Company Page

Changed Risks for VUZIX CORP (VUZI)

Remaining Performance Obligations

The consumer electronics and IT industries are subject

our financial performance may suffer

and Other Financial Information (Unaudited)

rights of others

Several steps of our production processes are dependent

Note 10 – Other

Note 5 — Fixed Assets,

appearing elsewhere in this annual report In addition to historical information, the following discussion and analysis includes

Investing Activities

differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those

and Fair Value Measurements

Assets

harmed

changes, any of which could disrupt our supply chain and may increase our costs

Taxes

of warranty claims or returns could harm our business and operating results

STATEMENTS — (Continued) 

two directors to our board, may conflict with the interests of our other stockholders

Warrants

stock or exercise of warrants or options may depress the price of our common stock

Benefit Plans

Party Transactions

and Product Discontinuance

processes and several steps of our production processes are dependent upon certain critical machines and tools which could result

Significant Judgments

our operating results

Option Plans

We operate in a highly competitive market and the size,

Note 6 — Patents

CONSOLIDATED STATEMENTS OF

Adoption

we may be unable to meet the demands of our customers and end-users on a timely basis

Note 18 — Employee

We rely on third-party suppliers, some of which are sole-source

Carrying Value of Long-Lived

Our business depends in part on access to third-party

Performance Obligations

We collect, store, process and use our customers’

NOTES TO CONSOLIDATED FINANCIAL

Derivative Liability and Fair

Note 7 — Software

to incur additional expenses and could limit the supply and increase the costs of certain materials used in the manufacturing

There are a number of competing providers of micro-display-based

Control — Integrated Framework

Note 20 — Geographic

We do not control our contract manufacturers or suppliers

Note 14 — Capital

Note 16 — Stock

If we are unable to achieve profitability over the next

Revenues

Development Costs, Net

acquired, which could require significant management attention, disrupt our business, dilute stockholder value and adversely affect

in delivery interruptions, which could adversely affect our operating results

Disaggregated Revenue

platforms or technologies, and if the access is withdrawn, denied, or is not available on terms acceptable to us, or if the platforms

Note 19 — Litigation

discussed in “Risk Factors” and elsewhere in this annual report See the discussion under “Forward Looking Statements”

Fair Value Measurements and Disclosures

SIGNATURES

Note 22 — Related

Years Ended December 31, 2018 and December 31, 2017

Internal

Our products could infringe on the intellectual property

Critical Accounting Policies and

Note 2 – Revenue Recognition and Contracts with Customers

suppliers, to provide components for our products which may lead to supply shortages, long lead times for components, and supply

and Trademarks, Net

If significant tariffs or other restrictions are placed

Our use of open source software could negatively affect

Note 17 — Commitments

Note 13 — Income

to significant fluctuations in the availability of components If we do not properly anticipate the need for critical components,

Derivatives and Hedging,

The following discussion and analysis

Product quality issues and a higher-than-expected number

of Significant Accounting Policies

Note 4 — Inventories, Net

on Chinese imports or any related counter-measures are taken by China, our revenue and results of operations may be materially

Note 9 — Intangible

or technologies change without notice to us, our business and operating results could be adversely affected

to lengthy OEM development periods

resources and brand name of some of our competitors may allow them to compete more effectively than we can, which could result

Significant Developments and Estimates

of financial condition and results of operations should be read in conjunction with our financial statements and related notes

Note 15 — Stock

If our estimates or judgments relating to our critical

to privacy, information security and data protection Any cybersecurity breaches or our actual or perceived failure to comply with

STATEMENTS

Our waveguide and display engine products are subject

forward looking statements that involve risks, uncertainties and assumptions Our actual results and the timing of events could

If we fail to manage our operating expenses effectively,

(Gain) Loss on Inventory Revaluation

We may acquire other businesses or receive offers to be

Value Measurements

Provision for Future Warranty

Asset, Net

personally identifiable information and other data, which subjects us to governmental regulation and other legal obligations related

Note 21 — Quarterly

Note 8 — Licenses,

Stock

Note 12 — Derivative Liability

Our issuance of common stock upon conversion of preferred

The manufacture of waveguides encompasses several complex

Cost of Engineering Services

OPERATIONS

Costs

Stock-Based Compensation Expense

twelve months or raise new capital, we may not be able to continue our current operations

If micro-display-based personal displays do not gain

Note 1 — Summary

upon certain critical machines and tools which could result in delivery interruptions and foregone revenues

Regulations related to conflict minerals may cause us

such legal obligations by us, or by our third-party service providers or partners, could harm our business

Expenses

greater acceptance in the market for mobile displays, our business strategy may fail

accounting policies prove to be incorrect, our operating results could be adversely affected

Note 3 — Going Concern Issues

our ability to sell our products and could subject us to possible litigation