about the market. It is based on what customers are asking us for now. What is new is the pace. AI has given enterprise smart glasses a much broader purpose, and the software barrier that used to slow deployment is now coming down. OEM programs are moving from validation into commercialization, defense programs are moving towards production, and our waveguide line is scaling to support both. This is happening across all three pillars at once, with programs involving some of the world's largest and most sophisticated organizations. Waveguide design and manufacturing is clearly a cornerstone pillar of the Vuzix business, and we're investing in it accordingly, expanding our imprint capacity, reconfiguring our plant floor, adding metrology, continuing to advance our materials and process capabilities. We believe that progression has the potential to change Vuzik's financial performance as these programs convert, not only through higher revenue, but through better utilization of the manufacturing and technology infrastructure we have already built. In other words, the opportunity is not simply to grow the top line, it is to begin demonstrating the operating leverage these three pillars are capable of delivering. Our focus is straightforward, execute and convert these customer programs into production. At our annual meeting we noted that our waveguide capabilities have potential applications beyond smart glasses. Today we can be more specific that one of those areas is optical interconnect in AI data centers. We have received inbound interest in our planar waveguides as a way to move data optically within AI systems with greater bandwidth and lower energy per bit. This inbound interest has come from multiple corners of the AI data center ecosystem. The underlying requirement is closely related to what we already do, moving light with precision through passive glass manufactured repeatably and at scale. We have been actively exploring this area and we are encouraged by the possibilities for VUZIX in this new space. With that, I'll turn the call over to Grant for the financial overview. Grant.

Thank you, Paul. As Ed mentioned, the 10Q we filed this afternoon provides a detailed explanation of our quarterly and year-to-date financials. So we'll provide you with just some color on the key numbers for our second quarter ending June 30th, 2026 only. Total revenue for the second quarter ending June 30th, 2026 were 1.1 million versus 1.3 million in 2025, a decrease of 14%. Product sales for 0.9 million for Q2 2026 versus 1 million for Q2 2025, with the reduction primarily due to decreased unit sales of our M400 product and the lack of current period sales of smart glasses that were discontinued at the end of 2025. Engineering services and OAM product sales were 0.2 million versus 0.3 million, a decrease of 8%. The gross loss for Q2 2026 was 0.6 million as compared to a gross loss of 0.8 million in the prior year's quarter, an overall 15% improvement. R&D expense was $3.1 million for Q2 2026 versus $2.6 million in Q2 2025, up 20%, primarily due to higher external new product development costs and increased personnel costs. Sales and market expense was $1.2 million versus $1.4 million in Q2 2025, a decrease of 11%, primarily due to lower non-cash stock-based compensation. total gna expenses for the second quarter ending june 30th 2026 were 2.7 million versus 2.8 million in q2 2025 a decrease of three percent the net loss attributable to common shareholders for our second quarter of 2026 was 7.7 million or nine cents per share as compared to 7.7 million or $0.10 per share for Q2 of 2025. Now for some balance sheet and cash flow highlights. As of June 30th, 2026, cash and cash equivalents were $17.3 million, and our net working capital position was approximately $18 million. The company continues to have no current or long-term debt obligations outstanding. For the three months ending June 30, 2026, net cash used in operating activities was $6.6 million as compared to $4.8 million in the prior year's period, an increase of $1.8 million year-over-year. For the three months ending June 30, 2026, cash used for investing activities on fixed assets and patents with $0.4 million versus $0.9 million in the comparable 2025 period. For the three months ending June 30, 2026, cash provided by financing activities was $4.1 million versus $7.9 million in the comparable 2025 period, driven by ATM net proceeds in both periods. With that, I would like to turn the call back over to the operator.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment please while we poll for questions. Thank you. Our first question comes from the line of Christian Schwab with Craig Hallam Group. Please proceed.

Hey guys, thanks for taking my question. it's been on for christian here um my first question is on uh this expanded opportunity with optical interconnects can you give us a little bit more detail uh regarding the types of customers you guys have talked to um and also um any initial thoughts on the size of the opportunity hey ben thanks thanks for the question and it's a really good one i am just sorry I mean it's not difficult to take a look at who those players are these days I can say a lot of it's been inbound to music we've done some of our

own outreach but I really can't get into specifics on this call what I can say is the interest is real it's significantly engaged us on our part we're spending a fair amount of time with it and we're gonna have a whole lot more to update for you on shortly sorry i just can't get further into it at this point no no that's that's all right i get it um any my second question here is can you go can you talk a little bit more about the relationship with quanta and and any more updates you can share there yes actually um we had some inbound questions and that was actually one of the questions that was on the list of this will be great two birds with one stone as everybody knows we have a great working relationship with quanta and at this point in time we're working on we've built some early generations smart classes waveguides for smart classes with them we have some next generation waveguides that we're working on with them right now we fully expect that at the CES show which is where they do a lot of announcing and showing of some of their latest stuff they'll be shown. These things are designed for the high-volume marketplace, and they're focused on price points that the mass market and the broader markets could afford to play and pay on. So things are moving forward. The relationship is as strong as it's ever been, and we're looking forward to sharing a whole lot more as these next-generation systems come out.

Great. And then And just my last question, this will be on defense. You talked about, you know, Collins going into initial production. Can you help us kind of gauge that opportunity over the next year in anything we should expect or any news kind of we should be looking for there?

We, in the second half here, we're fully expecting more production orders. I can tell you we've also gotten follow on design development work which we'll share more on here also in the second quarter the the production side of the house these guys have built this product for a very large segment of the US defense base and it's for drones and remote flying of drones and situational awareness at the same time because they're optically see-through and so So they share with us some very compelling numbers, but it's early in the game. 2027 should be a really good year for production as it rolls out with those guys. And you'll see more than one device coming from them. Sorry, I wish I had more granular and better, tighter answers for you on that. But quite frankly, they probably wouldn't be happy if I was sharing some of the inside stuff they shared with us.

No, I understand. That's all I got. I'll go back in the queue. Thanks, guys.

Yeah, thanks, Ben.

Thank you. That concludes today's Q&A session. I'd like to pass the call back over to Paul Travers for closing remarks.

We've actually gotten a few other inbound Q&A stuff, so I thought, Ed, if he could read the questions back, I can take a shot at giving some answers.

Sure, Paul, we have a few. The first question, why has enterprise revenue been flat, and what changes that?

Yeah, so the enterprise demand for Vuzix these days is really splitting into kind of two paths. Where people need a glanceable monocular display, the right tool is the M400 and our newest LX1. They serve applications that are well-defined today. We have an installed base that are working with those products. And we see people that were using M400s upgrading to LX1s, so we should see some nice momentum, knock on wood, with our LX1 as it acceptance its roles into the market. And with AI, we're seeing AI wrapped around the use, in particular around the LX1, for applications that are giving it really new markets and new opportunities that it's going to play in. So that's one of the paths, and at this point in time, those are our major products that we're offering into the marketplace. The other path, which I think, I hope you guys have all heard, is where applications need information in the worker's natural field of view. Customers are waiting for and designing apps around optically see-through systems that Vuzix is making that are in the EBT side of the business right now. They need self-contained products with the processors built in, and those products are inherently AI-driven. They are designed for the AI user, and users that enterprise today is trying to give capabilities to make their jobs happen faster and easier. The Ultralight Pro addresses that, as will another device that we're developing for one of our key OEM customers. Both of these tracks are moving forward towards different products and different timelines, but with the momentum that's building around those, we expect that the flat nature of the transition that we're going through is going to start cranking up and showing growth here over the coming quarters.

Okay, Paul, and the second question we have is can you identify the automotive OEM you're working with and maybe discuss their rollout time from?

We kind of included this question because we get it so often from folks so we thought we'd try to address it. First, we cannot name who this customer is. I can tell you they are a tier one automotive manufacturer. If you don't know who this company is when you hear it, you've been living in a hole so it's very obvious. They're a leading global manufacturer we have delivered initial systems we have gone back and forth with those systems working with people on their plant floors working with people in the actual applications these are live real applications that they're testing them on their plant floors with and the feedback has been really positive and discussions now have moved from well can you do this and can you change that to how are we going to get these things deployed and how do we get them into production programs so the factory floor seems to like the product at the same time the users seem to like them I cannot put a timeframe though on the customers deployment discussions other than to say it's continuing to progress in a timely fashion especially when you consider how large of a project this could be but also the size of the company that we're working with sorry that's I know a bit vague but I it should be getting clearer here in the later in the second half of this year That's it, folks. I would like to thank everybody again for following Vuzix, and I really look forward here to the second half and going into next year with all of the great things that Vuzix has in the queue and sharing with everybody the progress that we're making. Exciting times. Thank you very much, everybody.

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