Mr. Paul Travers reports

VUZIX RELEASES SECOND QUARTER 2011 QUARTERLY OPERATING RESULTS

Vuzix Corp. has released its second quarter results for the period ended June 30, 2011. Unless otherwise indicated, dollar amounts referred to herein are references to U.S. dollars.

Paul Travers, president and chief executive officer, commented: "Despite difficult economic uncertainties in Japan and Europe and slowdowns in some areas of U.S. government defence spending, we were pleased with our overall performance in the first half of 2011. We realized strong revenue growth in our defence products and engineering services areas and narrowed our operating losses in both the quarterly and semi-annual periods against the prior year. While our business continues to be working capital constrained, we continue to execute against our operating plan and deliver products that are critical to our customers. We currently have a $3.8-million backlog for our defence products and ongoing engineering services programs. Among the key drivers of our expected continued growth is our line of Tac-Eye rugged display systems, which continues to gain program wins in the defence markets, and sales of our augmented reality products. Our new consumer product, the Wrap 1200, will be launched this August. It will be our highest-resolution video eyewear that we have released to date, and it offers a virtual 75-inch widescreen TV-viewing experience. Additionally the August launch of our Star 1200 will be our first video eyewear product with see-through optics offered outside the defence markets. With its integrated head tracker and HD camera, we expect this model to be attractive to augmented reality researchers and users."

Financial results

The following financial results are for the three and six months ended June 30, 2011, compared with the same periods in 2010. Sales were $2,328,649 for the second quarter ended June 30, 2011, compared with $1,915,359 for the same three-month period last year, an increase of 21.6 per cent. Revenues for the first six months of 2011 were $6,401,758 versus $3,977,318 for the same period last year, an increase of 61.0 per cent. Gross profits were $1,076,664 for the second quarter of 2011, compared with $392,625 for the second quarter of 2010, an increase of 174 per cent. For the six months ended June 30, 2011, gross margins were $2,774,053 versus $952,510 for the same six-month period in 2010, a 191-per-cent increase. The improvement was primarily attributable to defence products being a larger percentage of the company's overall sales and the high margins it is currently earning on the augmented reality products. Operating expenses were $1,699,731 for the second quarter of 2011, compared with $1,678,163 for the second quarter of 2010, an increase of 1.3 per cent. Operating costs were $3,525,583 for the six months ended June 30, 2011, versus $3,649,281 for the same six-month period in 2010, a 3.4-per-cent decrease. Net loss and loss per share for the second quarter of 2011 were $927,539 or 0.35 cent per share versus a loss of $1,385,908 or 0.53 cent per share in the same period in 2010. For the six-month period ended June 30, 2011, the company reported a loss of $1,347,844 or 0.51 cent per share versus a loss of $2,894,031 or 1.11 cents per share in the same period in 2010.

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