cash at a price equal to 100% of the liquidation preference plus accrued but unpaid dividends.

Because the Series B Preferred Stock contains redemption features that are not solely within the control of the Company and may be triggered by events outside the Company’s control, the Series B Preferred Stock is classified outside of permanent equity, in accordance with ASC 480-10-S99-3A (SEC guidance on redeemable securities).

On September 3, 2024, Vuzix entered into a Securities Purchase Agreement (“SPA”) with Quanta Computer Inc. (“Quanta”), for the sale by the Company to Quanta of (i) $10,000,000 of the Company’s common stock, and (ii) up to $10,000,000 of the Company’s newly created Series B Convertible Preferred Stock in two tranches.

​

The second closing under the SPA, for the sale of $5,000,000 of the Company’s Series B Preferred Stock occurred on June 13, 2025, when the Company demonstrated the achievement of milestones required to complete the

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second closing under the SPA resulting in the issuance of 189,717 shares of Series B Preferred Stock at a purchase price of $26.35 per share.

​

The third closing under the SPA, for the sale of $5,000,000 of the Company’s Series B Preferred Stock occurred on September 19, 2025, when the Company demonstrated the achievement of milestones required to complete the third closing under the SPA resulting in the issuance of 230,242 additional shares of Series B Preferred Stock at a purchase price of $21.72 per share.

​

Common Stock

The Company’s authorized common stock consists of 200,000,000 shares, par value of $0.001, an increase from 100,000,000 shares as of December 31, 2024, which increase was effective upon the Company’s filing of an amendment to the Company’s certificate of incorporation with the Secretary of the State of Delaware. There were 79,986,789 shares issued and 79,407,117 shares outstanding as of September 30, 2025 and 76,553,694 shares issued and 75,974,022 shares outstanding as of December 31, 2024.

​

As stated above, on September 3, 2024, Vuzix entered into the SPA with Quanta, for the sale by the Company to Quanta of (i) $10,000,000 of the Company’s common stock, and (ii) up to $10,000,000 of the Company’s newly created Series B Convertible Preferred Stock in two tranches.

​

The first closing under the SPA, for the sale of $10,000,000 of the Company’s common stock at a purchase price of $1.30 per share, occurred on September 13, 2024.

​

ATM Program

The Company filed a Registration Statement on Form S-3 with the SEC 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” (or ATM) offering.

​

During the three months ended September 30, 2025, the Company sold 1,903,120 shares of common stock for gross proceeds of $5,757,883 (average of $3.03 per share) before deducting broker expenses paid by the Company of $207,284 pursuant to the ATM offering. During the nine months ended September 30, 2025, the Company sold 3,206,855 shares of common stock for gross proceeds of $10,000,466 (average of $3.12 per share) under the ATM before deducting broker expenses paid by the Company of $360,017. The Company is using the net proceeds from these sales for general corporate purposes, including working capital.

​

To-date in the fourth quarter of 2025, the Company sold 718,869 shares of common stock for gross proceeds of $2,690,654 (average of $3.74 per share) before deducting broker expenses paid by the Company of $96,864 pursuant to the terms of the ATM offering.

​

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Note 12 – Stock-Based Compensation

A summary of stock option activity related to the Company’s standard employee incentive plan (excluding options awarded under the Long-Term Incentive Plan (“LTIP” – Note 13) for the nine months ended September 30, 2025, is as follows:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Weighted | ​ | Average
​ | ​ | Number of | ​ | Average | ​ | Remaining Life
​ |  | Options |  | Exercise Price |  | (years)
Outstanding at December 31, 2024 |  | 4,609,187 | ​ | $ | 4.25 |  | 7.84
Granted |  | 136,491 | ​ |  | 3.39 |  |
Exercised |  | (116,583) | ​ |  | 1.33 |  |
Expired or Forfeited |  | (637,596) | ​ |  | 6.80 |  |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Outstanding at September 30, 2025 |  | 3,991,499 | ​ | $ | 3.90 |  | 7.18

​

The weighted average remaining contractual term for all options as of September 30, 2025, and December 31, 2024, was 7.18 years and 7.84 years, respectively.

As of September 30, 2025, there were 3,768,658 options that were fully vested and exercisable at a weighted average exercise price of $3.94 per share. The weighted average remaining contractual term of the vested options is 7.10 years.

As of September 30, 2025, there were 222,841 unvested options exercisable at a weighted average exercise price of $3.33 per share. The weighted average remaining contractual term of the unvested options is 8.50 years.

The weighted average fair value of option grants was calculated using the Black-Scholes-Merton option pricing method.

On March 19, 2025, the Company issued 509,571 RSUs and 207,404 PSUs to all employees of the Company, excluding certain members of senior management that were in the Company’s LTIP described in Note 13. The fair market value on the date of award of the RSUs and PSUs was $2.30, resulting in an aggregate fair value of $1,649,041. The fair market value of these awards is being expensed over twenty and a half (20.5) months beginning March 19, 2025. The RSUs typically vest over time at a rate of one-third annually on each December 31st. The PSUs vest upon the achievement of certain revenue and EBITDA targets and, as of September 30, 2025, these targets are considered probable and the associated expense is being amortized. If both the revenue and EBITDA targets are exceeded by 150%, an additional 103,702 PSUs could be issued and vest immediately. The fair market value on the date of award of these bonus awards was $2.30, resulting in an aggregate fair value of $238,515. As of September 30, 2025, these bonus targets are not considered probable and their fair market value is not being amortized in stock-based compensation expense.

On June 17, 2025, the Company issued 297,027 RSUs and 297,027 PSUs to the executives and certain members of senior management of the Company as a replacement for the 5,089,500 stock options that were surrendered under the original LTIP (see Note 13 for additional details). The fair market value on the date of award of the RSUs and PSUs was $3.15, resulting in an aggregate fair value of $1,871,270. The RSUs vest over time at a rate of one-third annually on each December 31st. The PSUs vest upon the achievement of certain revenue and EBITDA targets and, as of September 30, 2025, these targets are considered probable and the associated expense is being amortized. If both the revenue and EBITDA targets are exceeded by 125%, an additional 74,257 PSUs could be issued and vest immediately. The fair market value on the date of award of these bonus awards was $3.15, resulting in an aggregate fair value of $233,910. As of September 30, 2025, these bonus targets are not considered probable and their fair market value is not being amortized in stock-based compensation expense.

On September 3, 2025, the Company issued 150,000 RSUs and 1,000,000 PSUs to its new President of its Enterprise Solutions business unit. The fair market value on the date of award of the RSUs and PSUs was $2.15, resulting in an aggregate fair value of $2,472,500. The RSUs will vest in equal portions quarterly over 12 months. The

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PSUs vest upon the achievement of certain revenue and EBITDA targets of the Company’s Enterprise Solutions business unit by December 31, 2028. As of September 30, 2025, these targets are not considered probable and their fair market value is not being amortized in stock-based compensation expense.

A summary of RSU and PSU activity related to the Company’s standard employee incentive plan and long-term incentive plan, excluding bonus awards, for the nine months ended September 30, 2025, is as follows:

​

​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Weighted Average
Restricted Stock Units | ​ | Number of | ​ | Grant Date
​ |  | Units |  | Fair Value Per Unit
Unvested at December 31, 2024 |  | — | ​ | $ | —
Granted |  | 956,598 | ​ |  | 2.54
Vested |  | — | ​ |  | —
Forfeited |  | — | ​ |  | —
​ | ​ | ​ | ​ | ​ | ​
Unvested at September 30, 2025 |  | 956,598 | ​ | $ | 2.54

​

​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | Weighted Average
Performance Stock Units | ​ | Number of | ​ | Grant Date
​ |  | Units |  | Fair Value Per Unit
Unvested at December 31, 2024 |  | — | ​ | $ | —
Granted |  | 1,504,431 | ​ |  | 2.37
Vested |  | — | ​ |  | —
Forfeited |  | — | ​ |  | —
​ | ​ | ​ | ​ | ​ | ​
Unvested at September 30, 2025 |  | 1,504,431 | ​ | $ | 2.37

​

For the three months ended September 30, 2025 and 2024, the Company recorded total stock-based compensation expense, including stock awards but excluding stock option awards under the Company’s LTIP, of $765,955 and $1,776,684, respectively. For the nine months ended September 30, 2025 and 2024, the Company recorded total stock-based compensation expense, including stock awards but excluding stock option awards under the Company’s LTIP, of $3,311,353 and $4,231,127, respectively.

​

As of September 30, 2025, the Company had $3,870,879 of unrecognized stock compensation expense related to stock options, stock awards, RSAs, and PSUs considered probable, which will be recognized over a weighted average period of 2.0 years.

​

Note 13 – Long-Term Incentive Plan

On March 17, 2021, the Company granted options to purchase a total of 5,784,000 shares of common stock to its officers and certain other members of its management team. The options were granted under the Company’s 2014 Incentive Stock Plan. The options had an exercise price of $19.00, with 375,000 options vesting immediately and the remaining portion vesting upon the achievement of certain equity market capitalization milestones, and revenue and EBITDA operational milestones. As of June 17, 2025, a total of 5,359,500 of these options that were unvested were cancelled after receipt of stockholder approval at the Company’s 2025 Annual Shareholders Meeting for such cancellation coupled with a simultaneous issuance of new RSUs and PSU to those remaining option holders as described in Note 12.

The award exchange was accounted for as a modification under ASC Topic 718, Compensation—Stock Compensation. Under modification accounting compensation cost to be recognized over the revised requisite service period include the unrecognized cost of the original award that was previously deemed probable, the fair value of the new award if the prior award was not deemed probable, as well as any incremental cost, representing the excess of the fair value of the new awards over the fair value of the old award immediately prior to modification. As a result of the

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modification, there was a remaining fair market value of $1,871,276 and this cost will be recognized over the new requisite service period of the replacement awards, which is thirty and half months (30.5) beginning on June 17, 2025.

For the three months ended September 30, 2025 and 2024, the Company recorded non-cash stock-based compensation expense of nil and $1,409,294, respectively, for LTIP options that vested or were probable to vest, prior to their cancellation effective June 16, 2025. For the nine months ended September 30, 2025 and 2024, the Company recorded non-cash stock-based compensation expense of $1,180,356 and $4,227,880, respectively, for LTIP options that vested or were probable to vest, prior to their cancellation effective June 16, 2025. These expenses are presented in the same financial statement line items in the Statements of Operations as the cash-based compensation expenses for the same employees.

​

​

Note 14 – Litigation

We are involved in various lawsuits and claims arising in the ordinary course of business, including actions with respect to intellectual property, employment, and contractual matters. In connection with these matters, we 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 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 requires 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 limited to, past history, scientific and other evidence, and the specifics and status of each 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 effect on our business, financial condition, results of operations, and/or cash flows. With respect to these matters, based upon management’s current knowledge, the Company believes that the amount or range of 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.

​

Note 15 – Right-of-Use Assets and Liabilities

Future lease payments under operating leases as of September 30, 2025, were as follows:

​

​ | ​ | ​ | ​
2025 (Remaining 3 months) | ​ | $ | 140,352
2026 | ​ | ​ | 567,184
2027 | ​ |  | 519,919
Total Future Lease Payments | ​ |  | 1,227,455
Less: Imputed Interest | ​ |  | (93,444)
Total Lease Liability Balance | ​ | $ | 1,134,011

​

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. As a result, the Company recorded an additional Right-of-Use asset and Right-of-Use liability of $1,044,154 on the Consolidated Balance Sheet as of September 23, 2025. These amounts were non-cash in nature and therefore are excluded from the statement of cash flows.

Operating lease costs under the operating leases totaled $284,386 and $177,490 for the three months ended September 30, 2025 and 2024, respectively. Operating lease costs under the operating leases totaled $777,505 and $553,138 for the nine months ended September 30, 2025 and 2024, respectively.

As of September 30, 2025, the weighted average discount rate was 7.1% and the weighted average remaining lease term was 2.2 years.

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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of financial condition and results of operations in conjunction with the financial statements and related notes appearing elsewhere in this quarterly report and in our Annual Report on Form 10-K for the year ended December 31, 2024.

As used in this report, unless otherwise indicated, the terms “Company,” “Vuzix”, “management,” “we,” “our,” and “us” refer to Vuzix Corporation.

Critical Accounting Policies and Significant Developments and Estimates

The discussion and analysis of our financial condition and results of operations is based upon our unaudited consolidated financial statements and related notes appearing elsewhere in this quarterly report. The preparation of these statements in conformity with GAAP 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 financial statements, including those related to revenue recognition, allowance for credit losses, inventories, warranty reserves, product warranty, carrying value of long-lived assets, fair value measurement of financial instruments, valuation of stock 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 future events and their impact cannot be determined with certainty, the actual results will inevitably 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. Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using such necessary estimates.

Management believes certain factors and trends are important in understanding our financial performance. The critical accounting policies, judgments and estimates we believe have the most significant effect on our consolidated financial statements are:

| ● | Valuation of inventories;

| ● | Going concern;

| ● | Investments in equity securities;

| ● | Carrying value of long-lived assets and other intangible assets;

| ● | Software development costs;

| ● | Revenue recognition;

| ● | Product warranties;

| ● | Stock-based compensation and modification accounting; and

| ● | Income taxes.

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Our accounting policies are more fully described in the notes to our consolidated financial statements included in this quarterly report and in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no significant changes in our accounting policies for the nine months ended September 30, 2025.

Off-Balance Sheet Arrangements

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

Business Matters

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 enables 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. We design and manufacture waveguide optics and related coupling optics combined for use with compact display engines from third parties to form a see-through display module needed for AI/AR Smart Glasses.

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, and display engine technology.

Recent Accounting Pronouncements

See Note 1 to the Unaudited Consolidated Financial Statements.

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Results of Operations

Comparison of Three Months Ended September 30, 2025 and 2024

The following table compares the Company’s consolidated statements of operations data for the three months ended September 30, 2025 and 2024:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended September 30, |
​ |  | ​ | ​ |  | ​ | ​ |  | Dollar |  | % Increase |
​ | ​ | 2025 | ​ | 2024 | ​ | Change | ​ | (Decrease) |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Sales: |  | ​ |  |  | ​ |  |  | ​ |  |  |  | ​
Sales of Products | ​ | $ | 896,274 |  | $ | 988,328 |  | $ | (92,054) |  | (9) | %
Sales of Engineering Services | ​ |  | 264,673 |  | ​ | 397,386 |  | ​ | (132,713) |  | (33) | %
​ | ​ |  |  |  | ​ |  |  | ​ |  |  |  | ​
Total Sales | ​ |  | 1,160,947 |  | ​ | 1,385,714 |  | ​ | (224,767) |  | (16) | %
​ | ​ |  |  |  | ​ |  |  | ​ |  |  |  | ​
Cost of Sales: | ​ |  |  |  | ​ |  |  | ​ |  |  |  | ​
Cost of Sales - Products | ​ |  | 1,240,310 |  | ​ | 1,395,939 |  | ​ | (155,629) |  | (11) | %
Cost of Sales - Depreciation and Amortization | ​ |  | 180,927 |  | ​ | 181,807 |  | ​ | (880) |  | (0) | %
Cost of Sales - Engineering Services | ​ |  | 151,017 |  | ​ | 67,816 |  | ​ | 83,201 |  | 123 | %
​ | ​ |  |  |  | ​ |  |  | ​ |  |  |  | ​
Total Cost of Sales | ​ |  | 1,572,254 |  | ​ | 1,645,562 |  | ​ | (73,308) |  | (4) | %
​ | ​ |  |  |  | ​ |  |  | ​ |  |  |  | ​
Gross Loss | ​ |  | (411,307) |  | ​ | (259,848) |  | ​ | (151,459) |  | 58 | %
Gross Loss% | ​ |  | (35) | % | ​ | (19) | % | ​ |  |  |  | ​
​ | ​ |  |  |  | ​ |  |  | ​ |  |  |  | ​
Operating Expenses: | ​ |  |  |  | ​ |  |  | ​ |  |  |  | ​
Research and Development | ​ |  | 2,935,971 |  | ​ | 2,333,798 |  | ​ | 602,173 |  | 26 | %
Selling and Marketing | ​ |  | 1,147,194 |  | ​ | 1,766,246 |  | ​ | (619,052) |  | (35) | %
General and Administrative | ​ |  | 2,575,087 |  | ​ | 4,347,013 |  | ​ | (1,771,926) |  | (41) | %
Depreciation and Amortization | ​ |  | 424,335 |  | ​ | 410,697 |  | ​ | 13,638 |  | 3 | %
Impairment on Intangible Asset and Equity Investment | ​ |  | — |  | ​ | 181,676 |  | ​ | (181,676) |  | (100) | %
​ | ​ |  |  |  | ​ |  |  | ​ |  |  |  | ​
Loss from Operations | ​ |  | (7,493,894) |  | ​ | (9,299,278) |  | ​ | 1,805,384 |  | (19) | %
​ | ​ |  |  |  | ​ |  |  | ​ |  |  | ​ | ​
Other Income (Expense): | ​ |  |  |  | ​ |  |  | ​ |  |  |  | ​
Investment Income | ​ |  | 156,760 |  | ​ | 95,234 |  | ​ | 61,526 |  | 65 | %
Other Taxes | ​ |  | — |  | ​ | (44,706) |  | ​ | 44,706 |  | (100) | %
Foreign Exchange Gain (Loss) | ​ |  | (17,091) |  | ​ | 26,471 |  | ​ | (43,562) |  | (165) | %
​ | ​ |  |  |  | ​ |  |  | ​ |  |  |  | ​
Total Other Income, Net | ​ |  | 139,669 |  | ​ | 76,999 |  | ​ | 62,670 |  | 81 | %
​ | ​ |  |  |  | ​ |  |  | ​ |  |  |  | ​
Net Loss | ​ | $ | (7,354,225) | ​ | $ | (9,222,279) | ​ | $ | 1,868,054 |  | (20) | %

​

Sales. There was a decrease in total sales for the three months ended September 30, 2025, compared to the same period in 2024 of $224,767, or 16%. The following table reflects the major components of our sales:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Three Months Ended |  | % of |  | Three Months Ended |  | % of |  | Dollar |  | % Increase |
​ | ​ | September 30, 2025 | ​ | Total Sales | ​ | September 30, 2024 | ​ | Total Sales | ​ | Change | ​ | (Decrease) | ​
Sales of Products | ​ | $ | 896,274 |  | 77 | % | $ | 988,328 |  | 71 | % | $ | (92,054) |  | (9) | %
Sales of Engineering Services | ​ |  | 264,673 |  | 23 | % |  | 397,386 |  | 29 | % |  | (132,713) |  | (33) | %
Total Sales | ​ | $ | 1,160,947 |  | 100 | % | $ | 1,385,714 |  | 100 | % | $ | (224,767) |  | (16) | %

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​

Sales of products decreased by 9% for the three months ended September 30, 2025, compared to the same period in 2024. Decreased Smart Glasses revenue was the primary driver of this decrease as unit sales of our M400 product decreased compared to the previous year’s comparable period.

Sales of engineering services for the three months ended September 30, 2025, was $264,673 compared to $397,386 in the comparable 2024 period.

Cost of Sales and Gross 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 rendering of engineering services. The following table reflects the components of our cost of goods sold:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Three Months Ended |  | % of |  | Three Months Ended |  | % of |  | Dollar |  | % Increase | ​
​ | ​ | September 30, 2025 | ​ | Total Sales | ​ | September 30, 2024 | ​ | Total Sales | ​ | Change | ​ | (Decrease) | ​
Product Cost of Sales | ​ | $ | 727,316 | ​ | 63 | % | $ | 846,211 | ​ | 61 | % | $ | (118,895) | ​ | (14) | %
Manufacturing Overhead - Unapplied |  | ​ | 512,994 |  | 44 | % | ​ | 549,728 |  | 40 | % | ​ | (36,734) |  | (7) | %
Depreciation and Amortization | ​ | ​ | 180,927 | ​ | 16 | % | ​ | 181,807 | ​ | 13 | % | ​ | (880) | ​ | (0) | %
Engineering Services Cost of Sales |  | ​ | 151,017 |  | 12 | % | ​ | 67,816 |  | 5 | % | ​ | 83,201 |  | 123 | %
​ |  | ​ |  |  |  |  | ​ |  |  |  |  | ​ |  |  |  | ​
Total Cost of Sales | ​ | $ | 1,572,254 |  | 135 | % | $ | 1,645,562 |  | 119 | % | $ | (73,308) |  | (4) | %
​ | ​ |  |  |  |  | ​ |  |  |  |  | ​ |  |  |  |  | ​
Gross Loss | ​ | $ | (411,307) |  | (35) | % | $ | (259,848) |  | (19) | % | $ | (151,459) |  | 58 | %

​

For the three months ended September 30, 2025, there was a gross loss from total sales of $411,307, or 35% compared to a gross loss of $259,848, or 19% in the comparable period in 2024. For the three months ended September 30, 2025, there was a gross profit of $113,656 on engineering services, or 43% compared to a gross profit of $329,570, or 83% compared to the comparable period in 2024.

Unapplied manufacturing overhead costs, not already added into product cost of sales, decreased by $36,734, or 7% for the three months ended September 30, 2025 compared to the 2024 comparable period. The decrease 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 manufacturing headcount.

​

Depreciation and Amortization included in cost of sales was relatively flat for the three months ended September 30, 2025 versus the 2024 comparable period.

​

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, purchase 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.

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | % of | ​ | Three Months Ended | ​ | % of | ​ | Dollar | ​ | % Increase | ​
​ |  | September 30, 2025 |  | Total Sales |  | September 30, 2024 |  | Total Sales |  | Change |  | (Decrease) | ​
Research and Development Expenses | ​ | $ | 2,781,191 |  | 240% | ​ | $ | 1,813,993 |  | 131% | ​ | $ | 967,198 |  | 53 | %
Related Stock-based Compensation (non-cash) | ​ | ​ | 154,780 |  | 13% | ​ | ​ | 519,805 |  | 37% | ​ | ​ | (365,025) |  | (70) | %
Total Research and Development | ​ | $ | 2,935,971 |  | 253% | ​ | $ | 2,333,798 |  | 168% | ​ | $ | 602,173 |  | 26 | %

​

Total research and development expenses for the three months ended September 30, 2025 increased by $602,173, or 26% compared to the comparable period in 2024. This increase was largely due to a $284,814 increase in external development costs for our new products; a $277,742 increase in depreciation related to under-utilized new

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manufacturing equipment; a $184,203 increase in cash salary and benefits related expenses; and a $110,124 increase in rent utilities expenses; partially offset by a $365,025 decrease in non-cash stock-based compensation expense.

Selling and Marketing. Selling and marketing expenses consist of trade show costs, advertising, sales samples, travel costs, sales staff compensation costs including non-cash stock-based compensation expense, consulting fees, public relations agency fees, website costs, and sales commissions paid to full-time staff and outside consultants.

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | % of | ​ | Three Months Ended | ​ | % of | ​ | Dollar | ​ | % Increase | ​
​ |  | September 30, 2025 |  | Total Sales |  | September 30, 2024 |  | Total Sales |  | Change |  | (Decrease) | ​
Selling and Marketing Expenses | ​ | $ | 1,028,262 | ​ | 89% | ​ | $ | 1,407,913 | ​ | 102% | ​ | $ | (379,651) | ​ | (27) | %
Related Stock-based Compensation (non-cash) | ​ | ​ | 118,932 | ​ | 10% | ​ | ​ | 358,333 | ​ | 25% | ​ | ​ | (239,401) | ​ | (67) | %
Total Selling and Marketing | ​ | $ | 1,147,194 | ​ | 99% | ​ | $ | 1,766,246 | ​ | 127% | ​ | $ | (619,052) | ​ | (35) | %

​

Total selling and marketing expenses for the three months ended September 30, 2025 decreased by $619,052, or 35% compared to the comparable period in 2024. This decrease was largely due to a $250,000 decrease in bad debt expense and a $199,323 recovery of previously written-off bad debt; a $239,401 decrease in non-cash stock-based compensation expense; and a $40,465 decrease in computer hardware and software expenses: partially offset by a $33,638 increase in salary and benefits related expenses; and a $47,630 increase in advertising and trade show expenses.

General and Administrative. General and administrative expenses include professional fees, investor relations (“IR”) costs, salaries and related non-cash stock-based compensation, travel costs, and office and rental costs.

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | % of | ​ | Three Months Ended | ​ | % of | ​ | Dollar | ​ | % Increase | ​
​ |  | September 30, 2025 |  | Total Sales |  | September 30, 2024 |  | Total Sales |  | Change |  | (Decrease) | ​
General and Administrative Expenses | ​ | $ | 2,127,363 |  | 183% | ​ | $ | 2,111,283 |  | 152% | ​ | $ | 16,080 |  | 1 | %
Related Stock-based Compensation (non-cash) | ​ | ​ | 447,724 |  | 39% | ​ | ​ | 2,235,730 |  | 162% | ​ | ​ | (1,788,006) |  | (80) | %
Total General and Administrative | ​ | $ | 2,575,087 |  | 222% | ​ | $ | 4,347,013 |  | 314% | ​ | $ | (1,771,926) |  | (41) | %

​

Total general and administrative expenses for the three months ended September 30, 2025, decreased by $1,771,926, or 41% compared to the comparable period in 2024. The decrease was largely due to a $1,788,006 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; partially offset by a $294,195 increase in IR and shareholder related expenses; and a $26,000 increase in IT consulting fees.

Depreciation and Amortization. Depreciation and amortization expense, not included in cost of sales, for the three months ended September 30, 2025, was relatively flat at $424,335, compared to $410,697 in the comparable period in 2024.

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Other Income, Net. Total other income was $139,669 for the three months ended September 30, 2025, compared to total other income of $76,999 in the comparable period in 2024, an increase of $62,670. The overall increase in other income was primarily the result of an increase of $61,526 in investment income earned on excess cash on hand; a decrease of $44,706 in other taxes; partially offset by an increase of $43,562 in foreign exchange losses.

Provision for Income Taxes. There was no provision for income taxes in the respective three-month periods ending September 30, 2025 and 2024.

Comparison of Nine Months Ended September 30, 2025 and 2024

The following table compares the Company’s consolidated statements of operations data for the nine months ended September 30, 2025 and 2024:

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended September 30, | ​
​ |  | ​ | ​ |  | ​ | ​ |  | Dollar |  | % Increase |
​ | ​ | 2025 | ​ | 2024 | ​ | Change | ​ | (Decrease) |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Sales: |  | ​ |  |  | ​ |  |  | ​ |  |  |  | ​
Sales of Products | ​ | $ | 3,265,657 | ​ | $ | 3,418,665 | ​ | $ | (153,008) |  | (4) | %
Sales of Engineering Services | ​ |  | 771,941 | ​ |  | 1,063,488 | ​ |  | (291,547) |  | (27) | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total Sales | ​ |  | 4,037,598 | ​ |  | 4,482,153 | ​ |  | (444,555) |  | (10) | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cost of Sales: | ​ |  |  | ​ |  |  | ​ |  |  |  |  | ​
Cost of Sales - Products Sold | ​ |  | 4,468,385 | ​ |  | 4,270,983 | ​ |  | 197,402 |  | 5 | %
Cost of Sales - Depreciation and Amortization | ​ |  | 525,144 | ​ |  | 545,422 | ​ |  | (20,278) |  | (4) | %
Cost of Sales - Engineering Services | ​ |  | 481,861 | ​ |  | 311,993 | ​ |  | 169,868 |  | 54 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total Cost of Sales | ​ |  | 5,475,390 | ​ |  | 5,128,398 | ​ |  | 346,992 |  | 7 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Gross Loss | ​ |  | (1,437,792) | ​ |  | (646,245) | ​ |  | (791,547) |  | 122 | %
Gross Loss % | ​ |  | (36) | % |  | (14) | % |  |  |  |  | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operating Expenses: | ​ |  |  | ​ |  |  | ​ |  |  |  |  | ​
Research and Development | ​ |  | 8,112,684 | ​ |  | 7,406,913 | ​ |  | 705,771 |  | 10 | %
Selling and Marketing | ​ |  | 4,037,649 | ​ |  | 6,245,411 | ​ |  | (2,207,762) |  | (35) | %
General and Administrative | ​ |  | 9,292,659 | ​ |  | 12,941,336 | ​ |  | (3,648,677) |  | (28) | %
Depreciation and Amortization | ​ |  | 1,242,828 | ​ |  | 2,569,413 | ​ |  | (1,326,585) |  | (52) | %
Loss on Fixed Asset Disposal | ​ |  | — | ​ |  | 11,277 | ​ |  | (11,277) |  | (100) | %
Impairment on Intangible Asset and Equity Investment | ​ |  | — | ​ |  | 30,301,355 | ​ |  | (30,301,355) |  | (100) | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Loss from Operations | ​ |  | (24,123,612) | ​ |  | (60,121,950) | ​ |  | 35,998,338 |  | (60) | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other Income (Expense): | ​ |  |  | ​ |  |  | ​ |  |  |  |  | ​
Investment Income | ​ |  | 460,998 | ​ |  | 453,657 | ​ |  | 7,341 |  | 2 | %
Other Taxes | ​ |  | 22,372 | ​ |  | (62,547) | ​ |  | 84,919 |  | (136) | %
Foreign Exchange Loss | ​ |  | (17,864) | ​ |  | (151,214) | ​ |  | 133,350 |  | (88) | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total Other Income, Net | ​ |  | 465,506 | ​ |  | 239,896 | ​ |  | 225,610 |  | 94 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net Loss | ​ | $ | (23,658,106) | ​ | $ | (59,882,054) | ​ | $ | 36,223,948 |  | (60) | %

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Sales. There was a decrease in total sales for the nine months ended September 30, 2025, compared to the same period in 2024 of $444,555, or 10%. The following table reflects the major components of our sales:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Nine Months Ended |  | % of |  | Nine Months Ended |  | % of |  | Dollar |  | % Increase | ​
​ | ​ | September 30, 2025 | ​ | Total Sales | ​ | September 30, 2024 | ​ | Total Sales | ​ | Change | ​ | (Decrease) | ​
Sales of Products | ​ | $ | 3,265,657 |  | 81 | % | $ | 3,418,665 |  | 76 | % | $ | (153,008) |  | (4) | %
Sales of Engineering Services | ​ |  | 771,941 |  | 19 | % |  | 1,063,488 |  | 24 | % |  | (291,547) |  | (27) | %
Total Sales | ​ | $ | 4,037,598 |  | 100 | % | $ | 4,482,153 |  | 100 | % | $ | (444,555) |  | (10) | %

​

Sales of products decreased by 4% for the nine months ended September 30, 2025, compared to the same period in 2024.

Sales of engineering services for the nine months ended September 30, 2025 was $771,941 compared to $1,063,488 in the comparable 2024 period.

Cost of Sales and Gross 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 rendering of engineering services. The following table reflects the components of our cost of goods sold:

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended | ​ | % of | ​ | Nine Months Ended | ​ | % of | ​ | Dollar | ​ | % Increase | ​
​ |  | September 30, 2025 |  | Total Sales |  | September 30, 2024 |  | Total Sales |  | Change |  | (Decrease) | ​
Product Cost of Sales | ​ | $ | 2,598,041 |  | 64 | % | $ | 2,772,109 |  | 62 | % | $ | (174,068) |  | (6) | %
Inventory Reserve for Obsolescence | ​ |  | 265,000 |  | 7 | % |  | - |  | — | % |  | 265,000 |  | NM | ​
Manufacturing Overhead - Unapplied | ​ |  | 1,605,344 |  | 40 | % |  | 1,498,874 |  | 33 | % |  | 106,470 |  | 7 | %
Depreciation and Amortization | ​ |  | 525,144 |  | 13 | % |  | 545,422 |  | 12 | % |  | (20,278) |  | (4) | %
Engineering Services Cost of Sales | ​ |  | 481,861 |  | 12 | % |  | 311,993 |  | 7 | % |  | 169,868 |  | 54 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total Cost of Sales | ​ | ​ | 5,475,390 |  | 136 | % | ​ | 5,128,398 |  | 114 | % | ​ | 346,992 |  | 7 | %
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Gross Loss | ​ | $ | (1,437,792) | ​ | (36) | % | $ | (646,245) |  | (14) | % | $ | (791,547) |  | 122 | %

​

For the nine months ended September 30, 2025, there was a gross loss from total sales of $1,437,792, or 36% compared to a gross loss of $646,245, or 14% in the comparable period in 2024.

Unapplied manufacturing overhead costs, not already added into product cost of sales, increased by $106,470, or 7% for the nine months ended September 30, 2025 compared to the 2024 comparable period. As a percentage of total sales, such costs increased to 40% compared to 33% in 2024 due to lower 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 compared to the same period in 2024, as the Company has sufficient finished goods on hand to meet currently expected demand for current Smart Glasses models for the foreseeable future.

​

Depreciation and Amortization included in cost of sales decreased by $20,278, or 4% for the nine months ended September 30, 2025 versus the 2024 period.

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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, purchase 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.

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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended | ​ | % of | ​ | Nine Months Ended | ​ | % of | ​ | Dollar | ​ | % Increase | ​
​ |  | September 30, 2025 |  | Total Sales |  | September 30, 2024 |  | Total Sales |  | Change |  | (Decrease) | ​
Research and Development Expenses | ​ | $ | 7,420,592 |  | 184 | % | $ | 6,090,095 |  | 136 | % | $ | 1,330,497 |  | 22 | %
Related Stock-based Compensation (non-cash) | ​ | ​ | 692,092 |  | 17 | % | ​ | 1,316,818 |  | 29 | % | ​ | (624,726) |  | (47) | %
Total Research and Development Costs | ​ | $ | 8,112,684 |  | 201 | % | $ | 7,406,913 |  | 165 | % | $ | 705,771 |  | 10 | %

​

Total research and development expenses for the nine months ended September 30, 2025 increased by $705,711, or 10% compared to the comparable period in 2024. This increase was largely due to a $877,943 increase in external development costs on our new smart glasses and waveguide products; a $423,704 increase of depreciation related to under-utilized new manufacturing equipment still being optimized, which were still being built in the comparable period; a $246,222 increase in rent utilities expenses related to our new California-based waveguide research and development facility; and a $68,385 increase in travel expenses; partially offset by a $624,726 decrease in non-cash stock-based compensation expense; and a $391,156 decrease in cash salary and benefits related expenses driven by headcount decreases and reduction in severance payments.

Selling and Marketing. Selling and marketing expenses consist of trade show costs, advertising, sales samples, travel costs, sales staff compensation costs including non-cash stock-based compensation expense, consulting fees, public relations agency fees, website costs, and sales commissions paid to full-time staff and outside consultants.

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended | ​ | % of | ​ | Nine Months Ended | ​ | % of | ​ | Dollar | ​ | % Increase | ​
​ |  | September 30, 2025 |  | Total Sales |  | September 30, 2024 |  | Total Sales |  | Change |  | (Decrease) | ​
Selling and Marketing Expenses | ​ | $ | 3,334,895 |  | 83 | % | $ | 5,365,165 |  | 120 | % | $ | (2,030,270) |  | (38) | %
Related Stock-based Compensation (non-cash) | ​ | ​ | 702,754 |  | 17 | % | ​ | 880,246 |  | 19 | % | ​ | (177,492) |  | (20) | %
Total Selling and Marketing | ​ | $ | 4,037,649 |  | 100 | % | $ | 6,245,411 |  | 139 | % | $ | (2,207,762) |  | (35) | %

​

Total selling and marketing expenses for the nine months ended September 30, 2025 decreased by $2,207,762, or 35% compared to the comparable period in 2024. This decrease was largely due to a $859,602 decrease in cash salary and benefits related expenses driven by headcount decreases; $540,000 decrease in bad debt expense and a $199,323 recovery of previously written-off bad debt; a $177,492 decrease in non-cash stock-based compensation expense; a decrease of $167,857 in advertising and tradeshow expenses; a $165,635 decrease in external contractor expenses; and a $124,174 decrease in computer software subscriptions expenses.

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General and Administrative. General and administrative expenses include professional fees, IR costs, salaries and related non-cash stock-based compensation, travel costs, and office and rental costs.

​

​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Nine Months Ended | ​ | % of | ​ | Nine Months Ended | ​ | % of | ​ | Dollar | ​ | % Increase | ​
​ |  | September 30, 2025 |  | Total Sales |  | September 30, 2024 |  | Total Sales |  | Change |  | (Decrease) | ​
General and Administrative Expenses | ​ | $ | 6,392,430 |  | 158 | % | $ | 6,840,739 |  | 153 | % | $ | (448,309) |  | (7) | %
Related Stock-based Compensation (non-cash) | ​ | ​ | 2,900,229 |  | 72 | % | ​ | 6,100,597 |  | 136 | % | ​ | (3,200,368) |  | (52) | %
Total General and Administrative | ​ | $ | 9,292,659 |  | 230 | % | $ | 12,941,336 |  | 289 | % | $ | (3,648,677) |  | (28) | %

​

Total general and administrative expenses for the nine months ended September 30, 2025, decreased by $3,648,677, or 28%, compared to the comparable period in 2024. The decrease was largely due to a $3,200,368 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 $297,473 decrease in legal expenses; a $264,251 decrease in accounting and auditing fees; a $122,623 decrease in cash salary and benefits; and a $92,508 decrease in insurance premiums; partially offset by a $524,391 increase in IR and shareholder related expenses.

Depreciation and Amortization. Depreciation and amortization expense, not included in cost of sales or research and development expenses, for the nine months ended September 30, 2025, was $1,242,828, compared to $2,569,413 in the comparable period in 2024, or a decrease of $1,326,585. 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.

Other Income, Net. Total other income was $465,506 for the nine months ended September 30, 2025 compared to other income of $239,896 in the comparable period in 2024, an increase of $225,610. The overall increase in other income was primarily the result of a decrease of $133,350 in foreign exchange losses; a decrease of $84,919 in other taxes; and a modest increase of $7,341 in investment income earned on excess cash on hand.

Provision for Income Taxes. There was no provision for income taxes in the respective nine-month periods ending September 30, 2025 and 2024.

​

Liquidity and Capital Resources

Capital Resources: As of September 30, 2025, we had cash and cash equivalents of $22,608,529, an increase of $4,422,023 from $18,186,506 as of December 31, 2024.

As of September 30, 2025, we had current assets of $28,230,117 compared to current liabilities of $3,954,671 which resulted in a positive working capital position of $24,275,446. As of December 31, 2024, we had a positive working capital position of $24,610,217. 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 Flows:

​

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

​

​ | ​ | September 30, | ​ | ​ September 30,
​ |  | 2025 |  | 2024
Net Cash Provided by (used in) |  | ​ |  |  | ​ |
Operating Activities | ​ | $ | (13,234,835) | ​ |  | $ (19,717,197)
Investing Activities | ​ |  | (2,090,434) | ​ |  | (2,566,729)
Financing Activities | ​ |  | 19,747,292 | ​ |  | 10,000,000

​

During the nine months ended September 30, 2025, we used $13,234,835 of cash for operating activities, a reduction of $6,482,362 from the comparable 2024 period. Net changes in working capital items were $3,584,700 for the nine months ended September 30, 2025, with the largest factors resulting from a $2,134,085 decrease in inventory and vendor prepayments; a $651,529 increase in trade accounts payables and accrued expenses; and a $827,593 decrease in trade accounts and other receivables. For the nine months ended September 30, 2024, we used a total of $19,717,197 in cash for operating activities.

During the nine months ended September 30, 2025, we used $2,090,434 of cash for investing activities, which included: $1,658,820 in manufacturing equipment and tooling for our new waveguide manufacturing facility; $381,614 in patent and trademark expenditures, and $50,000 of additional investment in a private corporation (see Note 8 for further details). For the nine months ended September 30, 2024, we used a total of $2,566,729 in cash for investing activities.

During the nine months ended September 30, 2025, we received $19,747,292 from financing activities, which included: $10,000,000 in proceeds from the sale of our Series B Convertible Preferred Stock to Quanta, under our SPA; $9,640,449 in net proceeds from sales of common stock under our ATM program; and $106,843 of proceeds from stock option exercises. For the nine months ended September 30, 2024, we received $10,000,000 from financing activities.

As of September 30, 2025, the Company does not have any current or long-term debt obligations outstanding.

The Company incurred net losses for the nine months ended September 30, 2025 of $23,658,106; $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 $13,234,835 for the nine months ended September 30, 2025; $23,739,372 for the year ended December 31, 2024; and $26,277,824 for the year ended December 31, 2023. As of September 30, 2025, the Company had an accumulated deficit of $391,181,056. The Company’s cash outflows for investing activities were $2,090,434 for the nine months ended September 30, 2025; $2,919,949 for the year ended December 31, 2024; and $19,280,966 for the year ended December 31, 2023.

​

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, 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.

​

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 take actions necessary to continue as a going concern, as discussed herein. Management’s plans to alleviate the conditions that raise substantial doubt include raising further capital, and the implementation of operational improvements and the curtailment of certain development programs, both of which the Company expects will preserve cash.

​

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Management’s plans concerning these matters and managing our liquidity include, among other things:

| ● | Reductions in our cash annual operating expenses across all operating areas, including in the areas of Research and Development, Sales and Marketing and General and Administrative;

| ● | Delaying or curtailing discretionary and non-essential capital expenditures not related to near-term product and manufacturing needs and reducing other investing activities for the remainder of our 2025 and 2026 fiscal years;

| ● | The expected margin contribution upon the commencement of volume manufacturing and sales of waveguides from our new waveguide manufacturing plant, particularly to OEM customers; and

| ● | Continued pursuit of licensing and strategic opportunities around our waveguide technologies with potential OEMs, which would include the receipt of upfront licensing fees and on-going supply agreements.

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 ATM offering. Since commencement of the ATM offering in May 2024, the Company has raised $20,363,120, net of broker expenses, including $5,550,599 and $9,640,449, respectively, in the three and nine months ended September 30, 2025, 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 needs to raise capital for additional liquidity, the Company may 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.

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Forward-Looking Statements

This quarterly 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 management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include, but are not limited to, statements concerning:

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

| ● | the effect of competitors and competition in our markets;

| ● | our wearable Smart Glasses products and their market acceptance and future potential;

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

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

| ● | our ability to attract and retain customers;

| ● | our ability to accurately forecast consumer demand and adequately manage our inventory;

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

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

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

| ● | our reliance on third-party suppliers, contract manufacturers and logistics providers and our limited control over such parties;

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

| ● | our ability to attract and retain highly skilled employees;

| ● | the impact of foreign currency exchange rates;

| ● | the effect of future regulations;

| ● | the sufficiency of our existing cash and cash equivalent balances and cash flow from operations to meet our working capital and capital expenditure needs for at least the next twelve (12) months; and

| ● | general market, political, economic, business and public health conditions.

All statements in this quarterly 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.

All such forward-looking statements are subject to certain risks and uncertainties and should be evaluated in light of important risk factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. These risk factors include, but are not limited to, those described in “Risk Factors” under Item 1A and elsewhere in our Annual

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Report on Form 10-K for the year ended December 31, 2024, and other filings we make with the Securities and Exchange Commission and the following: business and economic conditions, rapid technological changes accompanied by frequent new product introductions, competitive pressures, dependence on key customers, inability to gauge order flows from customers, fluctuations in quarterly and annual results, the reliance on a limited number of third-party suppliers, limitations of our manufacturing capacity and arrangements, the protection of our proprietary technology, the dependence on key personnel, changes in critical accounting estimates, potential impairments related to investments, foreign regulations, changes in trade policy in the United States and other countries, including changes in trade agreements and the imposition of tariffs, liquidity issues, and potential material weaknesses in internal control over financial reporting. Further, during weak or uncertain economic periods, customers may delay the placement of their orders. These factors often result in a substantial portion of our revenue being derived from orders placed within a quarter and shipped in the final month of the same quarter.

We caution readers to carefully consider such factors. Many of these factors are beyond our control. In addition, any forward-looking statements represent our estimates only as of the date they are made and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, except as may be required under applicable securities laws, we specifically disclaim any obligation to do so.

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Item 3.Quantitative and Qualitative Disclosures about Market Risk

Not Applicable

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Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management, with the participation of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), has performed an evaluation of the effectiveness of our disclosure controls and procedures that are defined in Rule 13a-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report. This evaluation included consideration of the controls, processes, and procedures that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is properly recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were effective at September 30, 2025.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as defined in 13a-15(f) and 15d-15(f) promulgated under the Exchange Act) that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1.Legal Proceedings

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

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Item 1A.Risk Factors

In addition to the other information set forth in this report you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes from those risk factors, except as set forth below. The risks discussed in our 2024 Annual Report and herein could materially affect our business, financial condition and future results.

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A substantial amount of the Company’s components and related materials are imported from abroad. The ongoing evolution of trade policies (including tariffs) could materially adversely affect the (i) costs of raw and finished components for our products, and (ii) demand for our current and future products.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Sale of Unregistered Securities - none

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Purchase of Equity Securities: - none

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Item 3.Defaults Upon Senior Securities

None

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Item 4.Mine Safety Disclosures

Not Applicable

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Item 5.Other Information

During the fiscal quarter ended September 30, 2025, no Section 16 director or officer adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” (as defined in Item 408 of Regulation S-K of the Exchange Act).

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There were no “non-Rule 10b5-1 trading arrangements” (as defined in Item 408 of Regulation S-K of the Exchange Act) adopted, modified or terminated during the fiscal quarter ended September 30, 2025 by our directors and Section 16 officers.

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Item 6.Exhibits

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Exhibit No. |  | Description
​ | ​ |
31.1 | ​ | Certification of the Chief Executive Officer of the Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
| ​ |
31.2 | ​ | Certification of the Chief Financial Officer of the Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
| ​ |
32.1 | ​ | Certification of the Chief Executive Officer of the Registrant pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
| ​ |
32.2 | ​ | Certification of the Chief Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
| ​ |
101 | ​ | Inline XBRL Document set for the financial statements and accompanying notes in Part I, Item 1, of this Quarterly Report on Form 10-Q.
​ | ​ | ​
104 | ​ | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*

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* Filed herewith.

** Furnished herewith

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.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| VUZIX CORPORATION
Date: November 13, 2025 | By: | /s/ Paul Travers
|  | Paul Travers
|  | President, Chief Executive Officer
|  | (Principal Executive Officer)
Date: November 13, 2025 | By: | /s/ Grant Russell
|  | Grant Russell
|  | Executive Vice President and Chief Financial
|  | Officer
|  | (Principal Financial and Accounting Officer)

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​

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