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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2025

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 1 — Summary of Significant Accounting Policies

Operations

Vuzix Corporation (the “Company”) was incorporated in 1997 under the laws of the State of Delaware and is headquartered in West Henrietta, New York (a suburb of Rochester). We design, manufacture, market, and sell AI-enabled smart glasses, waveguides, and related augmented reality (“AR”) technologies, components, and products for the enterprise, medical, defense, and consumer markets. Our offerings include head-mounted smart display and wearable computing devices that provide portable, hands-free access to digital content for mobility, frontline workflows, and AI- and AR-enabled applications, as well as OEM waveguide optical components and display engines. Our wearable display products integrate microdisplay technology with advanced optics to deliver compact, high-resolution display engines that, when used in our smart glasses or heads-up display solutions, present virtual images comparable in apparent size to a computer monitor or large-screen television. Our products are offered with varying features in both monocular and binocular configurations.

Basis of Presentation

The consolidated financial statements have been prepared in accordance with US Generally Accepted Accounting Principle (“GAAP”).

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Vuzix Europe GmbH, Vuzix Japan Corporation, and Moviynt, Inc. All inter-company transactions have been eliminated.

Evaluation of Liabilities, Equity and Derivatives

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

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

Variable Interest Entities

The Company determines at the inception of each arrangement whether an entity in which it has made an investment or in which the Company has other variable interests is considered a variable interest entity (VIE). The Company consolidates VIEs when it is the primary beneficiary. The Company is the primary beneficiary of a VIE when it has the power to direct activities that most significantly affect the economic performance of the VIE and have the obligation to absorb the majority of their losses or benefits. If the Company is not the primary beneficiary in a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with applicable GAAP. At each reporting period, the Company assesses whether any changes in our interest or relationship with the entity affect our determination of whether the entity is a VIE and, if so, whether the Company is the primary beneficiary.

We have an investment in a VIE, Atomistic, in which we are not the primary beneficiary. This VIE includes a private company investment, described further in Notes 6 and 7. We have determined that the governance and operating structures of this entity do not allow us to direct the activities that would significantly affect their economic performance. Therefore, we are not the primary beneficiary, and the results of operations and financial position of this VIE are not included in our consolidated financial statements. We had accounted for this investment as a technology license and an equity investment. The maximum exposure of this unconsolidated VIE is generally based on the current carrying value of the investment. We have determined that the single source of our exposure to this VIE was our capital investment in them. The carrying value and maximum exposure of this unconsolidated VIE was $31.8 million as of March 31, 2024; however, as of June 30, 2024, the carrying value of these investments of $30.1 million was written-off due to the termination of the Company’s exclusive license. Refer to Notes 6 and 7 for further details.

Investments in Equity Securities

Investments in equity securities with a readily determinable fair value, not accounted for under the equity method, are recorded at that value with unrealized gains and losses included in earnings. For equity securities without a readily determinable fair value, the investment is recorded at cost, less any impairment, plus or minus adjustments related to observable transactions for the same or similar securities, with unrealized gains and losses included in earnings. In the year ended December 31, 2025, there was an impairment charge of $400,000 recorded on two of the Company’s cost method investments. There was no impairment recorded in the years ended December 31, 2024 and 2023.

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 chief operating decision maker 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. The measure of segment assets is reported on the balance sheet as total consolidated assets. 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. Our CODM also reviews total assets, as reported on our consolidated balance sheets, and purchases of property and equipment, 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, Compensation, General and Administrative and Intangible Asset and Equity Investment Impairment. These segment items for the years ending December 31, 2025, 2024, and 2023 are:



		2025			2024		2023

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

Less expenses:
Cost of Sales, excluding compensation			(5,582,484)			(9,551,391)		(13,327,890)
Research and Development, excluding compensation			(6,722,657)			(2,922,449)		(3,548,119)
General and Administrative, excluding compensation			(5,483,915)			(6,229,882)		(5,100,484)
Total Compensation			(17,568,229)			(24,472,651)		(30,113,789)
Intangible Asset and Equity Investment Impairment			—			(30,301,355)		(2,136,993)
Other Segment Items			(3,196,454)			(5,814,985)		(8,050,941)
			(38,553,739)			(79,292,713)		(62,278,216)

Net Loss		$	(32,273,128)		$	(73,538,157)	$	(50,149,077)

Other Segment Items:

Selling and Marketing, excluding compensation expenses;

Depreciation and amortization, not included in Cost of Sales or Research and Development; and

Other Income.

Refer to Note 17 — Geographic and Other Financial Information (Unaudited).

Foreign Currency Transactions

The Company considers the U.S. dollar as the functional currency of the Company’s German and Japanese subsidiaries. The Company’s German subsidiary transacts primarily in Euros and the Company’s Japanese subsidiary transacts primarily in Yen. All transactions in foreign currencies are recorded in U.S. dollars at the then current exchange rate. Upon settlement of the underlying transaction, all amounts are re-measured to U.S. dollars at the current exchange rate on the date of settlement. All unsettled foreign currency transactions that remain in accounts receivable and trade account payables are re-measured to U.S. dollars at the period-end exchange rates. All re-measurement gains and losses are recorded in the current period net income.

Use of Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States 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.

Concentration of Credit Risk

The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits.

Cash and Cash Equivalents

Cash and cash equivalents can include highly liquid investments with original maturities of three months or less.

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.

In accordance with ASC Subtopic 205-40, Presentation of Financial Statements — Going Concern, management is required to evaluate whether conditions or events, considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The going concern assumption underlies all U.S. GAAP financial reporting and presumes that the Company will continue normal business operations into the foreseeable future, unless such conditions or events raise substantial doubt about the Company’s ability to continue as a going concern.

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

The Company’s cash requirements going forward are primarily for funding operating losses, research and development, working capital, and capital expenditures. Our cash requirements related to funding operating losses depend upon numerous factors, including new product development activities, research and development costs, our ability to commercialize our products, our products’ timely market acceptance, selling prices and gross margins, and other factors. Historically, the Company has met its cash needs primarily through the sale of equity securities. The Company will need to grow its business significantly to become profitable and self-sustaining on a cash flow basis or it will be required to cut its operating costs significantly or raise new equity and/or debt capital.

These historical financial factors initially raise doubt about the Company’s ability to continue as a going concern. Management intends to take actions necessary to continue as a going concern, as discussed herein. Management’s plans to alleviate the conditions that raise doubt include raising further capital and the implementation of 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 2026 and 2027 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 $28,250,484, net of broker expenses, including $14,286,816, in the year ended December 31, 2025 and $5,784,193 to-date in 2026, under this sales agreement.

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

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

Fair Value of Financial Instruments

The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, accrued revenue, 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.

Accounts Receivable and Allowance for Credit Losses

The Company maintains reserves for potential credit losses based upon our historical experience, aging profile and current and expected future general economic conditions. Receivable balances are written-off when collection is deemed unlikely. In determining the adequacy of the provision, the Company considers known uncollectible or at-risk receivables. The total allowance for expected credit losses as of December 31, 2025 and 2024 was $46,000 and $89,000, respectively. During the year ended December 31, 2025, the Company wrote-off gross receivables of $43,000. During the year ended December 31, 2024, the Company wrote-off gross receivables of $2,462,219, which included $1,402,484 of accounts receivables that were fully provisioned for in the year ended December 31, 2023. The Company does not accrue interest on any past due accounts receivable unless such receivable goes into collection.

The following table provides a rollforward of expected credit losses for the years ended December 31, 2025 and 2024:


		2025			2024
Balance at beginning of year		$	89,000		$	1,574,000
Provision for credit losses			—			977,363
Write-offs			(43,000)			(2,462,363)
Balance at end of year		$	46,000		$	89,000

Customer and Supplier Concentrations

Two customers represented 25% and 11%, respectively, of total product revenue and four customers represented 50%, 17%, 11%, and 11%, respectively, of engineering services revenue for the year ended December 31, 2025. One customer represented 24% of total product revenue and two customers represented 67% and 14%, respectively, of our engineering services revenue for the year ended December 31, 2024. Two customers represented 29% and 25%, respectively, of total product revenue and four customers represented 44%, 15%, 12% and 11%, respectively, of our engineering services revenue for the year ended December 31, 2023.

Two customers represented 55% and 35%, respectively, of accounts receivable at December 31, 2025. One customer represented 76% of accounts receivable at December 31, 2024. Two customers represented 47% and 26%, respectively, of gross accounts receivable at December 31, 2023.

Three third-party vendors represented 25%, 12%, and 11%, respectively, of purchases for the year ended December 31, 2025. As of December 31, 2025, the net amount due to these vendors was nil. One third-party vendor represented 63% of material purchases for the year ended December 31, 2024. No third-party vendors represented more than 10% of material purchases for the year ended December 31, 2023.

Accrued Project Revenue

The Company carries accrued project revenue based on the percentage of completion on the project measured using the input method based upon costs incurred to date as a percentage of total expected costs to complete the project less amounts invoiced, if any. As of December 31, 2025, 2024, and 2023 there was $533,665, $673,498, and $165,771, respectively, in accrued project revenue.

Inventories

Inventories are valued at the lower of cost or net realizable value using the weighted average first-in, first-out method. The Company includes labor and overhead costs in its inventory valuation costing. The Company records provisions for excess, obsolete or slow-moving inventory based on changes in customer demand, technology developments or other economic factors. The Company’s products have product life cycles that range on average from two to three years currently. At both the product introduction and product discontinuation stage, there is a higher degree of risk of inventory obsolescence. The provision for obsolete and excess inventory is evaluated for adequacy at each quarter end. The estimate of the provision for obsolete and excess inventory is partially based on expected future product sales, which are difficult to forecast for certain products. The total provision for obsolete and excess inventory as of December 31, 2025 and 2024 was $6,068,188 and $7,944,575, respectively.

Revenue Recognition

The Company recognizes revenue from Contracts with Customers under FASB ASC Topic 606, “Revenue from Contracts with Customers”. Product sales represent the majority of the Company’s revenue. The Company recognizes revenue from these product sales as performance obligations are satisfied and transfer of control and ownership to the customer has occurred. Revenue is recognized in the amount that the Company expects to receive in exchange for the sale of our products. FOB shipping point is our standard shipping term and revenue is generally recognized as our products ship to customers, as control and ownership are transferred at this time. All of our standard product sales include a 30-day money-back guarantee and expected returns are estimated at each reporting period date, and a portion of revenue is deferred for all estimated returns. As of December 31, 2025 and 2024, unearned revenue consisting of deferred revenue associated with our expected returns were immaterial. The Company collects and remits sales taxes in certain jurisdictions and reports revenue net of any associated sales taxes.

Revenue from any engineering consulting and other services is recognized at the time the services are rendered. The Company accounts for its longer-term development contracts, which to date have all been firm fixed-priced contracts, on the percentage-of-completion method, whereby income is recognized as work on contracts progresses, but estimated losses on contracts in progress are charged to operations immediately. The percentage-of-completion is determined using the cost-to-cost method. To date, the majority of such contracts have been less than one calendar year in duration.

Unearned Revenue

These amounts represent deferred revenue against our expected product sales returns for all December 2025 and 2024 products sales that are subject to the Company’s 30-day money back guarantee return policy.

Cost of Product Sales

Cost of product sales includes the direct and allocated indirect costs of products sold to customers. Direct costs include labor, materials, reserves for estimated warranty expenses, and other costs incurred directly, or charged to us by our contract manufacturers in the manufacturing of these products. Indirect costs include labor, manufacturing overhead, and other costs associated with operating our manufacturing facility and capacity. Manufacturing overhead includes the costs of procuring, inspecting and storing material, facility and other costs, and is allocated to cost of product revenue based on the proportion of indirect labor which supported production activities. Depreciation of manufacturing tools and equipment and amortization of software development costs are included in our cost of product sales. The cost of product sales can fluctuate significantly from period to period, depending upon the product mix and volume, the level of manufacturing overhead expense and the volume of direct cost of materials.

Cost of Engineering Services

Cost of engineering services revenues includes both the direct and allocated indirect costs of performing on contracts and prototype units. Direct costs include labor, materials and other costs incurred directly in performing under the contract. Direct costs also include labor and other costs associated with operating our research and development department based on the level of effort supporting the development activity. Indirect costs include labor, manufacturing overhead, and other costs associated with operating our manufacturing facility and capacity. Cost of engineering sales is determined by the level of direct and indirect costs incurred, which can fluctuate substantially from period to period.

Fixed Assets

Fixed assets are stated at cost. Depreciation of fixed assets is provided for using the straight-line method over the following estimated useful lives:


Computers and Purchased Software		3 years
Leasehold Improvements		Lesser of expected life or lease term
Manufacturing Equipment		5 years
Tooling		3 years
Furniture and Equipment		5 years

Repair and maintenance costs are expensed as incurred. Asset betterments are capitalized and depreciated over their expected useful life.

Patents and Trademarks

The Company capitalizes the costs of obtaining its patents and registration of trademarks. Such costs are accumulated and capitalized during the filing periods, which can take several years to complete. Successful applications that result in the granting of a patent or trademark are then amortized over 15 years on a straight-line basis. Unsuccessful applications are written-off and expensed in the fiscal period where the application is abandoned or discontinued. Ongoing maintenance and legal fees for issued patents and trademarks are expensed as incurred.

Software Development Costs

The Company capitalizes the costs of obtaining or developing its software once technological feasibility has been determined by management or of purchased software solutions when placed into service. Such costs are accumulated and capitalized. Projects can take several years to complete. Unsuccessful or discontinued software projects are written-off and expensed in the fiscal period when the software development effort is abandoned or discontinued. Costs incurred internally in researching and developing a computer software product are charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. Once the product is available for general release, accumulated costs are amortized over the life of the asset. The amortization of these costs is included in cost of product sales over the

estimated life of the products, which currently is estimated at three years using a straight-line basis. As of December 31, 2025, 2024, and 2023, we had $27,778, $194,445, and $361,111, respectively, of net software development costs included in Other Assets. For the years ended December 31, 2025, 2024, and 2023, there was nil in impairment of software development costs.

Licenses

The Company capitalizes the costs of acquiring licenses and prepaid royalties. They are amortized on either a per unit basis or straight line over the expected life of the license. In some cases, future royalties are subject to annual limits.

Long-Lived Assets, Goodwill and Other Acquired Intangible Assets

The Company, at least annually, assesses all of its long-lived assets and intangibles, excluding goodwill, for impairment and when events or circumstances indicate their carrying amounts may not be recoverable. For the years ended December 31, 2025 and 2024 impairment charges were nil, and for the year ended December 31, 2023, there was an impairment charge of $41,869 to patents and trademarks. For the years ended December 31, 2025, 2024, and 2023, we recorded a loss on fixed asset disposal of $106,898, $27,654, and nil, respectively, upon the retirement of certain tooling and manufacturing equipment assets no longer in use. Intangible assets with definite lives are amortized over their estimated useful lives on a straight-line basis over a five-year period.

We perform an evaluation of our goodwill and other intangible assets for impairment at least annually, or more frequently if events or changes in circumstances indicate a potential impairment trigger. For the year ending December 31, 2024, the Company recorded an impairment charge of $30,301,355 for the unamortized technology license and equity investment in Atomistic. For the year ended December 31, 2023, the Company recorded an impairment charge of $2,136,993 for the unamortized intangible assets and goodwill regarding its previous acquisition of Moviynt.

Research and Development

Research and development costs are expensed as incurred consistent with the guidance of FASB ASC Topic 730, “Research and Development,” and include employee-related costs, office expenses, third-party design and engineering services, and new product prototyping costs. Costs incurred internally in researching and developing a computer software product are charged to expense until technological feasibility has been established for the product.

Shipping and Handling Costs

Amounts charged to customers and costs incurred by the Company related to shipping and handling are included in net sales and cost of sales, respectively.

Provision for Future Warranty Costs

The Company provides for the estimated returns under warranty and the costs of fulfilling our obligations under product warranties at the time the related revenue is recognized. The Company estimates the costs based on historical and projected product failure rates, historical and projected repair costs, and knowledge of specific product failures (if any). The specific warranty terms and conditions vary depending upon the country in which we do business but generally include parts and labor over a period generally ranging from one to two years from the date of product shipment. The Company provides a reserve for expected future warranty returns at the time of product shipment or produces over-builds to cover replacements. We regularly re-evaluate our estimates to assess the adequacy of the recorded warranty liabilities and adjust the amounts as necessary each quarter end, based upon these historical and projected factors of warranty claims and costs.

Advertising

Advertising costs are expensed as incurred and recorded in “Selling and Marketing” in the Consolidated Statements of Operations. Advertising expense for the years ended December 31, 2025, 2024, and 2023 was $536,158, $648,123 and $2,279,797, respectively.

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC Topic 740-10, “Income Taxes.” Accordingly, the Company provides deferred income tax assets and liabilities based on the estimated future tax effects of differences between the financial and tax bases of assets and liabilities based on currently enacted tax laws. A valuation allowance is established for deferred tax assets in amounts for which realization is not considered more likely than not to occur.

The Company reports any interest and penalties accrued relating to uncertain income tax positions as a component of the income tax provision.

Net Loss Per Share

Basic earnings per share is computed by dividing net income (loss) less preferred dividends, whether paid or accrued, on any outstanding preferred stock by the weighted average number of common shares outstanding for the period. Diluted earnings per share calculations reflect the assumed exercise of all dilutive employee stock options, vesting of Restricted Stock Units (“RSUs”), and Performance Stock Units (“PSUs”) applying the treasury stock method promulgated by FASB ASC Topic 260, “Earnings Per Share” and the conversion of any outstanding convertible preferred shares or notes payable that are in-the-money, applying the as-if-converted method. However, if the assumed exercise of stock options, RSUs, PSUs, and the conversion of any preferred shares are anti-dilutive, basic and diluted earnings per share are the same for all periods. As a result of the net losses generated in 2025, 2024 and 2023, all outstanding instruments would be anti-dilutive. As of December 31, 2025, 2024, and 2023, there were 10,254,286, 10,367,990 and 8,695,308 common stock share equivalents, respectively, potentially issuable from the exercise of stock options, vesting of RSUs and PSUs, and the conversion of preferred stock that could dilute basic earnings per share in the future.

Stock-Based Compensation Expense

The Company accounts for stock-based compensation to employees and directors in accordance with FASB ASC Topic 718, “Compensation - Stock Compensation,” which requires that compensation expense be recognized in the consolidated financial statements for stock-based awards based on the grant date fair value. For stock option awards, the Black-Scholes-Merton option pricing model was used to estimate the fair value of share-based awards under FASB ASC Topic 718. The Black-Scholes-Merton option pricing model incorporates various and highly subjective assumptions, including expected term and share price volatility. The expected term of options granted was estimated to be the average of the vesting term, historical exercise and forfeiture rates, and the contractual life of the option. The share price volatility at the grant date is estimated using historical stock prices based upon the expected term of the options granted. The risk-free interest rate assumption is determined using the rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued.

For common stock awards, the Company uses the fair market value of our common stock on the date of each stock-based award based on the market price of the Company’s common shares. The expense related to these awards is recognized over the requisite service period of the awards on a straight-line or graded vesting basis, which is generally commensurate with the vesting term. Stock-based compensation expense associated with stock options, stock awards, RSAs, and PSUs considered probable for the years ended December 31, 2025, 2024, and 2023 was $4,149,950, $5,928,198, and $4,566,253, respectively, excluding awards under the Company’s former Long-term Incentive Plan (LTIP). The Company issues new shares upon stock option exercises and the vesting of RSUs and PSUs.

For stock options awarded under the Company's former LTIP, options were to vest only upon the achievement of certain equity market conditions or performance-based milestones. The fair value of options granted under this program were calculated by using a Monte Carlo simulation for the equity market condition tranches and the Black-Scholes-Merton option pricing method on the performance-based tranches. 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 13. Stock-based compensation expense associated with the Company's former LTIP for the years ended December 31, 2025, 2024, and 2023 was $1,180,356, $5,637,176, and $8,144,734, respectively.

Leases

The Company determines if an arrangement is a lease at inception. Our lease agreements generally contain lease and non-lease components. Historically, non-lease components such as utilities have been immaterial. Payments under our lease arrangements are primarily fixed. Lease assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The Company has made an accounting policy election to account for lease and non-lease components in its contracts as a single lease component for its real estate leases. The interest rate used to determine the present value of the future lease payments is our incremental borrowing rate, because the interest rate implicit in our leases is not readily determinable. Our incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. Our lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

As of December 31, 2025, all of our leases are considered operating leases. Operating lease right-of-use assets and liabilities were included on our Consolidated Balance Sheets beginning January 1, 2019. The Company does not have any finance leases as of December 31, 2025.

Recently Adopted Accounting Pronouncements

In December 2023, the FASB released Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The standard requires enhanced disaggregation in the rate reconciliation and disclosures of income taxes paid by jurisdiction. The Company elected to apply the amendments in this ASU on a retrospective basis to all periods presented in the consolidated financial statements. Accordingly, the prior-period income tax rate reconciliation and income taxes paid disclosures have been recast to conform to the current-year presentation. The adoption of this standard resulted in increased disclosures but did not impact the Company's financial position, results of operations, or cash flows.

Recent Accounting Pronouncements

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. The Company does not expect the adoption of ASU 2025-05 to have a material impact on its consolidated financial statements.