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Item 7. Management’s Discussion and Analysis

2026-03-25 compared with 2025-03-24 · 207 added, 224 removed, 121 unchanged (78% of the section changed)

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Except for historical information, the matters discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are forward-looking statements that involve risks and uncertainties and are based upon judgments concerning factors that are beyond our control.

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 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.

Our mission is to Upgrade Your Eyewear ® .

We develop and sell cutting-edge smart eyewear – including prescription eyeglasses, ready-to-wear sunglasses, safety glasses, and sport glasses.

Our smart eyewear products enable the wearer to listen to music, take and make calls, and use voice assistants and ChatGPT to perform many common smartphone tasks hands-free.

Our mission is to Upgrade Your Eyewear ® by 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 .

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 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.

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.

Since the initial launch of Lucyd Lyte in 2021, we have sold thousands of our smartglasses, and have continued to expand our product offerings over the years – including the launch of Lucyd Lyte 2.0 and Lyte XL smartglasses in 2023, the launch of the Lucyd Armor TM , Nautica® Powered by Lucyd , and Eddie Bauer ® Powered by Lucyd smart eyewear collections in 2024, and the launch of the Reebok® Powered by Lucyd sport collection in 2025.

The variety of smartglasses we offer underpins our goal 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 currently offer an expansive line of 34 different models of glasses and several accessories.

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, Target.com, BestBuy.com, DicksSportingGoods.com, Brookstone.com, and eBay;

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

A growing network of retail stores, including independent eyewear stores and national eyewear chains – we currently have over 400 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.

We increased the number of retail store locations in which our products are sold from over 350 at the beginning of 2025 to over 400 by the end of the 2025, and we remain optimistic that partnership with a national retailer will further increase our store count significantly in 2026.

We apply a manufacturer suggested retail price (“MSRP”) of $149 – $199 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.

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

Key Factors Affecting Performance

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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 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.

To address this, we offer a strong co-op marketing program and reordering incentives program.

In 2025, we expanded our sales team with the addition of two new sales directors.

One of these individuals brings 15 years of experience in optical sales, and has joined to support our expansion into key optical accounts and regional chains.

The other individual has a multi-decade career in hardware and power tool sales, and has joined to support our pursuit of brick-and-mortar and e-commerce placements for the Lucyd Armor line.

Retail store client retention and re-orders

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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 products and enable customers to virtually try them on.

These display systems, which have been installed in limited number of locations, enable customers to engage in music demos on a physical unit, explore social and tutorial content, and virtually try on all available units, an experience offered by no other smartglass display on the market today.

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.

We have deployed 45 such display systems 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 have two continuous trajectories of general product improvement:

(i) engineering, where we seek to improve the sound quality, temple thinness, and battery life of our frames;

and (ii) digital, where we are adding new features via the Lucyd app and improved component programming.

We view these continually ongoing R&D investments as essential to maintaining our competitive edge.

We are offering a strong co-op marketing program with retail stores, and have expanded our sales and marketing 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 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.

We believe that the number of retail stores selling our products is an important indicator of wholesale growth.

The Company has increased the number of retail store locations in which its products are sold from over 350 at the beginning of 2025 to over 400 by the end of the 2025.

We remain optimistic that partnership with a national retailer will increase our store count significantly in 2026.

Customer Ratings (B2C)

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.

International Trade and Tariffs

Beginning in April of 2025, the U.S.

government has announced new or increased tariffs on goods imported from various countries to the U.S., and countries subject to such tariffs have imposed or may in the future impose retaliatory tariffs and other trade measures.

These tariffs had a negative impact on our results of operations (more specifically, our gross profit margins) for the year ended December 31, 2025.

We have taken actions to mitigate the negative impacts of the tariffs, including diversifying our logistics network and modifying our product fulfilment and replenishment model.

More specifically, our multi-pronged approach to respond to tariff challenges includes the following:

We opened three new fulfillment centers (in Europe, Canada, and the Shenzhen special economic zone of China) to improve the fluidity of our international factory direct business (which is not subject to U.S.

tariffs), and are working to rapidly expand this business unit with regional resellers.

We have conducted a thorough investigation of alternatives to Chinese manufacturing in the event that tariffs make manufacturing there untenable.

Although this has not yet come to pass, the Company is prepared to shift manufacturing to Taiwan and/or Vietnam if necessary, and has developed contingency plans to do so.

We instituted a minor price increase of $15 to most custom lens orders;

although not directly related to tariffs (as lenses are filled by a company in Florida), this price increase has indirectly helped to offset new tariff expenses.

This modest increase is easily absorbed by customers and our lens pricing remains highly competitive with brick-and-mortar opticians.

The actions taken by management to date to mitigate the impacts of tariffs have been largely successful thus far, and restored our third and fourth quarter 2025 gross profit margins to a level that was mostly consistent with our pre-tariff business plan.

However, the current international geopolitical climate related to tariffs is fluid and continues to evolve.

We are actively monitoring the ongoing tariff and trade policy developments, and continue to evaluate the potential impacts to our business, cost structure, supply chain, and the broader economic environment.

We have developed contingency sourcing options in Southeast Asia should the U.S.‑China tariff conditions materially change.

The recent February 2026 ruling by the Supreme Court of the U.S.

striking down certain tariffs enacted during the current administration is expected to be beneficial to the Company;

however, we will continue to monitor developments, including potential legislative, regulatory, or judicial responses, that could affect the ultimate impact of the decision.

Due to the evolving nature of the situation related to tariffs, we cannot predict with certainty the ultimate impacts they may have on our business and results in the future, but those impacts could be material.

Results of Operations

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Cost of Goods Sold

Gross Profit (Deficit)

Gross (Deficit) Profit

Operating Expenses:

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Total Operating Expenses

Other Income (Expense)

Interest Expense

Total Other Income (Expense), net

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 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.

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.

All of the $375,513 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 and our optical store partners.

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.

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.

Other Income (Expense), net

Our revenues for the year ended December 31, 2025, were $2,661,669, representing an increase of approximately 63% as compared to revenues of $1,636,440 during the prior year.

This increase is primarily attributable to significant volume increases, slightly offset by the impacts of higher discounts on products sold and shifts in product price/mix.

The volume increases were predominantly driven by our Lucyd Armor product line, which first launched in October 2024 and has rapidly emerged as the Company’s first highly successful SKU.

We sold over 12,000 units of Lucyd Armor smartglasses in the current year, which represented approximately half of our total smartglass units sold for the year.

The strong demand for the unique Lucyd Armor product has led us to develop four alternate variants for this product line, in order to address a wider range of safety glass users;

three new Armor variants launched in November 2025, and the fourth variant is planned to launch in the first quarter of 2026.

The cobranded Reebok ® Powered by Lucyd collection, which launched in April 2025, also contributed to the year-over-year volume increases.

We sold over 2,000 units of Reebok smartglasses during the current year.

Despite the significant aforementioned volume growth, the shift in our product mix to be more heavily skewed towards (and in fact, predominantly composed of) the Lucyd Armor line, had an unfavorable impact on our revenues, as the Armor line carries a slightly lower manufacturer suggested retail price (“MSRP”) than our other product lines.

Slightly higher discounts in the current year primarily reflected our go-to-market strategy for new product lines, which included (i) introductory promotions and bundles for the Reebok ® Powered by Lucyd launch to accelerate awareness and trial, and (ii) targeted clearance of older frame styles as we rationalized the assortment ahead of the November Lucyd Armor line expansion.

For the year ended December 31, 2025, approximately 51% of sales were processed on our online store (Lucyd.co), 40% on Amazon.com, and 8% through reseller partners, with approximately 1% of our net revenues generated from Lucyd “Pro” app subscriptions.

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, with less than 1% of our net revenues generated from Lucyd “Pro” app subscriptions.

The decline in the proportional share of reseller sales versus the prior year period reflects the combination of (i) the uncertainty of the current economic environment in light of the current tariff and international trade situation, which we believe has led to delays in getting large retailers to commit to placing orders for new products such as ours, and (ii) an intentional shift by the Company away from small optical accounts and the timing of purchase orders from prospective big-box and home-improvement retailers currently under evaluation.

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

however, we continue to believe that the wholesale channel is the most scalable and most promising long-term opportunity for future growth.

To date, several factors have constrained wholesale sell-through:

(i) the optical retail ecosystem is fragmented and insurance-driven, which supports higher margins on conventional frames and can compress retailer margins on smart eyewear at mainstream price points;

(ii) smart eyewear requires interactive merchandising and in-store demos to educate consumers, which lengthens onboarding lead times;

and (iii) national retailers typically require category sell-through evidence, certifications, and planogram resets with long decision cycles.

However, large national retailers have recently started to recognize smart eyewear as proven category and are starting to move in the direction of selling more smart eyewear.

Our Lucyd Armor product line has a clear “smart safety glass” use case that aligns with home-improvement, safety distribution, and industrial channels, while our Reebok® sport product line aligns with electronics and sporting goods merchandising.

As such, we are prioritizing larger retailers whose economics are more aligned with consumer electronics and safety categories, including home-improvement and big-box stores.

With our expanded Lucyd Armor variants, the Reebok® sport collection, and our interactive retail fixtures, we believe we now have the product and merchandising set needed to scale wholesale placements over time.

Therefore, we expect that e-commerce channels (Lucyd.co and Amazon) will remain a larger proportional share of our revenue in the near to medium term, with wholesale contributions increasing over time.

In the long term, we anticipate that wholesale sales will comprise a larger proportional share of our revenue, which should bring consistent, large-scale orders with minimal marketing costs.

With the continued success and momentum of the 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 recent launch of Reebok® Powered by Lucyd smartglasses for the sport/active lifestyle segment, we believe we are very well positioned to generate significant revenue growth in 2026.

In addition, during the latter half of 2025, we have begun to focus more efforts on international expansion, including the development of new partnerships with distributors and retailers in the UK, EU, Canada, and Latin America, as well as securing initial orders from key European markets.

Cost of Goods Sold

Our total cost of goods sold increased to $2,094,218 for the year ended December 31, 2025, as compared to $1,421,250 for the year ended December 31, 2024.

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.

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 smaller quantities of a few thousand at a time.

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, 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.

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.

Gross profit (deficit)

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.

This increase was primarily driven by higher volumes, partially offset by lower costs.

More specifically, the increase in cost of goods sold was attributable to a combination of volume increases and significantly higher custom duties, tariffs, and importation (freight-in) costs, partially offset by lower product sourcing costs for both frames and prescription lenses, and also lower fees and commission expenses.

Incremental custom duties and tariff costs accounted for a significant portion of the year-over-year increase in cost of goods sold, as a result of the new or increased tariffs imposed on goods imported from various countries to the U.S., and our first large-scale U.S.

import of Lucyd smart eyewear in the second quarter of 2025.

We also incurred significantly higher shipping costs during the second quarter of 2025 to import large quantities of product using faster shipping methods, in order to move those goods into the U.S.

before increased tariff rates went into effect.

Subsequent to those initial shipments, we took actions to mitigate the impact of these tariffs;

by leveraging fast-track activation of bonded third-party logistics facilities in Shenzhen (China), Montreal (Canada), and Rotterdam (Netherlands), and by switching to a just-in-time U.S.

inventory replenishment model, we significantly reduced dutiable volumes after the initial shipments.

As a result of these actions, we were able to restore our third and fourth quarter 2025 gross profit margins to a level that was mostly consistent with our pre-tariff business plan.

However, management continues to monitor trade policy and has contingency sourcing options in Southeast Asia should the U.S.-China tariff conditions materially change.

The decrease in unit sourcing costs for frames as compared to the prior year was primarily attributable to the combination of:

realization of greater economies of scale – i.e., smart eyewear is a highly specialized product that is expensive to manufacture in smaller quantities, but over time as our manufacturing order volumes have grown, our cost per unit has decreased;

improvements in product price/mix – i.e., a significant portion of the units sold in the current year were from our newer product lines, which have a lower manufacturing cost than our other product lines (as they are designed differently and have fewer components).

The decrease in lens fulfilment costs per unit was attributable to actions taken by management in 2024 to better manage these costs, including:

the launch of 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;

the engagement of a new lower-cost lens supplier based in Miami, Florida during the third quarter of 2024

Cost of goods sold for current year included but was not limited to the cost of frames (inclusive of the cost of tariffs, importation costs, and other inventory adjustments) of approximately $1,483,000;

the cost of prescription lenses incurred with our third-party vendor of approximately $246,000;

commissions, affiliate referral fees, and e-commerce platform fees of approximately $124,000;

shipping and logistics costs of approximately $140,000;

provisions for excess, obsolete, and slow-moving inventory of $59,000;

and product certification costs of approximately $25,000.

Cost of goods sold for prior year included but was not limited to the cost of frames (inclusive of importation costs and inventory adjustments) of approximately $863,000;

the cost of prescription lenses incurred with our third-party vendor of approximately $257,000;

commissions, affiliate referral fees, and e-commerce platform fees of approximately $160,000;

shipping and logistics costs of approximately $95,000;

and product certification costs of approximately $33,000.

Our gross profit for the current year was $567,451, as compared to $215,190 for the prior year.

Our gross profit margin was 21% in the current year and 13% in the prior year, representing an increase of approximately 8 percentage points from the prior year period.

This improvement in profitability was the primarily attributable to measures taken by management to reduce our costs per sale and increase our average order value, including changing lens suppliers in 2024, launching our own transitional lenses in place of branded third-party transitional lenses, obtaining price reductions from our frame suppliers as we have scaled up our production quantities, and engaging in a variety of promotional efforts outside of traditional pay-per-click e-commerce ads.

These improvements were partially offset by the negative impacts of tariffs during the current year and provisions for certain excess, obsolete, and slow-moving inventory in the current year.

In the near to medium term, we anticipate further growth in revenues in future quarters, largely in part due to continued momentum of Lucyd Armor and Reebok® Powered by Lucyd product lines, along with corresponding growth in total cost of goods sold.

We are also continually refining our product mix with sales data, and anticipate further reducing our unit costs by focusing only on the highest volume, market-tested styles.

The optical retail market is highly fragmented and influenced by vision insurance reimbursement, which historically supports higher retailer gross margins on conventional frames.

Smart eyewear carries a higher component and service cost structure, which can result in lower retailer margins at consumer price points we believe are required to broaden adoption.

Large national retailers have only recently begun to recognize smart eyewear as proven category and are starting to move in the direction of selling more smart eyewear.

As a result, we are now prioritizing larger retailers whose economics are more aligned with consumer electronics and safety categories, including home-improvement and big-box stores.

In the near term, we expect e-commerce channels (Lucyd.co and Amazon) to remain a larger proportional share of our revenue while we build additional sell-through evidence, secure retailer-specific merchandising, and obtain additional certifications.

As national retail programs are finalized and set in stores, we expect wholesale contribution to increase over time.

We believe that in the long term, the majority of our business will ultimately come from frame sales to distributors and eyewear retailers.

We anticipate that recent and upcoming launches of new product lines will help us progress towards our long-term goal of shifting our sales mix more towards the wholesale channel, which should bring consistent, large-scale orders with minimal marketing costs.

Operating Expenses

Our operating expenses increased by 21% to $8,138,892 for the year ended December 31, 2024, as compared to $6,736,213 for the year ended December 31, 2023.

Our operating expenses increased by $923,523, or approximately 11%, to $9,062,415 for the year ended December 31, 2025, as compared to $8,138,892 for the year ended December 31, 2024.

This increase was primarily due to the following:

General and administrative expenses

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 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.);

Our general and administrative expenses increased by $752,542, or approximately 17%, to $5,225,834 for the year ended December 31, 2025, as compared to $4,473,292 for the prior year.

This increase was primarily driven by the combination of (i) higher compensation (including stock-based compensation) and benefit costs (approximately $449,000), mainly as a result of hiring additional employees in the current year, and (ii) higher payments due under our multi-year license agreements, based on the contractual terms of such agreements, which increased our licensing expense by approximately $297,000.

Higher IT and software costs also contributed approximately $223,000 to the year-over-year increase in general and administrative expenses.

Partially offsetting these higher costs was the fact that in the prior year we made a one-time release payment of $325,000 to a shareholder counterparty for the waiver of certain of that counterparty’s pre-existing contractual rights related to the Company’s equity offerings, and made no similar such payments in the current year.

Non-cash expenses – including depreciation, amortization, and stock-based compensation – comprised approximately 9% and 14% of our total general and administrative expenses in the current year and prior year, respectively.

Although we have recently hired some new employees to help drive and support our growth and expansion, we generally maintain 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 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.

Our sales and marketing expenses increased $264,980, or approximately 10%, to $2,971,193 for the current year from $2,706,213 for the prior year.

This increase was primarily driven by increased spending on events and trade shows, as we grow and expand our network of potential business partners and retailers.

In the current year, we participated at both Vision Expo East and Vision Expo West in North America, the MIDO Eyewear Show in Italy, SILMO Paris 2025 in France, and a multitude of other industry events, which have helped us secure new domestic retailer accounts as well as make substantial progress in our efforts to further develop our international presence and increase our distribution into Europe and Latin America.

At the same time, we have continued to make significant investments in paid ads in order to build brand awareness, attract new customers, and increase our market share.

Our marketing spend in 2025 was strategically allocated to support our launch of new products, and 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.

In the near to medium term, we expect that our sales and marketing expenses will continue to scale up to some degree as our revenue grows.

From a long-term perspective, we anticipate that increases in sales and marketing expenses will be mitigated somewhat by our plan to grow our business in the wholesale optical channel, which, due to the nature of that channel, inherently does not require costly marketing campaigns to acquire each customer and does not require the platform fees associated with e-commerce sales, 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 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.

Our research and development costs decreased by $93,999, or approximately 11%, to $725,388 for the current year, as compared with $819,387 for the prior year.

Research and development costs in the prior year primarily related to development of the Reebok smartglasses line which launched in April 2025, ongoing improvements to the platform and molds used for our Lucyd Lyte smartglasses, and improvements to the Lucyd app.

Research and development costs in the current year primarily related to development of new variants for the Lucyd Armor and Reebok collections, development of other new smartglass products, and improvements to the Lucyd app.

This decrease was primarily attributable to the prior year write-off of approximately $88,000 of previously-capitalized software costs related to the development of the Vyrb app, with no comparable write-offs in the current year.

Absent this one-time non-cash charge in the prior year expense amount, the year-over-year change in research and development costs would have been less than 1% or essentially flat.

Related party management fee

Our related party management fee was $140,000 for each of the years ended December 31, 2025 and 2024, based on the terms of the management services agreement between us and Tekcapital.

Other Income (Expense), net

Total other income (expense), net was $903,775 for the current year.

This amount was primarily comprised of a $570,000 payment received from a former shareholder related to the disgorgement of short-swing profits pursuant to Section 16(b) of the Securities Exchange Act of 1934.

The remaining amount of other income (expense), net mainly relates to interest and dividends earned on our investments in U.S.

Treasury bills and money market funds.

Total other income (expense), net in the prior year was $157,187.

This amount was mainly comprised of dividends received from our investments in money market funds, and, to a lesser extent, interest income earned on a short-term loan to a related party.

Liquidity and Capital Resources

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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.

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

Treasury bills as cash flows from financing activities;

the Company had net redemptions of such investments of $5,025,680 in the current year and net purchases of such investments of $4,895,184 in the prior year.

Including short-term U.S.

Treasury bill investments with cash and cash equivalents 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 negative $1,143,631 for the current year and positive $3,236,724 for the prior year.

Our net working capital (current assets less current liabilities) was $8,389,807 as of December 31, 2025, a decline of approximately 1% compared with $8,500,498 as of 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 have grown significantly during 2023 and 2024 as we have procured additional inventory to position us for future anticipated sales growth.

Net cash flows used in operating activities for the years ended December 31, 2025 and 2024 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, corporate overhead and various other costs associated with being a publicly-traded company.

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

Investing Activities

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.

Net cash flows provided by investing activities for the year ended December 31, 2025 were primarily driven by net redemptions of short-term U.S.

Treasury bills, partially offset by short-term loans made to a related party, and expenditures to file for various new patents.

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 equity offerings in short-term 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 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 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 approximately $4,116,000, and were used by the Company primarily for working capital and general purposes.

Net cash flows provided by financing activities for the year ended December 31, 2025 were mainly driven by proceeds from multiple equity-based financing transactions as described below.

Net cash flows provided by financing activities for the year ended December 31, 2024 were mainly driven by proceeds from multiple equity offering transactions and warrant exercises during the year.

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.

From August 15, 2025 through December 12, 2025, the Company sold 606,377 shares of common stock and received approximately $1.2 million of gross proceeds before deducting sales agent commissions and offering expenses.

The net proceeds received by the Company from these transactions amounted to approximately $1.2 million, and will be used for working capital and general corporate purposes.

April 2025 Warrant Inducement Transaction

On April 11, 2025, the Company entered into inducement letter agreements with certain holders of certain of its existing warrants to purchase an aggregate of 595,188 shares of the Company’s common stock, consisting of 60,750 Series A Warrants, 60,750 Series B Warrants, 157,896 Series E Warrants, and 315,792 Series F Warrants.

Pursuant to the inducement letter agreements, the holders agreed to exercise the existing warrants for cash at a reduced exercise price of $2.60 per share in consideration of the Company’s agreement to issue new unregistered Series G Warrants to purchase up to an aggregate of 218,646 shares of common stock and new unregistered Series H Warrants to purchase up to an aggregate of 1,724,814 shares of common stock, each at a purchase price of $0.125 per warrant.

This transaction closed on April 14, 2025, and the gross proceeds to the Company were approximately $1.8 million prior to deducting placement agent fees and offering expenses.

The net proceeds received by the Company from this transaction amounted to approximately $1.5 million, which the Company intends to use for working capital and general corporate purposes.

June 2025 Warrant Inducement Transaction

On June 20, 2025, the Company entered into inducement letter agreements with certain holders of certain of its Series H Warrants to purchase an aggregate of 746,782 shares of the Company’s common stock, which were originally issued to the holders on April 14, 2025.

Pursuant to the inducement letter agreements, the holders agreed to exercise the existing warrants for cash at an exercise price of $2.60 per share in consideration of the Company’s agreement to issue new unregistered Series I Warrants to purchase up to an aggregate 2,240,346 shares of common stock, each at a purchase price of $0.125 per warrant.

This transaction closed on June 24, 2025, and the gross proceeds to the Company were approximately $2.2 million prior to deducting placement agent fees and offering expenses.

The net proceeds received by the Company from this transaction amounted to approximately $1.8 million, which the Company intends to use for working capital and general corporate purposes.

Other 2025 Warrant Activity

During May and June 2025, certain holders of the Company’s Series G and Series H Warrants exercised such warrants to purchase an aggregate of 986,532 shares of the Company’s common stock at an exercise of $2.60 per share, resulting in gross cash proceeds to the Company of approximately $2.6 million.

These proceeds will be used for working capital and general corporate purposes.

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.

Pursuant to an agreement with Lucyd Ltd.

originally entered into on March 1, 2024 and subsequently amended on March 1, 2025 and March 11, 2026, 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.

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Upon issuance, the convertible note will have a maturity date of September 1, 2027, 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 may prepay the convertible notes at any time with the written consent of Lucyd Ltd.

The Company has not borrowed any amounts under this agreement.

Obligations and Commitments

Our capital light business model does not generally require material capital expenditures.

However, we do have long-term obligations and commitments under certain multi-year license agreements, which are described in Note 7 of the financial statements within this annual report.

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 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.

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 Lucyd Ltd.

financing agreement described above, 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.

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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 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.

Our inventory predominantly 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.

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As of December 31, 2025 and 2024, the Company recorded an inventory prepayment in the amount of $438,417 and $424,594, 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 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, 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 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.

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.

Stock-Based Compensation

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 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 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

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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;

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 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.

With respect to such instances, during the years ended December 31, 2025

and 2024, we recognized $30,000 of revenue for each period, that was included in the contract liability balance of $47,950 and

$77,950 as of January 1, 2025 and 2024, 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.

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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.

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

For sales processed through our website, U.S.

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.

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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.

Any costs associated with fees charged by the online platforms (i.e., Amazon.com, or Shopify for sales through our Lucyd.co website) 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 we sell products.

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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.

If collectability 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.

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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:

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.

For those customers that 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 $4,506 and $2,401 as of December 31, 2025 and 2024, respectively.

During the year ended December 31, 2025, we recognized $2,401 of revenue that was included in the contract liability balance as of January 1, 2025.

We allow our customers to return our physical products, subject to our refund policy, which allows any customer to return our physical 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).

We charge a standard $15 restocking fee for standard frame returns, which is deducted from applicable refunds to cover shipping and restocking costs, and our return policy prohibits discretionary returns of glasses with prescription lenses.

For all of our product sales, at the time of sale, we establish a reserve for returns, based on historical experience and expected future returns, as well as review all individual returns received in the month following the balance sheet date;

such reserve is recorded as a reduction of sales.

The Company recorded an allowance for sales returns of $14,669 and $15,746 as of December 31, 2025 and 2024, respectively.