0001144204-19-024878.txt : 20190509 0001144204-19-024878.hdr.sgml : 20190509 20190509160644 ACCESSION NUMBER: 0001144204-19-024878 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 61 CONFORMED PERIOD OF REPORT: 20190331 FILED AS OF DATE: 20190509 DATE AS OF CHANGE: 20190509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Vuzix Corp CENTRAL INDEX KEY: 0001463972 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 043392453 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-35955 FILM NUMBER: 19810517 BUSINESS ADDRESS: STREET 1: 25 HENDRIX ROAD STREET 2: SUITE A CITY: WEST HENRIETTA STATE: NY ZIP: 14586 BUSINESS PHONE: 585-359-5900 MAIL ADDRESS: STREET 1: 25 HENDRIX ROAD STREET 2: SUITE A CITY: WEST HENRIETTA STATE: NY ZIP: 14586 10-Q 1 tv520282_10q.htm 10-Q

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

For the Quarterly Period Ended March 31, 2019

 

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.)

 

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

  

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

 

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  x    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  x    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 x Non-accelerated filer ¨
           
Smaller reporting company x Emerging growth company ¨    

 

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

 

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

 

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

 

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

Nasdaq Capital Market

 

As of May 9, 2019, there were 27,602,083 shares of the registrant’s common stock outstanding.

 

 

 

 

 

 

Vuzix Corporation

INDEX

 

    Page
No.
     
Part I – Financial Information 3
     
Item 1. Consolidated Financial Statements (Unaudited): 3
     
  Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018 3
     
  Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2019 and 2018 4
     
  Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018 5
     
  Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2019 and 2018 6
     
  Notes to the Unaudited Consolidated Financial Statements 7
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 13
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
     
Item 4. Controls and Procedures 22
     
Part II – Other Information 22
     
Item 1. Legal Proceedings 22
     
Item 1A. Risk Factors 22
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
     
Item 3. Defaults Upon Senior Securities 23
     
Item 4. Mine Safety Disclosure 23
     
Item 5. Other Information 23
     
Item 6. Exhibits 23
     
Signatures   24

 

2

 

 

Part 1: FINANCIAL INFORMATION

 

Item 1: Consolidated Financial Statements

 

VUZIX CORPORATION

 

CONSOLIDATED BALANCE SHEETS

 

   (Unaudited)
March 31,
2019
   December 31,
2018
 
ASSETS          
Current Assets          
Cash and Cash Equivalents  $10,085,837   $17,263,643 
Accounts Receivable, Net   199,759    772,336 
Inventories, Net   8,110,226    7,281,802 
Manufacturing Vendor Prepayments   386,561    755,219 
Prepaid Expenses and Other Assets   872,148    1,310,095 
           
Total Current Assets   19,654,531    27,383,095 
           
Long-Term Assets          
Fixed Assets, Net   4,517,169    4,291,690 

Operating Lease Right-of-Use Assets, Net

   860,277     
Patents and Trademarks, Net   1,206,018    1,164,543 
Software Development Costs, Net   175,000    200,000 

Licenses, Net

   406,849    437,120 
Intangible Asset, net   1,296,000    1,398,000 
Other Assets   296,600    259,192 
           
Total Assets  $28,412,444   $35,133,640 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
Current Liabilities          
Accounts Payable  $1,715,744   $2,668,241 
Operating Lease Right-of-Use Liabilities   533,289     
Customer Deposits   74,615    152,362 
Unearned Revenue   230,344    211,726 
Accrued Expenses   943,010    1,614,078 
Taxes Payable   77,554    30,258 
           
Total Current Liabilities   3,574,556    4,676,665 
           
Long-Term Liabilities          
Operating Lease Right-of-Use Liabilities   326,988     
           
Total Liabilities   3,901,544    4,676,665 
           
Stockholders' Equity          
Preferred Stock - $.001 Par Value, 5,000,000 Shares Authorized; 49,626 and 49,626 Shares Issued and Outstanding as of March 31, 2019 and December 31, 2018.   50    50 
Common Stock - $.001 Par Value, 100,000,000 Shared Authorized; 27,597,917 Shares Issued and Outstanding as of March 31, 2019 and 27,591,670 as of December 31, 2018.   27,598    27,591 
Additional Paid-in Capital   149,109,454    148,695,775 
Accumulated Deficit   (124,626,202)   (118,266,441)
           
Total Stockholders' Equity   24,510,900    30,456,975 
           
Total Liabilities and Stockholders' Equity  $28,412,444   $35,133,640 

 

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

 

3

 

  

VUZIX CORPORATION

 

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited for the three months ended March 31, 2019 and 2018)

 

   Preferred Stock   Common Stock   Additional   Accumulated     
   Shares   Amount   Shares   Amount   Paid-In Capital   Deficit   Total 
                             
Balance - January 1, 2019   49,626   $50    27,591,670   $27,591   $148,695,775   $(118,266,441)  $30,456,975 
                                    
Stock-Based Compensation Expense          6,247    7    413,679        413,686 
Net Loss                       (6,359,761)   (6,359,761)
                                    
Balance - March 31, 2019   49,626   $50    27,597,917   $27,598   $149,109,454   $(124,626,202)  $24,510,900 

 

   Preferred Stock   Common Stock   Additional   Accumulated     
   Shares   Amount   Shares   Amount   Paid-In Capital   Deficit   Total 
                             
Balance - January 1, 2018   49,626   $50    24,276,275   $24,276   $117,827,839   $(96,472,452)  $21,379,713 
                                    
Cumulative Adj. - ASC 606 Adoption                       81,724    81,724 
Stock-Based Compensation Expense           6,250    6    424,694        424,700 
Exercise of Warrants           24,930    25    39,350        39,375 
Proceeds from Common Stock Offerings           3,000,000    3,000    29,997,000        30,000,000 
Direct Costs of Common Stock Offerings                   (1,975,000)       (1,975,000)
Net Loss                       (5,365,650)   (5,365,650)
                                    
Balance - March 31, 2018   49,626   $50    27,307,455   $27,307   $146,313,883   $(101,756,378)  $44,584,862 

 

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

 

4

 

 

VUZIX CORPORATION

 

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   Three Months Ended March 31, 
   2019   2018 
         
Sales:          
Sales of Products  $1,373,371   $1,363,379 
Sales of Engineering Services       180,516 
           
Total Sales   1,373,371    1,543,895 
           
Cost of Sales:          
Cost of Sales - Products   1,333,481    1,182,215 
Cost of Sales - Engineering Services       184,555 
           
Total Cost of Sales   1,333,481    1,366,770 
           
Gross Profit (exclusive of depreciation shown separately below)   39,890    177,125 
           
Operating Expenses:          
Research and Development   2,516,100    2,055,787 
Selling and Marketing   1,417,966    1,534,097 
General and Administrative   1,896,402    1,665,229 
Depreciation and Amortization   559,089    273,622 
           
Total Operating Expenses   6,389,557    5,528,735 
Loss from Operations   (6,349,667)   (5,351,610)
           
Other Income (Expense):          
Investment Income   58,313     
Other Taxes   (52,662)   (28,542)
Foreign Exchange Loss   (15,745)   (4,418)
Gain on Derivative Valuation       28,133 
Interest Expense       (9,213)
         
Total Other Expense   (10,094)   (14,040)
           
Loss Before Provision for Income Taxes   (6,359,761)   (5,365,650)
Provision for Income Taxes        
           
Net Loss   (6,359,761)   (5,365,650)
Preferred Stock Dividends   (465,765)   (438,836)
Loss Attributable to Common Stockholders  $(6,825,526)  $(5,804,486)
           
Basic and Diluted Loss Attributable to Common Stockholders per Share  $(0.25)  $(0.22)
Weighted-average Shares Outstanding - Basic and Diluted   27,595,767    26,296,188 

 

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

 

5

 

 

VUZIX CORPORATION

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Three Months Ended March 31, 
   2019   2018 
         
Cash Flows from Operating Activities          
Net Loss  $(6,359,761)  $(5,365,650)
Non-Cash Adjustments          
Depreciation and Amortization   559,089    273,622 
Amortization of Software Development Costs in Cost of Sales - Products   25,000     
Stock-Based Compensation Expense   489,754    508,451 
Loss (Gain) on Derivative Valuation       (28,133)
(Increase) Decrease in Operating Assets          
Accounts Receivable   572,577    (77,165)
Accrued Project Revenue       497,784 
Inventories   (828,424)   (424,013)
Vendor Prepayments   368,658    28,658 
Prepaid Expenses and Other Assets   437,947    277,615 
Increase (Decrease) in Operating Liabilities          
Accounts Payable   (952,497)   (1,978,637)
Accrued Expenses   (171,068)   (211,052)
Customer Deposits   (77,747)   137,178 
Unearned Revenue   18,618    (26,100)
Income and Other Taxes Payable   43,497    19,251 
Accrued Compensation       (92,000)
Accrued Interest       (10,787)
           
Net Cash Flows Used in Operating Activities   (5,874,357)   (6,470,978)
           
Cash Flows from Investing Activities          
Purchase of Fixed Assets   (724,565)   (306,739)
Investments in Patents and Trademarks   (41,475)   (64,664)
Investments in Licenses and Other Intangible Assets   (537,409)    
Investments in Software Development       (43,750)
           
Net Cash Used in Investing Activities   (1,303,449)   (415,153)
           
Cash Flows from Financing Activities          
Proceeds from Exercise of Warrants       39,375 
Proceeds from Common Stock Offerings       30,000,000 
Issuance Costs on Common Stock Offerings       (1,975,000)
           
Net Cash Flows from Financing Activities       28,064,375 
           
Net Increase (Decrease) in Cash and Cash Equivalents   (7,177,806)   21,178,244 
Cash and Cash Equivalents - Beginning of Period   17,263,643    14,889,636 
           
Cash and Cash Equivalents - End of Period  $10,085,837   $36,067,880 
           
Supplemental Disclosures          
Interest Paid in Cash  $   $19,999 
Cumulative Revenue Adjustment - ASC 606 Adoption     81,724 
Investment in Other Intangible Assets included in Accrued Expenses   250,000      
Unamortized Common Stock Expense included in Prepaid Expenses   463,154      
Operating Lease Right-of-Use Asset   860,277      

 

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

 

6

 

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") 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 (the “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. Certain re-classifications have been made to prior periods to conform with current reporting. The results of the Company’s operations for the three months ended March 31, 2019 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 December 31, 2018, as reported in the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2019.

 

The accompanying unaudited consolidated financial statements have been prepared assuming that we 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 unaudited 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 Company incurred net losses for the three months ended March 31, 2019 of $6,359,761 and annual net losses of $21,875,713 in 2018 and $19,633,502 in 2017. As of March 31, 2019, the Company has an accumulated deficit of $124,626,202.

 

The Company’s cash requirements are primarily for funding operating losses, working capital, research and development, and capital expenditures. Our cash requirements related to funding operating losses depend on 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 by the sale of equity, borrowings under notes, and sales of convertible debt.

 

The Company’s management intends to take actions necessary to continue as a going concern, as discussed herein. The Company will need to grow its business significantly to become profitable and self-sustaining on a cash flow basis or it will be required to raise new equity and/or debt capital. Management’s plans concerning these matters and managing our liquidity include, among other things:

 

  · the continued sale of our existing M300, M300XL and Blade inventory;
  · the introduction of our M400 Smart Glasses, our third-generation monocular device for enterprise. We expect to launch the product in the third quarter of 2019;
  · the commencement of volume manufacturing and sale of the new M100 Smart Swim product in the third quarter of 2019;
  · new engineering services and product sales into business customers, first responder, defense and governmental entity customers;
  · tightly control operating costs and reduce spending growth rates wherever possible;
  · decrease tradeshow and PR firm spending;
  · right size operations across all areas of the Company, both with head-count and spending;
  · delay or curtail discretionary and non-essential capital expenditures not related to near-term new products; and
  · reduce the rate of research and development spending on new technologies, particularly the use of costly external contractors.

 

However, if these plans are not successful within a reasonable time period, we will have to raise additional capital to maintain operations and/or materially reduce our operating and new product development costs.

 

If the Company raises additional funds, the ownership interest of existing stockholders may be diluted. The amount of such dilution could increase due to the issuance of new securities with warrants or other dilutive characteristics, such as full ratchet anti-dilution clauses or price resets.

 

Based upon our current amount of cash on hand, management’s historical ability to raise capital, and our ability to manage our cost structure and adjust operating plans if and as required, we have concluded that substantial doubt of our ability to continue as a going concern has been alleviated.

 

Recent Accounting Pronouncements

 

In July 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). This ASU requires that when determining whether certain financial instruments should be classified as liabilities or equity instruments, an entity should not consider the down round feature. The provisions of the ASU related to down rounds are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We have adopted this standard effective January 1, 2019. The adoption of this standard did not impact our Consolidated Financial Statements for the current or prior periods presented.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize a right-of-use asset and lease liability in the balance sheet for all leases, including operating leases, with terms of more than twelve months. We have adopted this standard effective January 1, 2019. Upon adoption, we recognized an Operating Lease Right-of-Use Asset of $994,000, a current Operating Lease Liability of $533,000 and a long-term Operating Lease Liability of $461,000. We applied Topic 842 to all leases as of January 1, 2019 with comparable periods continuing to be reported under Topic 840. Upon adoption, we elected: (i) the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification and (ii) the practical expedient which allows us not to separate non-lease components from lease components, as they are not considered the predominate components in our contracts. The adoption of this standard does not have a significant impact on our consolidated results of operations or cash flows. See Note 12 for further details.

 

For the three months ended March 31, 2019, no one customer represented more than 10% of our product revenue. For the three months ended March 31, 2018, Toshiba Japan represented 94% of the Company’s engineering revenues and 18% of the Company’s total revenues.

 

As of March 31, 2019, no significant customer represented more than 10% of accounts receivable. As of December 31, 2018, Toshiba and SATS represented 32% and 38%, respectively, of accounts receivable.

 

7

 

 

Note 2 – Revenue Recognition and Contracts with Customers

 

Disaggregated Revenue

 

The Company’s total revenue was comprised of four major product lines: Smart Glasses and iWear Video Headphones Sales, OEM product Sales, Waveguide and Display Engine Sales, and Engineering Services. The following table summarizes the revenue recognized by major product line:

 

   Three Months Ended
March 31,
 
   2019   2018 
         
Revenues          
Smart Glasses and iWear Video Headphones Sales  $1,278,371   $1,212,771 
OEM Product Sales       114,170 
Waveguide and Display Engine Sales   95,000    36,438 
Engineering Services       180,516 
           
Total Revenue  $1,373,371   $1,543,895 

 

Significant Judgments

 

Under Topic 606, there are judgments used 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. Judgments made include considerations in determining our transaction prices for our standard product sales that include an end-user 30-day right to return if not satisfied with product and include payment terms that are between Net 30 and 60 days. 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 satisfied at a point in time are typically for standard goods (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 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 cost 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 of 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, except in certain European countries where it can be twenty-four (24) months for some consumer-focused products. In the case of our OEM product and waveguide sales, some include a standard product warranty of up to eighteen (18) months. In 2018, we began offering extended warranties to customers, which extend 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 date of billing, subject to an agreed upon customer acceptance period.

 

8

 

  

The following table presents a summary of the Company’s net sales by revenue recognition method as a percentage of total net sales for the three months ended March 31, 2019:

 

   % of Total Net Sales 
Point-in-Time   100%
Over Time - Input Method   %
Total   100%

 

Remaining Performance Obligations

 

As of March 31, 2019, the Company had $970,000 of performance obligations under our OEM product purchase agreement, which represents the transaction price of firm orders less inception to date sales recognized. The Company expects to recognize sales relating to this existing performance obligation of $970,000 during the second quarter of 2019.

 

As of March 31, 2019, the Company had $148,000 of remaining performance obligations related to its extended warranties. The Company expects to recognize this deferred revenue on a twelve (12) month straight-line basis beginning on October 1, 2019.

 

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 from the assumed exercise of stock options and warrants, and the conversion of convertible preferred shares. 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 months ended March 31, 2019 and 2018, 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 March 31, 2019 and 2018, there were 7,529,006 and 8,800,821 common stock share equivalents, respectively, potentially issuable under conversion of preferred shares, options, and warrants 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:

 

   March 31,   December 31, 
   2019   2018 
         
Purchased Parts and Components  $3,206,094   $3,284,848 
Work in Process   631,840    1,523,616 
Finished Goods   4,783,213    2,837,183 
Less: Reserve for Obsolescence   (510,921)   (363,845)
Net  $8,110,226   $7,281,802 

 

Note 5 – Intangible Asset, Net

 

   March 31,
2019
   December 31,
2018
 
         
Intangible Asset  $1,500,000   $1,500,000 
Less: Accumulated Amortization   (204,000)   (102,000)
           
Intangible Asset, Net  $1,296,000   $1,398,000 

 

On October 4, 2018, the Company entered into amendment No. 1 to the original agreements (the “TDG Amendment”) with TDG Acquisition Company, LLC (“TDG”), aka Six15 Technologies, LLC. The TDG Amendment amends certain provisions of prior agreements between Vuzix and TDG, including an asset purchase agreement dated June 15, 2012, and an authorized reseller agreement dated June 15, 2012.

 

Pursuant to the TDG Amendment, the Company will be permitted to engage in sales of heads-up display components or subsystems (and any services to support such sale) for incorporation into a finished goods or systems for sale to military organizations, subject to certain conditions. The Company will also be permitted to sell its products to defense and security organizations that include business customers and governmental entity customers that primarily provide security and defense services, including police, fire fighters, EMTs, other first responders, and homeland and border security. The Company will owe TDG commissions with respect to all such sales until June 2022.

 

This reacquired right covers the entire remaining term of the original non-compete agreement with TDG, which expires June 15, 2022. The capitalized cost of this reacquired right is being amortized over 44 months, which began in October 2018. Total amortization expense for this intangible asset for the three months ended March 31, 2019 was $102,000. As of March 31, 2019, there was $250,000 in accrued current liabilities for the final payment due under the terms of this agreement.

 

9

 

 

Note 6 – Accrued Expenses

 

Accrued expenses consisted of the following:

 

   March 31,   December 31, 
   2019   2018 
         
Accrued Wages and Related Costs  $281,286   $461,619 
Accrued Professional Services   123,967    138,438 
Accrued Warranty Obligations   241,530    218,047 
Other Accrued Expenses   296,227    795,974 
           
Total  $943,010   $1,614,078 

 

Included in Other Accrued Expenses as of March 31, 2019 is $250,000 for the final payment described above in Note 5 related to the TDG Amendment. As of December 31, 2018, there was $750,000 in Other Accrued Expenses related to the TDG Amendment.

 

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 except in certain European countries where it can be twenty-four (24) months for some consumer-focused products. 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 on product-based historical performance rates and related costs to repair.

 

The changes in the Company’s accrued warranty obligations for the three months ended March 31, 2019 and the balance as of December 31, 2018 were as follows:

 

Accrued Warranty Obligation at December 31, 2018  $218,047 
Reductions for Settling Warranties   (62,394)
Warranties Issued During Period   85,877 
      
Accrued Warranty Obligations at March 31, 2019  $241,530 

 

Note 7 – Income Taxes

 

The Company’s effective income tax rate is a combination of federal, state and foreign tax rates and differs from the U.S. statutory rate due to taxes on foreign income, permanent differences including tax-exempt interest, and the resolution of tax uncertainties, offset by a valuation allowance against U.S. deferred income tax assets.

 

Note 8 – Capital Stock

 

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 special rights and qualifications. A total of 5,000,000 shares of preferred stock with a par value of $0.001 are authorized as of March 31, 2019 and December 31, 2018, 49,626 of which are designated as Series A Preferred Stock. There were 49,626 shares of Series A Preferred Stock issued and outstanding on March 31, 2019 and December 31, 2018.

 

On January 2, 2015 the Company closed a sale of Series A Preferred Stock to Intel Corporation (the “Series A Purchaser”), pursuant to which we issued and sold an aggregate of 49,626 shares of the Company’s Series A Preferred Stock, at a purchase price of $500 per share, for an aggregate purchase price of $24,813,000. Each share of Series A Preferred Stock is convertible, at the option of the Series A holder, into 100 shares of the Company’s common stock (determined by dividing the Series A Original Issue Price of $500 by the Series A Conversion Price, which is equal to $5.00).

 

Each share of Series A Preferred Stock is entitled to receive dividends at a rate of 6% per year, compounded quarterly and payable in cash or in kind, at the Company’s sole discretion. As of March 31, 2019, total accumulated and unpaid preferred dividends were $7,134,996. As of December 31, 2018, total accumulated and unpaid preferred dividends were $6,669,232. There were no declared preferred dividends owed as of March 31, 2019 or December 31, 2018.

 

The Series A Purchaser has the right, but not the obligation, to participate in any proposed issuance by the Company of its securities, subject to certain exceptions and in such amount as is sufficient to maintain the Series A Purchaser’s ownership percentage in the Company, calculated immediately prior to such applicable financing, at a purchase price equal to the per share price of the Company’s securities in such applicable financing.

 

Common Stock

 

The Company’s authorized common stock consists of 100,000,000 shares, par value of $.001. As of March 31, 2019 and December 31, 2018 there were 27,597,917 and 27,591,670 shares of common stock issued and outstanding, respectively.

 

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Note 9 – Stock Warrants

 

A summary of the various changes in warrants during the three-month period ended March 31, 2019 is as follows:

 

   Number of
Warrants
 
     
Warrants Outstanding at December 31, 2018   2,233,062 
Exercised During the Period    
Issued During the Period    
Expired During the Period   (1,200,000)
      
Warrants Outstanding at March 31, 2019   1,033,062 

 

The outstanding warrants as of March 31, 2019 expire on June 18, 2021. The remaining term of the warrants is 2.2 years and the exercise price is $7.00 per share.

 

Note 10 – Stock-Based Compensation Plans

 

A summary of stock option activity for the three months ended March 31, 2019 is as follows:

 

   Number of 
Options
   Weighted
Average
Exercise
Price
 
         
Outstanding at December 31, 2018   1,546,521   $5.11 
Granted        
Exercised        
Expired or Forfeited   (11,500)   5.98 
           
Outstanding at March 31, 2019   1,535,021   $5.10 

 

The weighted average remaining contractual term for all options as of March 31, 2019 and December 31, 2018 was 6.9 years and 7.2 years, respectively.

 

As of March 31, 2019, there were 999,891 options that were fully-vested and exercisable at a weighted average exercise price of $4.73 per share. The weighted average remaining contractual term on the vested options is 6.0 years.

 

As of March 31, 2019, there were 535,130 unvested options exercisable at a weighted average exercise price of $5.80 per share. The weighted average remaining contractual term on the unvested options is 8.7 years.

 

11

 

 

The weighted average fair value of option grants was calculated using the Black-Scholes-Merton option pricing method. At March 31, 2019, the Company had approximately $2,700,000 of unrecognized stock compensation expense, which will be recognized over a weighted average period of approximately 2.7 years.

 

For the three months ended March 31, 2019 and 2018, the Company recorded total stock-based compensation expense, including stock awards, of approximately $490,000 and $508,000, respectively.

 

Note 11 – Litigation 

 

We are not currently involved in any actual or pending legal proceeding or litigation and we are not aware of any such proceedings contemplated by or against us or involving our property, except as follows:

 

We filed a defamation lawsuit against Ricardo Antonio Pearson (a\k\a Richard Pearson) in the Supreme Court of the State of New York, County of New York on April 5, 2018. The Company’s complaint against Mr. Pearson alleges he published false and defamatory articles about the Company. Vuzix is seeking damages in excess of $80 million, including punitive damages, and monetary damages.

 

On or about October 27, 2018, Bob Glenn filed a shareholder derivative suit in the Supreme Court of the State of New York, County of Monroe against certain of the Company’s current and former directors and executive officers. The Company was named as a nominal defendant only. The complaint alleges breaches of fiduciary duty, unjust enrichment, and waste of corporate assets. The complaint alleges that the Company and certain of its officers and directors made materially false and/or misleading statements and failed to disclose material adverse events about the Company’s business, operations and prospects in press releases and public filings. The complaint seeks a declaration that the defendants have breached and/or aided and abetted the breach of their fiduciary duties to the Company, determining and awarding damages, and directing the Company to reform and improve its corporate governance. Similar derivative suits were filed by Michael Washington and John Mayer on or about October 26, 2018 and October 29, 2018. The Company believes the allegations are false and intends to vigorously defend itself. The Company plans to file a motion to dismiss the complaints.

 

12

 

 

Note 12 – Right-of-Use Assets and Liabilities

 

The Company has signed several lease agreements, with the largest being for its office and manufacturing facility in the Rochester, New York area under an operating lease that commenced October 3, 2015 and expires on October 3, 2020. This lease has an original five-year term with an option by the Company to renew for two additional three-year terms at pre-agreed to lease rates. This renewal term is excluded from our right-to-use asset and liability as of March 31, 2019 as the renewal option for our current leased facility is not reasonably certain. Rent expense under the operating leases totaled $140,300 and $112,896 for the three months ended March 31, 2019 and 2018, respectively.

 

Certain leases provide for increases in future minimum annual rental payments as defined in the lease agreements. The leases generally also include real estate taxes and common area maintenance charges in the annual rental payments. Short-term leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases.

 

As none of our leases provide an implicit interest rate, we use our incremental borrowing rate to determine our discount rate at lease inception based upon the information available at commencement in determining the present value of lease payments. As of March 31, 2019, the weighted average discount rate was 5% and the weighted average remaining lease term was 1.7 years.

 

Future lease payments under operating leases as of March 31, 2019 were as follows:

 

Remainder of 2019   $ 428,109  
2020           451,832  
2021               7,854  
2022               7,854  
2023              5,236  
  Total Future Lease Payments     900,885  
  Less: Imputed Interest       (40,608 )
  Total Lease Liability Balance   $ 860,277  

 

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, 2018.

 

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 on our unaudited consolidated financial statements and related notes appearing elsewhere in this quarterly report. The preparation of these statements in conformity with generally accepted accounting principles requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in our consolidated financial statements, including the statement of operations, balance sheet, cash flow and related notes. We continually evaluate our estimates used in the preparation of our financial statements, including those related to revenue recognition, bad debts, inventories, warranty reserves, product warranty, carrying value of long-lived assets, fair value measurement of financial instruments and embedded derivatives, 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 a change. Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

 

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

 

  · Valuation of inventories;
  · Carrying value of long-lived assets;
  · Going Concern;
  · Software development costs;
  · Revenue recognition;

 

13

 

 

  · Product warranty;
  · Stock-based compensation; and
  · Income taxes.

 

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, 2018. There have been no significant changes in our accounting policies other than the adoption of ASC 842, see Note 12 for further discussion, for the three-month period ended March 31, 2019.

 

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 wearable computing devices and augmented reality wearable display devices also referred to as head mounted displays (or HMDs, but also known as HUDs or near-eye displays), in the form of Smart Glasses and Augmented Reality (AR) glasses. Our wearable display devices are worn like eyeglasses or attach to a head-worn mount. These devices typically include cameras, sensors, and a computer that enable the user to view, record and interact with video and digital content, such as computer data, the Internet, social media or entertainment applications. Our wearable display products integrate micro-display technology with our advanced optics to produce compact high-resolution display engines, less than half an inch diagonally, which when viewed through our smart glasses products create virtual images that appear comparable in size to that of a computer monitor or a large-screen television.

 

With respect to our Smart Glasses and AR products, we are focused on the enterprise, industrial, commercial, first responder, and medical markets. All of the mobile display and mobile electronics markets in which we compete have been and continue to be subject to rapid technological change almost yearly 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 intellectual property portfolio gives us a leadership position in the design and manufacturing of micro-display projection engines, waveguides, mechanical packaging, ergonomics, and optical systems.

 

Recent Accounting Pronouncements

 

See Note 1 to the consolidated financial statements.

 

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Results of Operations

 

Comparison of Three Months Ended March 31, 2019 and March 31, 2018

 

The following table compares the Company’s consolidated statements of operations data for the three months ended March 31, 2019 and 2018:

 

   The Months Ended March 31, 
   2019   2018   Dollar
Change
   % Increase
(Decrease)
 
Sales:                    
Sales of Products  $1,373,371   $1,363,379   $9,992    1%
Sales of Engineering Services       180,516    (180,516)   (100%)
                     
Total Sales   1,373,371    1,543,895    (170,524)   (11%)
                     
Cost of Sales:                    
Cost of Sales - Products   1,333,481    1,182,215    151,266    13%
Cost of Sales - Engineering Services       184,555    (184,555)   (100%)
                     
Total Cost of Sales   1,333,481    1,366,770    (33,289)   (2%)
                     
Gross Profit (exclusive of depreciation shown separately below)   39,890    177,125    (137,235)   (77%)
Gross Profit %   3%   11%          
                     
Operating Expenses:                    
Research and Development   2,516,100    2,055,787    460,313    22%
Selling and Marketing   1,417,966    1,534,097    (116,131)   (8%)
General and Administrative   1,896,402    1,665,229    231,173    14%
Depreciation and Amortization   559,089    273,622    285,467    104%
                     
Loss from Operations   (6,349,667)   (5,351,610)   (998,057)   19%
                     
Other Income (Expense):                    
Investment Income   58,313        58,313    NM 
Other Taxes   (52,662)   (28,542)   (24,120)   85%
Foreign Exchange Loss   (15,745)   (4,418)   (11,327)   256%
Gain on Derivative Valuation       28,133    (28,133)   (100%)
Interest Expense       (9,213)   9,213    (100%)
                     
Total Other Expense   (10,094)   (14,040)   3,946    (28%)
                     
Loss Before Provision for Income Taxes   (6,359,761)   (5,365,650)   (994,111)   19%
Provision for Income Taxes                
                     
Net Loss  $(6,359,761)  $(5,365,650)  $(994,111)   19%

 

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Sales.    There was an overall decrease in total sales for the quarter ended March 31, 2019 over the same period in 2018 of $170,524 or 11%. The following table reflects the major components of our sales:

 

   Quarter Ended
March 31,
2019
   % of
Sales
   Quarter Ended
March 31,
2018
   % of
Sales
   Dollar
Change
   % Increase
(Decrease)
 
                         
Sales of Smart Glasses  $1,252,001    91%  $1,176,121    76%  $75,880    6%
Sales of Video Eyewear       0%   117,830    8%   (117,830)   (100)%

Sales of Waveguides & Display Engines

   95,000    7%   36,438    2%   58,562    161%
Sales Freight out   26,370    2%   32,990    2%   (6,620)   (20)%
Sales of Engineering Services       0%   180,516    12%   (180,516)   (100)%
Total Sales  $1,373,371    100%  $1,543,895    100%  $(170,524)   (11)%

 

Sales of smart glasses products rose by 6%, primarily the result of our new Blade Smart Glasses included in this revenue category. There were no sales of Video Eyewear in the 2019 period as the product was discontinued in September 2018. Sales of Waveguides and Display Engines for the three months ended March 31, 2019 were $95,000 versus $32,990 in the prior year’s comparable period.

 

Sales of engineering services for the three-month period ending March 31, 2019 was nil as compared to $180,516 in the 2018 period. There were no new programs that commenced in the first quart of 2019 and all the 2018 engineering services projects were completed by end of the year.

 

Cost of Sales and Gross Profit.  Cost of product revenues and engineering services are comprised of materials, components, labor, warranty costs, freight costs, manufacturing overhead, software royalties, and the non-cash 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 for products:

 

Component of Cost of Sales  Quarter Ended
March 31, 2019
   As % Related
Product Sales
   Quarter Ended
March 31, 2018
   As % Related
Product Sales
   Dollar
Change
   % Increase
 (Decrease)
 
                         
 Product Cost of Sales  $710,098    52%  $624,928    46%  $85,170    14%
 Freight Costs   132,970    10%   148,078    11%   (15,108)   (10%)
 Manufacturing Overhead   415,901    30%   258,843    19%   157,058    61%
 Warranty Costs   23,483    2%   123,060    9%   (99,577)   (81%)
 Amortization of Software Development Costs   25,000    2%       0%   25,000    NM 
 Software Royalties   26,029    2%   27,306    2%   (1,277)   (5%)
                               
 Total Cost of Sales - Products  $1,333,481    97%  $1,182,215    87%  $151,266    13%
                               
 Gross Profit - Product Sales  $39,890    3%  $181,164    13%  $(141,274)   (78%)

 

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For the quarter ended March 31, 2019, we reported an overall gross profit from product sales of $39,890 as compared to $181,164 in the prior year’s period. On a product cost of sales basis only, product direct costs were 52% of sales in the 2019 period as compared to 46% in the prior year’s period, the increase resulting from slightly lower margins on our Blade Smart Glasses as compared to our M series products. Manufacturing overhead costs for the 2019 period, as a percentage of total product sales, increased to 30% for the 2019 period from 19% in the 2018 period, as we have increased our production floor space, including related personnel, in anticipation of increased Blade manufacturing and the expected commencement in Q3-2019 of M400 production.

 

Costs for engineering services for the three months ended March 31, 2019 were nil as compared to $184,555 in the three-month period ending March 31, 2018. The 2018 period amounts represented costs related to the Toshiba engineering program which was completed in March 2018. There was nil gross profit from engineering services for the 2019 period versus a gross loss from engineering services of $4,039 in the same period in 2018 when the Toshiba project was active.

 

Research and Development.   Our research and development expenses consist primarily of compensation costs for personnel, related stock 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 costs.

 

   Quarter Ended
March 31, 2019
   % of
Sales
   Quarter Ended
March 31, 2018
   % of
Sales
   Dollar
Change
   % Increase
(Decrease)
 
                              
Research and Development  $2,516,100    183%  $2,055,787    133%  $460,313    22%

 

Comparing our research and development costs for the quarter ended March 31, 2019 versus the same period in 2018, there was an increase in salary, benefits and stock compensation expenses of $358,585, primarily the result of additional R&D staff as compared to the same period in 2018; and an increase of $102,000 in consulting fees for software contractors relating to our Blade product.

 

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

 

   Quarter Ended
March 31, 2019
   % of
Sales
   Quarter Ended
March 31, 2018
   % of
 Sales
   Dollar
Change
   % Increase
(Decrease)
 
                               
Selling and Marketing  $1,417,966    103%  $1,534,097    99%  $(116,131)   (8%)

 

These costs decreased overall as compared to the same period in 2018 primarily due to the following factors: a $73,261 decrease in salary, commissions, benefits and stock compensation expenses; a $38,883 decrease in advertising, marketing and trade show costs; a $44,268 decrease in website costs; partially offset by a $28,138 increase in consulting fees.

 

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General and Administrative.   General and administrative costs include professional fees, investor relations (IR) costs including shares and warrants issued for IR services, salaries and related stock compensation, travel costs, office and rental costs.

 

   Quarter Ended
March 31, 2019
   % of
Sales
   Quarter Ended
March 31, 2018
   % of
Sales
   Dollar
Change
   % Increase
(Decrease)
 
                               
 General and Administrative  $1,896,402    138%  $1,665,229    108%  $231,173    14%

 

General and administrative costs rose by 14% or $231,173 for the first quarter of 2019 versus the 2018 period primarily because of: increased accounting and SOX consultant costs of $39,383; increased IT and security assessment consulting fees of $208,984; increased legal fees of $158,170; increased IR and shareholder related expenses of $20,632; offset by a decrease in salary, commissions, benefits and stock compensation expenses of $160,027 and a decrease in travel expenses of $40,122.

 

Depreciation and Amortization.   Depreciation and amortization expense for the three months ended March 31, 2019 was $559,089 as compared to $273,622 in the same period in 2018, an increase of $285,467. The increase in depreciation and amortization expense is due to new investments in depreciable assets and our intangible asset related to the TDG Amendment.

 

Other Income (Expense).  Total other expense was $10,094 for the three months ended March 31, 2019 as compared to $14,040 in the same period in 2018. The overall decrease of $3,946 in other expenses was primarily the result of an increased loss of $24,120 in other taxes; a decreased gain of $28,133 in derivative valuation for the three months ended March 31, 2019 as compared to the same period in 2018, offset by a $58,313 increase in investment income.

 

Provision for Income Taxes. There was not a provision for income taxes in the respective three-month periods ending March 31, 2019 and 2018.

 

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Liquidity and Capital Resources

 

As of March 31, 2019, we had cash and cash equivalents of $10,085,837, a decrease of $7,177,806 from $17,263,643 as of December 31, 2018.

 

At March 31, 2019, we had current assets of $19,654,531 compared to current liabilities of $3,574,556 which resulted in a positive working capital position of $16,079,975. At December 31, 2018, we had a working capital position of $22,706,430. Our current liabilities are comprised principally of accounts payable, operating lease liabilities and accrued expenses.

 

Operating Activities. We used $5,874,357 of cash for operating activities for the three months ended March 31, 2019 and $6,470,978 in the same period in 2018. The net cash operating loss after adding back non-cash adjustments for the three months ended March 31, 2019 was $5,285,918, along with the following changes in operating assets and liabilities for the period: a $572,577 decrease in accounts receivable, a $828,424 increase in net inventory, a $368,658 decrease in vendor prepayments, a $437,947 decrease in prepaid expenses, and $952,497 decrease in accounts payable. The net cash operating loss after adding back non-cash adjustments for the comparative three-month period ended March 31, 2018 was $4,611,710, along with the following changes in operating assets and liabilities for the 2018 period: a $497,784 decrease in accrued revenue, a $424,013 increase in net inventory, a $1,978,637 decrease in accounts payable, and a $211,052 decrease in accrued expenses.

 

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Investing Activities.   Cash used in investing activities was $1,303,449 for the three months ended March 31, 2019 as compared to $415,153 in the same period in 2018. During the first three months of 2019, $724,565 was used primarily for the purchase of manufacturing equipment, product mold tooling, and computer equipment as compared to a spending of $306,739 for the same period in 2018. The costs of registering our intellectual property rights and license purchases, included in the investing activities totals described above, were $41,475 in the three-month period ended March 31, 2019 and $64,664 in the same period in 2018. During the three months ended March 31, 2019, a total of $537,409 in license and other intangible asset costs were capitalized, $500,000 of which was the second of three payments required under our TDG Amendment, versus nil for the same period in 2018.

 

Financing Activities.  We generated no cash from financing activities for the three months ended March 31, 2019 as compared to $28,064,375 in the same period in 2018.

 

Capital Resources.   As of March 31, 2019, we had a cash and cash equivalents balance of $10,085,837.

 

We incurred a net loss for the three months ended March 31, 2019 of $6,359,761 and annual net losses of $21,875,713 in 2018 and $19,633,502 in 2017. The Company has an accumulated deficit of $124,626,202 as of March 31, 2019.

 

The Company’s cash requirements are primarily for funding operating losses, working capital, research and development, and capital expenditures. The Company needs to grow its business significantly to become profitable and self-sustaining on a cash flow basis or it will be required to raise new equity and/or debt capital. Our cash requirements related to funding operating losses depend on 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. The Company’s management intends to take actions necessary to continue as a going concern, and accordingly, our consolidated financial statements included in this report have been prepared assuming that we 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. The consolidated financial statements included in this report 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.

 

Historically, the Company has met its cash needs primarily by the sale of equity. If the Company raises additional funds by new equity issuances, the ownership interests of existing shareholders may be diluted. The amount of such dilution could increase due to the issuance of new warrants or securities with other dilutive characteristics, such as full ratchet anti-dilution clauses or price resets.

 

However, there can be no assurance that we will be able to raise capital in the future or that if we raise additional capital it will be sufficient to execute our business plan. To the extent that we are unable to raise sufficient additional capital, we will be required to substantially modify our business plan and our plans for operations, which could have a material adverse effect on us and our financial condition.

 

20

 

 

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 our 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 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 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 12 months; and
  · general market, political, economic and business 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 that are described in “Risk Factors” under Item 1A and elsewhere in our annual report on Form 10-K for the year ended December 31, 2018 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 effects of pending or threatened litigation, the dependence on key personnel, changes in critical accounting estimates, potential impairments related to investments, foreign regulations, 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.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

We invest our excess cash in high-quality short-term corporate debt instruments, which bear lower levels of relative risk. We believe that the effect, if any, of reasonably possible near-term changes in interest rates on our financial position, results of operations, and cash flows should not be material to our cash flows or income. It is possible that interest rate movements would increase our unrealized gain or loss on interest rate securities. We are exposed to changes in foreign currency exchange rates primarily through transaction gains and losses as a result of non-U.S. dollar denominated cash flows related to business activities in Japan and Europe. We do not currently hedge our foreign currency exchange rate risk. We estimate that any market risk associated with our international operations is unlikely to have a material adverse effect on our business, financial condition or results of operation.

 

21

 

 

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 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 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 March 31, 2019.

 

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.

 

Part II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not currently involved in any actual or pending legal proceeding or litigation and we are not aware of any such proceedings contemplated by or against us or involving our property, except as follows:

 

We filed a defamation lawsuit against Ricardo Antonio Pearson (a\k\a Richard Pearson) in the Supreme Court of the State of New York, County of New York on April 5, 2018. The Company’s complaint against Mr. Pearson alleges he published false and defamatory articles about the Company. Vuzix is seeking damages in excess of $80 million, including punitive damages, and monetary damages.

 

On or about October 27, 2018, Bob Glenn filed a shareholder derivative suit in the Supreme Court of the State of New York, County of Monroe against certain of the Company’s current and former directors and executive officers. The Company was named as a nominal defendant only. The complaint alleges breaches of fiduciary duty, unjust enrichment, and waste of corporate assets. The complaint alleges that the Company and certain of its officers and directors made materially false and/or misleading statements and failed to disclose material adverse events about the Company’s business, operations and prospects in press releases and public filings. The complaint seeks a declaration that the defendants have breached and/or aided and abetted the breach of their fiduciary duties to the Company, determining and awarding damages, and directing the Company to reform and improve its corporate governance. Similar derivative suits were filed by Michael Washington and John Mayer on or about October 26, 2018 and October 29, 2018. The Company believes the allegations are false and intends to vigorously defend itself. The Company plans to file a motion to dismiss the complaints.

 

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, 2018. There have been no material changes from those risk factors. The risks discussed in our 2018 annual report could materially affect our business, financial condition and future results.

 

22

 

 

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

 

Sale of Unregistered Securities –

  

  · During the three months ended March 31, 2019, we issued 6,247 shares of common stock to an employee for their vested stock award.

 

In connection with the foregoing, we relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering.

 

Purchase of Equity Securities – none

 

Item 3. Defaults Upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

Not Applicable

 

Item 5. Other Information

 

None

 

Item 6. Exhibits

 

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.INS   XBRL Instance Document
     
101.SCH   XBRL Taxonomy Extension Schema Document
     
101.CAL   XBRL Taxonomy Extension Calculation Link base Document
     
101.DEF   XBRL Taxonomy Extension Definition Link base
     
101.LAB   XBRL Taxonomy Extension Label Link base Document
     
101.PRE   XBRL Taxonomy Extension Presentation Link base Document

 

23

 

 

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: May 9, 2019 By: /s/ Paul Travers
    Paul Travers
    President, Chief Executive Officer
    (Principal Executive Officer)
     
Date: May 9, 2019 By: /s/ Grant Russell
    Grant Russell
    Executive Vice President and Chief Financial
    Officer
    (Principal Financial and Accounting Officer)

 

24

EX-31.1 2 tv520282_31-1.htm EXHIBIT 31.1

 

Exhibit 31.1

 

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

 

I, Paul Travers, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Vuzix Corporation;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 9, 2019 /s/ Paul Travers
  Paul Travers
  President and Chief Executive Officer

 

 

EX-31.2 3 tv520282_31-2.htm EXHIBIT 31.2

 

Exhibit 31.2

 

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

 

I, Grant Russell, certify that:

  

1. I have reviewed this quarterly report on Form 10-Q of Vuzix Corporation;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 9, 2019 /s/ Grant Russell
  Grant Russell
  Executive Vice President and Chief Financial Officer

 

 

EX-32.1 4 tv520282_32-1.htm EXHIBIT 32.1

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Vuzix Corporation (“Vuzix”) on Form 10-Q for the quarterly period ended March 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul Travers, President and Chief Executive Officer of Vuzix, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Vuzix.

 

  /s/ Paul Travers
  Paul Travers
  President and Chief Executive Officer
   
Date: May 9, 2019  

 

 

EX-32.2 5 tv520282_32-2.htm EXHIBIT 32.2

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Vuzix Corporation (“Vuzix”) on Form 10-Q for the quarterly period ended March 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Grant Russell, Executive Vice President and Chief Financial Officer of Vuzix, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Vuzix.

 

  /s/ Grant Russell
  Grant Russell
  Executive Vice President and Chief Financial Officer
   
Date: May 9, 2019  

 

 

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0px;;display:inline;">&#160;</div></div></td><td style="border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="white-space: pre-line; font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;"><div style="font-weight:bold;display:inline;">&#160;</div></div></div></td><td colspan="2" style="border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; text-align: center; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;"><div style="font-weight:bold;display:inline;">March 31,</div></div></div></td><td style="border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="white-space: pre-line; font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;"><div style="font-weight:bold;display:inline;">&#160;</div></div></div></td><td style="border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="white-space: pre-line; font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;"><div style="font-weight:bold;display:inline;">&#160;</div></div></div></td><td colspan="2" style="border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; 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style="font-weight:bold;display:inline;">&#160;</div></div></div></td></tr><tr><td style="border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 1pt; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; 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style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td colspan="2" 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roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td colspan="2" style="border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times 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style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">Other Accrued Expenses</div></div></td><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 1pt; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(255, 255, 255); border-bottom: 1pt solid rgb(0, 0, 0); border-left-width: initial; border-left-color: initial; border-right-width: initial; border-right-color: initial; border-top: none; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(255, 255, 255); border-bottom: 1pt solid rgb(0, 0, 0); border-left-width: initial; border-left-color: initial; border-right-width: initial; border-right-color: initial; border-top: none; padding: 0pt 0px; vertical-align: bottom; 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style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; 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The warranty period for its products is generally twelve (12) months except in certain European countries where it can be twenty-four (24) months for some consumer-focused products. The costs incurred to provide for these warranty obligations are estimated and recorded as an accrued liability at the time of sale. 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font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td></tr><tr><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 2.5pt; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; 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The Company was named as a nominal defendant only. The complaint alleges breaches of fiduciary duty, unjust enrichment, and waste of corporate assets. The complaint alleges that the Company and certain of its officers and directors made materially false and/or misleading statements and failed to disclose material adverse events about the Company&#8217;s business, operations and prospects in press releases and public filings. The complaint seeks a declaration that the defendants have breached and/or aided and abetted the breach of their fiduciary duties to the Company, determining and awarding damages, and directing the Company to reform and improve its corporate governance. Similar derivative suits were filed by Michael Washington and John Mayer on or about October 26, 2018 and October 29, 2018. The Company believes the allegations are false and intends to vigorously defend itself. 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background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 1pt; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="white-space: pre-line; font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;"><div style="font-weight:bold;display:inline;">&#160;</div></div></div></td><td colspan="2" style="border-bottom: 1pt solid rgb(0, 0, 0); border-left-width: initial; border-left-color: initial; border-right-width: initial; border-right-color: initial; border-top: none; padding: 0pt 0px; 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font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td></tr><tr><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">Accrued Warranty Obligations</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; 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font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; 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font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(255, 255, 255); border-bottom: 1pt solid rgb(0, 0, 0); border-left-width: initial; border-left-color: initial; border-right-width: initial; border-right-color: initial; border-top: none; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(255, 255, 255); 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background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td></tr><tr><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; text-align: right; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; 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border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; text-align: right; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td></tr><tr><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 2.5pt; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; 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border-left-width: initial; border-left-color: initial; border-right-width: initial; border-right-color: initial; border-top: none; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">$</div></div></td><td style="background: rgb(255, 255, 255); border-bottom: 2.5pt double rgb(0, 0, 0); border-left-width: initial; border-left-color: initial; border-right-width: initial; border-right-color: initial; border-top: none; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; text-align: right; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">943,010</div></div></td><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 2.5pt; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; 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font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">$</div></div></td><td style="background: rgb(255, 255, 255); border-bottom: 2.5pt double rgb(0, 0, 0); border-left-width: initial; border-left-color: initial; border-right-width: initial; border-right-color: initial; border-top: none; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; text-align: right; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">1,614,078</div></div></td><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 2.5pt; vertical-align: bottom; 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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. Certain re-classifications have been made to prior periods to conform with current reporting. 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This ASU requires that when determining whether certain financial instruments should be classified as liabilities or equity instruments, an entity should not consider the down round feature. The provisions of the ASU related to down rounds are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We have adopted this standard effective January 1, 2019. The adoption of this standard did not impact our Consolidated Financial Statements for the current or prior periods presented.</div></div><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-bottom: 0px; margin-top: 0px; text-indent: 0.5in; margin-right: 0px; background: none;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div><div style="font-family: &quot;times new roman&quot;, times, serif; margin-bottom: 0px; margin-top: 0px; text-indent: 0.5in; margin-right: 0px; background: none; font-size: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize a right-of-use asset and lease liability in the balance sheet for all leases, including operating leases, with terms of more than twelve months. We have adopted this standard effective January 1, 2019. Upon adoption, we recognized an Operating Lease Right-of-Use Asset of $994,000, a current Operating Lease Liability of $533,000 and a long-term Operating Lease Liability of $461,000. We applied Topic 842 to all leases as of January 1, 2019 with comparable periods continuing to be reported under Topic 840. 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See Note 12 for further details.</div><div style="background: none; font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-bottom: 0px; margin-top: 0px; text-indent: 0.5in; margin-right: 0px;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div><div style="background: none; font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-bottom: 0px; margin-top: 0px; text-indent: 0.5in; margin-right: 0px;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">For the three months ended March 31, 2019, no one customer represented more than 10% of our product revenue. 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font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-bottom: 1pt solid rgb(0, 0, 0); border-left-width: initial; border-left-color: initial; border-right-width: initial; border-right-color: initial; border-top: none; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-bottom: 1pt solid rgb(0, 0, 0); border-left-width: initial; border-left-color: initial; border-right-width: initial; 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background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 1pt; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-bottom: 1pt solid rgb(0, 0, 0); border-left-width: initial; border-left-color: initial; border-right-width: initial; border-right-color: initial; border-top: none; padding: 0pt 0px; vertical-align: bottom; 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border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; text-align: right; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; text-align: right; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td></tr><tr><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 2.5pt; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;"><div style="font-weight:bold;display:inline;">Total Revenue</div></div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 2.5pt; vertical-align: bottom; 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color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">$</div></div></td><td style="background: rgb(204, 238, 255); border-bottom: 2.5pt double rgb(0, 0, 0); border-left-width: initial; border-left-color: initial; border-right-width: initial; border-right-color: initial; border-top: none; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; text-align: right; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">1,373,371</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 2.5pt; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; 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border-left-width: initial; border-left-color: initial; border-right-width: initial; border-right-color: initial; border-top: none; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">$</div></div></td><td style="background: rgb(204, 238, 255); border-bottom: 2.5pt double rgb(0, 0, 0); border-left-width: initial; border-left-color: initial; border-right-width: initial; border-right-color: initial; border-top: none; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; text-align: right; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">1,543,895</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 2.5pt; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td></tr></table><div style="clear: both; max-height: 0px;"></div><div style="clear: both; max-height: 0px;"></div><div style="clear: both; max-height: 0px;"></div><div style="clear: both; max-height: 0px;"></div><div style="clear: both; max-height: 0px;"></div></div><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-bottom: 0px; margin-top: 0px; text-indent: 0.5in; margin-right: 0px; background: none;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-bottom: 0px; margin-top: 0px; margin-right: 0px; background: none;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;"><div style="font-weight:bold;display:inline;">Significant Judgments</div></div></div><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-bottom: 0px; margin-top: 0px; margin-right: 0px; background: none;"><div style="white-space: pre-line; font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;"><div style="font-weight:bold;display:inline;">&#160;</div></div></div><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-bottom: 0px; margin-top: 0px; text-indent: 0.5in; margin-right: 0px; background: none;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">Under Topic 606, there are judgments used 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. Judgments made include considerations in determining our transaction prices for our standard product sales that include an end-user 30-day right to return if not satisfied with product and include payment terms that are between Net 30 and 60 days. 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.</div></div><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-bottom: 0px; margin-top: 0px; margin-right: 0px; background: none;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-bottom: 0px; margin-top: 0px; margin-right: 0px; background: none;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;"><div style="font-weight:bold;display:inline;">Performance Obligations</div></div></div><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-bottom: 0px; margin-top: 0px; margin-right: 0px; background: none;"><div style="white-space: pre-line; font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;"><div style="font-weight:bold;display:inline;">&#160;</div></div><div style="background-color: initial; font-size: 10pt; text-indent: 0.5in;;display:inline;">&#160;</div></div><div style="font: 10pt &quot;times new roman&quot;, times, serif; margin: 0px; text-indent: 0.5in; background: none;">Revenues from our performance obligations satisfied at a point in time are typically for standard goods (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 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&#8217;s cost 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 of completing the contract. 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In the case of our OEM product and waveguide sales, some include a standard product warranty of up to eighteen (18) months. In 2018, we began offering extended warranties to customers, which extend 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. 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font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td></tr><tr><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 2.5pt 10pt; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; text-indent: -0.13in; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">Outstanding at March 31, 2019</div></div></td><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 2.5pt; vertical-align: bottom; font-size: 10pt; 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Loss Per Share</div></div></div><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-bottom: 0px; margin-top: 0px; margin-right: 0px; background: none;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-bottom: 0px; margin-top: 0px; text-indent: 0.5in; margin-right: 0px; background: none;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">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 from the assumed exercise of stock options and warrants, and the conversion of convertible preferred shares. 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 months ended March 31, 2019 and 2018, 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. 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font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td></tr><tr><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">Finished Goods</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; 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font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; 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font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(255, 255, 255); border-bottom: 1pt solid rgb(0, 0, 0); border-left-width: initial; border-left-color: initial; border-right-width: initial; border-right-color: initial; border-top: none; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(255, 255, 255); border-bottom: 1pt solid rgb(0, 0, 0); border-left-width: initial; border-left-color: initial; border-right-width: initial; 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font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">)</div></div></td></tr><tr><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 2.5pt; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">Net</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 2.5pt; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; 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table-layout:fixed;" cellspacing="0" cellpadding="0"><tr><td></td></tr></table> <div style="background: none; font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-bottom: 0px; margin-top: 0px; margin-right: 0px;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;"><div style="font-weight:bold;display:inline;">Note&#160;5&#160;&#8211; Intangible Asset, Net</div></div></div><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-bottom: 0px; margin-top: 0px; margin-right: 0px; background: none;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div><div><table style="border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; 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font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; width: 1%; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">$</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; width: 10%; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; 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font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; text-align: right; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); 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font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">Intangible Asset, Net</div></div></td><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 2.5pt; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(255, 255, 255); border-bottom: 2.5pt double rgb(0, 0, 0); border-left-width: initial; border-left-color: initial; border-right-width: initial; border-right-color: initial; border-top: none; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">$</div></div></td><td style="background: rgb(255, 255, 255); border-bottom: 2.5pt double rgb(0, 0, 0); border-left-width: initial; border-left-color: initial; border-right-width: initial; border-right-color: initial; border-top: none; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; text-align: right; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; 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font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">In July 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). This ASU requires that when determining whether certain financial instruments should be classified as liabilities or equity instruments, an entity should not consider the down round feature. The provisions of the ASU related to down rounds are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We have adopted this standard effective January 1, 2019. The adoption of this standard did not impact our Consolidated Financial Statements for the current or prior periods presented.</div></div><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-bottom: 0px; margin-top: 0px; text-indent: 0.5in; margin-right: 0px; background: none;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div><div style="font-family: &quot;times new roman&quot;, times, serif; margin-bottom: 0px; margin-top: 0px; text-indent: 0.5in; margin-right: 0px; background: none; font-size: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize a right-of-use asset and lease liability in the balance sheet for all leases, including operating leases, with terms of more than twelve months. We have adopted this standard effective January 1, 2019. Upon adoption, we recognized an Operating Lease Right-of-Use Asset of $994,000, a current Operating Lease Liability of $533,000 and a long-term Operating Lease Liability of $461,000. We applied Topic 842 to all leases as of January 1, 2019 with comparable periods continuing to be reported under Topic 840. 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font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">Exercised</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td><td style="background: rgb(204, 238, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0pt 0px; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; 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font-size: 10pt; background: none; color: rgb(0, 0, 0); text-decoration: none; letter-spacing: 0px; top: 0px;;display:inline;">&#160;</div></div></td></tr><tr><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 2.5pt 10pt; vertical-align: bottom; font-size: 10pt; line-height: 10pt;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; text-indent: -0.13in; margin-right: 0px; margin-bottom: 0px; margin-top: 0px; background: none; line-height: normal;"><div style="font-family: &quot;times new roman&quot;, times, serif; font-size: 10pt; background: none; color: rgb(0, 0, 0); letter-spacing: 0px; top: 0px;;display:inline;">Outstanding at March 31, 2019</div></div></td><td style="background: rgb(255, 255, 255); border-width: initial; border-top-style: none; border-bottom-style: none; border-color: initial; padding: 0px 0px 2.5pt; vertical-align: bottom; font-size: 10pt; 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Document and Entity Information - shares
3 Months Ended
Mar. 31, 2019
May 09, 2019
Document and Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2019  
Document Fiscal Year Focus 2019  
Document Fiscal Period Focus Q1  
Entity Registrant Name Vuzix Corp  
Entity Central Index Key 0001463972  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Trading Symbol VUZI  
Entity Common Stock, Shares Outstanding   27,602,083
Entity Emerging Growth Company false  
Entity Small Business true  
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.19.1
CONSOLIDATED BALANCE SHEETS - USD ($)
Mar. 31, 2019
Dec. 31, 2018
Current Assets    
Cash and Cash Equivalents $ 10,085,837 $ 17,263,643
Accounts Receivable, Net 199,759 772,336
Inventories, Net 8,110,226 7,281,802
Manufacturing Vendor Prepayments 386,561 755,219
Prepaid Expenses and Other Assets 872,148 1,310,095
Total Current Assets 19,654,531 27,383,095
Long-Term Assets    
Fixed Assets, Net 4,517,169 4,291,690
Operating Lease Right-of-Use Assets, Net 860,277 0
Patents and Trademarks, Net 1,206,018 1,164,543
Software Development Costs, Net 175,000 200,000
Licenses, Net 406,849 437,120
Intangible Asset, net 1,296,000 1,398,000
Other Assets 296,600 259,192
Total Assets 28,412,444 35,133,640
Current Liabilities    
Accounts Payable 1,715,744 2,668,241
Operating Lease Right-of-Use Liabilities 533,289 0
Customer Deposits 74,615 152,362
Unearned Revenue 230,344 211,726
Accrued Expenses 943,010 1,614,078
Taxes Payable 77,554 30,258
Total Current Liabilities 3,574,556 4,676,665
Long-Term Liabilities    
Operating Lease Right-of-Use Liabilities 326,988 0
Total Liabilities 3,901,544 4,676,665
Stockholders' Equity    
Preferred Stock - $.001 Par Value, 5,000,000 Shares Authorized; 49,626 and 49,626 Shares Issued and Outstanding as of March 31, 2019 and December 31, 2018. 50 50
Common Stock - $.001 Par Value, 100,000,000 Shared Authorized; 27,597,917 Shares Issued and Outstanding as of March 31, 2019 and 27,591,670 as of December 31, 2018. 27,598 27,591
Additional Paid-in Capital 149,109,454 148,695,775
Accumulated Deficit (124,626,202) (118,266,441)
Total Stockholders' Equity 24,510,900 30,456,975
Total Liabilities and Stockholders' Equity $ 28,412,444 $ 35,133,640
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.19.1
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
Mar. 31, 2019
Dec. 31, 2018
Preferred Stock, Par Value $ 0.001 $ 0.001
Preferred Stock, Shares Authorized 5,000,000 5,000,000
Preferred Stock, Shares Issued 49,626 49,626
Preferred Stock, Shares Outstanding 49,626 49,626
Common Stock, Par Value $ 0.001 $ 0.001
Common Stock, Shares Authorized 100,000,000 100,000,000
Common Stock, Shares Issued 27,597,917 27,591,670
Common Stock, Shares Outstanding 27,597,917 27,591,670
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.19.1
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($)
Total
Preferred Stock
Common Stock
Additional Paid-in Capital
Accumulated Deficit
Balance at Dec. 31, 2017 $ 21,379,713 $ 50 $ 24,276 $ 117,827,839 $ (96,472,452)
Balance (in shares) at Dec. 31, 2017   49,626 24,276,275    
Cumulative Adj. - ASC 606 Adoption 81,724 $ 0 $ 0 0 81,724
Stock-Based Compensation Expense 424,700 $ 0 $ 6 424,694 0
Stock-Based Compensation Expense (in shares)   0 6,250    
Exercise of Warrants 39,375 $ 0 $ 25 39,350 0
Exercise of Warrants (in shares)   0 24,930    
Proceeds from Common Stock Offerings 30,000,000 $ 0 $ 3,000 29,997,000 0
Proceeds from Common Stock Offerings (in shares)   0 3,000,000    
Direct Costs of Common Stock Offerings (1,975,000) $ 0 $ 0 (1,975,000) 0
Net Loss (5,365,650) 0 0 0 (5,365,650)
Balance at Mar. 31, 2018 44,584,862 $ 50 $ 27,307 146,313,883 (101,756,378)
Balance (in shares) at Mar. 31, 2018   49,626 27,307,455    
Balance at Dec. 31, 2017 21,379,713 $ 50 $ 24,276 117,827,839 (96,472,452)
Balance (in shares) at Dec. 31, 2017   49,626 24,276,275    
Net Loss (21,875,713)        
Balance at Dec. 31, 2018 30,456,975 $ 50 $ 27,591 148,695,775 (118,266,441)
Balance (in shares) at Dec. 31, 2018   49,626 27,591,670    
Stock-Based Compensation Expense 413,686 $ 0 $ 7 413,679 0
Stock-Based Compensation Expense (in shares)   0 6,247    
Net Loss (6,359,761) $ 0 $ 0 0 (6,359,761)
Balance at Mar. 31, 2019 $ 24,510,900 $ 50 $ 27,598 $ 149,109,454 $ (124,626,202)
Balance (in shares) at Mar. 31, 2019   49,626 27,597,917    
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.19.1
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Sales:    
Total Sales $ 1,373,371 $ 1,543,895
Cost of Sales:    
Total Cost of Sales 1,333,481 1,366,770
Gross Profit (exclusive of depreciation shown separately below) 39,890 177,125
Operating Expenses:    
Research and Development 2,516,100 2,055,787
Selling and Marketing 1,417,966 1,534,097
General and Administrative 1,896,402 1,665,229
Depreciation and Amortization 559,089 273,622
Total Operating Expenses 6,389,557 5,528,735
Loss from Operations (6,349,667) (5,351,610)
Other Income (Expense):    
Investment Income 58,313 0
Other Taxes (52,662) (28,542)
Foreign Exchange Loss (15,745) (4,418)
Gain on Derivative Valuation 0 28,133
Interest Expense 0 (9,213)
Total Other Expense (10,094) (14,040)
Loss Before Provision for Income Taxes (6,359,761) (5,365,650)
Provision for Income Taxes 0 0
Net Loss (6,359,761) (5,365,650)
Preferred Stock Dividends (465,765) (438,836)
Loss Attributable to Common Stockholders $ (6,825,526) $ (5,804,486)
Basic and Diluted Loss Attributable to Common Stockholders per Share $ (0.25) $ (0.22)
Weighted-average Shares Outstanding - Basic and Diluted 27,595,767 26,296,188
Sales of Products    
Sales:    
Total Sales $ 1,373,371 $ 1,363,379
Cost of Sales:    
Cost of Sales 1,333,481 1,182,215
Sales of Engineering Services    
Sales:    
Total Sales 0 180,516
Cost of Sales:    
Cost of Sales $ 0 $ 184,555
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.19.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Cash Flows from Operating Activities    
Net Loss $ (6,359,761) $ (5,365,650)
Non-Cash Adjustments    
Depreciation and Amortization 559,089 273,622
Amortization of Software Development Costs in Cost of Sales - Products 25,000 0
Stock-Based Compensation Expense 489,754 508,451
Loss (Gain) on Derivative Valuation 0 (28,133)
(Increase) Decrease in Operating Assets    
Accounts Receivable 572,577 (77,165)
Accrued Project Revenue 0 497,784
Inventories (828,424) (424,013)
Vendor Prepayments 368,658 28,658
Prepaid Expenses and Other Assets 437,947 277,615
Increase (Decrease) in Operating Liabilities    
Accounts Payable (952,497) (1,978,637)
Accrued Expenses (171,068) (211,052)
Customer Deposits (77,747) 137,178
Unearned Revenue 18,618 (26,100)
Income and Other Taxes Payable 43,497 19,251
Accrued Compensation 0 (92,000)
Accrued Interest 0 (10,787)
Net Cash Flows Used in Operating Activities (5,874,357) (6,470,978)
Cash Flows from Investing Activities    
Purchase of Fixed Assets (724,565) (306,739)
Investments in Patents and Trademarks (41,475) (64,664)
Investments in Licenses and Other Intangible Assets (537,409) 0
Investments in Software Development 0 (43,750)
Net Cash Used in Investing Activities (1,303,449) (415,153)
Cash Flows from Financing Activities    
Proceeds from Exercise of Warrants 0 39,375
Proceeds from Common Stock Offerings 0 30,000,000
Issuance Costs on Common Stock Offerings 0 (1,975,000)
Net Cash Flows from Financing Activities 0 28,064,375
Net Increase (Decrease) in Cash and Cash Equivalents (7,177,806) 21,178,244
Cash and Cash Equivalents - Beginning of Period 17,263,643 14,889,636
Cash and Cash Equivalents - End of Period 10,085,837 36,067,880
Supplemental Disclosures    
Interest Paid in Cash 0 19,999
Cumulative Revenue Adjustment - ASC 606 Adoption 0 81,724
Investment in Other Intangible Assets included in Accrued Expenses 250,000 0
Unamortized Common Stock Expense included in Prepaid Expenses 463,154 0
Operating Lease Right-of-Use Asset $ 860,277 $ 0
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.19.1
Basis of Presentation
3 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Accounting [Text Block]
Note 1 – Basis of Presentation
 
The accompanying unaudited consolidated financial statements of Vuzix Corporation (“the Company") 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 (the “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. Certain re-classifications have been made to prior periods to conform with current reporting. The results of the Company’s operations for the three months ended March 31, 2019 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 December 31, 2018, as reported in the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2019. 
 
The accompanying unaudited consolidated financial statements have been prepared assuming that we 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 unaudited 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 Company incurred net losses for the three months ended March 31, 2019 of $6,359,761 and annual net losses of $21,875,713 in 2018 and $19,633,502 in 2017. As of March 31, 2019, the Company has an accumulated deficit of $124,626,202.
 
The Company’s cash requirements are primarily for funding operating losses, working capital, research and development, and capital expenditures. Our cash requirements related to funding operating losses depend on 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 by the sale of equity, borrowings under notes, and sales of convertible debt.
 
The Company’s management intends to take actions necessary to continue as a going concern, as discussed herein. The Company will need to grow its business significantly to become profitable and self-sustaining on a cash flow basis or it will be required to raise new equity and/or debt capital. Management’s plans concerning these matters and managing our liquidity include, among other things:
 
 ·the continued sale of our existing M300, M300XL and Blade inventory;
 ·the introduction of our M400 Smart Glasses, our third-generation monocular device for enterprise. We expect to launch the product in the third quarter of 2019;
 ·the commencement of volume manufacturing and sale of the new M100 Smart Swim product in the third quarter of 2019;
 ·new engineering services and product sales into business customers, first responder, defense and governmental entity customers;
 ·tightly control operating costs and reduce spending growth rates wherever possible;
 ·decrease tradeshow and PR firm spending;
 ·right size operations across all areas of the Company, both with head-count and spending;
 ·delay or curtail discretionary and non-essential capital expenditures not related to near-term new products; and
 ·reduce the rate of research and development spending on new technologies, particularly the use of costly external contractors.
 
However, if these plans are not successful within a reasonable time period, we will have to raise additional capital to maintain operations and/or materially reduce our operating and new product development costs.
 
If the Company raises additional funds, the ownership interest of existing stockholders may be diluted. The amount of such dilution could increase due to the issuance of new securities with warrants or other dilutive characteristics, such as full ratchet anti-dilution clauses or price resets.
 
Based upon our current amount of cash on hand, management’s historical ability to raise capital, and our ability to manage our cost structure and adjust operating plans if and as required, we have concluded that substantial doubt of our ability to continue as a going concern has been alleviated.
  
Recent Accounting Pronouncements
 
In July 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). This ASU requires that when determining whether certain financial instruments should be classified as liabilities or equity instruments, an entity should not consider the down round feature. The provisions of the ASU related to down rounds are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We have adopted this standard effective January 1, 2019. The adoption of this standard did not impact our Consolidated Financial Statements for the current or prior periods presented.
 
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize a right-of-use asset and lease liability in the balance sheet for all leases, including operating leases, with terms of more than twelve months. We have adopted this standard effective January 1, 2019. Upon adoption, we recognized an Operating Lease Right-of-Use Asset of $994,000, a current Operating Lease Liability of $533,000 and a long-term Operating Lease Liability of $461,000. We applied Topic 842 to all leases as of January 1, 2019 with comparable periods continuing to be reported under Topic 840. Upon 
adoption
, we
elected: (i) the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification and (ii) the practical expedient which allows us not to separate non-lease components from lease components, as they are not considered the predominate components in our contracts. The adoption of this standard does not have a significant impact on our consolidated results of operations or cash flows. See Note 12 for further details.
 
For the three months ended March 31, 2019, no one customer represented more than 10% of our product revenue. For the three months ended March 31, 2018, Toshiba Japan represented 94% of the Company’s engineering revenues and 18% of the Company’s total revenues.
 
As of March 31, 2019
, no
significant
customer represented more than 10% of
accounts receivable. As of December 31, 2018, Toshiba and SATS represented 32% and 38%, respectively, of accounts receivable.
XML 19 R8.htm IDEA: XBRL DOCUMENT v3.19.1
Revenue Recognition and Contracts with Customers
3 Months Ended
Mar. 31, 2019
Revenue from Contract with Customer [Abstract]  
Revenue Recognition and Contracts with Customers
Note 2 – Revenue Recognition and Contracts with Customers
 
Disaggregated Revenue
 
The Company’s total revenue was comprised of four major product lines: Smart Glasses and iWear Video Headphones Sales, OEM product Sales, Waveguide and Display Engine Sales, and Engineering Services. The following table summarizes the revenue recognized by major product line:
 
 
 
Three Months Ended

March 31,
 
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Smart Glasses and iWear Video Headphones Sales
 
$
1,278,371
 
 
$
1,212,771
 
OEM Product Sales
 
 
 
 
 
114,170
 
Waveguide and Display Engine Sales
 
 
95,000
 
 
 
36,438
 
Engineering Services
 
 
 
 
 
180,516
 
 
 
 
 
 
 
 
 
 
Total Revenue
 
$
1,373,371
 
 
$
1,543,895
 
 
Significant Judgments
 
Under Topic 606, there are judgments used 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. Judgments made include considerations in determining our transaction prices for our standard product sales that include an end-user 30-day right to return if not satisfied with product and include payment terms that are between Net 30 and 60 days. 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 satisfied at a point in time are typically for standard goods (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 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 cost 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 of 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, except in certain European countries where it can be twenty-four (24) months for some consumer-focused products. In the case of our OEM product and waveguide sales, some include a standard product warranty of up to eighteen (18) months. In 2018, we began offering extended warranties to customers, which extend 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 date of billing, subject to an agreed upon customer acceptance period.
 
The following table presents a summary of the Company’s net sales by revenue recognition method as a percentage of total net sales for the three months ended March 31, 2019:
 
 
 
% of Total Net Sales
 
Point-in-Time
 
 
100
%
Over Time - Input Method
 
 
%
Total
 
 
100
%
 
Remaining Performance Obligations
 
As of March 31, 2019, the Company had $970,000 of performance obligations under our OEM product purchase agreement, which represents the transaction price of firm orders less inception to date sales recognized. The Company expects to recognize sales relating to this existing performance obligation of $
970,000
during the second quarter of 2019.
 
As of March 31, 2019, the Company had $148,000 of remaining performance obligations related to its extended warranties. The Company expects to recognize this deferred revenue on a twelve (12) month straight-line basis beginning on October 1, 2019.
XML 20 R9.htm IDEA: XBRL DOCUMENT v3.19.1
Loss Per Share
3 Months Ended
Mar. 31, 2019
Earnings Per Share [Abstract]  
Earnings Per Share [Text Block]
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 from the assumed exercise of stock options and warrants, and the conversion of convertible preferred shares. 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 months ended March 31, 2019 and 2018, 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 March 31, 2019 and 2018, there were 7,529,006 and 8,800,821 common stock share equivalents, respectively, potentially issuable under conversion of preferred shares, options, and warrants that could dilute basic earnings per share in the future.
XML 21 R10.htm IDEA: XBRL DOCUMENT v3.19.1
Inventories, Net
3 Months Ended
Mar. 31, 2019
Inventory Disclosure [Abstract]  
Inventories
Note 4 – Inventories, Net
 
Inventories are stated at the lower of cost and net realizable value and consisted of the following:
 
 
 
March 31,
 
 
December 31,
 
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Purchased Parts and Components
 
$
3,206,094
 
 
$
3,284,848
 
Work in Process
 
 
631,840
 
 
 
1,523,616
 
Finished Goods
 
 
4,783,213
 
 
 
2,837,183
 
Less: Reserve for Obsolescence
 
 
(510,921
)
 
 
(363,845
)
Net
 
$
8,110,226
 
 
$
7,281,802
 
XML 22 R11.htm IDEA: XBRL DOCUMENT v3.19.1
Intangible Asset, Net
3 Months Ended
Mar. 31, 2019
Disclosure of Intangible Asset Net [Abstract]  
Intangible Asset, Net
Note 5 – Intangible Asset, Net
 
 
 
March 31,

2019
 
 
December 31,

2018
 
 
 
 
 
 
 
 
Intangible Asset
 
$
1,500,000
 
 
$
1,500,000
 
Less: Accumulated Amortization
 
 
(204,000
)
 
 
(102,000
)
 
 
 
 
 
 
 
 
 
Intangible Asset, Net
 
$
1,296,000
 
 
$
1,398,000
 
 
On October 4, 2018, the Company entered into amendment No. 1 to the original agreements (the “TDG Amendment”) with TDG Acquisition Company, LLC (“TDG”), aka Six15 Technologies, LLC. The TDG Amendment amends certain provisions of prior agreements between Vuzix and TDG, including an asset purchase agreement dated June 15, 2012, and an authorized reseller agreement dated June 15, 2012.
 
Pursuant to the TDG Amendment, the Company will be permitted to engage in sales of heads-up display components or subsystems (and any services to support such sale) for incorporation into a finished goods or systems for sale to military organizations, subject to certain conditions. The Company will also be permitted to sell its products to defense and security organizations that include business customers and governmental entity customers that primarily provide security and defense services, including police, fire fighters, EMTs, other first responders, and homeland and border security. The Company will owe TDG commissions with respect to all such sales until June 2022.
 
This reacquired right covers the entire remaining term of the original non-compete agreement with TDG, which expires
June 15, 2022
. The capitalized cost of this reacquired right is being amortized
over 44 months, which began in
October 2018
. Total amortization expense for this intangible asset for the three months ended
March 31, 2019
 was $102,000. As of 
March 31, 2019
, there was $
250,000
 
in accrued current liabilities for the
final payment due under the terms of this agreement. 
XML 23 R12.htm IDEA: XBRL DOCUMENT v3.19.1
Accrued Expenses
3 Months Ended
Mar. 31, 2019
Payables and Accruals [Abstract]  
Accrued Expenses
Note 6 – Accrued Expenses
 
Accrued expenses consisted of the following:
 
 
 
March 31,
 
 
December 31,
 
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Accrued Wages and Related Costs
 
$
281,286
 
 
$
461,619
 
Accrued Professional Services
 
 
123,967
 
 
 
138,438
 
Accrued Warranty Obligations
 
 
241,530
 
 
 
218,047
 
Other Accrued Expenses
 
 
296,227
 
 
 
795,974
 
 
 
 
 
 
 
 
 
 
Total
 
$
943,010
 
 
$
1,614,078
 
 
Included in Other Accrued Expenses as of March 31, 2019
is $250,000 
for the final payment described above in Note 5 related to the TDG Amendment. As of December 31, 2018, there was $750,000 in Other Accrued Expenses related to the TDG Amendment.
 
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 except in certain European countries where it can be twenty-four (24) months for some consumer-focused products. 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 on product-based historical performance rates and related costs to repair.
 
The changes in the Company’s accrued warranty obligations for the three months ended March 31, 2019 and the balance as of December 31, 2018 were as follows:
 
Accrued Warranty Obligation at December 31, 2018
 
$
218,047
 
Reductions for Settling Warranties
 
 
(62,394
)
Warranties Issued During Period
 
 
85,877
 
 
 
 
 
 
Accrued Warranty Obligations at March 31, 2019
 
$
241,530
 
XML 24 R13.htm IDEA: XBRL DOCUMENT v3.19.1
Income Taxes
3 Months Ended
Mar. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
Note 7 – Income Taxes
 
The Company’s effective income tax rate is a combination of federal, state and foreign tax rates and differs from the U.S. statutory rate due to taxes on foreign income, permanent differences including tax-exempt interest, and the resolution of tax uncertainties, offset by a valuation allowance against U.S. deferred income tax assets.
XML 25 R14.htm IDEA: XBRL DOCUMENT v3.19.1
Capital Stock
3 Months Ended
Mar. 31, 2019
Stockholders' Equity Note [Abstract]  
Capital Stock
Note 8 – Capital Stock
 
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 special rights and qualifications. A total of 5,000,000 shares of preferred stock with a par value of $0.001 are authorized as of March 31, 2019 and December 31, 2018, 49,626 of which are designated as Series A Preferred Stock. There were 49,626 shares of Series A Preferred Stock issued and outstanding on March 31, 2019 and December 31, 2018.
 
On January 2, 2015 the Company closed a sale of Series A Preferred Stock to Intel Corporation (the “Series A Purchaser”), pursuant to which we issued and sold an aggregate of 49,626 shares of the Company’s Series A Preferred Stock, at a purchase price of $500 per share, for an aggregate purchase price of $24,813,000. Each share of Series A Preferred Stock is convertible, at the option of the Series A holder, into 100 shares of the Company’s common stock (determined by dividing the Series A Original Issue Price of $500 by the Series A Conversion Price
, which is equal to $5.00). 
 
Each share of Series A Preferred Stock is entitled to receive dividends at a rate of 6% per year, compounded quarterly and payable in cash or in kind, at the Company’s sole discretion. As of March 31, 2019, total accumulated and unpaid preferred dividends were $7,134,996. As of December 31, 2018, total accumulated and unpaid preferred dividends were $6,669,232. There were no declared preferred dividends owed as of March 31, 2019 or December 31, 2018.
 
The Series A Purchaser has the right, but not the obligation, to participate in any proposed issuance by the Company of its securities, subject to certain exceptions and in such amount as is sufficient to maintain the Series A Purchaser’s ownership percentage in the Company, calculated immediately prior to such applicable financing, at a purchase price equal to the per share price of the Company’s securities in such applicable financing.
 
Common Stock
 
The Company’s authorized common stock consists of 100,000,000 shares, par value of $.001. As of March 31, 2019 and December 31, 2018 there were
27,597,917
and 27,591,670 shares of common stock issued and outstanding, respectively.
XML 26 R15.htm IDEA: XBRL DOCUMENT v3.19.1
Stock Warrants
3 Months Ended
Mar. 31, 2019
Stockholders' Equity Note [Abstract]  
Stock Warrants
Note 9 – Stock Warrants
 
A summary of the various changes in warrants during the three-month period ended March 31, 2019 is as follows:
 
 
 
Number of

Warrants
 
 
 
 
 
Warrants Outstanding at December 31, 2018
 
 
2,233,062
 
Exercised During the Period
 
 
 
Issued During the Period
 
 
 
Expired During the Period
 
 
(1,200,000
)
 
 
 
 
 
Warrants Outstanding at March 31, 2019
 
 
1,033,062
 
 
The outstanding warrants as of March 31, 2019 expire on June 18, 2021. The remaining term of the warrants is 2.2 years and the exercise price is $7.00 per share.
XML 27 R16.htm IDEA: XBRL DOCUMENT v3.19.1
Stock-Based Compensation Plans
3 Months Ended
Mar. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Based Compensation Plans
Note 10 – Stock-Based Compensation Plans
 
A summary of stock option activity for the three months ended March 31, 2019 is as follows:
 
 
 
Number of 

Options
 
 
Weighted

Average

Exercise

Price
 
 
 
 
 
 
 
 
Outstanding at December 31, 2018
 
 
1,546,521
 
 
$
5.11
 
Granted
 
 
 
 
 
 
Exercised
 
 
 
 
 
 
Expired or Forfeited
 
 
(11,500
)
 
 
5.98
 
 
 
 
 
 
 
 
 
 
Outstanding at March 31, 2019
 
 
1,535,021
 
 
$
5.10
 
 
The weighted average remaining contractual term for all options as of March 31, 2019 and December 31, 2018 was 6.9 years and 7.2 years, respectively.
 
As of March 31, 2019, there were 999,891 options that were fully-vested and exercisable at a weighted average exercise price of $4.73 per share. The weighted average remaining contractual term on the vested options is 6.0 years.
 
As of March 31, 2019, there were 535,130 unvested options exercisable at a weighted average exercise price of $5.80 per share. The weighted average remaining contractual term on the unvested options is 8.7 years.
 
The weighted average fair value of option grants was calculated using the Black-Scholes-Merton option pricing method. At March 31, 2019, the Company had approximately $2,700,000 of unrecognized stock compensation expense, which will be recognized over a weighted average period of approximately 2.7 years.
 
For the three months ended March 31, 2019 and 2018, the Company recorded total stock-based compensation expense
, including stock awards, of 
approximately $490,000 and $508,000, respectively.
 
XML 28 R17.htm IDEA: XBRL DOCUMENT v3.19.1
Litigation
3 Months Ended
Mar. 31, 2019
Litigation Disclosure [Abstract]  
Litigation
Note 11 – Litigation
 
 
We are not currently involved in any actual or pending legal proceeding or litigation and we are not aware of any such proceedings contemplated by or against us or involving our property, except as follows:
 
We filed a defamation lawsuit against Ricardo Antonio Pearson (a\k\a Richard Pearson) in the Supreme Court of the State of New York, County of New York on April 5, 2018. The Company’s complaint against Mr. Pearson alleges he published false and defamatory articles about the Company. Vuzix is seeking damages in excess of $80 million, including punitive damages, and monetary damages.
 
On or about October 27, 2018, Bob Glenn filed a shareholder derivative suit in the Supreme Court of the State of New York, County of Monroe against certain of the Company’s current and former directors and executive officers. The Company was named as a nominal defendant only. The complaint alleges breaches of fiduciary duty, unjust enrichment, and waste of corporate assets. The complaint alleges that the Company and certain of its officers and directors made materially false and/or misleading statements and failed to disclose material adverse events about the Company’s business, operations and prospects in press releases and public filings. The complaint seeks a declaration that the defendants have breached and/or aided and abetted the breach of their fiduciary duties to the Company, determining and awarding damages, and directing the Company to reform and improve its corporate governance. Similar derivative suits were filed by Michael Washington and John Mayer on or about October 26, 2018 and October 29, 2018. The Company believes the allegations are false and intends to vigorously defend itself. The Company plans to file a motion to dismiss the complaints.
XML 29 R18.htm IDEA: XBRL DOCUMENT v3.19.1
Right-of-Use Assets and Liabilities
3 Months Ended
Mar. 31, 2019
Leases, Operating [Abstract]  
Lessee, Operating Lease, Disclosure [Table Text Block]
Note 12 – Right-of-Use Assets and Liabilities
 
The Company has signed several lease agreements, with the largest being for its office and manufacturing facility in the Rochester, New York area under an operating lease that commenced October 3, 2015 and expires on October 3, 2020. This lease has an original five-year term with an option by the Company to renew for two additional three-year terms at pre-agreed to lease rates. This renewal term is excluded from our right-to-use asset and liability as of March 31, 2019 as the renewal option for our current leased facility is not reasonably certain.
Rent expense under the operating leases totaled $140,300 and $112,896 for the three months ended March 31, 2019 and 2018, respectively.
 
Certain leases provide for increases in future minimum annual rental payments as defined in the lease agreements. The leases generally also include real estate taxes and common area maintenance charges in the annual rental payments. Short-term leases are leases having a term of twelve months or less. The Company recognizes short-term leases on a straight-line basis and does not record a related lease asset or liability for such leases.
 
As none of our leases provide an implicit interest rate, we use our incremental borrowing rate to determine our discount rate at lease inception based upon the information available at commencement in determining the present value of lease payments. As of March 31, 2019, the weighted average discount rate
was 5% and the weighted average remaining lease term was 1.7 years.
 
Future lease payments under operating leases as of March 31, 2019 were as follows:
 
Remainder of 2019
 
$
428,109
 
2020
 
 
 
 
 
451,832
 
2021
 
 
 
 
 
    7,854
 
2022
 
 
 
 
 
    7,854
 
2023
 
 
 
 
 
   5,236
 
 
Total Future Lease Payments
 
 
900,885
 
 
Less: Imputed Interest
 
 
  (40,608
)
 
Total Lease Liability Balance
 
$
860,277
 
XML 30 R19.htm IDEA: XBRL DOCUMENT v3.19.1
Basis of Presentation (Policies)
3 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
Recent Accounting Pronouncements
Recent Accounting Pronouncements
 
In July 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). This ASU requires that when determining whether certain financial instruments should be classified as liabilities or equity instruments, an entity should not consider the down round feature. The provisions of the ASU related to down rounds are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We have adopted this standard effective January 1, 2019. The adoption of this standard did not impact our Consolidated Financial Statements for the current or prior periods presented.
 
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to recognize a right-of-use asset and lease liability in the balance sheet for all leases, including operating leases, with terms of more than twelve months. We have adopted this standard effective January 1, 2019. Upon adoption, we recognized an Operating Lease Right-of-Use Asset of $994,000, a current Operating Lease Liability of $533,000 and a long-term Operating Lease Liability of $461,000. We applied Topic 842 to all leases as of January 1, 2019 with comparable periods continuing to be reported under Topic 840. Upon 
adoption
, we
elected: (i) the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification and (ii) the practical expedient which allows us not to separate non-lease components from lease components, as they are not considered the predominate components in our contracts. The adoption of this standard does not have a significant impact on our consolidated results of operations or cash flows. See Note 12 for further details.
 
For the three months ended March 31, 2019, no one customer represented more than 10% of our product revenue. For the three months ended March 31, 2018, Toshiba Japan represented 94% of the Company’s engineering revenues and 18% of the Company’s total revenues.
 
As of March 31, 2019
, no
significant
customer represented more than 10% of
accounts receivable. As of December 31, 2018, Toshiba and SATS represented 32% and 38%, respectively, of accounts receivable.
XML 31 R20.htm IDEA: XBRL DOCUMENT v3.19.1
Revenue Recognition and Contracts with Customers (Tables)
3 Months Ended
Mar. 31, 2019
Revenue from Contract with Customer [Abstract]  
Company's total revenue was comprised of four major product lines The following table summarizes the revenue recognized by major product line:
 
 
 
Three Months Ended

March 31,
 
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Smart Glasses and iWear Video Headphones Sales
 
$
1,278,371
 
 
$
1,212,771
 
OEM Product Sales
 
 
 
 
 
114,170
 
Waveguide and Display Engine Sales
 
 
95,000
 
 
 
36,438
 
Engineering Services
 
 
 
 
 
180,516
 
 
 
 
 
 
 
 
 
 
Total Revenue
 
$
1,373,371
 
 
$
1,543,895
 
Company's net sales by revenue recognition method as a percentage of total net sales
The following table presents a summary of the Company’s net sales by revenue recognition method as a percentage of total net sales for the three months ended March 31, 2019:
 
 
 
% of Total Net Sales
 
Point-in-Time
 
 
100
%
Over Time - Input Method
 
 
%
Total
 
 
100
%
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.19.1
Inventories, Net (Tables)
3 Months Ended
Mar. 31, 2019
Inventory Disclosure [Abstract]  
Schedule of Inventories
Inventories are stated at the lower of cost and net realizable value and consisted of the following:
 
 
 
March 31,
 
 
December 31,
 
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Purchased Parts and Components
 
$
3,206,094
 
 
$
3,284,848
 
Work in Process
 
 
631,840
 
 
 
1,523,616
 
Finished Goods
 
 
4,783,213
 
 
 
2,837,183
 
Less: Reserve for Obsolescence
 
 
(510,921
)
 
 
(363,845
)
Net
 
$
8,110,226
 
 
$
7,281,802
 
XML 33 R22.htm IDEA: XBRL DOCUMENT v3.19.1
Intangible Asset, Net (Tables)
3 Months Ended
Mar. 31, 2019
Schedule of Finite-Lived Intangible Assets
 
 
March 31,

2019
 
 
December 31,

2018
 
 
 
 
 
 
 
 
Intangible Asset
 
$
1,500,000
 
 
$
1,500,000
 
Less: Accumulated Amortization
 
 
(204,000
)
 
 
(102,000
)
 
 
 
 
 
 
 
 
 
Intangible Asset, Net
 
$
1,296,000
 
 
$
1,398,000
 
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.19.1
Accrued Expenses (Tables)
3 Months Ended
Mar. 31, 2019
Payables and Accruals [Abstract]  
Components of Accrued Expenses
Accrued expenses consisted of the following:
 
 
 
March 31,
 
 
December 31,
 
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
Accrued Wages and Related Costs
 
$
281,286
 
 
$
461,619
 
Accrued Professional Services
 
 
123,967
 
 
 
138,438
 
Accrued Warranty Obligations
 
 
241,530
 
 
 
218,047
 
Other Accrued Expenses
 
 
296,227
 
 
 
795,974
 
 
 
 
 
 
 
 
 
 
Total
 
$
943,010
 
 
$
1,614,078
 
Changes in Accrued Warranty Obligations
The changes in the Company’s accrued warranty obligations for the three months ended March 31, 2019 and the balance as of December 31, 2018 were as follows:
 
Accrued Warranty Obligation at December 31, 2018
 
$
218,047
 
Reductions for Settling Warranties
 
 
(62,394
)
Warranties Issued During Period
 
 
85,877
 
 
 
 
 
 
Accrued Warranty Obligations at March 31, 2019
 
$
241,530
 
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.19.1
Stock Warrants (Tables)
3 Months Ended
Mar. 31, 2019
Stockholders' Equity Note [Abstract]  
Changes in Warrants
A summary of the various changes in warrants during the three-month period ended March 31, 2019 is as follows:
 
 
 
Number of

Warrants
 
 
 
 
 
Warrants Outstanding at December 31, 2018
 
 
2,233,062
 
Exercised During the Period
 
 
 
Issued During the Period
 
 
 
Expired During the Period
 
 
(1,200,000
)
 
 
 
 
 
Warrants Outstanding at March 31, 2019
 
 
1,033,062
 
XML 36 R25.htm IDEA: XBRL DOCUMENT v3.19.1
Stock-Based Compensation Plans (Tables)
3 Months Ended
Mar. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Summary of Stock Option Activity
A summary of stock option activity for the three months ended March 31, 2019 is as follows:
 
 
 
Number of 

Options
 
 
Weighted

Average

Exercise

Price
 
 
 
 
 
 
 
 
Outstanding at December 31, 2018
 
 
1,546,521
 
 
$
5.11
 
Granted
 
 
 
 
 
 
Exercised
 
 
 
 
 
 
Expired or Forfeited
 
 
(11,500
)
 
 
5.98
 
 
 
 
 
 
 
 
 
 
Outstanding at March 31, 2019
 
 
1,535,021
 
 
$
5.10
 
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.19.1
Right-of-Use Assets and Liabilities (Tables)
3 Months Ended
Mar. 31, 2019
Leases, Operating [Abstract]  
Lessee, Operating Lease, Liability, Maturity [Table Text Block]
Future lease payments under operating leases as of March 31, 2019 were as follows:
 
Remainder of 2019
 
$
428,109
 
2020
 
 
 
 
 
451,832
 
2021
 
 
 
 
 
    7,854
 
2022
 
 
 
 
 
    7,854
 
2023
 
 
 
 
 
   5,236
 
 
Total Future Lease Payments
 
 
900,885
 
 
Less: Imputed Interest
 
 
  (40,608
)
 
Total Lease Liability Balance
 
$
860,277
 
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.19.1
Basis of Presentation (Additional Information (Detail) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Dec. 31, 2018
Dec. 31, 2017
Jan. 01, 2019
Summary Of Significant Accounting Policies [Line Items]          
Operating Lease, Liability $ 860,277       $ 994,000
Operating Lease, Liability, Current 533,289   $ 0   533,000
Operating Lease, Liability, Noncurrent 326,988   0   $ 461,000
Net Loss 6,359,761 $ 5,365,650 21,875,713 $ 19,633,502  
Accumulated Deficit $ (124,626,202)   $ (118,266,441)    
Accounts Receivable [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Concentration Risk, Percentage 10.00%        
SATS [Member] | Accounts Receivable [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Concentration Risk, Percentage     38.00%    
Toshiba Japan [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Concentration Risk, Percentage   94.00%      
Engineering Revenues Percentage   18.00%      
Toshiba Japan [Member] | Accounts Receivable [Member]          
Summary Of Significant Accounting Policies [Line Items]          
Concentration Risk, Percentage     32.00%    
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.19.1
Revenue Recognition and Contracts with Customers (Company's total revenue was comprised of four major product lines) (Detail) - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Revenue $ 1,373,371 $ 1,543,895
Smart Glasses and iWear Video Headphones Sales [Member]    
Revenue 1,278,371 1,212,771
OEM Product Sales [Member]    
Revenue 0 114,170
Waveguide and Display Engine Sales [Member]    
Revenue 95,000 36,438
Engineering Services [Member]    
Revenue $ 0 $ 180,516
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.19.1
Revenue Recognition and Contracts with Customers (Company's net sales by revenue recognition method as a percentage of total net sales) (Detail)
3 Months Ended
Mar. 31, 2019
Revenue Performance Obligation Percentage 100.00%
Point-in-Time - Output Method [Member]  
Revenue Performance Obligation Percentage 100.00%
Over Time - Input Method [Member]  
Revenue Performance Obligation Percentage 0.00%
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.19.1
Revenue Recognition and Contracts with Customers (Additional Information (Detail) - USD ($)
Jun. 30, 2019
Mar. 31, 2019
Revenue, Remaining Performance Obligation   $ 970,000
Subsequent Event [Member]    
Expects to Recognize Sales in Existing Remaining Performance Obligation $ 970,000  
Extended Warranties [Member]    
Revenue, Remaining Performance Obligation   $ 148,000
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.19.1
Loss Per Share (Additional Information) (Detail)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Earnings Per Share [Abstract]    
Earnings Per Share, Potentially Dilutive Securities 7,529,006 8,800,821
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.19.1
Inventories, Net (Components of Inventories) (Detail) - USD ($)
Mar. 31, 2019
Dec. 31, 2018
Inventory Disclosure [Line Items]    
Purchased Parts and Components $ 3,206,094 $ 3,284,848
Work in Process 631,840 1,523,616
Finished Goods 4,783,213 2,837,183
Less: Reserve for Obsolescence (510,921) (363,845)
Inventories, Net $ 8,110,226 $ 7,281,802
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.19.1
Intangible Asset, Net (Schedule of Finite-Lived Intangible Assets) (Details) - USD ($)
Mar. 31, 2019
Dec. 31, 2018
Intangible Asset, net $ 1,296,000 $ 1,398,000
Intangible Assets [Member]    
Intangible Asset 1,500,000 1,500,000
Less: Accumulated Amortization (204,000) (102,000)
Intangible Asset, net $ 1,296,000 $ 1,398,000
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.19.1
Intangible Asset, Net (Additional Information) (Detail) - USD ($)
3 Months Ended
Oct. 04, 2018
Mar. 31, 2019
Dec. 31, 2018
Accrued Liabilities, Current   $ 943,010 $ 1,614,078
TDG Acquisition Company LLC [Member]      
Accrued Liabilities, Current   250,000  
Amortization of Intangible Assets   $ 102,000  
Finite-Lived Intangible Assets, Remaining Amortization Period 44 months    
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.19.1
Accrued Expenses (Components of Accrued Expenses) (Detail) - USD ($)
Mar. 31, 2019
Dec. 31, 2018
Accrued Liabilities [Line Items]    
Accrued Wages and Related Costs $ 281,286 $ 461,619
Accrued Professional Services 123,967 138,438
Accrued Warranty Obligations 241,530 218,047
Other Accrued Expenses 296,227 795,974
Total $ 943,010 $ 1,614,078
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.19.1
Accrued Expenses (Changes in Accrued Warranty Obligations) (Detail)
3 Months Ended
Mar. 31, 2019
USD ($)
Class Of Warrant Or Right [Line Items]  
Accrued Warranty Obligation $ 218,047
Reductions for Settling Warranties (62,394)
Warranties Issued During Period 85,877
Accrued Warranty Obligations $ 241,530
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.19.1
Accrued Expenses - Additional Information (Detail) - USD ($)
Mar. 31, 2019
Dec. 31, 2018
Other Accrued Liabilities, Current $ 296,227 $ 795,974
TDG Acquisition Company LLC [Member]    
Other Accrued Liabilities, Current $ 250,000 $ 750,000
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.19.1
Capital Stock (Additional Information) (Detail) - USD ($)
3 Months Ended
Jan. 02, 2015
Mar. 31, 2019
Mar. 31, 2018
Dec. 31, 2018
Preferred Stock, Shares Authorized   5,000,000   5,000,000
Stock Issued During Period, Value, New Issues     $ 30,000,000  
Preferred Stock, Liquidation Preference Per Share   $ 0.001   $ 0.001
Preferred Stock, Shares Outstanding   49,626   49,626
Dividends Payable   $ 7,134,996   $ 6,669,232
Common Stock, Shares Authorized   100,000,000   100,000,000
Common Stock, Shares, Issued   27,597,917   27,591,670
Common Stock, Shares, Outstanding   27,597,917   27,591,670
Common Stock, Par or Stated Value Per Share   $ 0.001   $ 0.001
Series A Preferred Stock [Member]        
Conversion of Stock, Description Each share of Series A Preferred Stock is convertible, at the option of the Series A holder, into 100 shares of the Company's common stock (determined by dividing the Series A Original Issue Price of $500 by the Series A Conversion Price, which is equal to $5.00).      
Preferred Stock, Dividend Rate, Percentage   6.00%    
Series A Preferred Stock [Member] | Corporation [Member]        
Stock Issued During Period, Shares, New Issues 49,626      
Shares Issued, Price Per Share $ 500      
Stock Issued During Period, Value, New Issues $ 24,813,000      
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.19.1
Stock Warrants (Changes in Warrants) (Detail)
3 Months Ended
Mar. 31, 2019
shares
Class Of Warrant Or Right [Line Items]  
Warrants Outstanding at December 31, 2018 2,233,062
Exercised During the Period 0
Issued During the Period 0
Expired During the Period (1,200,000)
Warrants Outstanding at March 31, 2019 1,033,062
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.19.1
Stock Warrants (Additional Information) (Detail)
3 Months Ended
Mar. 31, 2019
$ / shares
Class of Warrant or Right [Line Items]  
Weighted average term of warrants 2 years 2 months 12 days
Class of Warrant or Right Weighted Average Exercise Price of Warrants or Rights $ 7.00
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.19.1
Stock-Based Compensation Plans (Summary of Stock Option Activity) (Detail) - Employee Stock Option [Member]
3 Months Ended
Mar. 31, 2019
$ / shares
shares
Number of Options outstanding  
Outstanding, Beginning Balance | shares 1,546,521
Granted | shares 0
Exercised | shares 0
Expired or Forfeited | shares (11,500)
Outstanding, Ending Balance | shares 1,535,021
Weighted Average Exercise Price  
Outstanding, Beginning Balance | $ / shares $ 5.11
Granted | $ / shares 0
Exercised | $ / shares 0
Expired or Forfeited | $ / shares 5.98
Outstanding, Ending Balance | $ / shares $ 5.10
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.19.1
Stock-Based Compensation Plans (Additional Information) (Detail) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Dec. 31, 2018
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]      
Exercisable Options Outstanding Shares 999,891    
Weighted average exercise price per share, Exercisable $ 4.73    
Unvested Options Outstanding, Shares 535,130    
Unvested Options Outstanding, Weighted average exercise price $ 5.80    
Unvested Options Outstanding Weighted average remaining life (yrs) 8 years 8 months 12 days    
Weighted average remaining contractual term on vested options 6 years    
Unrecognized stock compensation expense $ 2,700,000    
Weighted average recognition period 2 years 8 months 12 days    
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term 6 years 10 months 24 days   7 years 2 months 12 days
Share-based Compensation $ 489,754 $ 508,451  
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.19.1
Litigation (Additional Information) (Detail)
$ in Millions
3 Months Ended
Mar. 31, 2019
USD ($)
Litigation Disclosure [Abstract]  
Loss Contingency, Damages Sought, Value $ 80
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.19.1
Right-of-Use Assets and Liabilities (Detail) - USD ($)
Mar. 31, 2019
Jan. 01, 2019
Remainder of 2019 $ 428,109  
2020 451,832  
2021 7,854  
2022 7,854  
2023 5,236  
Total Future Lease Payments 900,885  
Less: Imputed Interest (40,608)  
Total Lease Liability Balance $ 860,277 $ 994,000
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.19.1
Right-of-Use Assets and Liabilities (Additional informaton) (Detail) - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Operating Leases, Rent Expense, Net $ 140,300 $ 112,896
Operating Lease, Weighted Average Remaining Lease Term 1 year 8 months 12 days  
Operating Lease, Weighted Average Discount Rate, Percent 5.00%  
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