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Item 1. Financial Statements

2024-05-14 compared with 2023-11-14 · 468 added, 1286 removed, 183 unchanged (91% of the section changed)

Financial Statements

EYEWEAR, INC.

BALANCE SHEETS

September 30,

2023 (Unaudited) and December 31, 2022

INNOVATIVE EYEWEAR, INC.

CONDENSED BALANCE SHEETS

March 31, 2024 (Unaudited) and December 31, 2023

Current Assets

Cash and cash equivalents

Investments in debt securities, at amortized cost (fair value of $ 1,976,380 )

Accounts receivable, net of allowances of $ 21,437 and $ 25,772 , respectively

1 unchanged sentence

Inventory prepayment

Due from Tekcapital and Affiliates

Other current assets

9 unchanged sentences

Deferred revenue

Due to Parent and Affiliates

Related party convertible debt

Total Current Liabilities

2 unchanged sentences

TOTAL LIABILITIES

Commitments and contingencies

Commitments and contingencies (Note 7)

Stockholders’ Equity

Common stock (par value $ 0.00001 , 50,000,000 shares authorized, and 12,917,239 and 7,307,157 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively)

Common stock (par value $ 0.00001 , 50,000,000 shares authorized, and 13,233,544 and 12,917,239 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively)

Additional paid-in capital

Accumulated deficit

( 14,575,704 )

( 10,305,987 )

TOTAL STOCKHOLDERS’ EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

accompanying Notes to the Condensed Financial Statements.

EYEWEAR, INC.

STATEMENTS OF OPERATIONS

the three and nine months ended September 30, 2023 and 2022

See accompanying Notes to the Condensed Financial Statements.

INNOVATIVE EYEWEAR, INC.

CONDENSED STATEMENTS OF OPERATIONS

For the three months ended March 31, 2024 and 2023

Three Months Ended

September 30,

Nine Months Ended

September 30,

Revenues, net

2 unchanged sentences

General and administrative

( 2,877,663 )

( 1,797,091 )

Sales and marketing

( 1,545,615 )

Research and development

1 unchanged sentence

Total Operating Expenses

( 1,677,140 )

( 1,388,575 )

( 4,420,853 )

( 3,840,764 )

Other Income (Expense)

1 unchanged sentence

Total Other Income (Expense), net

$ ( 1,551,105 )

$ ( 1,404,321 )

$ ( 4,269,717 )

$ ( 3,804,692 )

Weighted average number of shares outstanding

Loss per share, basic and diluted

accompanying Notes to the Condensed Financial Statements.

EYEWEAR, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

the three and nine months ended September 30, 2023 and 2022

Stock Subscription

See accompanying Notes to the Condensed Financial Statements.

INNOVATIVE EYEWEAR, INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

For the three months ended March 31, 2024 and 2023

Stockholders’

January 1, 2023

$ ( 10,305,987 )

based compensation

of warrants by stockholders (see Note 9)

( 1,430,810 )

March 31, 2023

$ ( 11,736,797 )

based compensation

of stock options

of warrants by stockholders (see Note 9)

of warrants related to private placement transaction (see Note 9)

public offering (see Note 9)

( 1,287,802 )

June 30, 2023

$ ( 13,024,599 )

based compensation

( 1,551,105 )

September 30, 2023

$ ( 14,575,704 )

January 1, 2022

$ ( 4,624,154 )

based compensation

( 1,206,559 )

March 31, 2022

$ ( 5,830,713 )

$ ( 582,092 )

based compensation

of stock subscription receivable

( 1,193,812 )

June 30, 2022

$ ( 7,024,525 )

$ ( 1,352,269 )

based compensation

issued for convertible note exercise

public offering

( 1,404,321 )

September 30, 2022

$ ( 8,428,846 )

Balances as of January 1, 2024

Issuance of shares to third party service provider

Issuance of shares related to vesting of restricted share units

Stock-based compensation

Balances as of March 31, 2024

Balances as of January 1, 2023

Stock-based compensation

Exercises of warrants by stockholders

Balances as of March 31, 2023

See accompanying Notes to the Condensed Financial Statements.

1 unchanged sentence

CONDENSED STATEMENTS OF CASH FLOWS

the nine months ended September 30, 2023 and 2022

For the three months ended March 31, 2024 and 2023

Operating Activities

$ ( 4,269,717 )

$ ( 3,804,692 )

Adjustments to reconcile net loss to net cash used in operating activities:

1 unchanged sentence

Stock-based compensation expense

Expenses paid by parent and affiliates

Expenses paid by Tekcapital and Affiliates

(Recovery of) provision for doubtful accounts

3 unchanged sentences

Prepaid expenses

Other current liabilities

Contract assets and liabilities

Net cash flows from operating activities

( 4,630,320 )

( 2,106,826 )

Investing Activities

Purchase of debt securities (U.S.

Treasury bills)

( 1,949,204 )

Loan made to Tekcapital Europe, Ltd.

Repayment of amounts loaned to Tekcapital Europe, Ltd.

Purchases of property and equipment

Capitalized software expenditures

Net cash flows from investing activities

( 2,208,678 )

Financing Activities

Proceeds from initial public offering

Proceeds from second public offering (see Note 9)

Proceeds from exercises of warrants

related to private placement transaction (see Note 9)

Proceeds from exercise of warrants by stockholders (see Note 9)

Proceeds from exercise of stock options

Collection of stock subscription receivable

Proceeds from related party convertible debt

Repayment of related party convertible debt

Repayment of related party convertible debt (see Note 6)

Repayment of amounts due to Tekcapital and Affiliates

Net cash flows from financing activities

3 unchanged sentences

Significant Non-Cash Transactions

Expenses paid for by Parent reported as increase in Due to Parent and Affiliates and related party convertible debt

Issuance of shares from conversion of related party convertible debt

Expenses paid for by Tekcapital and Affiliates, reported as increase in Due to/from Tekcapital and Affiliates and related party convertible debt

Issuance of shares for prepayment to third party service provider

See accompanying Notes to the Condensed Financial Statements.

1 unchanged sentence

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

September 30, 2023 and 2022 (Unaudited)

March 31, 2024 and 2023 (Unaudited)

NOTE 1 – GENERAL INFORMATION

Innovative Eyewear, Inc.

(the “Company,”

“us,” “we,” or “our”) is a corporation organized under the laws of the State of Florida that

develops and sells cutting-edge eyeglasses and sunglasses, which are designed to allow our customers to remain connected to their

digital lives, while also offering prescription eyewear and sun protection.

The Company was founded by Lucyd Ltd.

(the “Parent”

or “Lucyd”), a portfolio company of Tekcapital Plc through Tekcapital Europe, Ltd.

(collectively, the “Parent

and Affiliates”), which owned approximately 40% of our issued and outstanding shares of common stock as of September 30,

Innovative Eyewear has licensed the exclusive rights to the Lucyd ®

brand from Lucyd Ltd., which includes

the exclusive use of all of Lucyd’s intellectual property, including our main product, Lucyd Lyte ®

(the “Company,” “us,” “we,” or “our”) is a corporation organized under the laws of the State of Florida that develops and sells cutting-edge eyeglasses and sunglasses, which are designed to allow our customers to remain connected to their digital lives, while also offering prescription eyewear and sun protection.

The Company was founded by Lucyd Ltd., a portfolio company of Tekcapital Plc through Tekcapital Europe, Ltd.

(collectively, together with Lucyd Ltd., “Tekcapital and Affiliates”), which owned approximately 40% of our issued and outstanding shares of common stock and was our largest shareholder as of March 31, 2024.

Innovative Eyewear has licensed the exclusive rights to the Lucyd ® brand from Lucyd Ltd., which includes the exclusive use of all of Lucyd’s intellectual property, including our main product, Lucyd Lyte ® glasses.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed balance sheet as of December 31, 2022 (which has been derived from audited financial statements) and the unaudited interim

condensed financial statements have been prepared in accordance with accounting principles

generally accepted in the United States (“GAAP”) for interim financial information

and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X promulgated

by the United States Securities and Exchange Commission (“SEC”).

Certain information

or footnote disclosures normally included in financial statements prepared in accordance

with GAAP have been condensed or omitted, pursuant to the rules and regulations of

the SEC for interim financial reporting.

Accordingly, they do not include all the

information and footnotes necessary for a comprehensive presentation of financial

position, results of operations, or cash flows.

In the opinion of management, all adjustments considered necessary for the fair presentation

of the financial statements for the periods presented have been included.

of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for future periods or

the full year.

The accompanying condensed balance sheet as of December 31, 2023 (which has been derived from audited financial statements) and the unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X promulgated by the United States Securities and Exchange Commission (“SEC”).

Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting.

Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows.

In the opinion of management, all adjustments considered necessary for the fair presentation of the financial statements for the periods presented have been included.

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for future periods or the full year.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts

of assets and liabilities and disclosure of contingent assets and liabilities at the

date of the financial statements and the reported amounts of revenues and expenses

during the reporting period.

Actual results could differ from those estimates, particularly given the significant economic disruptions and uncertainties associated

with the ongoing economic environment, including potential supply chain constraints.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates, particularly given the significant uncertainties associated with the current geopolitical and economic environment.

Cash Equivalents

All highly liquid investments with original maturities of three months or less, including

money market funds, certificates of deposit, and U.S.

All highly liquid investments with original maturities of three months or less, including money market funds, certificates of deposit, and U.S.

Treasury bills purchased three months or less from maturity, are considered cash equivalents.

Investment in Debt Securities

As of September 30, 2023, the Company held an investment in U.S.

Treasury bills, which matures in December 2023.

This investment is classified as “held-to-maturity” and is recorded at amortized

cost of $ 1,949,204 in the accompanying condensed balance sheet.

The fair value of

this investment, based on quoted prices (unadjusted) in active markets for identical

assets, is $ 1,976,380 as of September 30, 2023, which includes an unrealized gain of $ 27,176 .

Receivables and Credit Policy

Trade receivables from customers are uncollateralized customer obligations due under

normal trade terms.

For direct-to-consumer sales, payment is required before product

Trade receivables from customers are uncollateralized customer obligations due under normal trade terms.

For direct-to-consumer sales, payment is required before product is shipped.

Trade receivables are stated at the amount billed to the customer.

of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoice.

Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoice.

The Company, by policy, routinely assesses the financial strength of its customers.

To comply with industry standards, we offer “net 30” payments on wholesale orders

of $1,500 or more.

For wholesale orders, to acquire an order on net 30 terms, the

customer is provided a credit check application as well as a credit card authorization

The authorization form explicitly states when and for much we will bill the

customer via credit card.

To comply with industry standards, we offer “net 30” payment terms on wholesale orders of $1,500 or more.

For wholesale orders, to acquire an order on “net 30” payment terms, the customer is provided a credit check application as well as a credit card authorization form.

The authorization form explicitly states when and for much we will bill the customer via credit card.

Accounts receivable are reported net of the allowance for doubtful accounts.

The allowance

for doubtful accounts is based on the Company’s evaluation of each customer’s payment history, account aging, and financial position.

The Company recognized bad

debt expense of $ 14,065 and $ 19,879 for the three and nine months ended September 30, 2023, respectively.

There was no bad debt expense recognized for the three and nine months

ended September 30, 2022.

A roll forward of the allowance for doubtful accounts for the nine months ended September 30, 2023 is as follows:

of allowance for doubtful accounts

Balance at December 31, 2022

Bad debt expense

Write-offs (1)

Recoveries (1)

Balance at September 30, 2023

(1) During the period, the Company entered into a settlement agreement

with a former wholesale customer.

As a result of this settlement, $47,646 of accounts receivable were written-off as uncollectible, while

the $45,000 collected under the settlement agreement is reflected as a gain within general and administrative expenses in the condensed

statement of operations.

The Company’s inventory includes purchased eyewear and is stated at the lower of cost or net realizable value, with

cost determined on a specific identification method of inventory costing which attaches

the actual cost to an identifiable unit of product.

Provisions for excess, obsolete, or slow-moving inventory are recorded after periodic evaluation of historical sales,

current economic trends, forecasted sales, estimated product life cycles, and estimated inventory levels.

No provisions were determined as needed as of September 30, 2023 and as of December 31, 2022.

As of September 30, 2023 and December 31, 2022, the Company recorded an inventory prepayment in the amount of $ 402,255 and

$ 197,750 , respectively, related to down payments for eyewear purchased from the manufacturer, prior to shipment of the product that occurred after September 30, 2023 and December 31, 2022, respectively.

The allowance for doubtful accounts is determined based upon a variety of judgments and factors.

Factors considered in determining the allowance include historical collection, write-off experience, and management’s assessment of collectibility from customers, including current conditions, reasonable forecasts, and expectations of future collectibility and collection efforts.

Management continuously assesses the collectibility of receivables and adjusts estimates based on actual experience and future expectations based on economic indicators.

Receivable balances are written-off against the allowance when such balances are deemed to be uncollectible.

A roll forward of the allowance for doubtful accounts for the three months ended March 31, 2024 and 2023 is as follows:

Schedule of allowance for doubtful accounts

Balance at January 1

Bad debt expense (recovery)

Balance at March 31

The Company’s inventory includes purchased eyewear and is stated at the lower of cost or net realizable value, with cost determined on a specific identification method of inventory costing which attaches the actual cost to an identifiable unit of product.

Provisions for excess, obsolete, or slow-moving inventory are recorded after periodic evaluation of historical sales, current economic trends, forecasted sales, estimated product life cycles, and estimated inventory levels.

Such provisions were $ 0 and $ 31,637 as of March 31, 2024 and December 31, 2023, respectively.

As of March 31, 2024 and December 31, 2023, the Company recorded an inventory prepayment in the amount of $ 59,407 and $ 323,520 , respectively, related to down payments for eyewear purchased from the manufacturer, prior to shipment of the product that occurred after the respective balance sheet dates.

Intangible Assets

Intangible assets relate to patent costs received in conjunction with the initial

capitalization of the Company and internally developed utility and design patents.

Intangible assets relate to patent costs received in conjunction with the initial capitalization of the Company and internally developed utility and design patents.

The Company amortizes these assets over the estimated useful life of the patents.

The Company reviews its intangibles assets for impairment whenever changes in circumstances

indicate that the carrying amount of the assets may not be recoverable.

The Company reviews its intangible assets for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

Capitalized Software

The Company incurred software development costs related to development of the Vyrb

The Company capitalized these costs in accordance with ASC 985-20, “Software – Costs of Software to be Sold, Leased, or Marketed,” considering it is the Company’s intention to market and sell the software externally.

The Company has incurred software development costs related to development of the Vyrb application, and has capitalized certain of these costs as it is the Company’s intention to market and sell the software externally.

Planning, designing, coding, and testing occurred necessary to meet Vyrb’s design specifications;

As such, all coding, development, and testing costs incurred subsequent to establishing technical feasibility were

The Company launched a beta version of the Vyrb application in December 2021 that demonstrates the functionality of the software.

The Vyrb app launched in open beta on iOS and Android app stores in 2021, as the Company’s first social media platform.

The app has had several new features introduced in

February 2023, including live audio chatrooms for users of the Company’s smart eyewear, and offers market-leading audio accessibility features for social

media, including the ability to create and listen to a feed of audio content completely

hands-free, using unique voice assistant commands created for the app.

The Company plans to continue to develop the expansive Vyrb platform into a feature-rich

social toolbox for its customers.

This includes the introduction of revenue-generating

features such as native ads and in-app upgrades, as well as gamification features

such as a points and rewards system.

These new features are planned to launch in 2024.

The Company has diverted most of its software development resources in 2023 to the development and launch of the Lucyd app to provide groundbreaking Generative AI features to its smart eyewear.

The amortization of the capitalized software costs will begin once revenue-generating operations associated with the software have commenced.

as such, all coding, development, and testing costs incurred subsequent to establishing technical feasibility were capitalized.

Although we have launched an open beta version of Vyrb (for both iOS and Android) and have continued to add new features to the app, the revenue-generating features of Vyrb have not yet been launched and are planned to launch later in 2024.

Amortization of the capitalized software costs related to the Vyrb app will begin once revenue-generating operations associated with the software have commenced.

Property and Equipment

1 unchanged sentence

For income tax purposes, accelerated depreciation methods are generally used.

and maintenance costs are expensed as incurred.

The Company accounts for income taxes under an asset and liability approach that recognizes

deferred tax assets and liabilities based on the difference between the financial

statement carrying amounts and the tax bases of assets and liabilities using enacted

tax rates in effect in the years in which the differences are expected to reverse.

The Company follows a more-likely-than-not threshold for financial statement recognition

and measurement of a tax position taken, or expected to be taken, in a tax return.

Any interest and penalties accrued related to uncertain tax positions are recorded

in tax expense.

Repair and maintenance costs are expensed as incurred.

The Company accounts for income taxes under an asset and liability approach that recognizes deferred tax assets and liabilities based on the difference between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.

The Company follows a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return.

Any interest and penalties accrued related to uncertain tax positions are recorded in tax expense.

The Company periodically assesses the realizability of its net deferred tax assets.

If, after considering all relevant positive and negative evidence, it is more likely

than not that some portion or all of the net deferred tax assets will not be realized,

the Company will reduce the net deferred tax assets by a valuation allowance.

realization of net deferred tax assets is dependent on several factors, including

the generation of sufficient taxable income prior to the expiration of net operating

loss carryforwards.

If, after considering all relevant positive and negative evidence, it is more likely than not that some portion or all of the net deferred tax assets will not be realized, the Company will reduce the net deferred tax assets by a valuation allowance.

The realization of net deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of net operating loss carryforwards.

Stock-Based Compensation

The Company accounts for stock-based compensation to employees and directors in accordance

with ASC Topic 718, which requires that compensation expense be recognized in the

financial statements for stock-based awards based on the grant date fair value.

stock option awards, the Black-Scholes-Merton option pricing model is used to estimate the fair value of share-based awards.

The Black-Scholes-Merton option

pricing model incorporates various and highly subjective assumptions, including expected

term and share price volatility.

The expected term of the stock options is estimated based on the simplified method

as allowed by Staff Accounting Bulletin 107 (SAB 107).

The share price volatility at the grant date is estimated using historical stock prices

of comparably profiled public companies based upon the expected term of the award

being valued.

The Company recognizes compensation expense for stock-based awards to employees and directors and others based on the grant date fair value of such awards.

Forfeitures are accounted for as a reduction of compensation expense in the period when such forfeitures occur.

For stock option awards, the Black-Scholes-Merton option pricing model is used to estimate the fair value of share-based awards.

The Black-Scholes-Merton option pricing model incorporates various and highly subjective assumptions, including expected term and share price volatility.

The expected term of the stock options is estimated based on the simplified method as allowed by Staff Accounting Bulletin 107 (SAB 107).

The share price volatility is estimated using historical stock prices based upon the expected term of the options granted, using stock prices of comparably profiled public companies.

The risk-free interest rate assumption is determined using the rates for U.S.

zero-coupon bonds with maturities similar to those of the expected term of the award

being valued.

Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued.

For restricted stock units, the fair value of the share-based award is based on the quoted market price of our common shares on the NASDAQ stock exchange.

Revenue Recognition

Our revenue is generated from the sales of prescription and non-prescription optical

glasses, sunglasses, and shipping charges, which are charged to the customer, associated with these purchases.

Our revenue is generated from the sales of prescription and non-prescription optical glasses, sunglasses, and shipping charges, which are charged to the customer, associated with these purchases.

We sell products through our retail store resellers, distributors, on our own website Lucyd.co, and on Amazon.com.

To determine revenue recognition, we perform the following steps:

(i) identify the

contract(s) with a customer, (ii) identify the performance obligations in the contract,

(iii) determine the transaction price, (iv) allocate the transaction price to the

performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy a performance obligation.

At contract inception, we assess the goods or services

promised within each contract and determine those that are performance obligations, and also assess whether each promised good or service is distinct.

We then recognize as revenue the

amount of the transaction price that is allocated to the respective performance obligation

when (or as) the performance obligation is satisfied.

In instances where the collectability of contractual consideration is not probable at the time of sale, the revenue

is deferred on our balance sheet as a contract liability, and the associated cost

of goods sold is deferred on our balance sheet as a contract asset;

subsequently,

we recognize such revenue and cost of goods sold as payments are received.

During the three and nine months ended September 30, 2023, we recognized $ 2,500 and $ 10,000 of revenue, respectively, that was included

in the contract liability balance as of January 1, 2023.

All revenue, including sales processed online and through our retail store resellers

and distributors, is reported net of returns, discounts, and sales taxes collected from customers on behalf of taxing authorities.

For sales generated through our e-commerce channels, we identify the contract with

a customer upon online purchase of our eyewear and transaction price at the manufacturer

suggested retail price (“MSRP”) for non-prescription, polarized sunglass and blue

light blocking glasses across all of our online channels.

Our e-commerce revenue is

recognized upon meeting the performance obligation when the eyewear is shipped to

end customers.

consumers enjoy free USPS first class postage, with faster

delivery options available for extra cost, for sales processed through our website

and on Amazon.

For Amazon sales, shipping is free for U.S consumers while international

customers pay shipping charges on top of MSRP.

Any costs associated with fees charged

by the online platforms (Shopify for Lucyd.co website and Amazon) are not recharged

to customers and are recorded as a component of cost of goods sold as incurred.

Company charges applicable state sales taxes in addition to the MSRP for both online

channels and all other marketplaces on which the company sells products.

For sales to our retail store partners, we identify the contract with a customer upon

receipt of an order of our eyewear through our Shopify wholesale portal or direct

purchase order.

(i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy a performance obligation.

At contract inception, we assess the goods or services promised within each contract and determine those that are performance obligations, and also assess whether each promised good or service is distinct.

We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

In instances where the collectibility of contractual consideration is not probable at the time of sale, the revenue is deferred on our balance sheet as a contract liability, and the associated cost of goods sold is deferred on our balance sheet as a contract asset;

subsequently, we recognize such revenue and cost of goods sold as payments are received.

During the three months ended March 31, 2024 and 2023, we recognized $ 7,500 of revenue for each period, that was included in the contract liability balances as of January 1, 2024 and 2023, respectively.

All revenue, including sales processed online and through our retail store resellers and distributors, is reported net of sales taxes collected from customers on behalf of taxing authorities, returns, and discounts.

For sales generated through our e-commerce channels, we identify the contract with a customer upon online purchase of our eyewear and transaction price at the manufacturer suggested retail price (“MSRP”) for non-prescription, polarized sunglass and blue light blocking glasses across all of our online channels.

Our e-commerce revenue is recognized upon meeting of the performance obligation when the eyewear is shipped to end customers.

consumers enjoy free USPS first class postage on orders over $149, with faster delivery options available for extra cost, for sales processed through our website.

For Amazon sales, shipping is free for U.S.

consumers while international customers pay shipping charges on top of MSRP.

Any costs associated with fees charged by the online platforms (Shopify for Lucyd.co website and Amazon) are not recharged to customers and are recorded as a component of cost of goods sold as incurred.

The Company charges applicable state sales taxes in addition to the MSRP for both online channels and all other marketplaces on which the company sells products.

For sales to our retail store partners, we identify the contract with a customer upon receipt of an order of our eyewear through our Shopify wholesale portal or direct purchase order.

Revenue is recognized upon meeting the performance obligation, which is delivery of the Company’s eyewear products to the retail store, and is also recorded net of returns and discounts.

Our wholesale pricing for eyewear sold

to the retail store partners includes volume discounts, due to the nature of large

quantity orders.

The pricing includes shipping charges, while excluding any state

sales tax charges applicable.

Due to the nature of wholesale retail orders, no e-commerce

fees are applicable.

For sales to distributors, we identify the contract with a customer upon receipt of

an order of our eyewear through a direct purchase order.

Revenue is recognized upon meeting the performance obligation, which is delivery of

our eyewear products to the distributor and is also recorded net of returns and discounts.

Our wholesale pricing for eyewear

sold to distributors includes volume discounts, due to the nature of large quantity

The pricing includes shipping charges, while excluding any state sales tax

charges applicable.

Due to the nature of wholesale orders, no e-commerce fees are

The Company’s sales do not contain any variable consideration.

We allow our customers to return our products, subject to our refund policy, which

allows any customer to return our products for any reason within the first:

7 days for sales made through our website (Lucyd.co)

30 days for sales made through Amazon

30 days for sales to most wholesale retailers and distributors (although certain sales to independent distributors are ineligible for returns)

For all of our sales, at the time of sale, we establish a reserve for returns, based

on historical experience and expected future returns, which is recorded as a reduction

Additionally, we reviewed all individual returns received in October 2023 pertaining to orders processed prior to September 30, 2023.

As a result, the Company determined that an allowance for sales returns was

The Company recorded an allowance for sales returns of $ 5,234 and $ 24,897

as of September 30, 2023 and December 31, 2022, respectively.

Shipping and Handling

Costs incurred for shipping and handling are included in cost of revenue at the time

the related revenue is recognized.

Amounts billed to a customer for shipping and handling

are reported as revenues.

Our wholesale pricing for eyewear sold to retail store partners includes volume discounts, due to the nature of large quantity orders.

The pricing includes shipping charges, while excluding any state sales tax charges applicable.

Due to the nature of wholesale retail orders, no e-commerce fees are applicable.

For sales to distributors, we identify the contract with a customer upon receipt of an order of our eyewear through a direct purchase order.

If collectibility of substantially all of the contract consideration is probable, revenue is recognized upon meeting the performance obligation, which is delivery of our eyewear products to the distributor, and is also recorded net of returns and discounts.

Our wholesale pricing for eyewear sold to retail store partners and distributors includes volume discounts, due to the nature of large quantity orders.

The pricing does not include shipping.

Due to the nature of wholesale retail orders, no marketplace fees are applicable, only credit card processing fees.

We allow our customers to return our products, subject to our refund policy, which allows any customer to return our products for any reason and receive a full refund for frames (prescription lenses excluded) within the first 7 days for sales made through our website (Lucyd.co), 30 days for sales made through Amazon, and 30 days for sales to most wholesale retailers and distributors (although certain sales to independent distributors are ineligible for returns).

As of January 2024, our return policy was updated to prohibit discretionary returns of prescription lenses.

Additionally in January 2024, we instituted a standard $ 15 restocking fee for standard frame returns, which is deducted from applicable refunds to cover shipping and restocking costs.

For all of our sales, at the time of sale, we establish a reserve for returns, based on historical experience and expected future returns, which is recorded as a reduction of sales.

Additionally, we review all individual returns received in the month following the balance sheet date pertaining to orders processed prior to the balance sheet date in order to determine whether an allowance for sales returns is necessary.

The Company recorded an allowance for sales returns of $ 8,937 and $ 40,933 as March 31, 2024 and December 31, 2023, respectively.

Amounts billed to a customer for shipping and handling are reported as revenues.

Costs incurred for shipping and handling are included in cost of goods sold at the time the related revenue is recognized.

NOTE 3 – GOING CONCERN

The Company has a limited operating history.

The Company’s business and operations are sensitive to general business and economic conditions

in the United States.

The Company’s business and operations are sensitive to general business and economic conditions in the United States.

A host of factors beyond the Company’s control could cause fluctuations in these conditions.

Adverse conditions may include

recession, downturn, or otherwise, changes in regulations or restrictions in imports, competition, or changes in consumer taste.

Adverse conditions may include recession, downturn, or otherwise, changes in regulations or restrictions in imports, competition, or changes in consumer taste.

These adverse conditions could affect the Company’s financial condition and the results of its operations.

The Company meets its day-to-day working capital requirements using monies raised through sales of eyewear and issuances of equity, including our initial public offering completed in August 2022, a secondary public offering completed in June 2023, and exercises of warrants by stockholders (see Note 9 for additional details).

The Company also previously issued a convertible note held by its parent company,

which was repaid in full during the nine months ended September 30, 2023.

The Company’s forecasts and projections indicate that the Company expects to have sufficient cash

reserves and future income to operate within the level of its current facilities.

The Company anticipates that its available liquidity will be sufficient to fund operations through at least the next 12 months.

Company meets its day-to-day working capital requirements using monies raised through sales of eyewear and issuances of equity.

May 1, 2024, the Company closed on an offering of common stock and warrants for gross proceeds of approximately $ 1.0

million (see Note 10 for details).

The Company has also entered into an agreement with a related party,

under which the Company may borrow up to $1.25 million (see Note 6 for details);

as of March 31, 2024, the Company has not

borrowed any amounts under this agreement.

The Company’s forecasts and projections indicate that the Company expects to

have sufficient liquidity to fund operations through at least the next 12 months.

NOTE 4 – INCOME TAX PROVISION

At the end of each interim reporting period, the Company estimates its effective tax

rate expected to be applied for the full year.

This estimate is used to determine

the income tax provision or benefit on a year-to-date basis and may change in subsequent

interim periods.

The Company has no t recorded a tax provision for the three and nine months ended September 30, 2023 and 2022 as it maintains a full valuation allowance against its net deferred tax assets.

NOTE 5 – TANGIBLE AND INTANGIBLE

At the end of each interim reporting period, the Company estimates its effective tax rate expected to be applied for the full year.

This estimate is used to determine the income tax provision or benefit on a year-to-date basis and may change in subsequent interim periods.

The Company has no t recorded a tax provision for the three months ended March 31, 2024 and 2023 as it maintains a full valuation allowance against its net deferred tax assets.

NOTE 5 – TANGIBLE AND INTANGIBLE ASSETS

Schedule of property, plant and equipment

September 30,

Property & Equipment

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Property and equipment, net

Depreciation expense for the three months ended September 30, 2023 and 2022 was $ 17,017 and $ 4,667 , respectively.

Depreciation expense for the nine months ended September 30, 2023 and 2022 was $ 45,996 and $ 12,566 , respectively.

Depreciation expense for the three months ended March 31, 2024 and 2023 was $ 21,659 and $ 10,307 , respectively.

Schedule of intangible assets

September 30,

Finite-lived intangible assets

2 unchanged sentences

Intangible assets, net

Amortization expense for the three months ended September 30, 2023 and 2022 was $ 2,214 and $ 2,879 , respectively.

Amortization expense for the nine months ended September 30, 2023 and 2022 was $ 20,030 and $ 7,060 , respectively.

NOTE 6 – RELATED PARTY ADVANCES AND OTHER INTERCOMPANY AGREEMENTS

Convertible Note and Due to Parent and

During the nine months ended September 30, 2023 and during 2022, the Company had the availability of, but not the contractual right to, intercompany

financing from the Parent and Affiliates in the form of either cash advances or borrowings

under a convertible note (as discussed below).

The convertible notes balances were $ 61,356 at December 31, 2022.

In January 2023, the Company borrowed an additional $ 48,143 under such convertible notes, and

subsequently repaid the outstanding balances of the convertible notes in full in February 2023, such that there were no amounts outstanding under convertible notes as of September 30, 2023.

Amortization expense for the three months ended March 31, 2024 and 2023 was $ 7,814 and $ 5,956 , respectively.

NOTE 6 – RELATED PARTY TRANSACTIONS AND AGREEMENTS

Convertible Note and Due to Tekcapital and Affiliates

Through December 31, 2023, the Company had the availability of, but not the contractual right to, intercompany financing from Tekcapital and Affiliates in the form of either cash advances or borrowings under a convertible note (as discussed below).

The convertible notes balances were $ 61,356 at January 1, 2023.

In January 2023, the Company borrowed an additional $ 48,143 under such convertible notes, and subsequently repaid the outstanding balances of the convertible notes in full in February 2023.

No further amounts were borrowed under these convertible notes, and the convertible notes matured on December 1, 2023 with no amounts outstanding.

New Lucyd Ltd.

The Company entered into

an agreement with Lucyd Ltd.

pursuant to which the Company can receive up to $ 1,250,000

either (a) in services provided by Lucyd Ltd.

to the Company or (b) in cash upon request of funds by the Company.

The Company has

not borrowed any amounts under this agreement.

Once funds or services are received by the Company, it will issue a convertible note

to Lucyd Ltd.

(the “Convertible Note”) that will bear interest at 10 %

per annum and include the option to convert the Convertible Note into the Company’s common stock upon certain Conversion

Events (as defined in the Convertible Note).

Upon issuance, the Convertible Note will have a maturity date of September

1, 2025 , at which time all outstanding principal and accrued interest, if any, will be payable in full in

cash or in the Company’s common stock at the discretion of the holder .

The Company will be able to prepay the Convertible Notes at any time with the written

consent of Lucyd Ltd.

Loan to Tekcapital Europe, Ltd.

On January 11, 2024, the Company entered into an intercompany loan agreement (as lender) with Tekcapital Europe, Ltd.

(as borrower) and Tekcapital Plc, the parent of Tekcapital Europe, Ltd.

Pursuant to this agreement, the Company loaned 600,000 British pounds sterling (equivalent to approximately $ 768,000 ) to Tekcapital Europe, Ltd.

The loan bears simple interest at a rate of 10 % per annum and was required to be repaid on or before April 11, 2024 .

Tekcapital Plc executed the agreement as guarantor for Tekcapital Europe, Ltd.

on the full amount of the loan.

Tekcapital Europe, Ltd.

repaid the substantially all of the principal balance of the loan in March 2024.

As of March 31, 2024, the only amounts remaining outstanding and payable to us under the loan were 7,616 British pounds sterling of principal and 10,717 British pounds sterling of accrued interest (in total, approximately $ 23,000 ).

This balance is reflected in the condensed balance sheet as a current asset Due from Tekcapital and Affiliates, net of other amounts payable to Tekcapital and Affiliates for other related party agreements.

Management Service Agreement

The Company has entered into a management services agreement with Tekcapital Europe Ltd.

(a related party, related through common ownership), for which the Company is billed at $35,000 quarterly.

While the agreement does not stipulate a specific maturity

date, it can be terminated with 30 calendar days written notice by any party.

The Company has entered into a management services agreement with Tekcapital Europe, Ltd., for which the Company is billed at $ 35,000 quarterly.

While the agreement does not stipulate a specific maturity date, it can be terminated with 30 calendar days written notice by any party.

The related party currently provides the following services:

Support and advice to the Company in accordance with their area of expertise;

Research, technical review, legal review, recruitment, software development, marketing,

public relations, and advertisement;

Advice, assistance, and consultation services to support the Company or in relation

to any other related matter.

During the three months ended September 30, 2023 and 2022, the Company incurred $ 35,000 in each respective period under the management services agreement.

During the nine months ended September 30, 2023 and 2022, the Company incurred $ 105,000 in each respective period under the

management services agreement.

Research, technical and legal review, recruitment, software development, marketing, public relations, and advertisement;

Advice, assistance, and consultation services to support the Company or in relation to any other related matter.

During the three months ended March 31, 2024, the Company incurred $ 35,000 in each respective period under the management services agreement.

Rent of Office Space

Prior to the February 1, 2022 amendment of the aforementioned management services agreement, the Company

was provided with rent-free office space by the Parent and Affiliates.

Effective February 1, 2022, Tekcapital began to bill the Company for an allocation of rent paid by Tekcapital

on the Company’s behalf.

The Company recognized $ 22,992 and $ 68,752 of expense related to this month-to-month arrangement for the three and nine months ended September 30, 2023, respectively.

The Company recognized $ 52,085 of expense related to this arrangement for both the three and nine months ended September 30, 2022.

Under an agreement between the Company and Tekcapital, Tekcapital bills the Company for an allocation of rent paid by Tekcapital on the Company’s behalf.

The Company recognized $ 23,231 and $ 22,769 of expense related to this month-to-month arrangement for the three months ended March 31, 2024 and 2023, respectively.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

Legal Matters

We are not the subject of any material pending legal proceedings;

however, we may from time to time become a party to various legal proceedings arising in the ordinary

course of business.

Our executive offices are located at 11900 Biscayne Blvd., Suite 630 Miami, Florida

Our executive offices are provided to us by the parent of Tekcapital (see Note 6).

We consider our current office space adequate for our current operations.

License Agreements

In late 2022 and 2023, we entered into several multi-year license agreements which grant us the right to sell certain branded smart

eyewear, including the Nautica, Eddie Bauer, and Reebok brands worldwide.

These agreements require us to pay royalties based on a percentage of net retail and

wholesale sales during the period of the license, and also require guaranteed minimum

royalty payments.

We are not currently the subject of any material pending legal proceedings;

however, we may from time to time become a party to various legal proceedings arising in the ordinary course of business.

On January 3, 2024, we settled and resolved certain matters with a third party, including a complaint that had been brought before the International Trade Commission and an investigation instituted by the International Trade Commission in 2023, and entered into a multi-year non-exclusive license agreement with the third party covering multiple smart eyewear patents (as described more fully below).

In 2022 and 2023, we entered into several multi-year license agreements which grant us the right to sell certain branded smart eyewear, including the Nautica, Eddie Bauer, and Reebok brands worldwide.

These agreements require us to pay royalties based on a percentage of net retail and wholesale sales during the period of the license, and also require guaranteed minimum royalty payments.

The aggregate future minimum payments due under these license agreements are as follows:

2 unchanged sentences

Thereafter (through 2033)

Also, on January 3, 2024, entered into a multi-year non-exclusive license agreement with a third party (IngenioSpec, LLC) for multiple smart eyewear patents.

Pursuant to this license agreement, the Company added licenses for 46 new patents to its portfolio of owned and licensed patents and applications.

The Company fully prepaid this license for the term of the agreement, and as of March 31, 2024 does not have any obligation for future payments under this agreement.

Our executive offices are located at 11900 Biscayne Blvd., Suite 630 Miami, Florida 33181.

Our executive offices are provided to us by a related party (see Note 6).

We consider our current office space adequate for our current operations.

Other Commitments

1 unchanged sentence

NOTE 8 – STOCK-BASED COMPENSATION

During the nine months ended September 30, 2023, we granted the following option awards:

Options to purchase an aggregate of 330,000 shares of common stock at $ 1.275 per share

were issued to the Company’s officers and management, of which 1/3 vested immediately, 1/3 shall vest on January 13, 2024, and the remaining 1/3 shall vest on January 13, 2025.

The options expire on January 13, 2028.

Options to purchase an aggregate of 75,000 shares of common stock at $ 1.275 per share

were issued to non-management directors, which vest evenly over three years, whereby

1/3 shall vest on each of January 13, 2024, January 13, 2025, and January 13, 2026.

The options expire on January 13, 2028.

Options to purchase an aggregate of 162,000 shares of common stock at $ 1.275 per share

were issued to certain employees and consultants, which vest evenly over three years,

whereby 1/3 shall vest on each of January 13, 2024, January 13, 2025, and January 13, 2026.

During the three months ended March 31, 2024, we granted options to purchase an aggregate of 10,000 shares of common stock at $ 0.4201 per share to an employee, of which 1/5 vested immediately, and 1/5 shall vest on each six-month anniversary of the grant date.

The options expire on January 11, 2029.

Options to purchase an aggregate of 75,000 shares of common stock at $ 1.275 per share

were issued an employee, which would have vested evenly over three years (whereby

1/6 of the options would have vested every six months).

During the three months ended

September 30, 2023, all of these options were forfeited.

Options to purchase an aggregate of 6,000 shares of common stock at $ 1.275 per share

were issued to a consultant, which vested immediately.

These options were all exercised

during the nine months ended September 30, 2023.

Options to purchase an aggregate of 15,000 shares of common stock at $ 0.66 per share

were issued to certain employees and consultants, which vest evenly over two years,

whereby 1/4 of the options shall vest every six months.

The options expire on September 5, 2028.

Additionally, on June 1, 2023, we modified the terms of certain options awarded in 2021 to purchase an aggregate

of 140,000 shares of common stock, in order to extend their expiration dates from

July 21, 2023 to July 21, 2024.

There were no changes to the exercise price or other terms of these stock

options, and these options were already fully vested prior to the modification.

a result of this modification, we recognized incremental stock option expense of $ 9,188

for the nine months ended September 30, 2023.

Details of the number of stock options and the weighted average exercise price outstanding as of and during the nine months ended September 30, 2023 are as follows:

Summary information regarding the number of options, exercise price, and remaining contractual life as of and during the three months ended March 31, 2024 is as follows:

Schedule of number of share options and the weighted average exercise price outstanding

Weighted Average

Price per share

Weighted Average

Contractual Life

As at January 1, 2024

Forfeited / Expired

As at September 30, 2023

Exercisable as at September 30, 2023

As of September 30, 2023, the weighted average remaining contractual life of options was 1.91 years for outstanding options, and 1.32 years for exercisable options.

As of September 30, 2023, unrecognized stock option expense of $ 885,010 remains to be recognized over next 1.17 years.

As of September 30, 2023, the aggregate intrinsic value for all options outstanding as well as all

options exercisable was zero 0 .

NOTE 9 – STOCKHOLDERS’ EQUITY

Second Public Offering

On June 26, 2023, the Company closed on a public offering of 4,500,000 units consisting of 4,500,000 shares of its common stock and 4,500,000 warrants to purchase 4,500,000 shares of common stock (the “Common Warrants”) at a combined offering price of $ 1.05 per unit in exchange for gross proceeds of approximately $ 4.73 million, before deducting underwriting discounts and offering expenses.

of common stock was sold together with one warrant.

Each Common Warrant is exercisable to purchase one share of common stock at an initial exercise price

of $1.05 per share, subject to certain adjustments as set forth in the warrant agreement.

In addition, pursuant to the terms of the placement agency agreement for the offering, the Company issued to the placement agent certain other warrants to purchase up to 180,000 shares of the Company’s common stock at an exercise price of $ 1.31 per share.

The net proceeds received by the Company from this offering amounted to $ 4,115,688 .

On August 17, 2022, as part of the Company’s initial public offering, the Company issued a total of 2,254,000 warrants to purchase

2,254,000 shares of common stock, which began trading and are currently trading on

the Nasdaq Capital Market, under the symbol “LUCYW” (which we refer to as the “Listed Warrants”).

Additionally, pursuant to the terms of the related underwriting agreement for the initial public offering, the Company issued to the underwriter certain other warrants to purchase

up to 58,800 shares of the Company’s common stock, which have an exercise price of $ 8.228 per share.

In February 2023, holders of the Company’s Listed Warrants exercised such warrants to purchase an aggregate of 408,600 shares of the Company’s common stock, at an adjusted exercise price of $ 3.75 per share, resulting in cash

proceeds to the Company of $ 1,532,250 .

Between April 1, 2023 and April 16, 2023, holders of the Company’s Listed Warrants exercised such warrants to purchase an aggregate of 321,120 shares of the Company’s common stock, at an adjusted exercise price of $ 3.75 per share, resulting in cash

proceeds to the Company of $ 1,204,200 .

On April 17, 2023, the Company entered into a warrant exercise inducement letter agreement (“Inducement Letter”) with certain accredited investors that were existing holders of the Company’s Listed Warrants to purchase an aggregate of 150,000 shares of the Company’s common stock for cash, wherein the investors agreed to exercise all of their existing Listed Warrants at an exercise price of $ 3.75 per share.

The gross proceeds to the Company from this transaction, before deducting estimated expenses and fees, was $ 562,000 .

In consideration for the immediate exercise of the existing Listed Warrants for cash, the exercising holders received new warrants to purchase up to an aggregate of 300,000 shares of common stock (the

“Private Warrants”) in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

The Private Warrants are immediately exercisable upon issuance at an exercise price of $ 3.75 per

common share and will expire on April 19, 2028.

The Private Warrants were offered in a private placement pursuant to an applicable exemption from the registration requirements of the Securities Act and, along with

the shares of common stock issuable upon their exercise, have not been registered under the Securities Act of

1933, and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from such

registration requirements.

The securities were offered only to accredited investors.

The net proceeds received by the Company from this transaction amounted to $ 391,268 .

None of the aforementioned other warrants issued to underwriters and placement agents

have been exercised.

As of September 30, 2023, the Company’s remaining outstanding warrants are as follows:

Schedule of stockholders' equity note, warrants or rights

Listed Warrants

Common Warrants

Private Warrants

Underwriter warrants

Placement agent warrants

As at March 31, 2024

Exercisable as at March 31, 2024

of March 31, 2024, the aggregate intrinsic value for all options outstanding as well as all options exercisable was 0 zero, and

unrecognized stock option expense of approximately $ 463,000

remains to be recognized over next 1.11

Also during the three months ended March 31, 2024, we recognized $ 5,075 of expense related to restricted stock units awarded in 2023;

as of March 31, 2024, unrecognized restricted stock unit expense of approximately $ 14,000 remains to be recognized between April 1, 2024 and November 30, 2024.

Additionally, on March 28, 2024, we entered into an agreement for a third party to provide us with financial advisory and investment banking services.

As consideration for the services provided to the Company, we issued to the counterparty 300,000 shares of our common stock.

No expense related to this agreement has been recognized in the condensed statement of operations for the three months March 31, 2024, although the fair value of the shares transferred has been recognized in the condensed balance sheet as of March 31, 2024 as a prepaid expense.

The related expense will be recognized over a 6-month period from April 1, 2024 through September 30, 2024.

NOTE 9 – EARNINGS PER SHARE

The Company calculates earnings/(loss) per share data by calculating the quotient of earnings/(loss) divided by the weighted average number of common shares outstanding during the respective period as required by ASC 260-10-50.

Due to the net losses for the three and nine months ended September 30, 2023 and 2022, all shares underlying the related party convertible debt, common

stock warrants, and common stock options were excluded from the earnings per share

calculation due to their anti-dilutive effect.

The Company calculates earnings/(loss) per share data by calculating the quotient of earnings/(loss) divided by the weighted average number of common shares outstanding during the respective period.

Due to the net losses for the three months ended March 31, 2024 and 2023, all shares underlying the related party convertible debt, common stock warrants, and common stock options were excluded from the earnings per share calculation due to their anti-dilutive effect.

The calculation of net earnings/(loss) per share is as follows:

1 unchanged sentence

three months ended

nine months ended

September 30,

Basic and diluted:

$ ( 1,551,105 )

$ ( 1,404,321 )

$ ( 4,269,717 )

$ ( 3,804,692 )

Weighted-average number of common shares

Basic and diluted net loss per common share

NOTE 10 – SUBSEQUENT EVENTS

At-the-Market Offering

On April 15, 2024, the Company entered into an

at-the-market offering agreement with H.C.

Wainwright & Co., LLC, as sales agent (“HCW”), relating to the sale of common

In accordance with the terms of the offering agreement, Form S-3 shelf registration, and related prospectus documents filed with

the SEC, the Company offered to sell up to $ 1,120,446 of shares of its common stock from time to time, through HCW acting as agent.

From April 15, 2024 through April 28, 2024, the

Company sold 50,395 shares of common stock at purchase prices of approximately $ 0.25 per share, and received approximately $ 13,000 of

gross proceeds before deducting sales agent fees and expenses.

The net proceeds received by the Company from these transactions

amounted to approximately $ 12,000 .

Following the May 1, 2024 registered direct offering

described below, the Company filed an amended prospectus document, reducing the maximum remaining aggregate offering amount under the

at-the-market facility to $ 538,599 of shares of common stock.

Registered Direct Offering

May 1, 2024, the Company closed on a registered direct offering of 4,200,822

shares of its common stock and, in a concurrent private placement, warrants to purchase up to 4,200,822

shares of common stock at an exercise price of $ 0.244

per share, for a combined purchase price per share and warrant of $ 0.244 .

In exchange, the Company received approximately $1.0 million of gross proceeds, before deducting placement agent fees and expenses.

In addition, the Company issued to the placement agent warrants to purchase up to 315,062

shares of common stock at an exercise price of $ 0.305

The net proceeds received by the Company from this transaction amounted to approximately $ 837,000 .

We intend to use the net proceeds of this offering primarily for working capital and general corporate purposes.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations

should be read together with our financial statements and the related notes and the

other financial information included elsewhere in this Quarterly Report.

This discussion

contains forward-looking statements that involve risks and uncertainties.

results could differ materially from those anticipated in these forward-looking statements

as a result of various factors, including those discussed below and elsewhere in this

Quarterly Report.

The mission of our company is to upgrade

the world’s eyewear, by adding useful tech features to comfortable and stylish sunglasses and eyeglasses.

Our products enable

seamless Bluetooth connection to your digital life and prescription vision correction in one affordable and convenient package.

Our flagship brand of smart eyewear is called Lucyd ®

Lucyd eyewear is enjoyed by thousands of people around the

world who want the convenience and utility of wireless headphones and glasses in one.

Furthermore, we believe we are revolutionizing

the concept of eyewear overall, by enabling connection to the powerful ChatGPT AI assistant right on our glasses, using a novel

and ergonomic voice interface.

The Company believes the addition of this powerful feature to our eyewear will significantly enhance

user adoption of Lucyd eyewear, and may provide a new revenue stream for the business in the form of in-app purchases.

In January 2021, we officially launched

our first commercial product, Lucyd Lyte ®

(“Lucyd Lyte”).

This initial product offering embodied our

goal of creating smart eyewear for all day wear that looks like and is priced similarly to designer eyewear, but is also light

weight and comfortable, and enables the wearer to remain connected to their digital lives.

The product was initially launched with

six styles, and in September 2021, an additional six styles were added.

We recently launched version 2.0 of our Lucyd Lyte eyewear, and our current product

offering consists of 21 version 2.0 models, which offers a similar amount of style variety as many traditional

eyewear collections.

Six of the 21 styles are from a new sub-collection called Lyte XL, which boasts our

most advanced features yet, launched in October 2023.

All styles are each available with 80+ different lens types, resulting in hundreds

of variations of products currently available.

The new Lucyd Lyte version 2.0 collection features several key breakthroughs for the smart eyewear product category:

Music playback and call time were extended to 12 hours, a 50% increase over the version 1.0 and making Lyte one of the longest-lasting true wireless audio devices on the

A four-speaker array was introduced, improving audio fidelity significantly compared

to the version 1.0 model and many other smart eyewear products.

Styling of the frames deployed the Company’s new expert design team, producing smart eyewear that follows trending styles in

2023 in the traditional eyeglasses and sunglasses markets.

The collection features many style firsts for a smart eyewear collection

designed in the United States, that have proven commercially successful in traditional eyewear, such as titanium

rose gold and champagne crystal styles for women, and gunmetal gray and acetate aviator

styles for men.

The upgrade to a Bluetooth 5.2 chip improves connection stability, especially for

older devices.

Responsiveness of touch controls improved with an audible tone added to alert the

wearer when they have used a command successfully.

The transition of the LED status indicators to the interior of the temples, a change

based on consumer feedback, makes the product more discreet.

Since the launch of Lucyd Lyte, we witnessed interest and demand from customers throughout

the United States and have sold thousands of our smart glasses.

Within six months

of the launch of Lucyd Lyte, several optical stores in the United States and Canada

have on-boarded the product and we have had discussions with several other large

eyewear chains (by number of locations) regarding onboarding our product.

smart eyewear is a product category whose time has come, and we believe we are well

positioned to capitalize on and help develop this exciting new sector–where eyewear

meets electronics in a user-friendly, mass market format, priced similarly to designer

In first quarter of 2022 we introduced a virtual try-on kiosk for select retail stores.

This device introduces our products to prospective retail customers and enables them to digitally try on our line of smart glasses in

a touch-free manner.

In 2023, we launched a total of 21 new styles of Lucyd Lyte eyewear, and entered production

for our first licensed product, the Nautica Powered by Lucyd smart eyewear collection.

Due to slight delays in production, the Nautica line will launch in the first quarter of 2024, rather than in the fourth quarter of 2023 as originally anticipated.

Additionally, unforeseen manufacturing issues with

the Lucyd safety glass product line caused this product launch to also be delayed,

and is now planned to launch in the second quarter of 2024.

Due to the complexity of smart eyewear products, and the number of components and

details involved, the Company believes in taking the time to ensure its products are

as perfected as possible to meet the needs of the customer.

Other recent product developments are as follows:

In October 2023, the Company launched six new styles of smart eyewear under the Lucyd line, branded as Lyte XL, bringing several key innovations to the core product line.

The new frames feature

patent-pending flexible hinges which enable a more comfortable fit and a wider range

of suitable head sizes for each frame, significant improvements to speaker and microphone

quality, thinner and more ergonomic temples, multi-lingual packaging for global sales,

and the use of 99% post-consumer recycled materials in the packaging.

Additionally, the new packaging design is more compact and more clearly advertises

the frame style within, making it more retail-friendly.

These key improvements will

be rolled out across all of the Company’s smart eyewear products to come, and marks notable R&D advancements towards the Company’s goal to develop the global standard in smart eyewear.

These improvements also come

just eight months after the Company’s previous frame launch, showing our ability to rapidly improve our products on a

short timetable.

The patent-pending Lucyd Charging Dock accessory will be upgraded to feature a charging status LED and USB data capability, enabling

it to be used as a USB multi-device hub for computers in addition to a charging hub.

Additionally, the new Dock has a special spring-action connector that enables it

to function perfectly with any pair of glasses from the Company, whereas the original

Dock had difficulty with some petite and wide fit frames.

We completed an overhaul of our retail fixtures in the third quarter of 2023, offering our new enhanced video and audio demo displays to all current and prospective

retail partners.

The new displays were designed in-house and purpose-built for enhancing sell-through

of our smart eyewear.

Our new modular display system incorporates two different center stations focused on audio and video experiences,

along with side pieces for stores with additional counter space to exhibit any number

of our frames.

Over the course of the third quarter of this year, we began upgrading the store fixtures of our retail partners to the new display systems, which we believe will enhance sell-through of our products.

Initial retailer feedback on the new display system has been

positive, as it eliminates key issues with our previous displays, by providing enough consumer information to make an educated buying

decision, including allowing the customer to interact with and listen to music on live products, and also including the addition of a security tether to make it suitable for all retail environments.

We introduced a proprietary new custom lens in the third quarter of 2023, called the Lucyd Blueshift lens.

This new lens transitions from clear indoors to dark outdoors, and has a handmade

blue light blocking coating that was independently lab tested to block 40% of harmful

This is an achievement since blue light lenses with this degree of filtration

normally have a yellowish or amber tint, while the Blueshift lens is fully clear indoors.

The Blueshift lens is offered in polarized and nonpolarized variants in any prescription

or as a non-prescription custom lens.

In the fourth quarter of 2022, we introduced key features in the Vyrb app, including

live broadcasts for up to 100 users in one digital “room”, and the ability to upload

external audio content into Vyrb, enabling longstanding content creators to import

their existing libraries swiftly into the platform.

This new feature allows content creators to share content they made outside of Vyrb

on the Vyrb network, and in the future we plan to allow users to monetize this content

as well as the content they generate originally on the platform.

For example, we plan

to enable podcasters to import their existing podcast library into Vyrb, and set a

paywall for other users to access the content.

Also in the fourth quarter of 2022, we completed development of core audio eyewear

product improvements, such as upgrading all frames to quadraphonic sound, which have

been rolled out across all new eyewear models as of January 2023.

In April 2023, we introduced a major software upgrade for our glasses with the launch of the

Lucyd app for iOS/Android.

This free application enables the user to converse with

the extremely popular ChatGPT AI language model on the glasses, to instantly gain

the benefit of one of the world’s most powerful AI assistants in a hands-free ergonomic interface.

The app deploys a powerful and unique Siri and Google Voice

integration with the Open AI API for ChatGPT, developed internally by the company

and now pending patent.

This development instantly makes all Lucyd eyewear perhaps the smartest smartglasses available today, and represents a significant marketing opportunity

for the company’s core smartglasses product, and a potential in-app purchase revenue stream for the Company.

We subsequently launched version 2.0 of the Lucyd app in August 2023 for iOS, which included an upgraded visual interface, new AI tool, and usability improvements, with the same updates planned for the Android version of the app in the fourth quarter of 2023.

The new state-of-the-art interface makes perhaps the world’s most powerful commercial AI easier to use than ever on our smart glasses.

to introduce more features, a shop, and a pro version of the app in the near future.

We apply a manufacturer suggested retail price (“MSRP”) of $199 (for our standard frames) to $229 (for our titanium frames) for non-prescription, polarized sunglass and blue light

blocking glasses across our online channels, with our wholesale pricing offering volume

discounts to these prices.

Please refer to discussion in the Components of Results

of Operations section below for more details regarding our pricing structure.

Our business model is capital light, as we have elected not to build our own manufacturing facilities and Company-owned retail distribution,

but rather have contracted with existing sources of production and proven consumer-facing retail distribution.

In summation, the ultimate synopsis from management on the status of the Company at

the end of the third quarter of 2023 is as follows:

The Company has made notable advancements in both hardware and software products, fostering a

market-leading smart eyewear user experience.

This follows the Company’s mission to continuously iterate and improve its products to better serve the customer, shown by the development of new custom components launching in the third quarter;

improvement of fit, style, and functionality coming to our products with each successive

and the combination of our core technology with the globally renowned Nautica,

Eddie Bauer, and Reebok brands pending launch over the next three to six months.

The Company has built its strongest team to date, with 12 full-time staff extremely

devoted to building the global standard in smart eyewear, and several capable design, promotion, and sales contractors supplementing the core team.

The Company was the first to market with a touch-free voice interface for ChatGPT,

demonstrating our ability to rapidly incorporate new innovations into our core product

to the immediate and great benefit of all users.

The Company has launched a very sophisticated and attractive modular display system

that is primed to introduce smart eyewear to lay customers and maximize sell-through

in any retail environment suitable for our products.

The new display system features a 10” video monitor continuously running promotional

videos, can be programmed with new videos seasonally via an SD card slot, and describes

to passerby how to conduct a music demo on the pair of Lucyd glasses on the display.

The display also features modular side pieces enabling retail locations to take advantage

of varied amounts of counter space to display Lucyd products.

The optical industry itself has begun to recognize us as a leader of innovation in

optics, as shown in recent coverage that lists us alongside major, well-established

players in the space.

Although we underwent some significant challenges with product defects and returns,

primarily in 2022 but also leading into 2023, the result of this was a total overhaul

of our supply chain that yielded more reliable factories and an overall significant

quality improvement on all of our glasses, positioning us well for the future.

The Company began adopting aggressive influencer marketing strategies in the third quarter of 2023, some of which have already been successful in generating high-quality, authentic

user content to support advertising our products, as well as growing our social media

The Company believes influencer marketing will be a cornerstone of its

marketing efforts going forward, given the nature of smart eyewear as a complex new

product that typically requires detailed exposition for consumer adoption.

Optical retailer feedback at the Vision Expo West conference on the new Lyte XL frames

and pre-production Nautica smart eyewear samples was extremely positive, indicating

the strong potential of the optical channel for our products.

Reception of the Nautica

samples was some of the best feedback the Company had ever received.

With the optical industry being a largely brand-driven marketplace, the introduction

of the Powered by Lucyd lines bode well for the Company’s future prospects.

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes and the other financial information included elsewhere in this Quarterly Report.

This discussion contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report.

Our mission is to Upgrade Your Eyewear ® .

We develop and sell cutting-edge smart eyeglasses and sunglasses, which are designed to allow our customers to remain connected to their digital lives, while also offering vision correction and protection.

Our smart eyewear is a fusion of headphones with glasses, bringing vision correction and protection together with digital connectivity and clear audio, while also offering a safer solution for listening to music outdoors (as compared to in-ear headphones).

The convenience of having a Bluetooth headset and comfortable glasses in one, especially for those who are already accustomed to all-day eyewear use, offers a lifestyle upgrade at a price most consumers can afford.

Our flagship product, Lucyd Lyte ® , enables the wearer to listen to music, take and make calls, and use voice assistants and ChatGPT to perform many common smartphone tasks hands-free.

Products and History

In January 2020, we introduced our first beta product and began market testing.

In January 2021, we officially launched our first commercial product, Lucyd Lyte.

This initial product offering embodied our goal of creating smart eyewear for all day wear that looks like and is priced similarly to designer eyewear, but is also lightweight and comfortable, and enables the wearer to remain connected to their digital lives.

The product was initially launched with six styles, and in September 2021, an additional six styles were added.

In the first quarter of 2022 we introduced a virtual try-on kiosk for select retail stores.

This device introduces our products to prospective retail customers and enables them to digitally try-on our line of smart glasses in a touch-free manner.

In the fourth quarter of 2022, we completed development of core audio eyewear product improvements, such as upgrading all frames to quadraphonic sound, which was subsequently rolled out across all of our new eyewear models.

In February 2023, we launched version 2.0 of our Lucyd Lyte eyewear with 15 different styles, incorporating several key breakthroughs for the smart eyewear product category – including a four-speaker audio array, 12-hour music playback and call time, and improved styling as well as technical upgrades.

In October 2023, we launched six new styles of smart eyewear, branded as Lyte XL, bringing even more advancements – including patent-pending flexible hinges for a more comfortable fit and a wider range of suitable head sizes, significant improvements to speaker and microphone quality, thinner and more ergonomic temples, and post-consumer recycled packaging.

Also during 2023, we completed upgrades to our accessory products, including the charging dock and virtual try-on kiosk.

The patent-pending Lucyd charging dock was upgraded to version 2.0 edition, featuring auto-adjusting connectors to fit any size of smart eyewear we produce, a new charging status LED, and USB data capability, enabling it to be used as a USB hub for computers in addition to a charging hub.

The Lucyd virtual try-on kiosk was replaced with a fully modular display system, with eight available components for stores to mix and match to suit their display needs.

The display can be deployed as a countertop display or freestanding, making it suitable for almost any retail environment.

In January 2024, we launched the Nautica ® Powered by Lucyd smart eyewear collection in eight different styles, along with various branded accessories including a power brick, cleaning cloth, and a slipcase adorned with the iconic Nautica sail logo.

We anticipate launching the Eddie Bauer ® Powered by Lucyd and Reebok ® Powered by Lucyd smart eyewear collections later in 2024.

Our current product offering consists of 29 different models, which offers a similar amount of style variety as many traditional eyewear collections.

All styles are each available with 80+ different lens types, resulting in thousands of variations of products currently available.

The Company currently has over 100 licensed patents and applications.

Since the launch of Lucyd Lyte, we have witnessed interest and demand from customers throughout the United States and have sold thousands of our smart glasses.

Within six months of the launch of Lucyd Lyte, several optical stores in the United States and Canada have on-boarded the product and we have had discussions with several other large eyewear chains regarding on-boarding our product.

We believe smart eyewear is a product category whose time has come, and we believe we are well positioned to capitalize on and help develop this exciting new sector – where eyewear meets electronics in a user-friendly, mass market format, priced similarly to designer eyewear.

The Vyrb app launched in open beta on iOS and Android app stores in 2021, as the Company’s first social media platform.

In 2022, we introduced key features in the Vyrb app, including live broadcasts for up to 100 users in one digital “room,” and the ability to upload external audio content into Vyrb, enabling longstanding content creators to import their existing libraries swiftly into the platform.

In the first quarter of 2023, we introduced several new features for the Vyrb app, including market-leading audio accessibility features for social media, such as the ability to create and listen to a feed of audio content completely hands-free, using unique voice assistant commands created for the app.

We plan to continue to develop the expansive Vyrb platform into a feature-rich social toolbox for customers.

This includes the introduction of revenue-generating features such as native ads and in-app upgrades, as well as gamification features such as a points and rewards system.

Additional new features for the Vyrb app are planned to launch in 2024, including a fully upgraded user interface.

Once this update to the interface is completed, the app will be considered officially launched, and the Company will begin to promote it and capitalize on it in earnest.

In April 2023, we introduced another major

software upgrade for our glasses with the launch of the Lucyd app for iOS and Android.

This free application enables the user to converse

with the extremely popular ChatGPT AI language model on our glasses, to instantly gain the benefit of one of the world’s most powerful

AI assistants in a hands-free ergonomic interface.

The app deploys a powerful and unique Siri integration with the Open AI API for ChatGPT,

developed internally by the Company.

The Company has filed a patent application related to this software upgrade.

We believe this development

makes our Lucyd eyewear perhaps the smartest smartglasses available today, and represents a significant marketing opportunity for the

Company’s core smartglass product.

In addition, the Company plans to launch new features for the Lucyd app in 2024, including a

paid “Pro” version of the app, which will provide another potential incremental revenue stream for the Company from glasses

Key Factors Affecting Performance

Expansion of retail points of purchase

In addition to sustained growth of our e-commerce business, our future revenues are

correlated positively with our placement of Lucyd glasses in optical stores, as well

as sporting goods stores and other specialty stores such as cellular shops.

this, we assembled a team with decades of experience in the eyewear industry and are

offering a strong co-op marketing program and reordering incentives program.

offer an expansive line of 21 different styles and several accessories, with plans to continuously expand this offering

In the first quarter of 2023, we added approximately 50 new retail partners, comprised

of independent optical stores, and in the second quarter of 2023 we added approximately

25 new independent optical stores and seven Duty Free stores operated by Privato Inc.

In the third quarter of 2023, we added 37 new accounts, entirely optical stores.

In addition to sustained growth of our e-commerce business, our future revenues are correlated positively with our placement of Lucyd glasses in optical stores, as well as sporting goods stores and other specialty stores.

To address this, we have assembled a team with decades of experience in the eyewear industry and are offering a strong co-op marketing program and reordering incentives program.

We currently offer an expansive line of 29 different styles and several accessories, and are in the process of expanding our product offerings to include cobranded eyewear with well-known brands like Nautica, Eddie Bauer, and Reebok.

In total, the Company expects to offer 38 total smart eyewear SKUs across these brands and Lucyd by the end of 2024.

Retail store client retention and re-orders

Our ability to sustain and increase revenue is correlated positively with our ability

to receive re-orders from stores, either directly or through our wholesale distributors.

To support our sales to retail stores directly, we offer a strong co-op marketing

program that includes free and paid store display materials.

As part of this strategy,

we have launched a new modular display system with engaging video screens and audio testing capabilities

for our resellers to help educate their in-store customers about Lucyd Lyte and enable

customers to try them on.

This proprietary display system is central to our efforts to introduce traditional retail customers to Lucyd eyewear,

and we are planning further enhancements to our merchandising displays to enable more

immersive experiences.

Additionally, we consistently incorporate retail partner feedback directly into our

frames to better serve our end users.

44 display systems have been deployed so far to retailers.

Our ability to sustain and increase revenue is correlated positively with our ability to receive re-orders from stores, either directly or through our wholesale distributors.

To support our sales to retail stores directly, we offer a strong co-op marketing program that includes free and paid store display materials.

As part of this strategy, we have launched a new modular display system with engaging video screens and audio testing capabilities for our resellers to help educate their in-store customers about Lucyd Lyte and enable customers to try them on.

This proprietary display system is central to our efforts to introduce traditional retail customers to Lucyd eyewear, and we are planning further enhancements to our merchandising displays to enable more immersive experiences.

Additionally, we consistently incorporate retail partner feedback directly into our frames to better serve our end users.

As of March 31, 2024, 45 display systems have been deployed so far to retailers.

Investing in business growth

We believe that people care about what they wear on their faces, and because we understand

that customers have diverse preferences about the shape, size and design of their

eyewear, we aim to continuously invest in the design and development of new models

in an effort to provide the consumer with a wide selection of styles, colors, and finishes.

We are offering a strong co-op marketing program with retail stores, and intend to

expand our sales, marketing and brand ambassador teams to broaden our brand awareness

and online presence.

We will also increase our general and administrative expenses

in the foreseeable future to cover the additional costs for finance, compliance, supply

chain, quality assurance and investor relations as we grow as a public company.

We believe that people care about what they wear on their faces, and because we understand that customers have diverse preferences about the shape, size, and design of their eyewear, we aim to continuously invest in the design and development of new models in an effort to provide the consumer with a wide selection of styles, colors, and finishes.

We are offering a strong co-op marketing program with retail stores, and intend to expand our sales, marketing, and brand ambassador teams to broaden our brand awareness and online presence.

Key Performance Indicators

Store Count (B2B)

We believe that one of the key indicators for our business is the number of retail

stores onboarded to sell Lucyd Lyte.

We started onboarding our first retail stores

in June 2021.

Currently, we have approximately 350 retail stores selling Lucyd Lyte, primarily located within the United States and Canada, across just over 300 unique wholesale accounts.

Based on the existing demand for our products, current

distribution, and recently consummated supply agreements, we anticipate that our products will

be available in a significant number of new third-party retail locations in 2024.

We expect this number to gradually increase as we continue to improve our product,

roll out our co-op marketing program and introduce more of our modular display systems into retail stores, to facilitate customer education and product sell-through.

The Company has consistently introduced its products in dozens of new points of sale

every quarter;

however, we expect a more notable increase with the rollout of our Powered by Lucyd branded products over the next year.

The introduction of fashion-branded products from our partnerships with Nautica, Eddie

Bauer, and Reebok are expected to significantly increase our retail store presence due to the popularity and built-in following of

these brands, particularly Nautica which has a large audience for their traditional

eyewear, and Eddie Bauer due to their large US brick-and-mortar retail presence.

We believe that one of the key indicators for our business is the number of retail stores onboarded to sell Lucyd Lyte.

We started onboarding our first retail stores in June 2021.

Currently, we have over 350 retail stores selling Lucyd Lyte primarily in the United States and Canada.

Based on the existing demand for our products, current distribution, and recently consummated supply agreements, we anticipate that our products will be available in a significant number of new third-party retail locations in 2024.

Customer Ratings (B2C)

The Lucyd Lyte version 2.0 product is receiving higher ratings online compared to

our previous products, indicating that customers are appreciative of improvements

in product design, functionality and build quality.

Many of our version 2.0 variants carry a 4.0/5 rating or higher, compared to most products with an approximate 3.5/5 rating from our previous collection.

This is a strong signal of positive feedback on our products that indicates our ability

to grow and scale with America’s largest online retailer and other platforms.

The Lucyd Lyte version 2.0 product is receiving higher ratings online compared to our previous products, indicating that customers are appreciative of improvements in product design, functionality, and build quality.

Many of our Lyte XL variants carry a 4.0/5 rating or higher.

This is a strong signal of positive feedback on our products that indicates our ability to grow and scale with America’s largest online retailer and other platforms.

Number of online orders (B2C)

For our e-commerce business, we track the number of online orders as an indicator

of the success of our online marketing efforts.

As of September 30, 2023, we had 17,173 cumulative total orders from customers online since inception, up from a cumulative total of 10,435 as of September 30, 2022.

We believe that the addition of new styles, as well as further investment in brand

awareness, product ambassadors, and influencer campaigns, will enable continued growth

of online orders in the foreseeable future.

We expect to allocate a significant portion

of our advertising expenditures towards influencer marketing programs.

For our e-commerce business, we track the number of online orders as an indicator of the success of our online marketing efforts.

As of March 31, 2024, we had over 20,000 cumulative total orders from customers online since inception.

We believe that the addition of new styles, as well as further investment in brand awareness, product ambassadors, and influencer campaigns, will enable continued growth of online orders in the foreseeable future.

We expect to allocate a significant portion of our advertising expenditures towards influencer marketing programs.

Components of Results of Operations

Our revenue is generated from the sales of prescription and non-prescription optical

glasses, sunglasses, and shipping charges, which are charged to the customer, associated

with these purchases.

We sell products through our retail store resellers, distributors,

on our own website Lucyd.co, and on Amazon.com.

Our flagship product line increased in price with the launch of the version 2.0 models,

from $149 to $199 on acetate models, and $179 to $229 on titanium models for non-prescription

glasses across all of our online channels.

In addition, we have introduced a minimum

advertised price on the new models of $139 and $159, respectively, to support our retail partners with guaranteed minimum pricing.

When adding a prescription lens upgrade to

our glasses on the Lucyd.co website, the price can increase from between $40 for a basic clear prescription lens, all the way up

to $450 for the latest Transitions ®

progressive lens.

Glasses with prescription lenses are only available through

our website Lucyd.co, while our sales through Amazon and to our retail partners only include non-prescription glasses with rare

exceptions such as a reseller ordering a customized unit for display purposes.

consumers enjoy free USPS first class postage, with faster delivery options available

for extra cost, for sales processed through our website.

For Amazon sales, shipping

is free for U.S consumers while international customers pay shipping charges.

costs associated with fees charged by the online platforms (Shopify for Lucyd.co website

and Amazon) are not recharged to customers.

We charge applicable state sales taxes

for both online channels and all other marketplaces on which we sell.

Our wholesale pricing for eyewear sold to retail store partners and distributors includes

volume discounts, due to the nature of large quantity orders.

The pricing includes

shipping charges, while excluding any state sales tax charges applicable.

nature of wholesale retail orders, no e-commerce fees are applicable.

Our revenue is generated from the sales of prescription and non-prescription optical glasses and sunglasses, and shipping charges associated with these purchases, which are charged to the customer.

We sell products through our retail store resellers, distributors, on our own website Lucyd.co, and on Amazon.com.

Our newest flagship Lucyd Lyte XL brand frames are priced at $179 on acetate models and $199 on titanium models for non-prescription glasses across all of our online channels.

When adding a prescription lens upgrade to our glasses on the Lucyd.co website, the price can increase from between $40 for a basic clear prescription lens, all the way up to $449 for our proprietary Blueshift transitional blue light lenses in a progressive high index (ultra-thin) format.

Glasses with prescription lenses are provided by the Company through our website Lucyd.co, while our sales through Amazon and to our e-commerce partners only include non-prescription glasses (with rare exceptions, such as a reseller ordering a customized unit for display purposes).

Lucyd.co consumers enjoy free USPS first class postage on orders over $149, with faster delivery options available for extra cost, for sales processed through our website.

For Amazon sales, shipping is free for U.S.

consumers while international customers pay shipping charges.

Any costs associated with fees charged by the online platforms (Shopify for our Lucyd.co website and Amazon.com) are not recharged to customers.

We charge applicable state sales taxes for online channels and all other marketplaces on which sell.

Our wholesale pricing for eyewear sold to retail store partners and distributors includes volume discounts, due to the nature of large quantity orders.

The pricing does not include shipping.

Due to the nature of wholesale retail orders, no marketplace fees are applicable, only credit card processing fees.

Cost of Goods Sold

Cost of goods sold includes the costs incurred to acquire materials, assemble, and

sell our finished products.

For retail sales placed on one of our e-commerce channels, these costs include (i)

product costs held at the lesser of cost and net realizable value and inclusive of

inventory reserves, (ii) freight, import, and inspection costs, (iii) optical laboratory

costs for prescription glasses, (iv) merchant fees, (v) fees paid to third-party e-commerce

platforms, and (vi) cost of shipping the product to the consumer.

For wholesale sales these costs include (i) product costs stated at the lesser of

cost and net realizable value and inclusive of inventory reserves, (ii) freight, import,

and inspection costs, and (iii) credit card fees.

When consumers place their orders directly on our online store, we save approximately

12-15% on marketplace fees than when consumers place their orders directly from third-party

platforms like Amazon and eBay.

We expect our cost of goods sold to fluctuate as a percentage of net revenue primarily

due to product mix, customer preferences and resulting demand, customer shipping costs,

and management of our inventory and merchandise mix.

Over time we expect our total cost of goods sold on a per unit basis to decrease as

a result of an increase in scale.

Increase in scale is achieved as a result of increase

in volumes from both business to consumer and business to business (retail store)

We continue to expand our products with line extensions and new models and

broaden our presence in retail stores carrying our products.

Cost of goods sold includes the costs incurred to acquire materials, assemble, and sell our finished products.

For retail sales placed through one of our e-commerce channels, these costs include (i) product costs stated at the lesser of cost and net realizable value and inclusive of inventory reserves, (ii) freight, import, and inspection costs, (iii) optical laboratory costs for prescription glasses, (iv) merchant fees, (v) fees paid to third-party e-commerce platforms, and (vi) cost of shipping the product to the consumer.

For wholesale sales, these costs include (i) product costs stated at the lesser of cost and net realizable value and inclusive of inventory reserves, (ii) freight, import, and inspection costs, and (iii) credit card fees.

When consumers place their orders directly on our website, we save approximately 12% - 15% on marketplace fees compared with orders placed through third-party platforms like Amazon and eBay.

We expect our cost of goods sold to fluctuate as a percentage of net revenue primarily due to product mix, customer preferences and resulting demand, customer shipping costs, and management of our inventory and merchandise mix.

Over time, we expect our total cost of goods sold on a per unit basis to decrease as a result of an increase in scale.

Increase in scale is achieved as a result of increase in volumes from both business to consumer and business to business (retail store) orders.

We continue to expand our products with line extensions and new models and broaden our presence in retail stores carrying our products.

Gross Profit and Gross Margin

We define gross profit as net revenues less cost of goods sold.

Gross margin is gross

profit expressed as a percentage of net revenues.

Our gross margin may fluctuate in

the future based on a number of factors, including the cost at which we can obtain,

transport, and assemble our inventory, the rate at our vendor network expands, and

how effective we can be at controlling costs, in any given period.

We anticipate our cost of goods sold, on a per unit basis, will decrease with scale,

and this will likely have a positive impact on our gross margins.

Gross margins in 2022 and the first half

of 2023 were adversely impacted by supply chain challenges with our previous manufacturer.

We received a high number of defective frames

in 2022 despite our rigorous inspection procedure, which involves a third-party inspection agency reviewing 100% of new units as they

come off the production line, testing every pair of glasses for sound quality and basic functionality.

Despite this, a large number of

inaccurately-tested frames made it to our customers, precipitating a large number of replacement units and lenses which negatively impacted

To address this problem, we immediately underwent a new manufacturer search program in 2022 which we believe yielded two higher-quality

factories, that are now producing all of our glasses to a higher quality standard.

These issues were resolved and remediated by the end

of the second quarter of 2023, and we do not expect such impacts on our gross margins going forward.

Additionally, in late 2022, the cost

of nearly all lenses produced by our supplier increased by approximately 10% from previous levels, which adversely impacted our gross

margins in 2023;

we do not anticipate similar increases in the cost of lenses in the foreseeable future

We define gross profit as net revenue less cost of goods sold.

Gross margin is gross profit expressed as a percentage of net revenue.

Our gross margin may fluctuate in the future based on a number of factors, including the cost at which we can obtain, transport, and assemble our inventory, the rate at our vendor network expands, and how effective we can be at controlling costs in any given period.

Over time, we anticipate that our cost of goods sold, on a per unit basis, will decrease with scale, and this will likely have a positive impact on our gross margins.

Operating Expenses

Our operating expenses consist primarily of:

general & administrative expenses that include primarily consulting and payroll expenses,

IT & software, legal, and other administrative expense;

sales and marketing expenses including cost of online and TV advertising, marketing

agency fees, influencers, trade shows, and other initiatives;

related party management fees for a range of back-office services and occupancy costs provided by Tekcapital LLC;

general and administrative expenses that primarily include payroll and consulting expenses, IT & software, legal, and other administrative expenses;

sales and marketing expenses including cost of online advertising, marketing agency fees, influencers, trade shows, and other initiatives;

related party management fees for a range of back-office services provided by Tekcapital;

research and development expenses related to (i) development of new styles and features of our smart eyewear, (ii) development and improvement of our e-commerce website, and (iii) development of our Vyrb social media app for wearables.

Interest and Other Income, Net

Interest and other income, net, primarily includes interest, dividends, and investment returns from our investments in money market funds

Treasury bills, and interest expense paid on convertible note loan due to the Parent.

Provision for Income Taxes

Provision for income taxes consists of income taxes related to foreign and domestic

federal and state jurisdictions in which we conduct business, adjusted for allowable

credits, deductions, and valuation allowance against deferred tax assets.

Interest and other income, net, primarily includes interest, dividends, and investment returns from our investments in money market funds and U.S.

Treasury bills, as well as interest income and expense related to loans with related parties.

Results of Operations

Three Months Ended September 30,

2023 and 2022

The following table summarizes our results of operations for the three months ended

September 30, 2023 (the “current quarter”) and the three months ended September 30, 2022 (the “prior year quarter”):

Three months ended

September 30,

The following table summarizes our results of operations for the three months ended March 31, 2024 (the “current quarter”) and the three months ended March 31, 2023 (the “prior year quarter”):

Three months ended

September 30,

Change between

Three months ended

September 30,

Revenues, net

3 unchanged sentences

Sales and marketing

Research & development

Related party management fee

Total Operating Expenses

Other Income (Expense)

Interest Expense

Total Other Income (Expense), net

$ (1,551,105 )

$ (1,404,321 )

Our revenues for the three months ended September 30, 2023 were $221,875, representing an increase of approximately 46% as compared to revenues of $151,957 during the three months ended September 30, 2022.

The increase in revenue was primarily attributable to significant growth in the wholesale channel, with our net wholesale

revenues increasing by approximately 72% over the prior year quarter as we continue to add new independent optical stores

as retail partners and grow our distribution network.

Net sales through Amazon and our website also grew significantly from the prior year quarter, increasing by approximately 59% and 26%, respectively.

However, the aforementioned increases were partially offset by significant price discounts we granted in the current quarter, in order to respond to aggressive discounts offered by key competing products, and to support our continued market share growth.

Additionally, our revenues for the current quarter were somewhat negatively impacted by a slight decrease in spending on marketing by the Company compared to the prior year quarter, due to our decision to preserve more of our marketing budget for the fourth quarter of 2023, in order to align with the October 2023 announcement of our significantly improved Lyte XL collection.

On a sequential quarter basis, our current quarter net revenues grew approximately

31% from the three months ended June 30, 2023, after growing approximately 17% from the three months ended March 31, 2023 to the three months ended June 30, 2023.

For the three months ended September 30, 2023, approximately 42% of sales were processed on our online store (Lucyd.co), 29% on Amazon.com, and 29% with reseller partners.

This sales channel mix negatively impacted our revenue for the current quarter as compared with the prior year quarter, due to the fact we charge an additional $35 to $275 for our prescription lenses available only on Lucyd.co, and that channel represented a higher proportion of our total product sales in the

prior year quarter than in the current quarter.

For the three months ended September 30, 2023, we generated $187,086 of revenue from sales of non-prescription frames and accessories, and $34,789 from sales of frames with prescription lenses.

All of the $63,027 in sales generated on Amazon.com during the current quarter were for non-prescription frames and accessories, as we only offer prescription lenses through our website.

Of the $93,704 in online sales generated through Lucyd.co, $34,789 was related to frames with prescription lenses and $58,915 was related to glasses with non-prescription lenses.

For the three months ended September 30, 2022, approximately 49% of sales were processed on our online store (Lucyd.co), 26% on Amazon.com, and 25% with retail store partners.

For the three months ended September 30, 2022, we generated $91,661 of revenue from sales of non-prescription frames, and $22,706 from sales of frames with prescription lenses.

All of the $33,432 in sales generated on Amazon.com during the period were for non-prescription frames, as we only offer prescription lenses through our website.

Of the $80,934 in online sales generated through Lucyd.co, $22,706 was related to frames with prescription lenses and $58,228 was related to glasses with non-prescription lenses.

Over time, we expect third-party retail stores will become our primary sales channel as we onboard

additional stores, while the online portion of our sales will gradually decrease on a percentage basis but

remain an important component of our total sales.

We currently have a retail store presence in approximately 350 stores.

Cost of goods sold

cost of goods sold increased to $141,531 for the three months ended September 30, 2023, as compared to $129,092 for the prior year

This increase was primarily driven by increased cost of lenses and frames largely as a result of the increase in sales volumes

during the current quarter as compared with the prior year quarter.

The increase in the cost of lenses was also driven by (i) a 10% increase

in the production cost of lenses sourced through supplier in late 2022, and (ii) the introduction of our new proprietary blueshift premium

lenses in August 2023, which are more expensive than other lenses to produce.

These cost increases were partially offset by the fact

that the prior year quarter cost of goods sold included significant write-offs of damaged inventory, related to product quality and supply

chain issues in 2022 that have since been remediated and resolved.

Smart eyewear is a highly specialized product that has the combined

specifications and component requirements of a wireless Bluetooth headset and optical eyewear in one, meaning it is expensive to manufacture

in small quantities of a few thousand at a time.

As demand and awareness for smart eyewear continues to grow over time, the Company expects

that its per unit cost will decrease as its order volumes increase.

Cost of goods sold for the three months ended September 30, 2023 included the cost of frames of $79,410;

cost of prescription lenses incurred with our third-party vendor of $76,346;

and other items including affiliate referral fees, e-commerce platform fees, commissions, and custom duties and importation fees for a total of $(14,225).

Out of $141,531 of our total cost of goods sold for the three months ended September 30, 2023, $76,346 related to orders with prescription lenses, while $65,185 pertained to non-prescription orders.

Cost of goods sold for the three months ended September 30, 2022 included the cost of frames of $89,768;

cost of prescription lenses incurred with our third-party vendor of $15,482;

and affiliate referral fees, sales commission expense, and e-commerce platform fees of $23,719.

Of our total cost of goods sold for the prior year quarter, $15,482 related to orders with prescription lenses, while $113,610 pertained to non-prescription orders.

Over time, we expect third-party retail stores will become our primary sales channel as we

onboard additional stores, while the online portion of our sales will remain an important component of our

Consequently, we expect sales of prescription lenses offered through our website to decrease, as our third-party retail partners outfit

our Lyte frames with more prescriptions.

We anticipate growth in both wholesale and

e-commerce channel sales for the remainder of 2023 and heading into 2024, and we also expect corresponding growth in total cost of goods sold, primarily from

increases in core product costs due to licensed brand royalties, and the addition of more expensive materials such as recycled packaging, improved hardware, and improved electronic components.

We believe this growth will be attributable to several factors:

our products continue

to improve with each successive launch, notably in terms of comfort and sound quality;

consumer awareness of our category continues to grow with smart eyewear sales overall increasing every year;

and finally, the Company is deploying new marketing efforts focused heavily on influencer content which we believe will better inform consumers about our products.

Our gross profit was $80,344 for the three months ended September 30, 2023, as compared to $22,865 for the prior year quarter.

This increase was primarily due to the combination of (i) increased sales during the current quarter, and (ii) the fact that the prior year

quarter cost of goods sold included significant write-offs of damaged inventory related

to product quality and supply chain issues in 2022, that have since been remediated

and resolved and thus did not recur in the current quarter.

These factors were partially

offset by significant discounts offered during the current quarter in order to help drive unit

sales and grow our market share.

We expect gross profit for the fiscal year ending December 31, 2023 to improve, primarily due to economies of scale from large, anticipated wholesale / retail partner orders.

Although we expect retail stores to become our primary sales channel as we onboard new stores,

we also expect our overall gross margin to be better than that of the wholesale channel,

since profitability per unit is typically higher with direct-to-consumer orders.

Operating expenses

Our operating expenses increased by 21% to $1,677,140 for the three months ended September 30, 2023, as compared to $1,388,575 for the three months ended September 30, 2022.

This increase was primarily due to the continued investments in the future growth and development of our business and included, but was not limited to, the following:

General and administrative expenses

Our general and administrative expenses increased by 91% to $915,537 for the three months ended September 30, 2023, as compared to $479,983 for the prior year quarter.

This increase was largely driven by (i) an increase in employee-related costs, resulting from increases in our staffing and new employment

agreements entered into with executives in the latter portion of 2022, and (ii) increased costs associated with being a publicly-traded company, including

but not limited to directors’ remuneration, insurance expenses, legal, accounting and public and investor relations.

Sales and marketing expenses

Our sales and marketing expenses decreased by 6% to $533,902 for the three months ended September 30, 2023, as compared to $568,901 for the three months ended September 30, 2022.

While we continued our ongoing efforts to further develop the Company’s brand presence and awareness across all of our sales channels, the slight decrease in expense was mainly attributable to management’s tactical decision to adjust the timing of certain marketing spend in order to optimize

its reach and impact.

The Company launched a new e-commerce website in the first half of 2023, and has been working to refine the user journey and maximize conversion rate, in order to enhance the results of current and future marketing initiatives.

In the third quarter of 2023, this strategy began to bear fruit as the conversion rate of the website improved

significantly from an average of 0.14% in the second quarter of 2023 to 0.23% in the third quarter of 2023.

This indicates over a 50% improvement in the ratio of site visitors to purchasers,

and reduced acquisition cost per sale in our primary channel.

As such, we preserved a portion of our marketing budget which would have otherwise been spent in the current quarter, in order to utilize those funds in the fourth quarter of 2023 with a better converting website, aligning with the October 2023 announcement of our significantly improved Lyte XL collection, and the upcoming launch of the Nautica Powered by Lucyd product line.

We anticipate these costs to further increase as we continue to invest in and build

our brand, expand the number of e-commerce platforms on which we sell our products, invest in retail store co-op marketing programs to help educate our in-store customers about Lucyd Lytes, and increase our brand’s physical presence and role in the eyewear industry.

Research and development costs

Our research and development costs decreased by 37% to $192,701 for the three months ended September 30, 2023, as compared to $304,691 for the three months ended September 30, 2022.

This decrease was primarily attributable to the allocation of stock-based compensation expense, and product development cycle

Related party management fee

Our related party management fee was $35,000 for each of the three months ended September 30, 2023 and 2022, based on the terms of the management services agreement between us

and an affiliate of our Parent.

Other income (expense)

Total other income (expense), net in the three months ended September 30, 2023 was $45,691.

This amount was primarily comprised of interest, dividends, and investment returns from our investments in money market funds

Treasury bills.

Total other income (expense), net in the three months ended September 30, 2022 was $(38,611), and was primarily comprised of interest expense on intercompany financing from the Parent and Affiliates in the

form of borrowings under a convertible note.

The convertible notes were repaid in

full during the nine months ended September 30, 2023, and there were no amounts remaining outstanding under such convertible notes

as of September 30, 2023.

Nine Months Ended September 30,

2023 and 2022

The following table summarizes our results

of operations for the nine months ended September 30, 2023 (the “current year period”) and the nine months ended September 30,

2022 (the “prior year period”):

Nine months ended

September 30,

Nine months ended

September 30,

Change between the

September 30,

2023 and 2022

Revenues, net

Cost of Goods Sold

Operating Expenses:

General and administrative

Sales and marketing

Research & development

Research and development

Related party management fee

3 unchanged sentences

Total Other Income (Expense), net

$ (4,269,717 )

$ (3,804,692 )

Our revenues for the nine months ended September 30, 2023 were $536,725, representing a decrease of approximately 9% as compared to revenues of $592,720 during the prior year period.

The decline in revenue was primarily attributable to significant discounts offered during the current year period in order to help drive unit sales and grow our market share, which accounted for

slightly more than half of the total revenue decline.

Key competing products, including the Amazon Echo Frames, Ray Ban Stories, and Bose

Frames, dropped their prices to or below the price point of Lucyd frames during temporary

and extended discount sales;

the power of these recognizable brands coupled with aggressive

discounting meant that the competitive landscape was more saturated than in the prior year.

To help respond to the ramp-up in the competition’s discounts, we introduced several promotions in 2023 to support our continued market

share growth.

The decline in revenue was also partially attributable to lower revenues generated

through the wholesale sales channel, due in large part to a significant one-time sale

to a retail store reseller / distributor in the prior year period, which was non-recurring

in the current year period.

The imminent diversification of our products with the Powered by Lucyd lines coming in 2024 is expected to reduce the need for discounting to support customer

acquisition due to the global renown of the Nautica, Eddie Bauer, and Reebok brands.

We also believe these new brands will cause many existing customers

to repurchase with minimal marketing expenses.

For the nine months ended September 30, 2023, approximately 37% of sales were processed on our online store (Lucyd.co), 32% on Amazon.com, and 31% with reseller partners.

This sales channel mix positively impacted our revenue for the current year period

as compared with the prior year period, due to the fact we charge additional $35 to

$275 for our prescription lenses available only on Lucyd.co.

For the nine months ended September 30, 2023, we generated $454,233 of revenue from sales of non-prescription frames and accessories, and $82,492 from sales of frames with prescription lenses.

All of the $170,284 in sales generated on Amazon.com during the current year period were for non-prescription frames and accessories as we only offer prescription

lenses through our website.

Of the $193,591 in online sales generated through Lucyd.co, $82,492 was related to frames with prescription lenses and $111,099 was related to glasses with non-prescription lenses.

E-commerce sales are the most

material portion of our sales to date.

For the nine months ended September 30, 2022, approximately 34% of sales were processed on our online store (Lucyd.co), 29% on Amazon.com, and 37% with reseller partners.

For the nine months ended September 30, 2022, we generated $460,073 of revenue from sales of non-prescription frames and $95,057 of revenue from sales of frames with prescription lenses.

All of the $175,269 in sales generated on Amazon during the prior year period were for non-prescription frames as we only offer prescription lenses through

Of the $197,437 in online sales generated through Lucyd.co, $95,058 related to frames with prescription lenses and $102,380 related to glasses sold were with non-prescription lenses.

Despite the decline in net revenues in the current year period as compared with the

prior year period, which was largely attributable to manufacturing and shipping delays experienced during the first quarter of 2023, we have made significant progress in recovering from a

slow start to the year.

On a sequential quarter basis, our revenues grew approximately 17% from the first quarter of 2023 to the second quarter of 2023, and grew approximately 31% from the second quarter of 2023 to the third quarter of 2023.

In addition, there have been several notable advances in our technology products and partnerships

which speak to the potential to grow revenues well beyond the current level:

Key hardware improvements include the development of a new proprietary four-speaker

audio temple for the Lucyd Lyte flagship line, the increase in battery life of all

of our flagship to 12 hours of playback, which is longer than the vast majority of

wireless audio products, and design improvements to the frames overall that were the

result of hiring two new expert eyewear designers.

The Company’s new proprietary modular video display system has been helpful in winning new retailers

and is expected to increase sell-through in reseller locations.

The introduction of the Lyte XL capsule collection in October 2023, which brought several key improvements including better audio, thinner temples,

and flexible hinges for maximum comfort and auto-adjustability.

Key software improvements include the development of the first-ever voice interface for ChatGPT on a wearable device with the new Lucyd app, and of several updates to the Vyrb app including a live broadcasting feature, the ability to import any form of audio content into Vyrb to support the migration

of existing audio content creators to the platform, and the introduction of the Company’s Digital Try-on Display into dozens of retail stores, to offer an immersive product

experience for in-store shoppers at our partner locations.

Our partnership with Authentic Brands Group, which provides us with the right to use

the Nautica, Eddie Bauer, and Reebok brands, foretells significantly improved consumer

adoption, due to the global popularity of these brands and existing traditional eyewear

customers who already buy eyewear under these three brands.

The anticipated upcoming launch of the Nautica Powered by Lucyd line in the first quarter of 2024, made possible by the exclusive agreement with Authentic Brands Group, represents

significant revenue potential.

We intend to partner with Nautica-branded sales channels

and expect to be able to increase our presence in other retail channels via the Nautica

brand, a household name in dozens of countries.

We anticipate rolling out our Nautica Powered by Lucyd line on Nautica.com and in Nautica stores in early 2024.

Over time, we expect that the online portion of our sales will gradually decrease

on a percentage basis but remain an important component of our total sales as we onboard

more retail stores.

We currently have a retail store presence in approximately 350 stores, up from 280 stores as of June 30, 2023.

Our revenues for the three months ended March 31, 2024 were $383,471, representing an increase of 165% as compared to revenues of $144,921 during the three months ended March 31, 2023.

The increase in revenue was primarily attributable to significant growth in the e-commerce channel, largely driven by our significant investments in advertising and marketing initiatives during the latter portion of 2023 and through the current quarter, combined with recent new product launches (including the Lyte XL and Nautica ® Powered by Lucyd collections).

Net sales through our Lucyd.co website and Amazon.com grew by more than 400% and over 150%, respectively, from the prior year quarter.

This growth in e-commerce sales was partially offset by significant price discounts granted in the current quarter, in order to respond to aggressive discounts offered by key competing products, and to support our continued market share growth.

Wholesale revenue decreased approximately 72%

from the prior year quarter, largely driven by a change in our focus from small, independent retailers to major national retailers, the

latter of which have slower product approval and purchasing cycles.

However, we believe that focusing on introducing our product in major

national retailers will have a significant positive impact on the Company’s revenues in the next 6-24 months.

For the three months ended March 31, 2024,

approximately 67% of sales were processed on our online store (Lucyd.co), 29% on Amazon.com, and 4% with reseller partners.

channel mix positively impacted our revenue for the current quarter as compared with the prior year quarter, due to the fact we charge

an additional $35 to $275 for our prescription lenses available only on Lucyd.co.

For the three months ended March 31, 2024, we

generated an aggregate of $272,742 of revenue from sales of non-prescription frames and accessories, and $110,729 from sale of frames

with prescription lenses.

All of the $113,619 in sales generated on Amazon.com during the current quarter were for non-prescription frames

and accessories, as we only offer prescription lenses through our website.

Of the $255,920 in online sales generated through Lucyd.co,

$110,729 was related to frames with prescription lenses and $145,191 was related to glasses with non-prescription lenses.

E-commerce sales

remain to be the most material portion of our sales to date.

For the three months ended March 31, 2023, approximately 35% of sales were processed on our online store (Lucyd.co), 31% on Amazon.com, and 34% with reseller partners.

For the three months ended March 31, 2023, we generated $33,350 of revenue from sales of non-prescription frames and accessories and $16,918 was generated from sales of frames with prescription lenses.

All of the $45,045 in sales generated on Amazon.com during the period were for non-prescription frames and accessories as we only offer prescription lenses through our website.

Of the $50,268 in online sales generated through Lucyd.co, $16,918 related to frames with prescription lenses and $33,350 of glasses sold were with non-prescription lenses.

Cost of Goods Sold

Our total cost of goods sold increased to

$475,906 for the nine months ended September 30, 2023, as compared to $452,218 for the nine months ended September 30, 2022.

This increase is primarily attributable to increased cost of lenses and, to a lesser extent, increased quality assurance inspection costs

and higher Amazon fees.

The increase in the cost of lenses largely driven by (i) a 10% increase in the production cost of lenses sourced

through supplier in late 2022, and (ii) the introduction of our new proprietary blueshift premium lenses in August 2023, which are more

expensive than other lenses to produce.

These increases were partially offset by the fact that the prior year period cost of goods sold

included significant write-offs of damaged inventory related to product quality and supply chain issues in 2022 that have since been

remediated and resolved.

Smart eyewear is a highly specialized product that has the combined specifications

and component requirements of a wireless Bluetooth headset and optical eyewear in

one, meaning it is expensive to manufacture in small quantities of a few thousand

As demand and awareness for smart eyewear continues to grow over time,

the Company expects that its per unit cost will decrease as its order volumes increase.

Cost of goods sold for the nine months ended September 30, 2023 notably included, but was not limited to, the cost of frames of $215,713;

Our total cost of goods sold increased to $376,520 for the three months ended March 31, 2024, as compared to $134,630 for the prior year quarter.

This year-over-year increase of 180% was primarily driven by higher sales volumes during the current quarter as compared with the prior year quarter.

Cost of frames increased by approximately 150% from the prior year quarter, which was generally in-line with (although slightly lower than) the increase in net sales from the prior year quarter, both proportionally and on an absolute dollar basis.

Cost of lenses increased by more than 300% from the prior year quarter, mainly driven by the combination of (i) the introduction of our new proprietary Blueshift premium lenses in August 2023, which are more expensive than other lenses to produce, and (ii) sales channel mix, as a higher relative proportion of our sales in the current quarter were through our online store (Lucyd.co), and the cost of prescription lenses attributable to this channel increased our cost of goods sold while not impacting cost of goods sold for sales realized through Amazon or retail store partners.

Cost of goods sold for the three months ended March 31, 2024 included but was not limited to the cost of frames of $184,978;

cost of prescription lenses incurred with our third-party vendor of $103,069;

affiliate referral fees, sales commission expense, and e-commerce platform fees

commissions, affiliate referral fees, and e-commerce platform fees of $42,826;

shipping and logistics costs of $15,914;

and quality assurance costs related to our products sold of $4,238.

Cost of goods sold for the nine months ended September 30, 2022 included, but were not limited to, the cost of frames of $285,586;

Out of $376,520 of our total cost of goods sold for the current quarter, $103,069 related to orders with prescription lenses, while $273,451 pertained to non-prescription orders.

Cost of goods sold for the three months ended

March 31, 2023 included the cost of frames of $73,798;

cost of prescription lenses incurred with our third-party vendor of $22,123;

and affiliate referral fees, sales commission expense, and e-commerce platform fees of $93,706.

Out of our total cost of goods sold for the current year period of $452,218, $79,370 related to orders with prescription lenses, while $372,848 pertained to non-prescription orders.

Over time, we expect third-party retail stores to become our primary sales channel

as we onboard additional stores.

Consequently, we expect sales of prescription lenses as a proportion of total sales to decrease, as our third-party retail partners outfit our Lyte frames with more prescriptions.

As a result, over time we expect prescription lens costs to gradually decrease as

a percentage of our overall cost of goods sold.

We anticipate growth in both wholesale

and e-commerce channel sales in the second half of 2023, and we also expect corresponding

growth in total cost of goods sold, primarily from additional product related costs.

We believe this growth will be attributable to several factors:

our products continue

to improve with each successive launch, notably in terms of comfort and sound quality;

consumer awareness of our category continues to grow with smartglass sales overall

increasing every year;

and finally, we are deploying new marketing tactics focused

heavily on influencer content which we believe will better inform consumers about our products.

Our gross profit was $60,819 for the nine months ended September 30, 2023, as compared to a gross profit of $140,502 for the prior year period.

This decrease was primarily due to the combination of the aforementioned significant

discounts offered during the current year period in order to help drive unit sales

and grow our market share, and the aforementioned significant cost of prescription lenses during the current year period, partially offset by slightly lower cost of frames.

We expect gross profit for the fiscal year ending December 31, 2023 to improve, primarily due to economies of scale from large, anticipated wholesale

/ retail partner orders.

Although we expect retail stores to become our primary sales channel as we onboard new stores,

we also expect our overall gross margin to be better than that of the wholesale channel,

due to a typical higher per-unit profitability on direct-to-consumer channels.

commissions, affiliate referral fees, and e-commerce platform fees of $18,696;

shipping and logistics costs of $8,313;

and quality assurance

costs related to our products sold of $11,700.

Out of $134,630 of our total cost of goods sold for the three months ended March 31,

2023, $22,123 related to orders with prescription lenses, while $112,507 pertained to non-prescription orders.

Also, during the current

quarter we incurred approximately $29,000 of product certification costs to support the expansion of our product sales in jurisdictions

outside the U.S.

We anticipate further growth in sales in 2024.

We also expect corresponding growth in total cost of goods sold, primarily from additional product related costs.

As we continue to refine

our product mix with sales data, we anticipate reducing our unit costs by focusing only on the highest volume, market-tested styles.

have also launched new Lucyd Shift and Lucyd Blueshift transitional lenses in place of branded third-party transitional lenses, offering

similar functionality for a lower cost of goods, while also enabling a slightly lower cost to the customer.

Additionally, we have been

informed by key suppliers that significant price reductions over 10% are possible as we continue to scale our production quantities.

Our gross profit for the current quarter was $6,951, as compared to $10,291 for the prior year quarter.

Our gross margin was 2% and 7% in the current quarter and prior year quarter, respectively.

This decline in gross profit and gross margin

was primarily attributable to the aforementioned increase in the cost of lenses.

While we have started to realize some economies of scale

in the cost of frames, and in the area of shipping and logistics, the cost of prescription lenses has grown disproportionately and significantly

more than our revenue, which has had a significant negative impact on our gross profit margin.

Prescription smart eyewear offered direct-to-consumer

has been a key unique selling point used to attract new customers, bringing an important marketing benefit since it is not offered by

most of our competitors.

We are working with our current prescription lens provider to explore opportunities to reduce costs and we are

also actively in discussions with alternative prescription lens suppliers whom we believe may help further lower our lens fulfilment costs.

Ultimately, we believe that the majority of our business will come from frame sales to distributors and eyewear retailers, who will outfit

lenses themselves for the final customer.

We anticipate that the launches of more co-branded products later this year will help us progress

towards our long-term goal of shifting our sale mix over time more towards the wholesale channel, which carries higher margins for us

as such sales to our third-party retail store partners do not include the cost of prescription lenses.

Also, during the current quarter we incurred approximately $29,000 of product certification costs to support the expansion of our product sales in jurisdictions outside the U.S.

Operating Expenses

Our operating expenses increased by 15% to $4,420,853 for the nine months ended September 30, 2023, as compared to $3,840,764 for the nine months ended September 30, 2022.

This increase was primarily due to the continued investments in the future growth

and development of our business and included, but was not limited to, the following:

Our operating expenses increased by 40% to $2,021,542 for the three months ended March 31, 2024, as compared to $1,439,238 for the three months ended March 31, 2023.

This increase was primarily due to the continued investments in the future growth and development of our business and included, but was not limited to, the following:

General and administrative expenses

Our general and administrative expenses increased by 60% to $2,877,663 for the nine months ended September 30, 2023, as compared to $1,797,091 for the nine months ended September 30, 2022.

This increase was primarily attributable to (i) increased costs associated with being a publicly-traded company, including but not

limited to directors’ remuneration, insurance expense, and public and investor relations, which resulted

in an increase in expense of approximately $430,000, and (ii) an increase of approximately $477,000 in employee-related costs, resulting from increases in our staffing and new employment

agreements entered into with executives in the latter portion of 2022.

The increase in general and administrative expenses was also partly attributable to an increase in legal costs of approximately $125,000

over the prior year period, and higher depreciation and amortization expense, which

increased by approximately $46,000 from the prior year period.

Our general and administrative expenses increased

by 12% to $1,108,946 for the three months ended March 31, 2024, as compared to $993,772 for the prior year quarter.

This increase

was largely driven by the combination of (i) additional team members, (ii) the cost of various licensing agreements we have entered into

in order to support our co-branding initiatives and expand our patent portfolio, which are assessed annually in January, and (iii) higher

legal expenses.

We expect our general and administrative expenses to be lower in future quarters due to certain one-time fees this

Sales and marketing expenses

Our sales and marketing expenses decreased by 42% to $896,842 for the nine months ended September 30, 2023, as compared to $1,545,615 for the nine months ended September 30, 2022.

The decrease was primarily due to (i) the reversal of approximately $309,000 of previously-recognized stock-based compensation

for certain individuals within the Company’s sales and marketing function whose awards expired without ever having vested, as

the related performance conditions (sales quotas) for those awards were not met, and

(ii) a temporary pause and postponement on marketing spending during the first quarter

of the 2023 while the Company restructured its e-commerce business, along with management’s tactical decision to preserve a portion of our marketing budget for later in the

year, in order to better align the timing of marketing spending with major new product

launches and thus maximize impact.

We anticipate our marketing costs to increase as we continue to invest in and build our brand, expand the number

of e-commerce platforms on which we sell our products, invest in retail store co-op marketing programs to help educate our in-store customers about our products, and increase our brand’s physical presence and role in the eyewear industry.

Our sales and marketing expenses increased by 155% to $661,295 for the three months ended March 31, 2024, as compared to $259,297 for the three months ended March 31, 2023.

This year-over-year increase is primarily attributable to the restructuring of our e-commerce business during the prior year quarter, during which we temporarily paused and postponed our marketing spending, and management made a tactical decision to preserve a significant portion of our marketing budget for later in the year, in order to better align the timing of marketing spending with major new product launches and thus maximize impact.

In the latter portion of 2023 and continuing through the current quarter, we have significantly increased our advertising and marketing efforts, particularly in the areas of spending on paid ads on websites and social media platforms, in order to drive growth in our revenues and market share.

Research and development costs

Our research and development costs increased by 38% to $541,348 for the nine months ended September 30, 2023, as compared to $393,058 for the nine months ended September 30, 2022.

This increase was primarily attributable to a large number of new temple and frontplate molds as we expand our core offering,

an expansion of the Company’s software initiatives to include the Lucyd app, and therefore increased the portion

of the work hours spent by the CEO and CTO (as well as a portion of their stock-based

compensation expense) on new software development on the Vyrb app, the new Lucyd app,

and our glasses, as well as the hiring of an additional full-time software engineer to support our CTO.

Some planned features for our Lucyd app include the ability to access AI other than

ChatGPT, the addition of an audio content library for users to enjoy, and further

enhancements to the core AI functionality.

In terms of the Vyrb app, we are planning

launching a full peer-to-peer content marketplace in the style of Patreon, but with

a focus on audio and content designed on and for wearables.

Our research and development costs increased by 43% to $216,301 for the three months ended March 31, 2024, as compared to $151,169 for the three months ended March 31, 2023.

This increase was primarily attributable to additional resources added to the team for app development, and new mold costs associated with the creation of the safety and sport (Reebok) product format.

Related party management fee

Our related party management fee was $105,000 for each of the nine months ended September 30, 2023 and 2022, based on the terms of the management services agreement between

us and an affiliate of our Parent.

Other income (expense)

Total other income (expense), net in the nine months ended September 30, 2023 was $90,317, and was primarily comprised of the combination of (i) approximately $52,000 of interest, dividends, and investment returns from our investments in money

market funds and U.S.

Treasury bills;

and (ii) approximately $35,000 of refunds of certain amounts that had been previously charged to the Company from the

Parent and Affiliates in prior periods.

Total other income (expense), net in the nine months ended September 30, 2022 was $(104,430), and was primarily comprised of interest expense on intercompany financing from

the Parent and Affiliates in the form of borrowings under a convertible note.

convertible notes were repaid in full during the nine months ended September 30, 2023, and there were no amounts remaining outstanding under such convertible notes

as of September 30, 2023.

Our related party management fee was $35,000 for each of the three months ended March 31, 2024 and 2023, based on the terms of the management services agreement between us and Tekcapital.

Other Income (Expense), net

Total other income (expense), net in the three months ended March 31, 2024 was $43,280.

This amount was primarily comprised of dividends from our investments in money market funds, and, to a lesser extent, interest income earned on a short-term loan to a related party.

Total other income (expense), net in the three months ended March 31, 2023 was $(1,863), and was primarily comprised of interest expense on financing from a related party in the form of borrowings under a convertible note, which was repaid in full during the prior year quarter.

Liquidity and Capital Resources

Cash Flow Data:

Nine months ended

September 30,

Nine months ended

September 30,

Three months ended

Net cash flows from operating activities

$ (4,630,320 )

$ (2,106,826 )

Net cash flows from investing activities

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Net Change in Cash

Net cash flows used in operating activities for the nine months ended September 30, 2023 are primarily reflective of our net loss for the period, resulting from our

operating costs to support and grow our business, including employee-related costs,

sales and marketing, research and development, and various costs associated with being

a publicly-traded company.

Additionally, our operating asset levels grew significantly as we have procured additional

inventory to position us for future anticipated sales growth.

Net cash flows used in investing activities for the nine months ended September 30, 2023 are primarily related to the investment of a portion of the proceeds from our recent capital-raising activities,

in order to generate a return on those funds until they are needed, while also maintaining appropriate liquidity levels.

Net cash flows from investing activities

also reflect the continuing growth and expansion of our patent portfolio.

Net cash flows provided by financing activities for the nine months ended September 30, 2023 are mainly driven by the various capital-raising activities undertaken during the current year period,

including our second public offering completed in June 2023, and exercises of warrants by stockholders earlier in the year.

We expect that operating losses could continue in the foreseeable future as we continue

to invest in the expansion and development of our business.

We believe our existing

cash and cash equivalents, as well as proceeds from our various capital-raising activities undertaken in the

nine months ended September 30, 2023 (including our second public offering in June 2023, as described in Note 9 of the unaudited condensed financial statements), funds available under our existing credit facility, and cash flows from operating

activities will be sufficient to fund our operations for at least the next twelve

However, our future capital requirements will depend on many factors, including, but

not limited to, growth in the number of retail store customers, the needs of our e-commerce

business and retail distribution network, expansion of our product and software offerings,

and the timing of investments in technology and personnel to support the overall growth

of our business.

To the extent that current and anticipated future sources of liquidity

are insufficient to fund our future business activities and requirements, we may be

required to seek additional equity or debt financing.

The sale of additional equity

would result in additional dilution to our stockholders.

The incurrence of debt financing

would result in debt service obligations and the instruments governing such debt could

provide for operating and financing covenants that would restrict our operations.

Net cash flows used in operating activities for the three months ended March 31, 2024 are primarily reflective of our net loss for the period, resulting from our operating costs to support and grow our business, including employee-related costs, sales and marketing, and research and development.

Net cash flows used in investing activities for the three months ended March 31, 2024 are mainly related to the continuing growth and expansion of our patent portfolio.

Net cash flows used in financing activities for the three months ended March 31, 2024 are mainly driven by the payment to Tekcapital and affiliates for services provided under related party agreements.

Registered Direct Offering

May 1, 2024, the Company closed on a registered direct offering of 4,200,822 shares of its common stock and, in a concurrent

private placement, warrants to purchase up to 4,200,822 shares of common stock at an exercise price of $0.244 per share, for a

combined purchase price per share and warrant of $0.244.

In exchange, the Company received approximately $1.0 million of gross

proceeds, before deducting placement agent fees and expenses.

In addition, the Company issued to the placement agent warrants to

purchase up to 315,062 shares of common stock at an exercise price of $0.305 per share.

The net proceeds received by the Company

from this transaction amounted to approximately $732,000.

We intend to use the net proceeds of this offering primarily for working

capital and general corporate purposes.

Other Factors

We expect that operating losses could continue

in the foreseeable future as we continue to invest in the expansion and development of our business.

We believe our existing cash and

cash equivalents (including the proceeds from the aforementioned May 2024 registered direct offering), plus planned future sales

of our common stock through our at-the-market offering facility, and the availability to borrow funds through the

March 2024 related party agreement with Lucyd Ltd., will be sufficient to fund our operations for at least the next twelve months.

However, our future capital requirements will

depend on many factors, including, but not limited to, growth in the number of retail store customers, licenses, the needs of our e-commerce

business and retail distribution network, expansion of our product and software offerings, and the timing of investments in technology

and personnel to support the overall growth of our business.

To the extent that current and anticipated future sources of liquidity are

insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing.

The sale of additional equity would result in additional dilution to our stockholders.

The incurrence of debt financing would result in

debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict

our operations.

There can be no assurances that we will be able to raise additional capital.

event that additional financing is required from outside sources, we may not be able

to negotiate terms acceptable to us or at all.

If we are unable to raise additional

capital when required, or if we cannot expand our operations or otherwise capitalize

on our business opportunities because we lack sufficient capital, our business, results

of operations, financial condition, and cash flows would be adversely affected.

In the event that additional financing is

required from outside sources, we may not be able to negotiate terms acceptable to us or at all.

Geopolitical and macroeconomic factors

could cause disruption in the global financial markets, which could reduce our ability to access capital and negatively affect our liquidity

in the future.

If we are unable to raise additional capital when required, or if we cannot expand our operations or otherwise capitalize

on our business opportunities because we lack sufficient capital, our business, results of operations, financial condition, and cash flows

would be adversely affected.

Off-Balance Sheet Arrangements

As of September 30, 2023, we did not have any off-balance sheet arrangements.

Critical Accounting Policies and Significant Developments and Estimates

Management’s discussion and analysis of our financial condition and results of operations is

based on our financial statements, which have been prepared in accordance with GAAP.

The preparation of our financial statements requires us to make estimates and assumptions

that affect the reported amounts of assets and liabilities at the date of the financial

statements, as well as the reported revenue generated and expenses incurred during

the reporting periods, as well as related disclosures.

Our estimates are based on

our historical experience and on various other factors that we believe are reasonable

under the circumstances, the results of which form the basis for making judgments

about the carrying value of assets and liabilities and the amount of revenue and expenses

that are not readily apparent from other sources.

Actual results may differ from these

estimates under different assumptions or conditions, and any such differences may

We believe that the accounting policies discussed below are critical

to understanding our historical and future performance, as these policies relate to

the more significant areas involving management’s judgments and estimates.

We believe that our application of accounting policies, and the estimates inherently

required therein, are reasonable.

We periodically re-evaluate these accounting policies

and estimates and make adjustments when facts and circumstances dictate a change.

Historically, we have found our application of accounting policies to be appropriate,

and actual results have not differed materially from those determined using necessary

Our inventory includes purchased eyewear and is stated at the lower of cost or net

realizable value, with cost determined on a specific identification method of inventory

costing which attaches the actual cost to an identifiable unit of product.

for excess, obsolete, or slow-moving inventory are recorded after periodic evaluation

of historical sales, current economic trends, forecasted sales, estimated product

life cycles, and estimated inventory levels.

No provisions were determined as needed

as of September 30, 2023 and December 31, 2022.

As of September 30, 2023 and December 31, 2022, we recorded an inventory prepayment in the amount of $402,255 and $197,750, respectively, related to down payments for eyewear purchased from the manufacturer, prior to shipment of the product that occurred after September 30, 2023 and December 31, 2022, respectively.

Intangible Assets

Intangible assets relate to:

Internally-developed and licensed utility and design patents.

We amortize these assets over the

estimated useful life of the patents.

Capitalized software costs incurred due to development of the Vyrb app.

these assets over the estimated useful life of the software application.

We review our intangible assets for impairment whenever changes in circumstances indicate

that the carrying amount of the assets may not be recoverable.

We are taxed as a C corporation.

We comply with Financial Accounting Standards Board

(FASB) ASC 740 for accounting for uncertainty in income taxes recognized in a company’s financial statements, which prescribes a recognition threshold and measurement process

for financial statement recognition and measurement of a tax position taken or expected

to be taken in a tax return.

For those benefits to be recognized, a tax position must

be more-likely-than-not to be sustained upon examination by taxing authorities.

ASC 740 also provides guidance on derecognition, classification, interest and penalties,

accounting in interim periods, and disclosure.

Based on our evaluation, we have concluded

that there are no significant uncertain tax positions requiring recognition in our

financial statements.

We believe that our income tax positions would be sustained

on audit and do not anticipate any adjustments that would result in a material change

to the Company’s financial position.

We have incurred taxable losses since inception but are current in our tax filing

We are not presently subject to any income tax audit in any taxing jurisdiction.

Stock-Based Compensation

We account for stock-based compensation to employees and directors in accordance with

FASB ASC Topic 718, which requires that compensation expense be recognized in the

financial statements for stock-based awards based on the grant date fair value.

stock option awards, the Black-Scholes-Merton option pricing model was used to estimate

the fair value of share-based awards.

The Black-Scholes-Merton option pricing model

incorporates various and highly subjective assumptions, including expected term and

share price volatility.

The expected term of the stock options was estimated based

on the simplified method as allowed by Staff Accounting Bulletin 107 (SAB 107).

The share price volatility at the grant date is estimated using historical stock prices

based upon the expected term of the options granted, using stock prices of comparably

profiled public companies.

The risk-free interest rate assumption is determined using

the rates for U.S.

Treasury zero-coupon bonds with maturities similar to those of

the expected term of the award being valued.

Revenue Recognition

Our revenue is generated from the sales of prescription and non-prescription optical glasses, sunglasses, and shipping charges, which are charged to the customer, associated with these purchases.

We sell products through our retail store resellers, distributors, and on our own website Lucyd.co and on Amazon.

To determine revenue recognition, we perform the following steps:

At contract inception, we assess the goods or services promised

within each contract, determine those that are performance obligations, and assess whether each promised good or service is distinct.

We then recognize as

revenue the amount of the transaction price that is allocated to the respective performance

obligation when (or as) the performance obligation is satisfied.

In instances where the collectibility of contractual consideration is not probable at the time of sale, the revenue is

deferred on our balance sheet as a contract liability, and the associated cost of

goods sold is deferred on our balance sheet as a contract asset;

subsequently, we

recognize such revenue and cost of goods sold as payments are received.

All revenue, including sales processed online and through our retail store resellers

and distributors, is reported net of sales taxes collected from customers on behalf

of taxing authorities, returns, and discounts.

For sales generated through our e-commerce channels, we identify the contract with

a customer upon online purchase of our eyewear and transaction price at the manufacturer

suggested retail price (“MSRP”) for non-prescription, polarized sunglass and blue

light blocking glasses across all of our online channels.

Our e-commerce revenue is

recognized upon meeting of the performance obligation when the eyewear is shipped

to end customers.

consumers enjoy free USPS first class postage, with faster

delivery options available for extra cost, for sales processed through our website

and on Amazon.

For Amazon sales, shipping is free for U.S consumers while international

customers pay shipping charges on top of MSRP.

Any costs associated with fees charged

by the online platforms (Shopify for Lucyd.co website and Amazon) are not recharged

to customers and are recorded as a component of cost of goods sold as incurred.

Company charges applicable state sales taxes in addition to the MSRP for both online

channels and all other marketplaces on which the company sells products.

For sales to our retail store partners, we identify the contract with a customer upon

receipt of an order of our eyewear through our Shopify wholesale portal or direct

purchase order.

Our revenue is recognized upon meeting the performance obligation

which is delivery of our eyewear products to the retail store and also recorded net

of returns and discounts.

Our wholesale pricing for eyewear sold to the retail store

partners includes volume discounts, due to the nature of large quantity orders.

pricing includes shipping charges, while excluding any state sales tax charges applicable.

Due to the nature of wholesale retail orders, no e-commerce fees are applicable.

For sales to distributors, we identify the contract with a customer upon receipt of

an order of our eyewear through a direct purchase order and after collectibility of substantially all of the contract consideration is probable.

is recognized upon meeting the performance obligation, which is delivery of our eyewear

products to the distributor and is also recorded net of returns and discounts.

wholesale pricing for eyewear sold to distributors includes volume discounts, due

to the nature of large quantity orders.

The pricing includes shipping charges, while

excluding any state sales tax charges applicable.

Due to the nature of wholesale distributor

orders, no e-commerce fees are applicable.

Our sales to both retail partners and through our e-commerce channels do not contain

any variable consideration.

We allow our customers to return our products, subject to our refund policy, which

allows any customer to return our products for any reason within the first:

7 days for sales made through our website (Lucyd.co)

30 days for sales made through Amazon

30 days for sales to most wholesale retailers and distributors (although certain sales to

independent distributors are ineligible for returns)

For all of our sales, at the time of sale, we establish a reserve for returns, based on historical experience and

expected future returns, which is recorded as a reduction of sales.

Additionally,

we review all individual returns received in the month following the balance sheet

date pertaining to orders processed prior to the balance sheet date in order to determine

whether an allowance for sales returns is necessary.

We recorded an allowance for sales returns of $5,234 and $24,897 as of September 30, 2023 and December 31, 2022, respectively.

Shipping and Handling

Costs incurred for shipping and handling are included in cost of revenue at the time

the related revenue is recognized.

Amounts billed to a customer for shipping and handling

are reported as revenues.

Earnings/loss per share

We present earnings and loss per share data by calculating the quotient of earnings/(loss)

divided by the weighted average number of common shares outstanding during the period

as required by ASC 260-10-50.

For the three and nine months ended September 30, 2023 and 2022, all shares underlying the related party convertible debt and common

stock options were excluded from the earnings per share calculation, due to their

anti-dilutive effect.

As of March 31, 2024, we did not have any off-balance sheet arrangements.

Critical Accounting Policies and Significant Estimates

There have been no material changes in our critical accounting policies and significant estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 25, 2024.

Quantitative and Qualitative Disclosures about Market Risk

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What changed 10-Q

Item 1. Financial Statements