Greetings, and welcome to the Vuzix Second Quarter ending June 30, 2025, Financial Results and Business Update Conference Call. 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 Q2 2025 financial results and filed its 10-Q with the SEC. So participants on 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 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?

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, representing a significant milestone and statement about Vuzix's ability to manufacture waveguides in 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 from enterprise to the broader markets. Just this week, we 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. 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. 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 currently engaged 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. 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 gives Vuzix a powerful entry point into broad consumer markets. While we respect Quanta greatly, we are also engaged with some of their competitors directly, 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. With Vuzix waveguide optics, we believe we are positioned to power the coming wave. In Q2 2025, Vuzix received $5 million tied to the second tranche of Quantum Computers investment contract, 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 expectations. Quanta set key production yield gates. 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. 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. Quanta is not just 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, enabling 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 emerge 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. Consider simple applications like taking a picture with smart glasses. That's a starting point. 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 a shrinking talent pool, AI-enabled smart glasses will become vital 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. If you took a deep dive today, you would be surprised by what a large percentage of a car is built by human hands. Major car companies will tell you that far more than 80% of their final manufacturing is done by humans. The problem is they're expecting human beings to do more and more. How do they achieve that without the proper training and support provided by AI-driven smart glasses? There are simply limits to human capacity. By employing AI, those limits can be significantly lifted by having AI agents to assist. Within warehousing and logistics, automated robotic systems excel at handling routine tasks with predictable outcomes but struggle 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 instance, a worker is equipped with vision picking smart glasses like Vuzix's new LX1, which can outperform traditional voice-only systems, especially in complex environments with high SKUs and velocity. The warehouse labor market has hit a crossroads in recent years. Turnover in warehouse roles often exceeds 30% annually. Skilled pickers are in short supply, and an aging workforce, alongside rising labor costs, will accelerate the adoption of assisted technology, 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 markets and markets estimated at approximately $6 billion in 2024 and could reach $25 billion by 2034. This phenomenal growth is driven by human-in-the-loop automation, a massive and fast-growing segment of the supply chain. We have customers searching for alternatives to their outdated pick-by-voice solutions. The LX1 features integrated voice control and visual access to real-time information, providing warehousing operators the best of both worlds: voice and vision-based systems. The LX1 is rugged and purpose-built for 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, extending our growing relationship with Qualcomm. Select end users and ISVs are already receiving their first samples of the LX1, which will be in production and available to enterprise customers before the year ends. The Vuzix Software Solutions Group, formerly Moviynt, has a growing pipeline of recognizable brands operating in traditional logistics markets with comprehensive workflows. Initial implementations are already demonstrating strong operational gains and productivity improvements in specific warehouse contexts, highlighting our leadership in AI-enhanced enterprise solutions. As we look to the future of smart glasses, I liken it to the early automotive industry of the late 1800s. When cars first emerged, numerous small makers were experimenting before the industry solidified. Today, the smart glasses world feels similar, with various players trying different approaches. Even giants like Microsoft with the HoloLens and Magic Leap with billions in funding have come and gone from the smart glasses industry. Yet here we are, Vuzix, a smaller company, still standing strong. Our enterprise side is in good shape, and we're carving our own path in this new frontier, similar to early automotive pioneers. The smart glasses industry has evolved significantly; we have customers who know what they want and have influenced products like the LX1 to be effective solutions, particularly in the warehouse sector. The LX1 isn't just another pair of smart glasses; it's a tool built from the ground up with real customer insights, representing a turning point where these devices are ready for the mainstream. Our capabilities in designing and manufacturing critical waveguides, coupled with maturing customer market opportunities and partner engagements across enterprise, defense, and consumer sectors, are expanding. Our target markets are extensive, and innovation and investment in these areas continue to accelerate. In defense, we have numerous programs with prime defense contractors and other brands to deliver waveguide and display technologies for next-generation products and devices supporting drones, radar surveillance, commercial aircraft, and eventually consumer products. Our relationship with Quanta remains central, but we have also recently added Himax as a development partner and are advancing collaboration discussions with several other ODMs and projection makers. In conclusion, we believe a structural inflection point is finally at hand for Vuzix and the industry. The investments, time, and energy we have made across these verticals position us for a period of growth that we believe will be transformative for the world, our financial results, and market valuation. I will now turn the call over to Grant for the financial overview.

Thank you, Paul. As Ed mentioned, the 10-Q we filed this afternoon with the SEC offers a detailed explanation of our quarterly financials. I'll provide some color on several 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, compared to $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, compared to a gross loss of $0.3 million for the same period in 2024. The larger gross loss resulted from additional reserves for inventory obsolescence, increased unapplied manufacturing overhead costs due to lower production of smart glasses, and a gross loss on engineering services due to additional costs 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, compared to $2.4 million for the comparable 2024 period, an increase of approximately 9%, largely due to increased external development costs on new products. Sales and marketing expense was $1.4 million for the 3 months ended June 30, 2025, down approximately 40% from the $2.2 million in the comparable 2024 period. This reduction 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, along with 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%. This reduction is largely due to a decline in non-cash stock-based compensation expense and the completion on April 30, 2025, of our 2024 cash salary reduction program in exchange for equity. Operating expenses for the 3 months ended June 30, 2024, included a non-cash charge of $30.1 million related to the impairment of intangible assets and our equity investment in Atomistic. Excluding that impairment charge, 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 compared to a net loss of $40.6 million or $0.62 per share for the same period in 2024. For 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. Net cash flows used in operating activities was $4.7 million for the second quarter of 2025. 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 in 2024. Cash used for investing activities for the second quarter of 2025 was just $0.9 million compared to $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, primarily $5 million 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's third tranche 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.

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 timeline should we be thinking about for a ramp of these programs?

Those are good questions, Tyler. First, the program that we announced maybe 3 months ago or so is actually not with Quanta. It's another very large supplier or manufacturer, like an ODM partner, and it's for a company that is making industrial thermal vision systems. We've already delivered the 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 have irons in the fire with Quanta still. We should see some developments before the end of this year, but in 2026, I think is when you'll see the bulk of the ramp start.

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

Yes, you're going to start to see first production orders in the back half of this year. We have multiple programs underway, and more than one of them is at that point where they're starting to sample for production. It's not going to be really significant initially, but it will be a meaningful stake in the ground when we start rolling before the end of this year. There will 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 over $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 answering that. Grant might want to add a bit. The LX1 is generating remarkable interest. We have customers that have used the LX1 and are considering expanding their use. Some customers want to upgrade their M400 fleet to the LX1. But we also have other customers that are finally through qualifications, starting programs on the M400. The LX1 will get released, and you'll see the M400 continue for now, but at some point, the M400 will become obsolete. We plan to sell both programs in parallel. As for inventory levels, I'll let Grant address that.

Ideally, we'd like to reduce it down to $2 million, but that's based on the current revenue product sales basis. As sales rise, it may increase slightly, plus we're making changes in our supply chain. We'll be getting the LX1 from Quanta, so we're not having to buy all the raw materials and manage work-in-progress. We aim to better manage our inventory to minimize what we carry while having enough product to respond quickly to customer needs.

Yes, we're trying to transition our customers to a made-to-order basis. It should become easier as they start to see their needs grow and can project future requirements, allowing them to place orders in advance. This way, we're not building up inventory for storage; we’re building it to meet real customer demands.

We have a couple of other questions that have come in over the last day or so. One is related to Quanta since we've achieved the hurdles, would you care to comment on when you think that $5 million might come in?

Right now, it's only a matter of time and paperwork. I anticipate we should see that $5 million in our balance sheet before the end of this year.

Okay. And then a follow-on question about the LX1 since it's purpose-built for warehousing and logistics. Does that mean we're walking away from the other market verticals that we've always targeted?

That’s a great question. The LX1 is designed for warehousing, with features such as charge banks tailored for easy use in a warehouse, allowing users to rotate them without cumbersome cables. It mirrors existing systems so organizations can easily implement it. It's built for durability and extended use. The feedback has been positive, and the LX1 is not only for warehousing; it has applications for remote support and operational settings. There are also ongoing developments for the M400 that may see upgrades to the LX1, with strong potential in warehousing. The software part integrates smoothly with warehousing operations

As a last question, Paul, regarding the rollout for the broader market of AI smart glasses, what do you think the biggest technological hurdles are right now for this market to take off?

The weight of the glasses is one of the biggest challenges for mass market adoption. If they are too heavy, people won't wear them, especially when moving around. They also need to look appealing to consumers. That technology is crucial and has hurdles to overcome. Companies like Meta with their Ray-Ban offerings don’t include displays because they can't fit the necessary technology in an attractive, lightweight format. Vuzix has solutions to these issues, which is why companies like Quanta are looking to us. I'd like to thank everyone for joining today's conference call. It’s going to be an exciting rest of the year, and I look forward to speaking with everyone during our next call. Thank you, and have a great evening as well as a wonderful end to summer.

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