Rochester Business Journal

Vuzix Corp. has announced the sale of its Tactical Display Group for $8.5 million.

The group was responsible for the company’s military and defense products and services, including its Tac-Eye head-mounted displays.

The business assets of the Tactical Display Group were acquired by TDG Acquisition Co. LLC, a company that will be based in Rochester and still offer the same military and defense products and services. Some 35 percent of Vuzix’s employees will be transferred to TDG, Vuzix said.
 
The acquisition includes equipment, tooling, certain patents and trademarks. The deal includes the $8.5 million in cash and an additional $2.5 million earn-out provision if certain quarterly and annual revenue benchmarks are reached within one year of the June 15 purchase date, Vuzix said.

As party of the deal, Vuzix said it received a worldwide, royalty free, assignable grant-back license to all the patents sold for use in the manufacture and sale of products outside of TDG’s military and defense markets.

Both companies have entered into a 10 year non-compete agreement. Vuzix has agreed to not sell products and services to the global defense market, while TDG agreed not to sell products and services to the commercial market.

TDG also has agreed to become the exclusive reseller of Vuzix’s video eyewear products into the global military and defense markets.

Vuzix president Paul Travers said Vuzix now will focus on its commercial endeavors.

“Since 2005, the company has had a major focus on consumer and commercial markets for gaming, entertainment, mobile video and more recently augmented reality,” he said in a statement. “The strategic divestiture of TDG assets, allows Vuzix to focus on its long-held goal of delivering HD smart video glasses in a true sunglass format based on our new waveguide optics and HD displays while still pursuing funded research and development from the U.S. government and other agencies.”

For Vuzix, the $8.5 million in cash comes during a time of major financial troubles. Vuzix has struggled with a growing loss and shrinking cash availability. As of Dec. 31, the company had accumulated a debt of more than $26 million and negative working capital of more than $6 million.

Vuzix said it will have used roughly $5 million of the sale proceeds to satisfy its indebtedness with its senior secured lenders, which had been in default. The rest of the money will be used for working capital and trade payable payments. Vuzix said four other secured creditors have agreed to forgo any further debt repayments until July 2013.

“The cash proceeds of the sale will provide the company with additional resources to satisfy certain of its debt obligations that are currently in default, with the goal of better executing Vuzix’s plan of focusing on and investing in its core business,” he said.

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