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Greetings, and welcome to the Vuzix Corporation First Quarter 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to turn the call over to Ed McGregor, Director of Investor Relations at Vuzix. Mr. McGregor, please go ahead.

Thank you, operator, and thank you, everyone, for joining us today. Welcome to the Vuzix Corporation First Quarter 2026 Financial Results Conference Call. With us today are Vuzix CEO, Paul Travers; and our CFO, Grant Russell.

Before I turn the call over to Paul, I would like to remind you that on this call, management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements during the question-and-answer session. Therefore, the company claims the protection of the safe harbor for forward-looking statements that are contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those contemplated by any forward-looking statements as a result of certain factors, including, but not limited to, general economic and business conditions, competitive factors, changes in business strategy or development plans, the ability to attract and retain qualified personnel as well as changes in legal and regulatory requirements.

In addition, any projections as to the company's future performance represent management's estimates as of today, May 14, 2026. Vuzix assumes no obligation to update these projections in the future as market conditions change.

This afternoon, the company issued a press release announcing its Q1 2026 financial results and filed its 10-Q with the SEC. So participants in this call who may not have already done so may wish to look at those documents as the company will provide a summary of the results discussed on today's call.

Today's call may include certain non-GAAP financial measures. When required, reconciliation to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found in the company's Form 10-K annual filing at sec.gov, which is also available at www.vuzix.com.

I will now turn the call over to Vuzix' CEO, Paul Travers, who will give an overview of the company's operating results and business outlook. Paul will then turn the call over to Grant Russell, Vuzix CFO, who will provide an overview of the company's first quarter financial results, after which we'll move on to the Q&A session. Paul?

Thank you, Ed, and thanks to everyone for joining us today. With our first quarter of 2026 behind us and as we have shared previously, Vuzix continues to drive forward with a clear strategy focused around two primary growth engines for the company, OEM products and waveguides. We believe these are areas where we can create the greatest long-term value for Vuzix. Importantly, many of these OEM and waveguide opportunities begin as customer-funded engineering and development programs. We believe this creates a more capital-efficient path towards long-term production opportunities while allowing Vuzix to leverage the technology, manufacturing and customer relationships we have spent years building.

This strategy is built directly on the core technologies, products and capabilities we have developed over the last several decades. Vuzix established its position through two closely connected strengths. Advanced waveguides and designing and selling enterprise smart glasses products. Together, those capabilities helped us develop deep technical know-how, real customer experience and market credibility while also opening doors with larger organizations seeking a partner that understands not just optics, but the full product deployment and support equation.

Since the beginning of 2026, our announcements have not been isolated updates. They show a progression of ecosystem validation, product readiness, customer expansion, defense and OEM momentum and broader waveguide partner engagement.

The first leg of our growth strategy is centered around the OEM products business across enterprise, defense, security and ultimately, broader consumer markets. We are particularly excited that we'll begin shipping initial EVT-based OEM orders in Q2 for the new Ultralight Pro platform-based smart glasses to Amazon to support the business outcomes and operational challenges presented by the rapid adoption of AI and data center expansion.

At the same time, Amazon's reliability and maintenance engineering teams use of the Vuzix M400 smart glasses continues to expand to support fulfillment center operations worldwide. Our custom M400 kit for Amazon ensures fulfillment center machinery, robotics, conveyors and automation equipment run safely and efficiently.

In addition to Amazon, we're also working with a leading auto manufacturer where Vuzix is developing a waveguide-based smart glasses solution for widespread use on their factory floor operations. We recently delivered initial units to this customer to support operational evaluation and workflow validation activities within active manufacturing environments and look forward to the next phase of the relationship. We expect derivative versions of this platform could ultimately support broader enterprise market opportunities under the Vuzix brand, and we are currently evaluating that option.

Within defense, we continue to see growing momentum as wearable displays, advanced optics, AI-assisted visualization and drone-related applications become increasingly important. Recently, we announced that we had received a 6-figure development order from a Tier 1 defense supplier supporting the design of a next-generation waveguide-based head-mounted display system intended for military applications and future production deployment.

In addition, a program with Collins Aerospace is moving into production as evidenced by a recently received 6-figure order for waveguide-based AR display systems to support drone-based applications. We currently expect order volumes associated with this program to continue to increase throughout the year. Another project slated to kick off shortly is a 7-figure program for U.S.-based next-generational waveguide design and manufacturer funded by the U.S. Department of Defense.

Overall, we believe our position within defense and government opportunities is substantially stronger today than it was even just 3 months ago. The broader engagement, including several active RFPs, clearer pathways towards production programs and increasing interest tied to secure U.S.-based manufacturing capabilities.

Geopolitics is changing how defense and security agencies think about wearable technology. Drones have rapidly become a critical operational tool as smart glasses and HUDs are becoming an important interface for real-time situational awareness, coordination, visualization and secure information delivery. More broadly, secure information access, situational awareness and AI delivered through wearable displays are becoming increasingly relevant across defense, homeland security and public safety use cases. We believe these trends will become an important driver of long-term demand for advanced wearable systems and waveguide-based display.

The second major leg of our strategy is capitalizing on our waveguide technology where scalable, cost-effective production of advanced waveguides position Vuzix to play a central role in the next generation of AI-enabled smart glasses. Over the past year, we have continued strengthening our position through our strategic relationship with Quanta Computer, which is building the infrastructure for what should be meaningful revenue-generating opportunities surrounding Vuzix waveguides as a strategic supplier to Quanta and their customer ecosystem.

The microdisplay industry is witnessing tremendous investment and innovation as the race to support the AI smart glasses ecosystem accelerates. For Vuzix, the opportunity is not to bet on a single display technology, but rather to support and enable multiple display technologies that we believe could become important over time. Including LCOS, laser-based displays and microLED technologies. These relationships matter because the more third-party display partners we can support, the more ways we have to embed our waveguides into wearable products.

As Vuzix is one of the few companies with both advanced waveguide design expertise and scalable manufacturing capabilities, we continue nurturing and expanding our relationship across the broader display ecosystem. These collaborations, which have resulted in as many as a dozen custom waveguide designs in the last 24 months currently include TCL, Saphlux, Himax, Avegant, RayPrus, Redoxlens, among others. This matters because the industry increasingly recognizes that success in AI glasses will require the right combination of waveguides, display performance, manufacturability and cost.

We believe the waveguide business represents the single largest long-term opportunity for Vuzix. As near-eye display-based smart glasses evolve towards becoming a true mass market computing platform over time, advanced waveguides will become one of the key enabling technologies supporting that transition. That is why scale matters. That is why manufacturability matters, and that is why Quanta matters as a world-leading contract manufacturer.

As part of preparing for that next phase of growth, we're continuing to expand and optimize our manufacturing and development infrastructure in Rochester, New York. During the quarter, we continued expanding our plant floor manufacturing capacity to better support the increasing number of OEM, defense and waveguide development programs now moving through the company. These ongoing upgrades are designed to improve throughput, reduce development cycle times, minimize manufacturing changeovers and allow Vuzix to manage multiple advanced programs simultaneously as a broader set of opportunities move towards production.

We are also in the process of expanding and consolidating additional advanced waveguide tooling and development capabilities into the Rochester facility. This includes the relocation of our advanced etching equipment that was acquired from a Silicon Valley-based entity last spring. Bringing these capabilities closer to our core optical science and engineering teams is expected to improve development speed, process integration and next-generation waveguide research activities.

In addition, during Q1, we completed the on-site construction of a new and more capable chemistry laboratory focused on advancing the materials used within our waveguide manufacturing process. This effort is being led by our newly added PhD-level chemistry team and is focused on improving polymer formulations, advanced in printing materials and better matching material properties to the next generation of high-performance waveguide substrates. These investments continue to strengthen our position as one of the few companies combining advanced waveguide design expertise with scalable manufacturing capabilities in the United States.

Ultimately, the waveguide manufacturing market will not be won by simply demonstrating a strong laboratory prototype or hero samples as known within our industry. It will be won by having technology that performs, can be produced reliably and can scale cost effectively to support the needs of the large volume customers. Vuzix has spent years building towards that exact position.

The broader consumer smart glasses market is now entering an important new phase. AI is making smart glasses more practical. Customers are becoming more specific about what they need with additional technology companies, platform providers and eyewear brands bringing products, software platforms and ecosystem support into the category and advanced waveguide manufacturing, scalable optics and protected enabling technologies are becoming increasingly central to success. That is why the emergence of platforms such as Google's Android XR and similar ecosystem initiatives are important. The market is increasingly evolving from a device story into a platform and ecosystem story.

Emerging technology markets often move through cycles of early enthusiasm, consolidation and infrastructure build-out before real commercial adoption begins to scale. We believe the smart glasses market has now entered that next phase. Vuzix has remained committed to this market through multiple technology cycles while continuing to invest in innovation, waveguide technology, manufacturing capabilities, customer relationships and intellectual property.

Today, with more than 500 patents and patents pending worldwide, we believe those investments position Vuzix well for the direction this industry is now moving. As AI-enabled smart glasses move from concept towards broader adoption, we believe the consistency of our execution and our long-term commitment to this market can become increasingly important drivers of shareholder value.

With that, I'll now turn the call over to Grant for the financial overview. Grant?

Thank you, Paul. As Ed mentioned, the 10-Q we filed this afternoon with the SEC offers a detailed explanation of our quarterly financials. So I'm just going to provide you with a bit of color on some of the quarterly numbers.

Our first quarter 2026 total revenues was $1.4 million, down 12% year-over-year versus $1.6 million in 2025. Product sales decreased primarily due to lower sales of our M400. Engineering services revenues were $0.35 million for the 3 months ended March 31, 2026, versus $0.26 million in the prior year's period, an increase of 36%. There was an overall gross loss of $0.4 million for the 3 months ended March 31, 2026, as compared to a gross loss of $0.3 million for the same period in 2025. The increased gross loss was primarily due to lower total sales versus the prior year's period that resulted in less absorption of our relatively fixed manufacturing costs.

Research and development expense was $3 million for the 3 months ended March 31, 2026, compared to $2.6 million for the comparable 2025 period, an increase of approximately 16%. The higher R&D expense was largely due to a $0.4 million increase in wage costs related to headcount increases and a $0.2 million increase in depreciation related to new waveguide manufacturing equipment currently being used primarily for R&D purposes, less a $0.2 million decrease in external development costs.

Sales and marketing expense was virtually flat for the 3 months ended March 31, 2026, as compared to the same period in 2025, an increase of approximately 1% to just over $1.55 million. General and administrative expenses for the 3 months ended March 31, 2026, was $2.1 million versus $4 million for the comparable 2025 period, a decrease of approximately 46%. The overall decline was primarily due to a $1.7 million decrease in noncash stock-based compensation expense related to the termination and cancellation of prior equity incentive plans.

Total operating expenses for the 3 months ended March 31, 2026, declined by 20% to $6.8 million versus the prior year period of $8.5 million. For the first quarter ended March 31, 2026, the net loss attributable to common shareholders was $7.1 million or $0.09 per share as compared to a net loss of $8.6 million or $0.11 per share for the first quarter of 2025.

Now for some balance sheet and cash flow highlights. Our cash and cash equivalents position as of March 31, 2026, was $20.2 million, and our net working capital position was $20.8 million. For the quarter ended March 31, 2026, the net cash flow used for operating activities was $5.6 million as compared to $3.5 million in the prior year's period. As of March 31, 2026, the company continues to have no current or long-term debt obligations outstanding. Cash flow used for investing activities for the first quarter of 2026 was $1.2 million versus $0.8 million in the prior year's period. Cash flows provided from our financing activities during the 3 months ended March 31, 2026, was $5.8 million versus $1.3 million in the first quarter of 2025, all primarily the result of net proceeds from sales of common stock under our ATM facility.

Let me close by again reiterating that we believe our overall cash position, along with maintaining disciplined cost structure, general business expansion, particularly on the ODM and OEM side and judicious use of our ATM facility will collectively give us sufficient runway to execute our current operating plan well into 2027.

With that, I'd like to turn the call over to the operator.

[Operator Instructions] There are no questions at this time. And I'd like to turn the call back to Paul Travers for closing remarks.

Again, everybody, thank you so much for joining us on the call today. Vuzix is continuing to position ourselves for the next major phase of the market for smart glasses and advanced optics. We're building the company around what we believe are the two most important long-term opportunities in the industry, smart glasses and advanced waveguide technologies. We believe the overall market environment is continuing to improve. We see our business accelerating on OEM program after OEM program, which is why we've made these upgrades to our plant floor. We're having entertaining and actually receiving 7-figure programs, which you'll hear more about here as the summer unfolds. Obviously, Amazon is becoming a great partner that continues to roll product into their operations.

While we still believe the industry remains in the relatively early stages, it is very exciting to be where we are today after all these years. The business is coming, and it's going to be an exciting follow of the year. We remain focused on disciplined execution, strategic growth opportunities and continue to build long-term shareholder value.

Just as a reminder, our Annual Shareholders Meeting is coming up on June 16. We look forward to all those that want to come. It should be a nice event. We'll have some great demos and some new stuff to show at folks. Thanks again, everybody, and have a nice evening.

Thank you. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Greetings, and welcome to the Vuzix Fourth Quarter and Full Year Ending December 31, 2025, Financial Results and Business Update Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

Now I'd like to turn the call over to Ed McGregor, Director of Investor Relations at Vuzix. Mr. McGregor, you may begin.

Thank you, operator, and good afternoon, everyone. Welcome to the Vuzix 2025 Fourth Quarter and Full Year Ending December 31 Financial Results and Business Update Conference Call. With us today are Vuzix CEO, Paul Travers; and CFO, Grant Russell.

Before I turn the call over to Paul, I would like to remind you that on this call, management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements during the question-and-answer session. Therefore, the company claims the protection of the safe harbor for forward-looking statements that are contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those contemplated by any forward-looking statements as a result of certain factors, including, but not limited to, general economic and business conditions, competitive factors, changes in business strategy or development plans, the ability to attract and retain qualified personnel as well as changes in legal and regulatory requirements. In addition, any projections as to the company's future performance represent management's estimates as of today, March 12, 2026. Vuzix assumes no obligation to update these projections in the future as market conditions change.

This afternoon, the company issued a press release announcing its final 2025 results and filed its 10-K with the SEC. So participants in this call, who may not have already done so, may wish to look at those documents as the company will provide a summary of the results discussed on today's call.

Today's call may include certain non-GAAP financial measures. When required, reconciliation to the most directly comparable financial measure calculated and presented in accordance with GAAP can be found in the company's Form 10-K annual filing at sec.gov, which is also available at vuzix.com.

I will now turn the call over to Vuzix's CEO, Paul Travers, who will give an overview of the company's operating results and business outlook. Paul will then turn the call over to Grant Russell, Vuzix CFO, who will provide an overview of the company's fourth quarter and full year financial results, after which we will move on to the Q&A session. Paul?

Thank you, Ed, and thanks to everyone for joining us today. 2025 was an important year for Vuzix as we strengthened our financial discipline, improved the balance sheet and sharpened the company's focus around our OEM and waveguide businesses.

As we enter 2026, Vuzix is moving forward with a clear strategy focused on the areas where we can create the greatest long-term value. Our strategy is built directly on the core technologies, products and capabilities we have developed over many years.

Vuzix established its position through two closely connected strengths, advanced waveguides and enterprise smart glasses products. Together, those capabilities helped us develop deep technical know-how, real customer experience and market credibility while also opening doors with larger organizations seeking a partner that understands not just optics, but the full product deployment and support equation. That foundation remains highly valuable, and we are now building on it in a more focused and strategic way.

Going forward, our branded enterprise smart glasses products business remains important and has room for lots of growth over the next 5 years. It gives us credibility. It gives us real-world customer insight. It helps validate use cases and open doors. But increasingly, we see it more as a strategic enabler for the larger opportunities ahead.

Our long-term growth strategy is centered around our engineering services, which has expanded into two growth engines for the company, OEM products and waveguides, including the engineering services needed to support them both.

The first leg of this strategy is growing our OEM products business across enterprise, defense and security agencies and over time, the broader consumer markets where Vuzix can deliver complete smart glasses solutions as well as key optical components. The second leg of this strategy is capitalizing on our waveguide technology where scalable, cost-effective production of advanced waveguides positions Vuzix to play a central role in the next generation of AI and AR-enabled smart glasses.

These two growth engines are closely linked. Our OEM business is built on our core waveguide design and manufacturing technology as well as the credibility we have earned over many years in enterprise smart glasses. Companies do not simply see Vuzix as an optics company with interesting IP. More and more, they see us as a partner that understands how these products need to work in the real operating environments, how customers use them and how they get deployed and what it takes to support them successfully once they are.

We believe that credibility is helping create pull for our OEM opportunities that develop around customized solutions for large-scale enterprises. And once we are in those discussions, we quickly see what differentiates Vuzix is our waveguide design know-how, high-volume manufacturing capabilities and of course, our decades of making smart glasses products that we have developed and offered.

This strategic shift also affects how we think about our own branded products. Historically, Vuzix has designed, built and sold branded enterprise smart glasses. Going forward, we expect to be more selective in how we invest in that business. Rather than broadly funding entirely new enterprise product lines based primarily on our own market assumptions, we expect a greater portion of future product activity to be driven and funded by OEM customer demand. This demand for specialized AI smart glasses solutions, in some cases, will result in Vuzix expanded offerings where appropriate.

We believe our OEM business will become significant and will result in a more efficient and higher probability path to growth as smart glasses technology continues to rapidly evolve. We expect our award-winning Ultralite platform, especially the Ultralite Pro to be an important driver of that effort. The enterprise, along with the defense and security agency segments are already taking shape with active customer programs underway and visible demand emerging.

In the enterprise OEM area, for instance, we are currently under contract with multiple large brands to develop custom smart glasses devices. One example is with a leading auto manufacturer to design a waveguide-based smart glasses solution for widespread use on their factory floors. We expect a derivative of this solution could carry the Vuzix brand to ultimately be sold into other enterprise market opportunities.

Another good example of our expanding enterprise OEM business is Amazon. What began around maintenance use cases in distribution centers using off-the-shelf smart glasses is expanding with a purpose-built pair of AI-driven smart glasses into additional areas that include server farms, warehousing and robotics-related applications. We believe this kind of expansion in use cases is important because it shows how a single customer deployment can broaden into multiple operational areas over time, creating a deeper and more strategic relationship.

On the defense and security agencies OEM side, we continue to see engagement growth, both in the number of active programs and in the maturity of those discussions. Importantly, this is no longer just early-stage outreach. We now have a mix of activity that includes active deliveries, contracted programs, proposal-stage opportunities and additional programs that should expand over time.

Collins Aerospace is a good example of that progress. We have started receiving production orders, giving us a solid proof point that our defense-related efforts with waveguides and projection engines are translating into real business. Beyond Collins, we are now actively engaged in opportunities with multiple government agencies, traditional defense contractors and emerging new defense players. Overall, we believe our position in defense and government is substantially stronger today than it was a year ago with a broader opportunity set and clearer paths to opportunities that should ultimately result in production programs.

We also believe geopolitics is beginning to change how defense and security agencies think about wearable technology. For example, the battlefield and the broader security environments are evolving quickly. Drones have rapidly become a critical operational tool, and smart glasses are becoming an increasingly useful interface for helping operators see, control, coordinate and respond in real time. More broadly, secure information access, situational awareness and AI delivered through wearable displays are becoming increasingly relevant across defense, homeland security and public safety use cases. We believe this shift in thinking will become an important driver of long-term demand for smart glasses and related head-worn systems.

And that brings me to waveguides. During 2025, we completed the second and third tranches of Quanta's investment, bringing their total strategic investment in Vuzix to $20 million. That was important not only because of capital for our growth, but because it provided meaningful third-party validation of our waveguide road map, manufacturing capabilities and our ability to support future smart glasses programs at scale.

It is very clear that the main reason Quanta invested in Vuzix is to gain access to our high-volume waveguide manufacturing and design capabilities. That said, Quanta is also interested in Vuzix's smart glasses industry expertise. That is another key strategic prize they gained access to with their investments.

We also continued to strengthen our display ecosystem relationships. These relationships matter because the more third-party display partners we can support, the more ways we have to embed our waveguides into wearable products. Our recent collaborations with TCL, CSOT, Saphlux, Himax, Avegant and others matter because the industry increasingly recognizes that success in AI glasses and AR glasses will require the right combination of waveguides, display performance, manufacturability and cost.

Those pieces have to work together. We believe Vuzix is one of the few companies that can not only supply waveguides that are not only uniquely optimized for a given display, but also help design, develop and build full smart glasses products and system solutions from the ground up.

We believe our waveguide business represents the largest long-term opportunity for Vuzix. As display-based smart glasses become a true mass market computing platform over time, advanced waveguides will become one of the key enabling technologies. In that scenario, the ultimate unit opportunity for waveguides could potentially be enormous. That is why scale matters, that is why manufacturability matters, and that is why Quanta matters.

The waveguide market will not be won by having a good lab prototype. It will be won by having technology that performs, can be produced reliably and can be cost-competitively priced now and more so in the future as volumes ramp. Vuzix has spent years building toward exactly that value proposition. We believe the broader consumer smart glasses market is now entering an important new phase. Much of the recent growth and attention has been driven by Meta, and that has been positive for the industry because it has helped to validate demand and increase awareness, but we're also starting to see the early signs of a broader market forming with additional technology and eyewear players intending to bring products, platforms and ecosystem support into the category.

On the Vuzix branded enterprise side, the enterprise markets are becoming more mature and more ROI-driven. Customers are increasingly focused on implementing beneficial solutions that improve workflow efficiency, enable AI-driven hands-free operation, enhance safety and produce measurable business value. Our enterprise products continue to demonstrate that Vuzix understands real workflows, real customers and their real deployment challenges in maintenance, logistics, warehousing, inspection and other industrial settings. We will continue to support and monetize the M400 platform and the recently introduced LX1 to the market.

To be clear, though, the maturity of the enterprise space is providing revenue, but more importantly, opening doors for Vuzix OEM solutions. Going forward, to support our business, we are allocating a majority of our planned resources and R&D spend toward waveguides, Quanta-related programs, DoD efforts and funded OEM programs. This is intentional. We are putting our time, money and talent behind the areas where we believe Vuzix has its strongest leverage and clearest strategic advantage.

I would like to remind everyone that Vuzix has stayed in this market and continued building when many others, including better-funded players have stepped back, stumbled or disappeared. Over that time, we have continued innovating, serving customers, advancing our waveguides and manufacturing capabilities and building what we believe is a very meaningful intellectual property position. With more than 500 patents and patents pending worldwide, that investment in innovation represents a significant asset for the company.

The smart glasses market is now moving in a direction that we believe increasingly values exactly those kinds of capabilities. AI is making smart glasses more practical. Customers are becoming more specific about what they need and waveguide manufacturability and protected, enabling technologies are becoming more central to success, not less. We believe that the perseverance Vuzix has shown over these many years has positioned the company to create meaningful long-term value for our shareholders.

With that, I'll turn the call over to Grant for the financial overview. Grant?

Thank you, Paul. As Ed mentioned, the 10-K we filed this afternoon with the SEC offers a detailed explanation of our annual financials. So I'm just going to provide you with a bit of color on some of the full year as well as quarterly numbers.

For the fourth quarter ended December 31, 2025, we reported $2.2 million in total revenues as compared to $1.3 million for the fourth quarter of 2024, an increase of 76%. The revenue increase was primarily due to higher unit sales of our M400 smart glasses as well as significantly higher engineering services sales.

For the full year ended December 31, 2025, Vuzix reported $6.3 million in total revenues as compared to $5.8 million for the prior year, an increase of 9%. Product sales increased by 4% year-over-year on greater unit sales of our M400 products. Sales of engineering services for the year ended December 31, 2025, were $1.6 million as compared to $1.3 million in 2024, an increase of 27%.

For the full year ended December 31, 2025, there was an overall gross loss of $1.1 million as compared to a loss of $5.6 million in 2024. The reduced gross loss for 2025 was primarily a function of significantly lower inventory obsolescence reserves that were included in cost of sales in 2024.

Research and development expenses for 2025 rose 31% to $12.6 million as compared to $9.6 million in 2024. The increase was primarily due to a $2.6 million increase in external development costs on our new LX1 smart glasses, which did not begin shipping until early 2026 and our waveguide products and a $0.7 million increase of depreciation expense related to underutilized new manufacturing equipment still being optimized before they are placed into full service, partially offset by a $0.9 million decline in noncash stock-based compensation expense due to the completion of the 2024 voluntary salary reduction program for equity.

For the fourth quarter ended December 31, 2025, research and development expenses were $4.5 million as compared to $2.2 million in the fourth quarter of 2024. The increase again was largely driven by higher new product development costs related to the completion of the LX1.

Sales and marketing costs for all of 2025 fell to $5.5 million from $8.2 million in 2024, a reduction of $2.7 million or 33%. The most significant factors for these expense reductions included a $1.2 million net decrease in bad debt expense, a $0.8 million decrease in cash salary and benefits-related expenses driven by head count decreases and a $0.5 million decrease in noncash stock-based compensation expense, primarily due to the completion of the 2024 voluntary salary reduction program for equity.

For the fourth quarter of December 31, 2025, sales and marketing expenses were $1.4 million as compared to $2 million in the fourth quarter of 2024. The decrease was primarily driven by a $0.4 million reduction in bad debt expense and a $0.2 million decrease in stock-based compensation expense.

General and administrative expenses for the full year of 2025 decreased 32% to $11.6 million as compared to $17.2 million in 2024. The bulk of this decrease was due to a $4.9 million decline in noncash stock-based compensation expense related to our 2024 cash salary reduction program in exchange for equity, which ended on April 30, 2025, and the termination of the company's original LTIP, which was canceled on June 16 after shareholder approval.

For the fourth quarter ended December 31, 2025, general and administrative expenses were $2.3 million as compared to $4.3 million in the 2024 fourth quarter. The decrease was primarily driven by a decline in noncash stock-based compensation expense.

For the fourth quarter ended December 31, 2025, the net loss attributable to common shareholders was $8.7 million or $0.12 per share as compared to a net loss of $13.7 million or $0.16 per share for the fourth quarter of 2024.

For the full year ended December 31, 2025, the net loss attributable to common shareholders was $32.3 million or $0.42 per share as compared to a net loss of $73.5 million or $1.08 per share for the full year of 2024. Decreased net loss was in large part attributable to a $30.1 million impairment loss that was recorded in 2024. Excluding this impairment write-off, the overall net loss for 2025 still improved by over $11 million versus the 2024 year.

We also ended the year with a stronger balance sheet. Our cash position as of December 31, 2025, was $21.2 million versus $18.2 million as of December 31, 2024. And we ended 2025 with a net working capital position of $22.3 million and no current or long-term debt outstanding.

Inventory levels improved with our net inventory declining to $2.2 million as of December 31, 2025, as compared to $4.8 million at the end of 2024. Net cash flows used in operating activities declined to $18.8 million for the year ended December 31, 2025, as compared to $23.7 million for the 2024 year, a decrease of $4.9 million.

For all of 2025, we raised $24.4 million from financing activities that consisted of a $10 million of additional investments by Quanta Computer and $14.3 million of net proceeds received from equity sales under our ATM program during the year. Cash used for investing activities in 2025 was $2.6 million, down modestly from $2.9 million in 2024.

Overall, we continue to control and reduce our operating expenses where possible. Following a 36% reduction in our cash expenses in '24, resulting primarily from head count reductions, we held our cash expense growth to just 4% in 2025 despite new product development spending and better positioning ourselves for general business growth in 2026.

We look forward and remain confident that management's plans, along with potential further equity sales under our ATM program. Of note, we raised an additional $6 million to date thus far in 2026, that the company has more than adequate resources to move forward with its operating plan well through into 2027.

With that, I would like to turn the call back over to the operator for Q&A.

[Operator Instructions] Our first question today is coming from Christian Schwab from Craig-Hallum.

Paul, can you just give us an idea of what you expect for 2026? I know we've got this movement in Amazon for purpose-built glasses. It sounds like numerous different opportunities within the defense industry and hopefully eventually Quanta bringing a more meaningful program to the business. Can you give us an idea of what the range of outcomes for '26 revenue would be and where you think the most significant portion of that revenue will come from?

I hate saying it this way, but I'll spitball a little bit here for you, Christian. You should see the OEM and in particular -- and alongside it, the waveguide business start to climb quarter after quarter throughout the year. And you should see it surpass the revenues on the enterprise, the pure Vuzix-branded enterprise side of our business before the year is up.

So it's an exciting piece of our business right now. It's pretty amazing how the rate of new programs that we're bidding on and that we're winning are coming in the front door. So from that side, exciting stuff. Amazon is multiple different areas, and it's a custom-built OEM-style device. This large car company, we expect should be rolling in through to production by the end of this year also. We -- you guys know we put press releases out about Collins, and they are in production with Vuzix right now. And there's more than a handful of others that are in the queue.

Some of these guys could represent some really significant business for Vuzix, well beyond what 2025's numbers were in the entire enterprise space. But it's going to grow through the year, we expect. Yes, you should see us stepping forward each and every quarter, but this -- it's bumpy, the business, as you guys all know. So it's hard for us to predict exactly other than to say that it's impossible to miss the fact that there's a wave of OEM business that's coming for Vuzix.

And following up upon that, when is -- when could we see additional orders, whether they start small in '26 and meaningfully expand in '27. Would you anticipate throughout the course of the year that we could have 3 to 6 announcements regarding orders and go to market with production in 2026? Or is that yet to be seen?

I think you would see something like that, Christian. And I think you'll also see some press releases announcing some great business partnerships that have developed that won't yet be product revenue generating, but will be the beginnings of it through the engineering services and work that needs to get done to get it to that point. So there's a lot. It should be an exciting year from a perspective of new business opening up for Vuzix.

We've actually reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Thank you very much, Kevin, and thank you, everyone, for joining us today. We believe that Vuzix is entering 2026 with a very clear path to value creation through our OEM programs, defense and government opportunities and advanced waveguide technologies, supported by the enterprise smart glasses foundation that we have built over many years. We strive to invest where our advantages are the strongest. We have strengthened strategic relationships. We have improved the structure of the business, and we believe the value we have built is becoming clearer both operationally and strategically. There's still work to do, clearly, but we are encouraged by where we stand and by the direction we're heading.

Thank you again for your continued support, and we look forward to updating you again next quarter and as 2026 unfolds.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.

Greetings, and welcome to Vuzix's Third Quarter ending September 30, 2025, Financial Results and Business Update Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

Now I would like to turn the call over to Ed McGregor, Director of Investor Relations at Vuzix. Mr. McGregor, you may begin.

Thank you, operator, and good afternoon, everyone. Welcome to the Vuzix Third Quarter 2025 ending September 30 Financial Results and Business Update Conference Call. With us today are Vuzix CEO, Paul Travers; and CFO, Grant Russell. Additionally, Chris Parkinson, President of Enterprise Solutions, will be joining for a portion of this call.

Before I turn the call over to Paul, I would like to remind you that on this call, management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements during the question-and-answer session. Therefore, the company claims the protection of the safe harbor for forward-looking statements that are contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those contemplated by any forward-looking statements as a result of certain factors, including, but not limited to, general economic and business conditions, competitive factors, changes in business strategy or development plans, the ability to attract and retain qualified personnel, as well as changes in legal and regulatory requirements.

In addition, any projections as to the company's future performance represent management's estimates as of today, November 13, 2025. Vuzix assumes no obligation to update these projections in the future as market conditions change.

This afternoon, the company issued a press release announcing its Q3 2025 financial results and filed its 10-Q with the SEC. So participants in this call who may not have already done so may wish to look at those documents as the company will only provide a summary of the results discussed on today's call. Today's call may include certain non-GAAP financial measures. When required, reconciliation to the most direct comparable financial measures calculated and presented in accordance with GAAP can be found in the company's filings at sec.gov, which is also available at ww.vuzix.com.

I will now turn the call over to Vuzix' CEO, Paul Travers, who will give an overview of the company's operating results and business outlook. Paul will then turn the call over to Chris Parkinson, President of Enterprise Solutions, who will also briefly discuss developments in the enterprise smart glasses space. We will then hear from Grant Russell, Vuzix's CFO, who will provide an overview of the company's third-quarter results, after which we'll move on to the Q&A session. Paul?

Thank you, Ed, and thank you to everyone else joining us today. The race to deliver production-ready waveguides and display engines for broad markets is fully underway, and Vuzix is in it with momentum. Inbound interest from leading ODMs and microdisplay suppliers has accelerated over the last 12 months, led by Quanta Computer, one of the world's largest ODMs.

Just over a year ago, Quanta made an initial $10 million strategic investment to support a long-term waveguide design and supply partnership. We received a second $5 million tranche in June and completed the third $5 million tranche in September after meeting or exceeding the agreed-upon manufacturing milestones. This brings Quanta's total investment to $20 million. We are now into discussions with Quanta on how to ramp in a more significant way, capacity-wise, as the AI smart glasses industry begins to accelerate much further. Both of us want to be primed and ready to deliver.

We also announced 2 new display ecosystem partnerships in Q3, one with TCL, China Star Optoelectronics Technology to develop an integrated AR optical solution that combines our high-transparency production-ready waveguides with their microLED display engines, initially a monochrome green module with a road map to full color in 2026, and another with Saphlux to co-develop next-generation AR display engines pairing their high brightness mono microLEDs with our waveguides, targeting a reference design and ultimately full color mass producible optical solutions.

Beyond these public announcements, we've signed NDAs with multiple other ODMs, microdisplay makers, and consumer electronics brands seeking a capable, cost-effective waveguide supplier. Put simply, demand for high-quality color waveguides continues to rise, and Vuzix is making sure it is well-positioned to serve it. In parallel, our OEM and defense business continues to accelerate in active programs, engagements, and revenue, and our ties with prime contractors continues to deepen. We are now transitioning into production deliveries of the waveguides and display engines for a lightweight heads-up display for fielded military personnel, with revenue contribution beginning in Q4 this year.

We also have secured, as previously announced, a 6-figure development order for a new program that was received and expected to be delivered in Q4. And finally, a third program is advancing, pending a display engine modification that Vuzix needs to make to support the high dynamic range required for that unique application. On the enterprise side, which currently accounts for the majority of revenue, AI-enabled smart glasses are driving a new wave of interest as customers bring us their specific operational challenges. We've seen a real shift from push to pull. Customers now are coming to Vuzix with specific workflows and ROI targets and asking us to help deliver for them.

A good example of this is Amazon. As we disclosed in May of this year, Amazon is using Vuzix's Smart Glasses to support reliability and maintenance engineering teams with see what I see capabilities to reduce cost, speed repairs, and improve safety in large-scale logistics facilities. That program, which started in Europe, has now entered commercial rollout in the U.S. and Canada, with discussions underway to expand to additional regions, business units, and use cases. And as a result, we expect this business to grow materially with Vuzix delivering more and more custom M400 kits for them as they scale.

Overall, business and revenue momentum is increasing in Q4 as quarter-to-date revenue and purchase order obligations have already exceeded Q3 levels, with both our OEM waveguide and products business performing well.

Finally, our waveguide development efforts are not only focused on cost-effective high-volume manufacturing, but we are developing advanced high-index materials that are designed to deliver on the future performance requirements that this industry is going to demand as the industry matures. We will have more to share on this in 2026 as these new developments unfold, but you can imagine technology that revolves around all the way to silicon carbide waveguide solutions.

In September, we welcomed Dr. Chris Parkinson, Co-Founder and former Chief Technology Officer and CEO of RealWear, as President of Vuzix's Enterprise Solutions business. Chris' mandate spans the entire enterprise stack, product portfolio, and road map, solutions architecture, sales, strategic partnerships, customer adoption, and global channels so we can capture the clear, measurable value smart glasses deliver in the enterprise, higher productivity, faster time to resolution, better safety, and more consistent quality. Chris's leadership of our enterprise business also frees me to double down on core waveguide and optical technology, the defense business, and strategic development funding opportunities, ensuring we solidify being the supplier of choice for brands and prime contractors with the Made in U.S.A. operations.

Of course, we also have our eye on Asian operations for some of our high-volume broad market programs. His arrival coincides with the formal introduction of the LX1, our purpose-built warehouse-ready voice and vision smart glasses designed for full shift duty and fast time to productivity. Early customer feedback has been excellent, and Chris is already engaging with multiple key accounts that will shape this market.

And with that, I'm delighted to introduce you all to Chris Parkinson. Chris?

Thank you, Paul, and thank you, investors, for allowing me to share a little about myself and what I'm up here at Vuzix. I've been in the enterprise wearable space since 2007 and have been watching with increased interest the evolution of smart glasses over the last few years. We've seen an amazing improvement in displays and optics, a steady miniaturization of electronics, better batteries and power-efficient operating systems, and have seen an increased awareness and desire by the enterprise to want wearables. But one problem has continued to plague the industry: the user interface for hands-free systems, causing a barrier for wide-scale adoption.

But about 2 years ago, AI burst into our space to solve this overnight. With AI comes the natural language interface, and almost immediately, those clumsy devices can become eminently usable at scale. Just talk to the device and it works. This huge convergence of technology over the last few years has left me eager to continue to be a part of the smart glasses revolution. but not as a customer to a waveguide company, but rather part of the company that owns the building blocks of that future. And that's the Vuzix opportunity for me. Plus, of course, the Vuzix made in America story is such a strong message that just makes sense in the enterprise sales area.

As you know, I've only been on board at Vuzix for about 2 months, but I already feel I'm hitting the ground running. We are rebuilding the sales motion at Vuzix, building on the work performed by the teams today and adding procedure, accountability, and discipline to the way we go to market. That means working with trusted software partners to identify and assemble solutions, working with trusted resellers to educate, train, and help them scale their businesses, and to enhance the reputation and quality of Vuzix products in the field. This is by no means a small feat, but the end justifies the effort. Done well, we will have an army of people around the world eager, excited, and incentivized to sell Vuzix products and customers that are happy with the value that Vuzix brings.

And by product, we are talking about the M400, maybe long in the tooth for some, but actually a really solid device. We are seeing sales pick up at the moment, and I believe this device, when positioned correctly, has strong legs through 2026. And of course, we have the LX1 coming out very soon, not to replace the M400, but to sit side by side as a portfolio of devices, choose your model, lightweight M400 or rugged LX1 with integrated all-day battery. They make a very strong pairing, giving customers a choice to own what they need. And what are the Ultralight Pro? This is one device I'm really excited about, but it was never designed to be an end product. It's a platform to seed an industry, which I'm looking forward to helping to deliver on.

So I'd love to tell you more, but I feel I'm going to get in trouble if I do that. So needless to say, though, I'm actually very buzzed about these products, very buzzed about the story and the portfolio we're building. It's exactly why I'm here at Vuzix.

With that said, I'll hand the microphone over to Grant for the financial overview.

Thank you, Chris. As Ed mentioned, the 10-Q we filed this afternoon with the SEC offers a detailed explanation of our quarterly financials. So I'm just going to provide you with a bit of color on some of the quarterly numbers. Our third quarter 2025 revenue was $1.2 million, down 16% year-over-year due to decreased sales of our M400 smart glasses. Engineering services revenues recognized were $0.3 million for the 3 months ended September 30, 2025, versus $0.4 million in the prior year's period. The decrease was primarily due to the timing of work on a major project, and we have a strong pipeline for Q4 currently expected. There was an overall gross loss of $0.4 million for the 3 months ended September 30, 2025, as compared to a gross loss of $0.3 million for the same period in 2024. The larger gross loss was primarily the result of lower product sales to absorb our relatively fixed manufacturing overheads.

Research and development expense was $2.9 million for the 3 months ended September 30, 2025, as compared to $2.3 million for the comparable 2024 period, an increase of approximately 26%, primarily due to $0.3 million increases in both external development costs for new products and depreciation expenses, a $0.2 million increase in cash compensation and salary expenses, all partially offset by a $0.4 million decrease in noncash stock-based compensation expense.

Sales and marketing expense was $1.1 million for the 3 months ended September 30, 2025, as compared to $1.8 million for the comparable 2024 period, a decrease of approximately 35%. This reduction was largely due to a $0.3 million decrease in bad debt expense, a $0.2 million recovery of previously written off bad debt, and a $0.2 million decrease in noncash stock compensation expense.

General and administrative expense for the 3 months ended September 30, 2025, was $2.6 million versus $4.3 million for the comparable 2024 period, a decrease of approximately 41%. The reduction in total G&A expenses was primarily due to a $1.8 million decrease in noncash stock-based compensation expense, which was driven by the cancellation of the company's original LTIP plan approved by the stockholders in June 2025.

Total operating expenses for the 3 months ended September 30, 2025, declined $1.8 million or 20% to $7.1 million versus the prior year's period of $9 million, the lowest quarterly level achieved since 2020. The net loss for the 3 months ended September 30, 2025, was $7.4 million or $0.09 per share, versus a net loss of $9.2 million or $0.14 per share for the same period in 2024. Our cash and cash equivalents position as of September 30, 2025, was $22.6 million, up from $17.5 million as of June 30, 2025, and we had a positive working capital position of $24.3 million.

As of September 30, 2025, the company continues to have no current or long-term debt obligations outstanding. For the third quarter of 2025, net cash flows used in operating activities was $5 million versus $5.3 million for the comparable 2024 period. For the 9 months ended September 30, 2025, net cash flows used in operating activities was $13.3 million versus $19.7 million for the same period in 2024, a decrease of $6.5 million in cash used for investing activities for the third quarter of 2025 was $0.5 million, versus $0.3 million in the prior year's quarterly period.

During the third quarter of 2025, we received a total of $10.6 million from various financing activities, which primarily included the final tranche of $5 million from the sale of Series B preferred stock to Quanta Computer and $5.3 million in net proceeds from the sale of common stock under our ATM program. Total financing activities for the 9 months ending September 30, 2025, was $19.8 million.

Let me close by reiterating that we believe our overall cash position, along with maintaining a disciplined cost structure, further conversions of our finished goods inventories into cash, and general business expansion, particularly on the ODM and OEM side, and potential future uses of our ATM program, gives us sufficient runway to execute on our current operating plan through 2026.

With that, I would like to turn the call over to the operator for Q&A.

[Operator Instructions] Our first question is from Christian Schwab with Craig-Hallum Capital Group.

I just wanted to start with Quanta and potential -- your conversation about having conversations with them to ramp capacity even further. I think previously, you've said you had capacity for 1 million waveguides a year. I mean should we assume that when CES comes and some people introduce their products that there's high hopes for substantial volume? I'm just trying to understand that statement a little bit better.

Yes, Christian, thanks for asking the question. It's a good one. There are multiple programs that we're working on with our friends from Quanta right now. There'll be 3, maybe 4 new glasses presented, I think, at the Consumer Electronics Show. The forward momentum in this space, Quanta has inbound all over the place, of which I don't know all of it, frankly. They don't share. They're a very conservative company when it comes to who their customers even are. But there is a big pressure on being able to ramp to much significant -- more significant volumes than what we can do, the 1 million per year out of our plant here in Rochester.

And actually, the very initial input or communications between us and Quanta was how do we get to the point where we can make millions a year. If you think about the size of this business, right, ultimately, these glasses could replace the foam. And when that happens, it's 1 billion or 2 billion waveguides a year that will be needed. So yes, we are in discussions about the best way, where to do it, and how to get it done so that the volumes can ramp much more significantly than what we have here in Rochester. I will say that the Rochester plant is easily expanded. However, I also think there's supply chain issues that need to be addressed. There's issues associated with tariffs these days that need to get looked at, at least for North American versus rest of world markets. And so there's a whole lot of discussions about the best way to go from where we are today to where we need to be over the next year.

And following up on that, how long are these discussions in the early stages? Or do you think you're down the path to -- is that something that we're going to hear about in the next 1 to 2 quarters, how those discussions end? Or is it yet to be determined how long that may take?

I think people got to hold their breath just a little bit. We're working through the process. I would suggest that it takes time to bring up new lines. So it's sooner rather than later. But I can't comment on -- well, in Q1, you should see this happen, and then in Q3, this should be happening. Sorry about that. I wish I could put a sharper schedule and plan in place for you. I believe that as the next few quarters unfold, this will get way obvious, though. We'll be able to share a whole lot more.

And then just another question regarding the defense industry. Can you guys -- I know we've talked about a 6-figure development order with a leading U.S. defense contractor in the past. But as these type of programs ramp, when do you think you'll be able to give greater clarity on volume ramping in a more measurable pace?

So we're on the same page here, Christian. We have development programs here in Q4, and we are shipping production waveguides in Q4. So these programs are going into production. Looking forward to being able to announce exactly, but you will see in our Q4 revenue numbers that our OEM business is bigger certainly than it's been in a while. And a portion of that is related to production rollout, not a proof of concept, and not another development project. But there's also some of that in there, too. 2026, this one particular program that is obviously off to the races, we should know a whole lot more here early in the year as to how that's going to unfold through '26 and '27 and into the future. But it's real production now. We're not -- next week, they might get there. This is production.

And then as 2026 unfolds, how do you potentially see the defense contractor customer base expanding? And will we see other customers go into production in calendar '26 in your expectation?

This development program that we have is going to happen really fast. It's with a partner we've already had some level of success with, and the project is just waiting for the new waveguide. So that one should happen fairly quickly. So we might have 2 programs rolling in production in '26. There's another one that needs to have a design change to an engine that Vuzix has to have done. And we're in the process of doing that. It's got to force a display to do something that it wasn't really designed for, but it can do it. We have zero doubt about that. It's just we got to get through the engineering on that. And that's going to been the one that's been to hang up for that particular program getting into production. And that's the tip of the spear.

There's some programs -- other programs that we have that are contracted that we'll be able to share a whole lot more about here in Q1 and after this sequestration or with the continuing resolution happens and people actually go back to work at the U.S. government. Some of that's been holding some of these things up, including some of our ability to make announcements.

At this point, I would like to turn the call back over to Paul Travers.

We did have a couple of other questions come in that I thought what might be germane to the conversation for everybody. And one of them does relate to the Amazon program. The Amazon program actually has been around for some time now. They've been perfecting on how they use our glasses. And I don't know if you noticed, but if you're paying attention, you can see that Amazon robots, human in the loop, the use of glasses to help solve problems around some of the things that they're doing is all over the place at Amazon. And our glasses are being used today in fulfillment and warehouses, not for the picking actually, but for the maintenance and keeping the equipment up, and where there's human-in-the-loop relations between robots and humans, kinds of stuff.

And they're expanding that now that we started in Europe. They've expanded throughout North America, and it's now being moved. This is a brand-new component to their data centers to keep all those AI server farms and Amazon Web Services, and the likes up and operational. They're even looking at janitorial services for the glasses. And on top of that, Amazon Web Services has an AI component that they're doing that they're looking at potentially putting that with the glasses to enable even more all-day use case kinds of applications. So Amazon could be significant. It's off to a really good start, and it's finally rolling for Vuzix.

The other question, I think, Christian, I kind of answered it about what happened follow-on with our expectations around our partners, Quanta. And then there was one other question about gross margins. I will say that it's a balancing thing. The new stuff that we're doing, like the LX1, its margin models are better just out of the gate. The stuff that we do in defense typically is much higher margin than what we would do on something on the enterprise product side of the house. So in general, the product mix in 2026, you should start to see higher margins in the product side of the house.

So that's the questions today. I'd like to again thank everybody for coming to our call today. It's really starting to get to be exciting at Vuzix. We've said this before, but the train is leaving the station. We look forward to sharing a whole lot more here as all this stuff unfolds. Thanks again, everybody. Have a nice evening.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.

Greetings, and welcome to the Vuzix Second Quarter ending June 30, 2025, Financial Results and Business Update Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. Now I would like to turn the call over to Ed McGregor, Director of Investor Relations at Vuzix. Mr. McGregor, you may begin.

Good afternoon, everyone, and welcome to the Vuzix Second Quarter 2025 ending June 30 Financial Results and Business Update Conference Call. With us today are Vuzix CEO, Paul Travers; and our CFO, Grant Russell. Before I turn the call over to Paul, I would like to remind you that on this call, management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements during the question-and-answer session.

Therefore, the company claims the protection of the safe harbor forward-looking statements that are contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those contemplated by any forward-looking statements as a result of certain factors, including, but not limited to, general economic and business conditions, competitive factors, changes in business strategy or development plans, the ability to attract and retain qualified personnel as well as changes in legal and regulatory requirements.

In addition, any projections as to the company's future performance represent management's estimates as of today, August 14, 2025. Vuzix assumes no obligation to update these projections in the future as market conditions change. This afternoon, the company issued a press release announcing its 2Q 2025 financial results and filed its 10-Q with the SEC. So participants on this call who may not already done so may wish to look at those documents as the company will only provide a summary of the results discussed on today's call.

Today's call may include certain non-GAAP financial measures. When required, reconciliation to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in the company's filings at sec.gov, which is also available at www.vuzix.com. I will now turn the call over to Vuzix CEO, Paul Travers, who will give an overview of the company's operating results and business outlook.

Paul will turn the call over to Grant Russell, Vuzix's CFO, who will provide an overview of the company's second quarter results, after which we will move on to the Q&A session. Paul?

Thank you, Ed, and thank you to everyone joining us today. I'd like to start with a few select Q2 highlights. As you know, and representing a great milestone and statement about Vuzix's ability to manufacture waveguides and volume, Vuzix has met all the manufacturing and performance gates tied to the second Quanta tranche and received a further $5 million in equity, bringing Quanta's investment thus far to $15 million of a planned $20 million total. I will share a bit more on this shortly.

We have also commenced volume shipments of waveguides to our first OEM waveguide customer. And alongside that, we have formally engaged with multiple new Tier 1 OEM waveguide customers spanning enterprise to the broad markets. And just this week, we have announced the new LX1 enterprise smart glasses focused on warehousing and logistics with integrated voice and vision workflows.

Initial customer sampling is underway, and the production rollout is scheduled for Q4 with strong initial demand and interest across our existing customer base.

Why do these events matter? Our strategy is simple, and these proof points show its execution. We plan to monetize the enterprise market and scale OEM waveguide optics for AR and AI-driven smart glasses across the even broader consumer markets in parallel. And this strategy is driving multiple and sizable market verticals for Vuzix.

We're enabling enterprise customers to rethink frontline workflows and accelerate the digital transformation that is at the forefront of the integration of AI and the future of work.

We're engaged with multiple prime defense contractors to design and support the next generation of see-through wearables, and we're on the ground floor to participate in a global evolution from consumer smartphones to AI-driven smart glasses. This strategy is also leading towards a growing base of ODM and OEM customers, including strategic partners like Quanta, who will rely on our scalable waveguide capabilities to power their own smart glasses and HMD solutions for their customers.

Looking ahead, our vision is to power the future of these connected smart glasses with waveguides at their core. The collective opportunity is considered massive in both units and dollar terms, and we intend to participate in a very material way as we scale with disciplined and capital-efficient growth. For OEMs, the metrics that matter most to them when selecting key technology component suppliers are clear: high-volume and cost-effective manufacturing, strong yields and consistency at scale. Vuzix is demonstrating exactly that, proving we can meet the quality, volume and cost targets essential for global AI-driven smart glasses adoption.

These capabilities have been acknowledged not just by Quanta, but soon also by multiple ODM and OEM partners, reinforcing our leadership in scalable AR optics. Our ability to deliver new and customized waveguide prototypes with turnaround times far shorter than others gives us a unique edge. This isn't just about designing a single product or one-off engagement. It's ultimately about a long-term platform strategy. We are engaged currently in joint product development, co-marketing and integrated supply chain initiatives with several entities, positioning Vuzix as a core component supplier of next-generation waveguides.

We are often asked whether Vuzix is or will be inside a specific pair of smart glasses. The truth is many of the brands you know spanning tech companies, fashion houses and consumer electronics leaders are now attempting to develop and introduce smart glasses. And our goal is to supply waveguides to as many of them as possible. Crucially, Quanta, a $35 billion market cap company, already manufactures and supplies ODM/OEM products for nearly every major player in the Western world. Partnering with them give Vuzix a powerful entry point into broad consumer markets.

And while we respect Quanta greatly, we are also now engaged with some of their competitors directly as well that have been approached by their respective OEM customers for solutions. With partners like Quanta and other leading ODMs and OEMs, we feel we are entering the market at exactly the right time with scale, proven manufacturing and reference designs ready to go. The AR smart glasses ecosystem is aligning. Consumer and enterprise users' behavior is already shifting and smart glasses are next. And Vuzix waveguide optics, we feel are positioned to power the coming wave. In Q2 2025, Vuzix received $5 million tied to the second tranche of Quantum Computers investment contract.

Again, bringing their total commitment to $15 million thus far out of a planned $20 million. Importantly, this tranche was tied to actual manufacturing performance, not forecasts. We were required to demonstrate specific yield and volume capacity thresholds under real production conditions, and we have exceeded their expectation. Quanta set key production yield gates.

And from the very first runs, we delivered yields far north of their expectations with high run-to-run consistency. Our waveguides also met or surpassed all required performance metrics, including contrast, haze, brightness, efficiency and production run rates. And last, but certainly not least, from a financial perspective, we're hitting target price points that will produce strong production margins for Vuzix at scale.

We believe we have now also satisfied all the technical gates required for the final tranche investment of $5 million from Quanta and anticipate receiving funding as per the stock purchase agreement. I would like to add that Quanta is more than a strategic investor. They're a world-class manufacturing partner with a proven track record in high-volume production. Together, we're advancing multiple new programs built around Vuzix waveguides, all targeting large deployment opportunities. This relationship is shaping our go-to-market and scaling strategy.

It enables us to quickly commercialize at scale efficiently, reliably and profitably. By leveraging Quanta's infrastructure, we can remain capital efficient and focused on core innovation while accelerating production to meet the growing demands of our customers. We are seeing enterprise adoption reenergize as AI and AR capabilities and use cases are emerging fast across logistics, remote support, training, manufacturing and quality assurance. AI is transforming smart glasses into assistance in the workplace, but it can't solve problems unless it has a feel for what the problems are in front of the worker.

With our smart glasses, with see-through waveguides, we are building that ideal platform. Think about cool yet simple applications like taking a picture with smart glasses. That is nothing. When AI is integrated directly into these devices, their potential to enhance real-time decision-making and productivity in the workforce is game changing. As skilled labor shortages grow due to retirements and shrinking talent pool, AI-enabled smart glasses will become critical tools for augmenting workers in complex hands-on roles. Enterprise stands to benefit significantly as these devices streamline operations, reduce training time and boost overall efficiency.

Take the automotive industry, for example, a vertical where we see great potential for smart glasses usage. If you took a deep dive today, you would be surprised by what a large percentage of a car is built by human hands. I know they show robots on the outside of cars, painting them and welding them, sure. Those bigger, bulkier functions are jobs for a robot. But if you visit some of the largest car companies on the planet and ask them what percentage of their final manufacturing is done by a human, they will tell you it's far north of 80%.

The problem today is that they're expecting human beings to do more and more. And how do they do that if they don't have the proper training and support that a pair of AI-driven smart glasses can provide. There simply are limits to human capacity. And by using AI, those limits get significantly lifted by having AI agents to help. Within warehousing and logistics, automated robotic systems can excel at handling routine tasks with predictable outcomes, but struggle when faced with exceptions.

Human-in-the-loop automation is a hybrid approach where automated systems and human judgment are integrated into a single workflow. In this workplace instance, a worker is equipped with vision picking smart glasses like Vuzix's new LX1 that can outperform traditional voice-only systems, especially in complex loud or high SKU count and high velocity picking environments.

The warehouse labor market has also reached a crossroad in recent years. Turnover in the warehouse roles often exceeds 30% annually. Skilled pickers are in short supply and aging workforces alongside overall rising labor costs will accelerate the adoption of assisted tech, including AI-driven smart glasses. The LX1 announced earlier this week was specifically designed to meet the evolving demand of the warehousing and logistics voice picking industry, which according to research analyst firm markets and markets is estimated at approximately $6 billion in 2024 and could be $25 billion by 2034. This expected phenomenal growth falls squarely on top of the human-in-the-loop automation, which is one of the largest and fastest-growing market opportunity segments in supply chain today.

Let me add, we have customers coming to Vuzix that are searching for alternatives to their antiquated pick by voice solutions. The LX1 features integrated voice control and visual access to real-time information that allows warehousing operators to get the best of both worlds, voice and vision-based systems. The LX1 is rugged and purpose-built to stand up to the physical demands of modern logistics environments, all while supporting a single shift on a single charge. Quanta is our manufacturing partner for the LX1, and it extends our growing relationship with Qualcomm.

Select end customers and ISVs are already getting their first samples of the LX1, which will be in production and available more generally to enterprise customers before the end of the year.

The Vuzix Software Solutions Group, formerly Moviynt, has a growing pipeline of recognizable brands and logos operating in traditional logistics markets and with comprehensive workflows. Initial implementations are already showing strong and in some cases, remarkable operational gains and productivity improvements in certain warehouse applications, highlighting our going-in leadership position in AI-enhanced enterprise solutions.

As we look at the future of smart glasses, I like to think of it a bit like the early automotive industry in the late 1800s. Back when cars were just emerging, there were countless small makers in a wild frontier of innovation before the industry took shape. And before that, there were many years of horse and buggy. Today, the smart glasses world feels somewhat like that.

Many players, big and small, all trying different approaches. Even giants like Microsoft with the HoloLens or Magic Leap with billions in funding have stepped in and stepped out of the smart glasses industry. Yet here we are, Vuzix, a smaller company, still standing out and going strong. Our enterprise side is sitting in a great spot, and we are carving our own path in this new frontier, just like those early automotive pioneers who eventually reshaped the world.

And if we think about how the smart glasses industry has evolved, there's another important parallel. For a long time, smart glasses were almost like an experiment. People weren't sure what to expect. They were feeling out what might work. But now after years of learning and listening to real-world feedback and with the amazing capabilities of AI, the landscape is changing. We've got customers who know exactly what they need and who have helped shape products like the LX1 to be a true solution, especially in the warehouse space.

It's like the moment when people realized they could afford a car, and it wasn't just a novelty. It was something that could change how they worked and lived in the same way the LX1 isn't just another pair of smart glasses. It's a tool built from the ground up with real customer insight, and it's a sign that we've reached a turning point where these devices are truly ready for prime time. And with our capabilities in design and manufacturing of the critical waveguides needed, customer market opportunities and partner engagements across enterprise, defense and consumer continue to mature and expand.

Our target markets are large and innovation and investment in these markets by many entities continues to accelerate. In defense, we have numerous programs in flight with prime defense contractors and other brands to deliver waveguide and display technologies that are going into next-generational products and head-worn devices to support drones, radar surveillance, commercial and industrial aircraft, commercial products and even ultimately in consumer products.

For the broader markets, our relationship with Quanta remains central, but we have recently added Himax as a development partner and are advancing collaboration discussions with numerous other ODMs and projection makers. Let me conclude by stating that we believe that a structural inflection point is finally at hand for Vuzix and the industry in general.

The investments, time and energy we made to date across these verticals have positioned us for an era of growth that we believe will ultimately be game-changing for the world, our financial results and market valuation. With that, I'll turn the call over to Grant for the financial overview. Grant?

Thank you, Paul. As Ed mentioned, the 10-Q we filed this afternoon with the SEC offers a detailed explanation of our quarterly financials. So I'm just going to provide you with a bit of color on some of the quarterly numbers. Our second quarter 2025 revenue was $1.3 million, up 19% year-over-year due to increased sales of smart glasses, particularly our M400.

Engineering services sales were $0.3 million for the 3 months ended June 30, 2025, versus $0.5 million in the prior year's period. There was an overall gross loss of $0.8 million for the 3 months ended June 30, 2025, as compared to a gross loss of $0.3 million for the same period in 2024. The larger gross loss was a result of further reserves for inventory obsolescence, increased unapplied manufacturing overhead costs caused by lower production of smart glasses and a gross loss on engineering services due to additional costs being recognized that were not originally part of the overall engineering project budget.

Research and development expense was $2.6 million for the 3 months ended June 30, 2025, as compared to $2.4 million for the comparable 2024 period, an increase of approximately 9%, largely due to increases in external development costs on new products. Sales and marketing expense was $1.4 million for the 3 months ended June 30, 2025, as compared to $2.2 million for the comparable 2024 period, a decrease of approximately 40%. The reduction in sales and marketing expense was largely due to a $0.5 million reduction in salary and benefits-related expenses driven by headcount decreases and the completion on April 30, 2025, of our 2024 cash salary reduction program in exchange for equity and a $0.3 million decrease in bad debt expense.

General and administrative expense for the 3 months ended June 30, 2025, was $2.8 million versus $4.5 million for the comparable 2024 period, a decrease of approximately 39%. The reduction in total G&A expense is largely due to a decline in noncash stock-based compensation expense and the completion on April 30, 2025, of our 2024 cash salary reduction program in exchange for equity. Included in operating expenses for the 3 months ended June 30, 2024, was an noncash charge of $30.1 million related to the impairment of intangible assets and our equity investment in Atomistic.

Excluding that $30.1 million impairment charge recorded in the 3-month period, ending June 30, 2024. Our total operating expenses for the 3 months ended June 30, 2025, declined $3.2 million or 31% to $7.1 million versus the prior year period, the lowest quarterly level achieved since 2020. The net loss for the 3 months ended June 30, 2025, was $7.7 million or $0.10 a share versus a net loss of $40.6 million or $0.62 per share for the same period in 2024.

Now for some balance sheet and cash flow highlights. Our cash and cash equivalents position as of June 30, 2025, was $17.5 million, up from $15.2 million as of March 31, 2025. We had a positive working capital position of $20.3 million. As of June 30, 2025, the company continues to have no current or long-term debt obligations outstanding. For the second quarter of 2025, net cash flows used in operating activities was $4.7 million. For the 6 months ended June 30, 2025, net cash flows used in operating activities was $8.2 million versus $14.4 million for the same period -- for the same 6-month period in 2024.

Cash used for investing activities for the second quarter of 2025 was just $0.9 million versus $1.2 million in the prior year's period. During the quarter ended June 30, 2025, we received a total of $7.9 million from various financing activities, which primarily included $5 million in net proceeds from the sale of Series B preferred stock to Quanta Computer under the terms of our SPA and $2.8 million in net proceeds from sales of common stock under our ATM program. Let me close by reiterating that we believe our overall cash position, along with maintaining a disciplined cost structure, further conversions of our finished goods inventories into cash and general business expansion, particularly on the ODM and OEM side and the expected receipt of Quanta tranche 3 funding gives us sufficient runway to execute on our current operating plan well into 2026.

Thanks, Grant. And with that, I would like to turn the call over to the operator for Q&A.

[Operator Instructions] Our first question is from Tyler Burmeister with Craig-Hallum.

Maybe first off, a point of clarification, I guess. The Tier 1 OEM that you began shipping to, is that with the Quanta partnership? Or is that outside of that? And then just maybe a little bit of an update on Quanta. I think you previously said you expect to have 2 programs shipping this year, I guess, still on track to get a second one later this year? And then what kind of time line should we be thinking about for a ramp of these programs?

The good questions, Tyler. First, the program that we actually announced maybe 3 months ago or so. I can't remember when it was. It is actually not with Quanta. It's another very large supplier or manufacturer like ODM partner, and it's for a company that is making industrial thermal vision systems. And we've already delivered first units to this customer. We expect that business to continue to ramp as we go through the rest of this year and into 2026.

There's a lot of potential in that particular project. We got irons in the fire with Quanta still. We should see some stuff before the end of this year, but 2026, I think, is where you'll see the bulk of the ramp start to happen with Quanta. Did I get all of those questions?

Perfect. No, that was perfect. And then maybe outside of Quanta, then on the defense side, we've talked in the past before about the opportunities for OEM work with defense contractors. Maybe just an update there, how those are tracking, what we might expect from those opportunities going forward, too?

Yes, you're going to start to see first production orders here in the back half of this year. And we have multiple programs that are going on there. And more than one of them actually are at that point where they're starting to sample for production kinds of programs. It's not going to be really significant, but it also will be a heck of a stake in the ground when we start rolling here before the end of this year. And I think there'll be visibility into 2026 as those programs unfold.

That's great. And then maybe last one on the cash side of things. You guys have done a pretty good job here of working down your inventory, a little over $3 million in this quarter, down from north of $10 million a year ago. Just wondering how much more is there to go there? What kind of level of inventory would you consider normal operating inventory versus kind of excess inventory that you're still trying to work to monetize?

I can start to answer that. Grant might want to add a little bit to it. The LX1 is generating some really incredible interest. We have customers that are -- have used the LX1, got an opportunity to expand on it and can do some testing with it. And a bunch of those want to upgrade their M400 fleet of products to the LX1. But we do have other customers that are finally through qualifications that will start rolling out programs on the M400. And so as the LX1 comes out, you'll see the M400 continue. At some point in time, the M400 will end up being obsolete. But for now, we plan to sell both programs in a parallel path. Inventory levels and the likes, I'll let Grant pick up that one.

I mean, ideally, we'd like to get it down to $2 million, but that's based on sort of the current revenue product sales basis. I mean, as that rises, it's going to increase a little, plus we're making some changes in our supply chain, we're going to be getting the LX1 from Quanta. So we're not having to buy all the raw materials and handle the WIP. So we'll be buying finished goods. So we hope to better manage it and try to minimize the amount of inventory we've got to carry, but have as much product as possible to respond quickly to customer needs.

Yes. I mean we're trying to get our customers into a made-to-order basis. And I think that gets easier once they start to rollout and they see their own needs start to grow and they can project what that need is over time and get those orders into us in advance. So we're not building inventory for a warehouse. We're building for our warehouse. We're building them for their warehouses to go into productive programs. Thank you, Tyler. I believe that we have a couple of other questions that have come in over the last day or so. And Ed, do you want to...

We do, Paul. One is related to Quanta since we've achieved the hurdles, would you care to comment on when you think that $5 million might be coming in?

I mean, at this point in time, it's only a matter of time, paperwork and the likes. I would suggest before the end of this year, we certainly should see that $5 million in our balance sheet.

Okay. And then a little bit of follow-on, on the LX1 since it's purpose-built for warehousing and logistics, does that mean we're kind of walking away or giving up on the other market verticals that we've always targeted?

Again, I thought that was a great question when it came in. Look, the LX1 was built for warehousing, all day use. It has charger banks now that are designed to just plug them in, set it in the warehouse and rotate them through. So there's not cables everywhere. It's not a mess. It's designed to deploy much like the pick by voice systems are today. We basically mirrored what those things look like.

So it's not difficult for those organizations to just put them in the warehouse and make them run. Often, people like to pair the smart glasses with a wrist-mounted barcode scanner. And there's NFC built into the glasses now. So literally, you just bump the handheld scanner -- excuse me, the wrist-mounted scanner against the Zebra-based scanners, by the way, are typically the ones that people use. You just bump it to the side of the glasses and boom, it's paired. You have to bring up screens.

You don't have to type in numbers, et cetera, et cetera. I mean this thing was designed to put on and run a race in the warehouse. The all-day use case, it's 10 hours' worth of run time with this thing, nonstop, through an entire workday. It's designed to take off and throw it on the counter if you want to, just like the pick by voice systems. They need to be rugged and tough and make it through the day. We've learned a lot from the feedback that we've had from our customers on that side of the house. And we've built in what they want.

And the feedback that we've gotten has been nothing, but positive. So there's been some trepidation on rolling out. It takes a lot more training with an M400 because it really comes more as a kit. This is just put on and go. That said, it's got a beautiful processor on it. It's a longevity processor from Qualcomm. What that means is into the future, there's going to be upgrades and upgrades and upgrades to the operating system. It's a fast processor. It's got a great camera on it.

So applications like remote support, applications where you're in an operating theater, all of those applications should still run. And we have customers there that just can't wait to get their hands on them. But the main use case is this multibillion-dollar warehousing opportunity, and it wraps right around our Moviynt software, which is designed to fit hand the glove with it. So it's no longer -- look, we've got great ISVs on that side of the house, too, software partners that their software is already being tested to make sure it runs.

And we've had further developments on that front. We've, I think, made an announcement of further rollouts on the M400 that same program is looking to upgrade also to the LX1 and it's all warehousing-based stuff. But the Vuzix Moviynt software Mobilium, now branded under Vuzix just plugs in hand of gloves. So you can ship a pair of glasses with the software is on it and it just goes.

So it's really centered around warehousing, but there is no reason why it won't stream beautiful streaming 2-way communications for remote support applications. It can be used in -- from warehouses right on through to plant floors, but you'll see us doing a lot of push and a lot of focus in the warehousing space, which if it evolves as market and markets expects, could be a $25 billion industry by 2034.

Maybe as a last question, Paul. In terms of the rollout for the broad market of AI smart glasses, what do you think the biggest technological hurdles are right now to overcome in terms of this market taking off?

I mean the reality of it is weight is one of the biggest issues when it comes to the mass market adopting glasses. If you're sitting at home and you're watching movies or something sitting in your couch is one thing. But when you're out and about walking around, if these things weigh much more than 35, 40 grams, people won't wear it. And if they look a little bit odd even, just a little bit odd even, they won't wear it. They're fashion statements.

And so the technology that goes into making that happen is probably the biggest hurdle to deployment of smart glasses with displays in them today. Case in point is Meta with their Ray-Ban offerings. Ray-Ban does not have a display in it for a reason yet, and it's because they don't have waveguides that are priced right and they don't have display engines that can fit in the same space to make them look fast forward enough, fashion forward enough. Vuzix has the bulk of the answers to solve those problems.

And that's, again, part of the reason why Quanta and others are starting to come to us because they see we're on a path to be able to supply and solve those problems. I think that's the end of the questions now. I'd like to thank everybody for showing up here for the conference call. It's going to be an exciting rest of this year. Look forward to having everybody along for our next conference call. And thanks, and have a great evening and end summer, everybody.

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.