What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-24 compared with 2024-03-25 · 217 added, 184 removed, 128 unchanged (76% of the section changed)

7 unchanged sentences

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.

Since the initial launch of Lucyd Lyte in 2021, we have sold thousands of our smartglasses, and have significantly upgraded and expanded our product offerings – including the launch of Lucyd Lyte 2.0 and Lyte XL smartglasses in 2023, and most recently with the launch of the Nautica® Powered by Lucyd smart eyewear collection in January 2024.

We plan to further expand our product offerings through the launch of new cobranded collections with Eddie Bauer and Reebok later in 2024.

Since the initial launch of Lucyd Lyte in 2021, we have sold thousands of our smartglasses, and have significantly upgraded and expanded our product offerings – including the launch of Lucyd Lyte 2.0 and Lyte XL smartglasses in 2023, and most recently with the launch of the Lucyd Armor ™ , Nautica ® Powered by Lucyd , and Eddie Bauer ® Powered by Lucyd smart eyewear collections in 2024.

The variety of smartglasses we offer underpin the Company’s mission to provide a smart alternative for all of the major types of eyewear used by consumers, offering a seamless upgrade in styles of eyewear they already enjoy.

We plan to further expand our product offerings through the launch of new cobranded collections with Reebok in 2025.

All of our products are designed in Miami, manufactured in Asia, and currently sold through two major types of channels:

E-commerce – primarily via our website (Lucyd.co) and Amazon.com, as well as through Walmart.com, BestBuy.com, DicksSportingGoods.com, Brookstone.com, and eBay;

A growing network of retail stores, including independent eyewear stores and national eyewear chains – we currently have approximately 350 retail stores selling our products (across just over 300 unique wholesale accounts), and are continually working to expand our network.

We apply a manufacturer suggested retail price (“MSRP”) of $149 – $199 for non-prescription, polarized sunglass, and blue light blocking glasses across all of our online channels, with our wholesale pricing offering volume discounts to these prices.

Please refer to discussion in the Components of Results of Operations for more details regarding our pricing structure.

We view our business model as capital light, as we have elected not to build our own manufacturing facilities and Company-owned retail distribution, but rather contract with existing sources of production and proven consumer-facing retail distribution.

E-commerce – primarily via our website (Lucyd.co) and Amazon.com, as well as through Walmart.com, Target.com, BestBuy.com, DicksSportingGoods.com, Brookstone.com, and eBay;

A growing network of retail stores, including independent eyewear stores and national eyewear chains – we currently have over 540 retail stores selling our products (across over 300 unique wholesale accounts), and are continually working to expand our network.

We apply a manufacturer suggested retail price (“MSRP”) of $149 – $199 for non-prescription, polarized sunglass, and photochromic glasses across all of our online channels, with our wholesale pricing offering volume discounts to these prices.

The Company believes having pricing that is competitive with traditional designer eyewear is essential for building market share in this new category, by eliminating the “cost of switching” for the average consumer.

We view our business model as capital light, as we have elected not to build our own manufacturing facilities and Company-owned retail distribution, but rather leverage existing sources of production and retail distribution.

This allows us to focus on our core competency of smart eyewear design and manufacturing.

Key Factors Affecting Performance

2 unchanged sentences

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.

During 2023, we added approximately 136 new wholesale accounts, primarily independent optical stores.

We currently offer an expansive line of 26 different models of glasses, and by mid-2025, we will offer 34 different styles and several accessories, including cobranded eyewear with well-known brands like Nautica, Reebok, and Eddie Bauer.

In total, the Company expects to offer over 40 total smart eyewear SKUs across these brands and Lucyd by the end of 2025.

Retail store client retention and re-orders

1 unchanged sentence

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 December 31, 2023, 45 display systems have been deployed so far to retailers.

We have deployed 45 such display systems to retailers.

Investing in business growth

3 unchanged sentences

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 in the United States and Canada, across just over 300 unique wholesale accounts.

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

We started onboarding our first retail stores in June 2021, and since then have continue to grow through the current year.

Currently, we have over 540 retail stores selling our smart eyeglasses, primarily in the United States and Canada, across 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 2025.

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.

The Company’s latest products are receiving higher ratings online compared to our previous products, indicating that customers are appreciative of improvements in product design, functionality, and build quality.

For example, our new Lucyd Armor product has a 4/5 rating on Amazon.

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 December 31, 2023, we had over 20,000 cumulative total orders from customers online since inception, up from a cumulative total of approximately 12,000 as of December 31, 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.

Components of Results of Operations

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 $500 for our proprietary Blueshift Polarized transitional blue light lenses in a progressive 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).

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.

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 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.

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, compared to 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) 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, and 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 margins.

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 have numerous products at different price points which impact the gross margins on each pair sold.

Although price points of Lucyd-branded frames have been reduced from their peak at the launch of the Lyte 2.0 in February 2023, while also costing slightly more to manufacture, the Company has reduced the size of discounts available, and has needed to send fewer warranty replacements due to improvements in product durability and comfort.

Therefore, we do not believe the increase in cost of goods sold has a material effect on our gross margins year over year.

Operating Expenses

Our operating expenses consist primarily of:

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

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 provided by Tekcapital LLC;

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 and U.S.

Treasury bills, and interest expense paid on convertible note loan due to Tekcapital (which was repaid in full in February 2023).

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.

Results of Operations

Years Ended December 31, 2024 (“current year”) and December 31, 2023 (“prior year”)

2023 and 2022

Revenues, net

Cost of Goods Sold

Gross Deficit

Gross Profit (Deficit)

Operating Expenses:

1 unchanged sentence

Sales and marketing

Research & development

Research and development

Related party management fee

4 unchanged sentences

Our revenues for the year ended December 31, 2024, were $1,636,440, representing an increase of approximately 42% as compared to revenues of $1,152,479 during the year ended December 31, 2023.

The increase in revenue was primarily attributable to the combination of higher unit volumes, favorable channel mix as described more fully below, and a larger number of styles available in 2023.

These positive factors were partially offset by significant discounts offered during the current year in order to help drive unit sales and grow our market share.

Key competing products dropped their prices to or below the price point of Lucyd frames during temporary and extended discount sales;

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 imminent diversification of our products with the new cobranded Powered by Lucyd lines (including Nautica, which launched in January 2024, and Eddie Bauer and Reebok, which are expected to launch later in 2024) is expected to reduce the need for discounting to support customer acquisition in the future, due to the global renown of our partner brands.

Overall, we believe that the significant increase in revenues in the current year is reflective of the high quality and cutting-edge technology of our Lucyd Lyte 2.0 and Lyte XL smartglasses, and our investment in marketing to grow our brand and our company.

The increase in revenue was primarily attributable to significant growth in the e-commerce channel, with net sales through our Lucyd.co website and Amazon.com increasing by approximately 89% and 14%, respectively, from the prior year, while wholesale revenues declined by approximately 27%.

Overall, our revenue growth was primarily attributable to higher unit volumes, largely driven by our new product launches over the past year (including the cobranded Nautica ® Powered by Lucyd and Eddie Bauer ® Powered by Lucyd collections which were launched in January 2024 and April 2024, respectively, and the Lucyd Armor product line which was launched in October 2024).

We sold over 2,000 units of Lucyd Armor glasses in the fourth quarter of 2024 alone.

With respect to our cobranded collections, we sold over 3,000 units during the current year, and sales of the Nautica ® Powered by Lucyd line have continued to increase each quarter since their initial launch.

While Eddie Bauer ® Powered by Lucyd styles have not been as successful as others thus far, likely due to their higher price point, the Nautica ® cobranded collection has been very popular, with several of those styles ranking among our top products.

We believe our brand partnerships play a significant role in our revenue growth by offering a more diversified product line that speaks to consumers from different demographics (for example, Nautica ® generally appeals to a more fashion-forward customer than Lucyd Lyte, and Eddie Bauer ® generally appeals to an older demographic than our other lines).

We also believe the cobranded collections have been useful in attracting retail partnerships, as merchandisers are more comfortable with well-known brands when introducing new products.

Also contributing to our growth in revenues were our continued investments in marketing and advertising initiatives, as well as increased public interest and growth in smart glasses and the wearable products category.

The decline in wholesale revenues was largely driven by a change in our focus during the current year 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 within the next 12 months.

For the year ended December 31, 2024, approximately 64% of sales were processed on our online store (Lucyd.co), 26% on Amazon.com, and 10% with reseller partners.

As the relative proportion of sales processed through Lucyd.co for the current year increased as compared to the relative proportion of sales processed through Lucyd.co in the prior year, this shift in sales channel mix positively impacted our revenue for the current year as compared with the prior year, due to the fact we charge an additional $35 to $275 for our prescription lenses available only on Lucyd.co.

For the year ended December 31, 2024, we generated an aggregate of $1,137,849 of revenue from sales of non-prescription frames and accessories, $494,085 from sales of frames with prescription lenses, and $4,506 of revenue from app subscriptions.

All of the $427,671 in sales generated on Amazon.com during the current year were for non-prescription frames and accessories, as we only offer prescription lenses through our website.

Of the $1,036,713 in online sales generated through Lucyd.co, $494,085 was related to frames with prescription lenses and $542,628 was related to glasses with non-prescription lenses.

For the year ended December 31, 2023, approximately 47% of sales were processed on our online store (Lucyd.co), 33% on Amazon.com, and 20% with reseller partners.

This product mix represents the fact that the e-commerce channels have grown more rapidly than our wholesale business.

This sales channel mix positively impacted our revenue for the current year as compared with the prior year, due to the fact we charge additional $35 to $275 for our prescription lenses available only on Lucyd.co.

For the year ended December 31, 2023, we generated $963,405 of revenue from sales of non-prescription frames and accessories, and $189,074 from sales of frames with prescription lenses.

1 unchanged sentence

Of the $547,850 in online sales generated through Lucyd.co, $189,074 was related to frames with prescription lenses and $358,776 was related to glasses with non-prescription lenses.

E-commerce sales are the most material portion of our sales to date since inception.

For the year ended December 31, 2022, approximately 32% of sales were processed on our online store (Lucyd.co), 38% on Amazon.com, and 30% with reseller partners.

For the year ended December 31, 2022, we generated $579,214 of revenue from sales of non-prescription frames and accessories and $80,574 was generated from sales of frames with prescription lenses.

All of the $252,799 in sales generated on Amazon.com during the prior year were for non-prescription frames and accessories, as we only offer prescription lenses through our website.

Of the $208,447 in online sales generated through Lucyd.co, $80,574 related to frames with prescription lenses and $127,873 of glasses sold were with non-prescription lenses.

E-commerce sales are the most material portion of our sales to date since inception.

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 over 250 stores as of December 31, 2022.

We anticipate that a partnership with a major eyeglass distributor will substantially increase our wholesale sales.

Overall, e-commerce sales remain to be the most material portion of our sales to date since inception;

however, out of all of our sales channels, we believe that the wholesale optical channel represents the most promising opportunity for future growth in the long-term.

To date, we believe e-commerce has been best suited to sell smart eyewear because of the enhanced product exposure opportunity compared to product on a shelf in a physical store – as online, prospective customers are able to learn more about products, conduct virtual try-ons, and comparison shop across the web with ease.

However, we anticipate that as smart eyewear becomes a more normalized product category and becomes more common for prescription wear, major national eye care providers will begin to onboard smart eyewear products, and we believe we are the value leader in that sector.

We have already started to see major retailers begin to offer smart eyewear in-store.

Thus, we believe that selling wholesale into brick-and-mortar retailers represents our largest growth opportunity for a number of reasons, including:

Our products are competitive with the few smart eyewear products that are currently sold in big box brick-and-mortar stores.

Consumer awareness of the category is improving, driving consumer interest to try smart eyewear in-store.

The optical channel is becoming more receptive to smart eyewear than in the past.

We have been in direct negotiations with some of the largest retailers in the world in the last 12 months in regards to onboarding our products.

Online competition in the category is only going increase, but with limited shelf space available in brick-and-mortar, only the strongest products will make it in-store.

Overall marketing and acquisition costs for wholesale sales per unit is much lower than direct to consumer online sales.

With the success of the recently-launched Lucyd Armor smartglasses for the safety/industrial segment (which represents a growing market in which we currently have little or no direct competition), and the anticipated success of the upcoming launch of Reebok ® Powered by Lucyd smartglasses for the sport/active lifestyle segment (in which we believe we will have a distinct advantage, as most sport smartglasses are very low quality Aliexpress products), we believe we are very well positioned to generate significant revenue growth in 2025.

Cost of goods sold

Our total cost of goods sold increased to $1,421,250 for the year ended December 31, 2024, as compared to $1,271,808 for the year ended December 31, 2023.

This increase was primarily driven by higher volumes of products sold during the current year.

This increase was primarily driven by increased cost of lenses and frames largely as a result of higher volumes of products sold in the current year.

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.

Cost of goods sold was also impacted by sales channel mix, as a higher relative proportion of our sales in the current year 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.

Also contributing to the increase in cost of goods sold in the current year were replacement products provided to customers free of charge (which could be due to warranty, improperly cut prescription lenses, or improperly fitting frames), and about 500 product samples distributed as promotional and content generation pieces to influencers, investors, online and traditional media, and other press outlets for the purpose of gaining various forms of brand awareness, investor interest, and site traffic.

We believe our product margins are competitive relative to other smartglasses.

This provides ample margins to support the higher cost of customer acquisition for an emerging product category.

Our relationship with a new supplier with lower cost of goods than our main supplier has enabled us to plan to launch the Reebok and Smart Safety lines at even more competitive prices than our current offering.

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, the Company expects that its per unit cost will decrease as its order volumes increase and we realize economies of scale.

Key components of cost of goods sold for the year ended December 31, 2023 included, but were not limited to, the cost of frames of $756,795, which was made much larger due to the high number of warranty replacements for product flaws which have since been eliminated.

Cost of prescription lenses incurred with our third-party vendor of $271,229, affiliate referral fees, sales commission expense, and e-commerce platform fees of $190,326, and quality assurance costs related to our products sold of $13,100.

This increase was primarily driven by higher volumes of products sold during the current year, partially offset by lower costs.

Cost of frames increased by approximately 14% on an absolute dollar basis from the prior year, primarily related to the increase in sales volumes and also partially attributable to higher cost of goods sold associated with the new Eddie Bauer ® Powered by Lucyd collection, due to the increased number of components, deluxe finishes, and materials for that product line.

However, cost of frames as a percentage of net sales declined by 13 percentage points from the prior year, due to the combination of our switch to new suppliers with higher quality and lower manufacturing costs during 2023, and greater economies of scale driven by higher unit volumes.

As demand and awareness for smart eyewear continue to grow, we expect that our per unit cost will continue to decrease as order volumes increase.

Cost of lenses decreased by approximately 5% on an absolute dollar basis from the prior year, and decreased as a percentage of net sales by 8 percentage points from the prior year.

These decreases were mainly driven by actions taken by management in the current year to better manage lens fulfillment costs, including (i.) the launch of the 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, and (ii.) the engagement of a new lower-cost lens supplier based in Miami, Florida.

These decreases were also impacted by sales channel mix, as a lower relative proportion of our sales in the current year were through our online store (Lucyd.co) in the current year than in the prior year, and all sales of glasses with prescription lenses are attributable to that channel.

Key components of cost of goods sold for the year ended December 31, 2024 included, but were not limited to, the cost of frames of $862,529;

cost of prescription lenses incurred with third-party vendors of $256,860;

commissions, affiliate referral fees, and e-commerce platform fees of $158,327;

shipping and logistics costs of $95,363;

product certification costs of $33,150;

and quality assurance costs of $11,240.

Out of our total cost of goods sold for the year ended December 31, 2024, $256,860 related to orders with prescription lenses, while $1,164,390 pertained to non-prescription orders.

Key components of cost of goods sold for the year ended December 31, 2022 included, but were not limited to, the cost of frames of $478,020, cost of prescription lenses incurred with our third-party vendor of $104,217, affiliate referral fees, sales commission expense, and e-commerce platform fees of $128,340, and quality assurance costs related to our products sold of $5,500.

Key components of cost of goods sold for the year ended December 31, 2023 included, but were not limited to, the cost of frames of $756,795;

cost of prescription lenses incurred with our third-party vendor of $271,229;

commissions, affiliate referral fees, and e-commerce platform fees of $201,686;

shipping and logistics costs of $20,415;

and quality assurance costs of $13,100.

Out of our total cost of goods sold for the year ended December 31, 2023, $271,229 related to orders with prescription lenses, while $1,000,579 pertained to non-prescription orders.

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

With the recent (October 2024) launch of the Lucyd Armor line and the upcoming launch of the Reebok ® Powered by Lucyd collection in 2025, we expect that our cost of goods sold will improve even more in future periods, as the frames for the aforementioned product lines are designed differently from our other products and accordingly have fewer components, thus reducing their price.

We estimate that the unit cost of for the Lucyd Armor and cobranded Reebok ® product lines will be at least 30% lower than our Lucyd Lyte models.

Thus, while we anticipate that the total dollar value of our cost of goods sold will increase in 2025, primarily from greater volumes of products sold, we anticipate reduced unit costs (i.e., lower cost of goods sold as a percentage of net sales) as we continue to refine our stock-keeping unit (“SKU”) mix and scale our production quantities.

Additionally, in the moderate to long term timeframe, we expect third-party retail stores will become our primary sales channel as we onboard additional stores.

Consequently, we expect sales of prescription lens offered through our website 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 2024.

We also expect corresponding growth in total cost of goods sold, primarily from additional product related costs.

As we continue to refine our SKU mix with sales data, we anticipate reducing our unit costs by reducing the variety of SKUs produced per product line compared to the past, to focus only on the highest volume styles.

Additionally, we have been informed by key suppliers that significant price reductions over 10% are possible as we continue to scale our production quantities.

Gross profit (deficit)

Our gross profit was negative $72,692 for the year ended December 31, 2023, as compared to negative $56,289 for the year ended December 31, 2022.

This decrease was primarily driven by the factors outlined above.

We expect gross profit for the fiscal year ending December 31, 2024, to improve, primarily due to economies of scale from large, anticipated orders.

As we expect retail stores to eventually become our primary sales channel as we onboard new stores, we also expect our overall gross margin to improve, since no e-commerce platform fees or prescription lens costs apply in wholesale channels.

We had gross profit of $215,190, or 13% of net sales, for the year ended December 31, 2024, as compared to a gross deficit of $119,329, or negative 10% of net sales, for the year ended December 31, 2023.

This improvement of $334,519 or 23 percentage points was primarily driven by the factors outlined above.

We expect that our gross profit margins will continue to improve in 2025, due to the factors outlined above.

Operating expenses

3 unchanged sentences

Our general and administrative expenses increased by 15% to $4,473,292 for the year ended December 31, 2024, as compared to $3,886,960 for the year ended December 31, 2023.

This increase was primarily attributable to (i) an increase of approximately $560,000 in employee-related costs, resulting from increases in our staffing and new employment agreements entered into with executives, (ii) increased costs associated with being a publicly-traded company, including directors’ remuneration, insurance expense, public and investor relations, and filing fees, which altogether resulted in an increase in expense of approximately $430,000, (iii) higher license costs, which increased approximately $146,000, and (iv) and increase in depreciation and amortization expense of approximately $53,000.

These increased expenses were partially offset by recoveries of bad debts, and lower costs related to consultants and other outside service providers.

This increase was primarily driven by the combination of (i) a $325,000 release payment made to a shareholder counterparty during the current year for the waiver of certain of that counterparty’s pre-existing contractual rights related to the Company’s equity offerings during the second quarter of 2024, (ii) an increase in legal costs of approximately $318,000, largely as a result of various shareholder and equity-related matters during the current year period.

These increases were partially offset by lower insurance costs.

The Company maintains a lean staff salaried at market rates, and a significant portion of our general and administrative expenses consist of corporate overhead type costs which are fixed or semi-fixed in nature (e.g., rent, compliance, legal and professional services, etc.);

as such, our general and administrative expenses are not expected to scale up significantly as our revenue increases over time.

Sales and marketing expenses

Our sales and marketing expenses were essentially flat year-over-year at $2,047,069 for the year ended December 31, 2023, as compared with $2,059,012 in the prior year.

During the first quarter of the current year, we temporarily paused and postponed our marketing spending while we restructured our e-commerce business, 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.

Our overall actual spending on advertising and promotions in 2023 increased significantly over prior year, particularly in the areas of spending on paid ads on websites and social media platforms, as well as spending on influencers, but was largely offset by 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 during the current year without ever having vested, as the related performance conditions (sales quotas) for those awards were not met.

We anticipate our marketing costs to increase in 2024 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 and displays to help educate in-store customers about our products, and increase our brand’s physical presence and role in the eyewear industry.

Related party management fee

Our related party management fee was $140,000 for each of the years ended December 31, 2023 and 2022, based on the terms of the management services agreement between us and Tekcapital.

Our sales and marketing expenses increased by 32% to $2,706,213 for the year ended December 31, 2024, as compared to $2,047,069 for the year ended December 31, 2023.

This increase was primarily driven by the combination of (i) increased spending on paid ads to drive sales growth, and (ii) higher stock-based compensation recognized expense in the current year, mainly due to the fact that the prior year expense amount included the impact of a significant reversal of previously-recognized stock-based compensation for certain individuals within the Company’s sales and marketing function whose awards expired in 2023 without ever having vested, as the related performance conditions (sales quotas) for those awards were not met.

Our marketing plan for 2025 is strategically allocated to support our phased product rollout (e.g., the cobranded Reebok ® Powered by Lucyd collections in the second and fourth quarters), while continuing to build overall brand awareness and presence.

We are using data-driven decision-making to refine and optimize our marketing campaigns, in order to make our spending in this area more efficient, thus maximizing returns on our marketing investments.

We anticipate that our total 2025 marketing spending will be between 2023 and 2024 levels.

From a long-term perspective, while we expect that our total sales and marketing expenses will scale up to some degree as our revenue increases, we anticipate that such increases in sales and marketing expenses will be mitigated somewhat by our planned focus on growing the wholesale optical channel, which, due to the nature of that channel, inherently does not require costly marketing campaigns to acquire each customer and as a result typically carries a lower marketing cost per unit sold.

Additionally, we generally expect that a retailer who is successful with our products will reorder in large quantities, also without significant marketing expenditure.

Research and development costs

Our research and development costs increased by 24% to $819,387 for the year ended December 31, 2024, as compared with $662,184 the year ended December 31, 2023.

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.

This increase was primarily attributable to the 2024 write-off of approximately $88,000 of previously-capitalized software costs related to the development of the Vyrb app (which was launched as an open beta version in 2021, and had new features added over time, but had never been officially launched) as a result of management’s decision in 2024 to de-emphasize the Vyrb app in favor of shifting our primary software development focus to the Lucyd app.

Certain elements and features developed for the Vyrb app may potentially be incorporated into future releases of the Lucyd app.

Also contributing to the increase in research and development costs were the impacts of product development cycles and timing of associated research and development spending.

We have expanded our software team with additional vendors and specialists to support feature enhancements to the Lucyd app, and we hired a new audio engineering team in 2024 to support our frames with enhanced audio input and output.

Related party management fee

Our related party management fee was $140,000 for each of the years ended December 31, 2024 and 2023, based on the terms of the management services agreement between us and Tekcapital.

Liquidity and Capital Resources

4 unchanged sentences

Net Change in Cash

The above table reflects changes in our cash and cash equivalents only, and reflects the Company’s investments in short-term U.S.

Treasury bills as a cash outflow (reduction).

The Company held $4,895,184 of such investments as of December 31, 2024.

Including such investments in the table above as part of the Company’s overall liquidity (which management believes provides a more accurate depiction of the Company’s liquidity and economic position) would result in a net change in the Company’s overall liquidity of positive $3,236,724 for the year ended December 31, 2024.

Operating Activities

Net cash flows used in operating activities for the years ended December 31, 2024 and 2023 are primarily reflective of our net losses, 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 during 2023 as we have procured additional inventory to position us for future anticipated sales growth.

Additionally, our operating asset levels have grown significantly during 2023 and 2024 as we have procured additional inventory to position us for future anticipated sales growth.

Investing Activities

During the current year, the Company used low-risk bonds and similar investment instruments for the purpose of earning interest on its cash balance.

Net cash flows used in investing activities for the year ended December 31, 2024 were primarily reflective of the investment of a portion of the proceeds from our recent equity offerings (as described below) in 6-month U.S.

Treasury bills.

At the same time, the Company continued to invest in its growing intellectual property portfolio, making expenditures to file for various new patents.

Net cash flows used in investing activities for the year ended December 31, 2023 were primarily reflective of the Company’s purchase and redemption of low-risk government bonds and similar investment instruments for the purpose of earning interest on its cash balance.

The Company also continued to invest in its growing intellectual property portfolio, making expenditures to file for various new patents.

Financing Activities

Net cash flows provided by financing activities for year ended December 31, 2023 are mainly driven by the various capital-raising activities undertaken during the current year, including our second public offering completed in June 2023 and exercises of warrants by stockholders earlier in the year, partially offset by repayment of advances and convertible debt to related parties.

Net cash flows provided by financing activities for the year ended December 31, 2022 are mainly driven by our initial public offering completed in August 2022, and, to a lesser extent, by net proceeds from related party borrowings through convertible debt.

Initial Public Offering

On August 17, 2022, the Company closed on its initial public offering of 980,000 units, consisting of 980,000 shares of its common stock and 1,960,000 warrants to purchase 1,960,000 shares of common stock, at a combined offering price of $7.50 per unit in exchange for gross proceeds of approximately $7.35 million, before deducting underwriting discounts and offering expenses.

Each share of common stock was sold together with two warrants, each warrant to purchase one share of common stock at an exercise price of $7.50 per share.

In addition, the Company granted the underwriters a 45-day option to purchase up to an additional 147,000 shares of common stock and/or warrants to purchase up to an additional 294,000 shares of common stock to cover over-allotments, of which the underwriter exercised its option to purchase additional warrants to purchase 294,000 shares of common stock.

The net proceeds received by the Company from this offering amounted to $6,189,734.

We used the proceeds from this offering primarily on (i) sales and marketing, (ii) expanding our inventory, (iii) updating and developing our in-store displays, (iv) developing new smart eyewear styles and sizes, as well as further development and commercialization of the Vyrb app, and (v) working capital and other general corporate purposes.

Net cash flows provided by financing activities for the year ended December 31, 2024 were mainly driven by proceeds from multiple equity offering transactions as described below.

Net cash flows provided by financing activities for year ended December 31, 2023 were mainly driven by the various capital-raising activities undertaken during the year, including our second public offering completed in June 2023 and exercises of warrants by stockholders earlier in the year, partially offset by repayment of advances and convertible debt to related parties.

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.

Each share 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.

On June 26, 2023, the Company closed on a public offering of 252,494 units, with each unit consisting of one share of the Company’s common stock and warrants to purchase one share of common stock (the “Common Warrants”), in exchange for gross proceeds of approximately $4.7 million, before deducting underwriting discounts and offering expenses.

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 9,000 shares of the Company’s common stock at an exercise price of $26.25 per share.

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

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

New Convertible Loan Note

Effective March 1, 2024, the Company issued a convertible note to Lucyd Ltd., the largest stockholder of the Company, for up to $1,250,000 that bears interest at 10% per annum, which includes the option to convert the debt into the Company’s common stock at market price.

The note can be converted into shares of common stock of the Company upon the occurrence of certain events, as defined in the note, or for any reason at the sole discretion of Lucyd Ltd.

The note has a maturity date of September 1, 2025, at which time all outstanding principal and accrued interest is payable in full.

As of the date of this Annual Report on Form 10-K, we have not borrowed any amounts under this convertible note.

The net proceeds received by the Company from this offering amounted to approximately $4,116,000, and were used by the Company primarily for working capital and general purposes.

At-the-Market Offerings

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 stock.

From April 15, 2024 through April 28, 2024, the Company sold 2,828 shares of common stock and received approximately $13,000 of gross proceeds before deducting sales agent commissions and offering expenses.

The net proceeds received by the Company from these transactions amounted to approximately $12,000.

Following the first registered direct offering described below, from May 2, 2024 through May 24, 2024, the Company sold 34,900 shares of common stock and received approximately $536,000 of gross proceeds before deducting sales agent commissions and offering expenses.

The net proceeds received by the Company from these transactions amounted to approximately $518,000.

Following the second registered direct offering described below, from June 13, 2024 through June 30, 2024, the Company sold 246,742 shares of common stock and received approximately $1,918,000 of gross proceeds before deducting sales agent commissions and offering expenses.

The net proceeds received by the Company from these transactions amounted to approximately $1,845,000.

From July 12, 2024 through August 30, 2024, the Company sold 273,517 shares of common stock and received approximately $1,446,000 of gross proceeds before deducting sales agent commissions and offering expenses.

The net proceeds received by the Company from these transactions amounted to approximately $1,399,000.

Approximately $50,000 of the net proceeds received from these offerings were used to pay legal fees to HCW.

We intend to use the remaining net proceeds from these offerings primarily for working capital and general purposes.

First Registered Direct Offering

On May 1, 2024, the Company closed on a registered direct offering of 210,043 shares of its common stock and, in a concurrent private placement, warrants to purchase up to 210,043 shares of common stock at an exercise price of $4.88 per share, for a combined purchase price per share and warrant of $4.88.

In exchange, the Company received approximately $1.0 million of gross proceeds, before deducting underwriting discounts and offering expenses.

In addition, the Company issued to the placement agent warrants to purchase up to 15,754 shares of common stock at an exercise price of $6.10 per share.

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

Approximately $100,000 of the net proceeds received from this registered direct offering were used to pay a former agent for their waiver of a contractual right of first refusal;

the remaining net proceeds received were used by the Company primarily for working capital and general purposes.

Second Registered Direct Offering

On May 29, 2024, the Company closed on a registered direct offering of 263,160 shares of its common stock and, in a concurrent private placement, warrants to purchase up to 263,160 shares of common stock at an exercise price of $9.50 per share, for a combined purchase price per share and warrant of $9.50.

In exchange, the Company received approximately $2.5 million of gross proceeds, before deducting underwriting discounts and offering expenses.

In addition, the Company issued to the placement agent warrants to purchase up to 19,737 shares of common stock at an exercise price of $11.876 per share.

The net proceeds received by the Company from this transaction amounted to approximately $2,134,000, and were used by the Company primarily for working capital and general purposes.

On August 17, 2022, as part of the Company’s initial public offering, the Company issued warrants to purchase 112,700 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”).

In February 2023, holders of the Company’s Listed Warrants exercised such warrants to purchase an aggregate of 22,926 shares of the Company’s common stock, at an adjusted exercise price of $75.00 per share, resulting in net cash proceeds to the Company of approximately $1,532,000.

Between April 1, 2023 and April 16, 2023, holders of the Company’s Listed Warrants exercised such warrants to purchase an aggregate of 18,019 shares of the Company’s common stock, at an adjusted exercise price of $75.00 per share, resulting in net cash proceeds to the Company of approximately $1,204,000.

On April 17, 2023, the Company entered into a warrant exercise inducement letter agreement with certain accredited investors that were existing holders of the Company’s Listed Warrants to purchase an aggregate of 8,417 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 $75.00 per share.

The net proceeds received by the Company from this transaction amounted to approximately $391,000.

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 15,000 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 $75.00 per common share and will expire on April 19, 2028.

Subsequently, the shares of common stock issuable upon exercise of these warrants were registered with the SEC through a Form S-1 filing.

During September 2024, the Company entered into multiple warrant inducement transactions with certain holders of its previously-issued warrants.

On September 3, 2024, the Company entered into inducement letter agreements with certain holders of existing warrants (originally issued on June 26, 2023) to purchase an aggregate of 126,699 shares of common stock.

The warrant holders exercised for cash the existing warrants at a reduced exercise price of $5.00 per share, resulting in gross proceeds to the Company of approximately $633,000;

in addition to the shares of common stock issued as a result of the warrant exercise, the warrant holders also received new unregistered Series A and Series B warrants.

This transaction closed on September 4, 2024, and the net proceeds received by the Company amounted to approximately $489,000.

On September 18, 2024, the Company entered into inducement letter agreements with certain holders of existing warrants (originally issued on May 1, 2024 in connection with the First Registered Direct Offering described above) to purchase an aggregate of 148,567 shares of common stock.

The warrant holders exercised for cash the existing warrants at an adjusted exercise price of $5.13 per share, resulting in gross proceeds to the Company of approximately $762,000;

in addition to the shares of common stock issued as a result of the warrant exercise, the warrant holders also received new unregistered Series C and Series D warrants.

This transaction closed on September 19, 2024, and the net proceeds received by the Company amounted to approximately $672,000.

On September 22, 2024, the Company entered into

inducement letter agreements with certain holders of existing warrants (originally issued on May 29, 2024 in connection with

the Second Registered Direct Offering described above) to purchase an aggregate of 263,160 shares of common stock.

holders exercised for cash the existing warrants at an adjusted exercise price of $9.875 per share, resulting in gross proceeds to

the Company of approximately $2.6 million;

in addition to the shares of common stock issued as a result of the warrant exercise, the

warrant holders also received new unregistered Series E and Series F warrants.

This transaction closed on September 24, 2024,

and the net proceeds received by the Company amounted to approximately $2,343,000.

New Lucyd Ltd.

Financing Agreement

On March 1, 2024, 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.

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

that will bear interest at 10% per annum and include the option to convert the note into shares of the Company’s common stock upon certain defined events.

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.

The Company will be able to prepay the convertible notes at any time with the written consent of Lucyd Ltd.

On March 1, 2025, the Company and Lucyd Ltd.

entered into an amendment of the March 1, 2024 convertible note financing agreement, such that upon issuance, the convertible note will have a maturity date of September 1, 2026.

There were no other changes to the terms and provisions of the agreement.

The Company has not borrowed any amounts under this agreement.

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 second public offering and proceeds received from investors’ exercises of warrants), plus planned capital-raising activities 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, 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.

We believe our existing cash and cash equivalents (including the proceeds from the equity offerings described above), plus the availability to borrow funds via 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.

3 unchanged sentences

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.

Current geopolitical and macroeconomic factors have caused disruption in the global financial markets, which could reduce our ability to access capital and negatively affect our liquidity in the future.

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.

10 unchanged sentences

Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

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.

Our inventory consists of purchased eyewear and related accessories, 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 December 31, 2023 and 2022.

As of December 31, 2023 and 2022, we recorded an inventory prepayment in the amount of $323,520 and $197,750, respectively, related to down payment on eyewear purchased from the manufacturer, prior to shipment of the product that occurred after the respective balance sheet dates.

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

As of December 31, 2024 and 2023, the Company recorded an inventory prepayment in the amount of $424,594 and $323,520, respectively, related to down payments on 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:

Intangible assets recognized on the Company’s books 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.

We amortize 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 amortize these assets over the estimated useful life of the patents, and review our intangible assets for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

Capitalized software costs.

We had previously incurred costs related to development of the Vyrb software application, and had previously capitalized approximately $88,000 of these costs related to coding, development, and testing (subsequent to establishing technical feasibility of the app), as it was our intention to market and sell this software externally.

Although we launched Vyrb as an open beta version in 2021, and continued to add new features to Vyrb throughout 2022 and 2023, we had not officially launched the Vyrb app.

During 2024, management decided to shift our primary software development focus to the Lucyd app, which was launched in April 2023 as a free application that enables the user to converse with the extremely popular ChatGPT AI language model through our glasses.

Based on this decision, during the year ended December 31, 2024, we expensed the previously-capitalized Vyrb software development costs totaling approximately $88,000 to research and development expense, and as of December 31, 2024, we had no remaining capitalized software costs recorded on our balance sheet.

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.

We have incurred taxable losses since inception but are current in our tax filing obligations.

We are not presently subject to any income tax audit in any taxing jurisdiction.

We account 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 (i.e., when taxes are actually paid or recovered).

We assess the realizability of our net deferred tax assets on an annual basis.

A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will not be realized.

A review of all relevant available positive and negative evidence is considered, including the Company’s current and past performance, the market environment in which the Company operates, length of carryback and carryforward periods, and existing contracts that will result in future profits.

After reviewing all relevant available evidence, the Company has recorded a full valuation allowance against its deferred tax assets as of December 31, 2024 and 2023.

We account for uncertainty in income taxes recognized in our financial statements by using 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.

FASB 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 obligations.

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.

We recognize 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 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 expected term of the stock options is estimated based on the simplified method as allowed by Staff Accounting Bulletin No.

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.

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

For options granted after our initial public offering on August 17, 2022, the fair value of common stock used in the option pricing model is based on the quoted market price of our common shares on the NASDAQ stock exchange.

For options granted prior to our initial public offering, the fair value of common stock used in the option pricing model was determined using the most recent price paid by independent investors through a Regulation Crowdfunding (“CF”) securities offering undertaken by the Company.

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.

For awards of restricted stock units and shares of common stock, the fair value of the 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 primarily generated from the sales of prescription and non-prescription optical glasses and 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.

We have also recently started to generate revenue from the sale of subscriptions to the “Pro” version of our Lucyd app, which provides unlimited ChatGPT interactions and priority tech support for a monthly or annual fee.

To determine revenue recognition, we perform the following steps:

4 unchanged sentences

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

During the year ended December 31, 2023, we recognized $17,500 of revenue 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 sales taxes collected from customers on behalf of taxing authorities, returns, and discounts.

During the years ended December 31, 2024 and 2023, we recognized $30,000 and $17,500 of revenue, respectively, that was included in the contract liability balance 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 discounts, returns, and sales taxes collected from customers on behalf of taxing authorities.

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.

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.

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.

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

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 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.

1 unchanged sentence

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 collectability of substantially all of the contract consideration is probable, our 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 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 do not contain any variable consideration.

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.

For sales of subscriptions to the “Pro” version of our Lucyd app, we identify the individual contracts with customers through detailed transaction reports from the Apple App Store or Google Play Store, with each individual transaction representing a separate contract.

Revenue is recognized upon meeting the performance obligation, which is the right and availability of each customer to access the “Pro” features of the Lucyd app.

For those customers that purchase such access on a month-to-month basis, we recognize revenue in the month in which the purchase of such access is made.

For those customers which purchase an annual subscription, we recognize revenue on a straight-line basis over the subscription period, using a mid-month convention.

The balance of unearned revenue related to app subscriptions that has been deferred on our balance sheet as a contract liability was $2,401 as of December 31, 2024.

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:

4 unchanged sentences

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 $25,933 and $24,897 as of December 31, 2023 and 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.

As of December 31, 2023 and December 31, 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.

The Company recorded an allowance for sales returns of $15,746 and $25,933 as of December 31, 2024 and 2023, respectively.

Quantitative and Qualitative Disclosures About Market Risk .

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis