Innovative Eyewear Inc

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Innovative Eyewear, Inc.

Miami, Florida

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Innovative Eyewear, Inc. (the “Company”) as of December 31, 2024 and 2023, and the related statements of operations, stockholders’ equity, and cash flows for each of the years then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.

Emphasis of Matter

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As more fully described in Note 3 to the financial statements, the Company has incurred losses and negative cash flows from operations. Management’s plans regarding liquidity matters are also described in Note 3. Our opinion is not modified with respect to this matter.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/Cherry Bekaert LLP

We have served as the Company’s auditor since 2021.

Tampa, Florida

March 24, 2025

BALANCE SHEETS

December 31, 2024 and 2023

STATEMENTS OF OPERATIONS

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

STATEMENTS OF CASH FLOWS

NOTES TO THE FINANCIAL STATEMENTS

December 31, 2024 and 2023

NOTE 1 –GENERAL INFORMATION

Innovative Eyewear, Inc. (the “Company,” “us,” “we,” or “our”) is a corporation organized under the laws of the State of Florida that develops and sells cutting-edge eyeglasses and sunglasses, which are designed to allow our customers to remain connected to their digital lives, while also offering prescription eyewear and sun protection. The Company was founded by Lucyd Ltd., a portfolio company of Tekcapital Plc through Tekcapital Europe, Ltd. (collectively, together with Lucyd Ltd., “Tekcapital and Affiliates”), which owned approximately 11% of our issued and outstanding shares of common stock as of December 31, 2024. Innovative Eyewear licensed the exclusive rights to the Lucyd® brand from Lucyd Ltd., which includes the exclusive use of all of Lucyd’s intellectual property, including our main product, Lucyd Lyte® smartglasses.

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and in accordance with the accounting rules under Regulation S-X, as promulgated by the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments considered necessary for the fair presentation of the financial statements for the years presented have been included. The results of operations for the years ended December 31, 2024 and 2023 are not necessarily indicative of the results to be expected for future periods.

Certain prior period amounts have been reclassified to conform to current period presentation; approximately $22,000 of capitalized costs related to the Company’s website previously reported within Capitalized software costs are now reported within Property and equipment, net.

Change in Capital Structure

As described more fully in Note 8, effective July 18, 2024, the Company effected a 1-for-20 reverse stock split for all of its issued and outstanding common stock. All share and per share related amounts presented in these financial statements and accompanying notes, including but not limited to shares issued and outstanding, dollar amounts of common stock and additional paid-in capital, earnings/(loss) per share, and warrants and options, have been retroactively adjusted for all periods presented in order to reflect this change in capital structure. There were no changes to the total number of authorized common shares or par value per common share as a result of this change.

Use of Estimates

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

Cash Equivalents

All highly liquid investments with original maturities of three months or less, including money market funds, certificates of deposit, and U.S. Treasury bills purchased three months or less from maturity, are considered cash equivalents.

Investments

As of December 31, 2024, the Company held investments in U.S. Treasury bills, which were purchased in September 2024 and mature in March 2025. These investments are classified as “held-to-maturity” and are recorded at amortized cost of $4,895,184 in the accompanying balance sheet. The aggregate fair value of these investments, based on quoted prices (unadjusted) in active markets for identical assets, is $4,957,750 as of December 31, 2024, which includes an unrealized gain of $62,566.

Accounts Receivable

Accounts receivable are uncollateralized obligations due from customers under normal trade terms. For direct-to-consumer sales, payment is required before product is shipped. For wholesale orders, we offer “net 30” payment terms on wholesale orders of $1,500 or more in accordance with industry standards. The Company, by policy, routinely assesses the financial strength of its customers.

Accounts receivable are reported at the amount billed to the customer, net of an allowance for doubtful accounts. The allowance for doubtful accounts is determined based upon a variety of judgments and factors. Factors considered in determining the allowance include historical collection, write-off experience, and management’s assessment of collectibility from customers, including current conditions, reasonable forecasts, and expectations of future collectibility and collection efforts. Management continuously assesses the collectibility of receivables and adjusts estimates based on actual experience and future expectations based on economic indicators. Receivable balances are written-off against the allowance when such balances are deemed to be uncollectible. The Company recognized bad debt expense of $19,859 and $30,275 for the years ended December 31, 2024 and 2023, respectively.

A roll forward of the allowance for doubtful accounts for the years ended December 31, 2024 and 2023 is as follows:

Inventory

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. 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 patent costs received in conjunction with the initial capitalization of the Company and internally developed utility and design patents. The Company amortizes these assets over the estimated useful life of the patents. The Company reviews its intangible assets for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

Capitalized Software

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

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.

No software development costs have been capitalized with respect to the Lucyd app.

Property and Equipment

Property and equipment are depreciated using the straight-line method over the estimated useful lives or lease terms if shorter. Depreciation expense for the years ended December 31, 2024 and 2023 was $109,489 and $61,093, respectively. For income tax purposes, accelerated depreciation methods are generally used. Repair and maintenance costs are expensed as incurred.

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash, cash equivalents, accounts receivable, and accounts payable, the carrying amounts approximate fair value due to the short-term maturities of these instruments.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, and accounts receivable. The Company limits its credit risk with respect to cash by maintaining cash and cash equivalent balances with high quality financial institutions. At times, the Company’s cash balances may exceed federally insured limits. Concentrations of credit risk with respect to accounts receivable are generally considered minimal due to collection history.

However, as of December 31, 2024, $47,950 or approximately 33% of the Company’s gross accounts receivable balance was related to a single customer under a long-term instalment arrangement; this same customer represented $77,950 or approximately 50% of the Company’s gross accounts receivable balance as of December 31, 2023. The Company manages its risk related to this counterparty via other contractual arrangements with such counterparty, and incentivization through stock-based compensation.

Additionally, as of December 31, 2024, $53,184 or approximately 37% of the Company’s gross accounts receivable balance was related to another unrelated wholesale customer, under normal trade terms.

Revenue Recognition

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: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy a performance obligation. At contract inception, we assess the goods or services promised within each contract and determine those that are performance obligations, and also assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

In instances where the collectibility of contractual consideration is not probable at the time of sale, the revenue is deferred on our balance sheet as a contract liability, and the associated cost of goods sold is deferred on our balance sheet as a contract asset; subsequently, we recognize such revenue and cost of goods sold as payments are received. During the 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. 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. 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 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. 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. Due to the nature of wholesale retail orders, no e-commerce fees are applicable.

For sales to distributors, we identify the contract with a customer upon receipt of an order of our eyewear through a direct purchase order. If collectibility of substantially all of the contract consideration is probable, revenue is recognized upon meeting the performance obligation, which is delivery of our eyewear products to the distributor, and is also recorded net of returns and discounts. Our wholesale pricing for eyewear sold to retail store partners and distributors includes volume discounts, due to the nature of large quantity orders. The pricing does not include shipping. Due to the nature of wholesale retail orders, no marketplace fees are applicable, only credit card processing fees.

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:

For all of our sales, at the time of sale, we establish a reserve for returns, based on historical experience and expected future returns, which is recorded as a reduction of sales. Additionally, we review all individual returns received in the month following the balance sheet date pertaining to orders processed prior to the balance sheet date in order to determine whether an allowance for sales returns is necessary. The Company recorded an allowance for sales returns of $15,746 and $25,933 as of December 31, 2024 and 2023, respectively.

Stock-Based Compensation

The Company recognizes compensation expense for stock-based awards to employees and directors and others based on the grant date fair value of such awards. Forfeitures are accounted for as a reduction of compensation expense in the period when such forfeitures occur.

For stock option awards, the Black-Scholes-Merton option pricing model is used to estimate the fair value of share-based awards. The Black-Scholes-Merton option pricing model incorporates various and highly subjective assumptions, including expected term and share price volatility.

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.

Segment Reporting

The Company has a single reportable segment, which generates revenue from the sales of smartglasses, and related accessories and apps. The Company derives revenue primarily in North America and manages its business activities on a consolidated basis.

The Company’s chief operating decision maker, as such term is defined under GAAP, is our Chief Executive Officer. The accounting policies of our single reportable segment are the same as those for the Company as a whole.

The chief operating decision maker assesses performance for the single reportable segment and decides how to allocate resources based on net income that also is reported on the income statement as consolidated net income. The measure of segment assets is reported on the balance sheet as total consolidated assets. The Company does not have intra-entity sales or transfers.

Recently Adopted Accounting Pronouncements

During the year ended December 31, 2024, the Company adopted the provisions of Accounting Standards Update (“ASU”) 2023-07,Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This standard requires expanded and enhanced disclosures regarding reportable segments and significant segment expenses, but does not change how an entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The adoption of this new guidance did not have a significant impact on our results of operations, cash flows, or financial condition.

Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 requires disclosure of additional categories of information about federal, state, and foreign income taxes in the rate reconciliation table and requires entities to provide more details about the reconciling items in some categories if items meet a quantitative threshold. The ASU also requires entities to disclose income taxes paid, net of refunds, disaggregated by federal (national), state, and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold. The guidance makes several other changes to the disclosure requirements. The ASU is required to be applied prospectively, with the option to apply it retrospectively. The ASU is effective for Innovative Eyewear, Inc. for fiscal years beginning after December 15, 2024. We do not anticipate that the adoption of this ASU will have a significant impact on our financial statements.

In November 2024, the FASB issued ASU 2024-03,Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires public business entities to disclose specified information about certain costs and expenses, including but not limited to purchases of inventory, employee compensation, depreciation, and intangible asset amortization, in a tabular format within the notes to their financial statements, as well as provide additional disclosures related to certain other specified expenses. The ASU may be applied on either a prospective or retrospective basis, and is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the ASU to determine its impact on the Company’s disclosures.

Subsequent Events

In connection with the preparation of these financial statements, the Company has evaluated subsequent events through March xx, 2025, which is the date the financial statements were available to be issued. See Note 11 for additional information.

NOTE 3 –GOING CONCERN

The Company has a limited operating history. The Company’s business and operations are sensitive to general business and economic conditions in the United States. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse conditions may include recession, downturn, or otherwise, changes in regulations or restrictions in imports, competition, or changes in consumer taste. These adverse conditions could affect the Company’s financial condition and the results of its operations.

The Company meets its day-to-day working capital requirements using monies raised through sales of eyewear and issuances of equity. During the year ended December 31, 2024, the Company raised approximately $10.5 million of net cash proceeds through the issuance of equity via a combination of at-the-market offerings, registered direct offerings, and warrant exercises (see Note 8 for details). The Company has also entered into an agreement with a related party, under which the Company may borrow up to $1.25 million (see Note 6 for details); as of December 31, 2024, the Company has not borrowed any amounts under this agreement.

Management expects that operating losses could continue in the foreseeable future as we continue to invest in the expansion and development of our business. Management’s forecasts and projections indicate that the Company expects to have sufficient liquidity to fund operations through at least the next 12 months. However, the Company may raise additional funds if management believes it would be beneficial to do so.

NOTE 4 –INCOME TAXES

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

The Company assesses the realizability of its 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.

The following is a reconciliation of tax computed at the statutory federal rate to the income tax benefit in the statements of operations:

The components of the Company’s deferred tax assets are as follows:

At December 31, 2024, the Company had federal net operating loss carryforwards of $18,713,951 and state net operating loss carryforwards of $10,417,616, both of which do not expire.

The Company follows a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. Any interest and penalties accrued related to uncertain tax positions are recorded in tax expense. As of December 31, 2024 and 2023, the Company doesnot believe that is has any liabilities for uncertain tax positions.

The Company files Federal and Florida tax returns. The years that remain subject to examination are the years ended December 31, 2021, 2022, 2023, and 2024.

NOTE 5 –INTANGIBLE ASSETS

These costs are amortized using the straight-line method over a period of 10 years. Amortization expense totaled $39,897 and $24,164 for the years ended December 31, 2024 and 2023, respectively. Future amortization is expected to approximate $50,000 per year.

NOTE 6 – RELATED PARTY TRANSACTIONS

Management Service Agreement

In 2020, the Company entered into a management services agreement with Tekcapital Europe Ltd. (an affiliate of Lucyd Ltd., whose Chief Executive Officer is the father of our Chief Executive Officer), for which the Company was billed $25,000 quarterly. Effective February 1, 2022, the original management services agreement was amended to have the Company billed at $35,000 quarterly. While the agreement does not stipulate a specific maturity date, it can be terminated with 30 calendar days written notice by any party.

Under this agreement, the related party provides the following services:

The Company incurred expense of $140,000 during each of the years ended December 31, 2024 and 2023 under this agreement.

Rent of Office Space

Prior to the February 1, 2022 amendment of the aforementioned management services agreement, the Company was provided with rent-free office space by Tekcapital and Affiliates. Effective February 1, 2022, Tekcapital began to bill the Company for an allocation of rent paid by Tekcapital on the Company’s behalf; the underlying lease between Tekcapital and its landlord has an end date of January 31, 2026. The Company recognized expense related to this arrangement of $92,312 and $91,672 for the years ended December 31, 2024 and 2023, respectively.

Old Tekcapital and Affiliates Convertible Notes

From December 1, 2020 through December 1, 2023, the Company had the availability of, but not the contractual right to, intercompany financing from Tekcapital and Affiliates in the form of either cash advances or borrowings under a convertible note. The convertible notes bore interest at 10% per annum, and included the option to convert the debt into the Company’s common stock at market price upon the occurrence of certain defined events. The maximum amount of available financing under this arrangement was initially $2,000,000, but was later increased as of November 1, 2021 via an amendment to $3,000,000.

As of December 31, 2022, the aggregate outstanding balance under these convertible notes was $61,356. In January 2023, the Company borrowed an additional $48,143 under such convertible notes, and subsequently repaid the outstanding balances of the convertible notes in full in February 2023. No further amounts were borrowed under the convertible notes, and the convertible notes matured on December 1, 2023 with no amounts outstanding.

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.

The Company has not borrowed any amounts under this agreement.

Loan to Tekcapital Europe, Ltd.

On January 11, 2024, the Company entered into an intercompany loan agreement (as lender) with Tekcapital Europe, Ltd. (as borrower) and Tekcapital Plc, the parent of Tekcapital Europe, Ltd. Pursuant to this agreement, the Company loaned 600,000 British pounds sterling (equivalent to approximately $768,000) to Tekcapital Europe, Ltd. The loan bore simple interest at a rate of 10% per annum and was required to be repaid on or before April 11, 2024. Tekcapital Plc executed the agreement as guarantor for Tekcapital Europe, Ltd. on the full amount of the loan.

Tekcapital Europe, Ltd. subsequently repaid all of the outstanding balance of the loan (including principal and accrued interest), and as of December 31, 2024, no amounts remain outstanding or payable to us under this agreement.

NOTE 7 –COMMITMENTS AND CONTINGENCIES

Legal Matters

We are not currently the subject of any material pending legal proceedings; however, we may from time to time become a party to various legal proceedings arising in the ordinary course of business.

In November 2023, a third party filed a complaint before the International Trade Commission, alleging that certain of our products (as well as certain products of our competitors) infringed on patents held by the third party. In December 2023, the International Trade Commission instituted an investigation against the Company. In January 2024, we settled and resolved all outstanding matters with the third party, and entered into a multi-year non-exclusive license agreement with the third party covering multiple smart eyewear patents (as described more fully below under ‘License Agreements’).

In August 2023, the Company entered into a settlement agreement with a former wholesale customer who owed the Company $92,646. As a result of this settlement, $47,646 of accounts receivable were written-off as uncollectible, while the $45,000 collected under the settlement agreement was reflected as a gain within general and administrative expenses in the statement of operations.

License Agreements

During the years ended December 31, 2023 and 2022, we entered into various multi-year license agreements which grant us the right to sell certain branded smart eyewear, including the Nautica, Eddie Bauer, and Reebok brands worldwide. These agreements require us to pay royalties based on a percentage of net retail and wholesale sales during the period of the license, and also require guaranteed minimum royalty payments. The agreements have base terms of 10 years but are cancellable at the option of the Company during the fifth year.

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

Also, on January 3, 2024, we entered into a multi-year non-exclusive license agreement with a third party (IngenioSpec, LLC) for multiple smart eyewear patents. Pursuant to this license agreement, the Company added licenses for 46 new patents to its portfolio of owned and licensed patents and applications. The Company fully prepaid this license for the term of the agreement and does not have any obligation for future payments under this agreement.

The Company recognized $225,222 and $156,931 of expense related to all license agreements for the years ended December 31, 2024 and 2023, respectively.

Leases

Our executive offices are located at 11900 Biscayne Blvd., Suite 630 Miami, Florida 33181. Our executive offices are provided to us by Tekcapital and Affiliates (see Note 6). We consider our current office space adequate for our current operations.

Other Commitments

See related party management services agreement discussed in Note 6.

NOTE 8 – STOCKHOLDERS’ EQUITY

Pursuant to a corporate resolution on July 1, 2021, the Company has authority to issue up to 15,000,000 shares of preferred stock and 50,000,000 shares of common stock. There wereno shares of preferred stock issued or outstanding as of December 31, 2024 and 2023.

Change in Capital Structure – Reverse Stock Split

At our annual meeting of shareholders on July 8, 2024, the Company’s shareholders approved an amendment to the Company’s articles of incorporation to effect a reverse stock split of our issued and outstanding common stock at a ratio between 1-for-14 and 1-for-24. Subsequently, the board of directors authorized a reverse stock split in a ratio of 1-for-20 shares, and we filed with the Florida Secretary of State a certificate of amendment to our articles of incorporation.

Effective July 18, 2024, each 20 shares of the Company’s issued and outstanding common stock were combined into one share of common stock, except to the extent that the reverse stock split would have resulted in any of the Company’s stockholders owning a fractional share, in which case such fractional share was rounded up to the next highest whole share. Additionally, pursuant to their terms, the shares of common stock underlying the Company’s outstanding stock options and warrants were similarly adjusted along with corresponding adjustments to their exercise prices.

All share and per share amounts presented in these financial statements and accompanying notes, included but not limited to shares issued and outstanding, earnings/(loss) per share, and warrants and options, as well as the dollar amounts of common stock and additional paid-in capital, have been retroactively adjusted for all periods presented in order to reflect this change in capital structure.

There was no change to the total number of authorized common shares of 50,000,000, and there was no change in the par value per common share of $0.00001.

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 $4.1 million.

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.

The Company also paid $50,000 of legal fees to HCW during the year ended December 31, 2024; this payment has been reflected in the financial statements as a reduction to additional paid in capital, as it represents a related cost of the at-the-market equity offering transactions.

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; such payment has been reflected in the financial statements as a reduction to additional paid in capital, as it represents a related cost of the equity transaction.

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.

Warrants

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.

As of December 31, 2024, the Company’s outstanding warrants are as follows:

Rights Plan

On September 25, 2024, our board of directors approved the adoption of a limited duration stockholder rights plan (the “Rights Plan”), and declared a dividend to stockholders of record at the close of business on September 25, 2024 of one common stock purchase right (a “Right”) for each outstanding share of our common stock. Each Right entitles the holder to purchase from the Company six shares of our common stock at an exercise price of $6.21 per share. The Rights are evidenced by and trade with the certificates for the shares of our common stock outstanding as of September 25, 2024, and will accompany any new shares of our common stock that are issued after that date.

Under the Rights Plan, the Rights generally will become exercisable only if a person or group acquires beneficial ownership of 20% or more of our common stock in a transaction not approved by our board of directors. In that situation, each holder of a Right (other than the acquiring person or group, whose rights will become void and will not be exercisable) will have the right to purchase, upon payment of the exercise price and in accordance with the terms of the Rights Plan, a number of shares of our common stock having a market value of twice such price.

The Rights expire at or prior to the earlier of (i) September 25, 2025, (ii) the redemption or exchange of the Rights in accordance with the terms of the Rights Plan, (iii) the closing of certain merger or other acquisition transactions involving the Company, and (iv) the date of the Company’s next meeting of its stockholders.

The Rights Plan is not intended to prevent a takeover of the Company and should not interfere with any merger or other business combination approved by our board of directors. However, the Rights Plan may cause substantial dilution to a person or group that acquires beneficial ownership of twenty percent (20%) or more of our outstanding common stock.

Other Matters

During the year ended December 31, 2024, the Company made a release payment of $325,000 to a shareholder counterparty for the waiver of certain of that counterparty’s pre-existing contractual rights related to certain of the Company’s equity offerings described above. This payment is reflected within general and administrative expenses in the statement of operations.

NOTE 9 –STOCK-BASED COMPENSATION

On July 1, 2021, an Equity Incentive Plan was approved, allowing for total of 20% of our issued and outstanding common stock, less the number of outstanding option grants, to be available for the grant of awards under the Plan. There were 84,250 option awards granted by the Company prior to the approval of the Plan, while 90,526 option awards have been granted under the Plan from July 1, 2021 through December 31, 2024.

Summary information regarding the number of options, exercise price, and remaining contractual life as of and during the years ended December 31, 2024 and 2023 is as follows:

As of December 31, 2024, the aggregate intrinsic value for all options outstanding as well as all options exercisable was zero.

During the year ended December 31, 2024, we granted the following option awards:

During the year ended December 31, 2023, we granted the following option awards:

The fair value of options granted is calculated using the Black-Scholes-Merton option pricing model. The underlying assumptions used in the option pricing model for stock option awards granted in 2024 and 2023 were as follows:

The weighted average grant date fair value of options outstanding was $26.81 and $29.82 as of December 31, 2024 and 2023, respectively.

As of December 31, 2024, unrecognized stock option expense of approximately $134,000 remains to be recognized over next 0.98 years.

Award Modifications

On June 1, 2023, we modified the terms of certain options previously awarded in 2021 to purchase an aggregate of 7,000 shares of common stock, in order to extend their expiration dates from July 21, 2023 to July 21, 2024. There were no changes to the exercise price or other terms of these stock options, and these options were already fully vested prior to the modification. As a result of this modification, we recognized incremental stock option expense of $9,188 for the year ended December 31, 2023.

Stock Grants

On March 28, 2024, we entered into an agreement for a third party to provide us with financial advisory and investment banking services, for a minimum term of six months. As consideration for the services provided to the Company, we issued to the counterparty 15,000 shares of our common stock. The total value of consideration transferred, measured using the fair value of our common stock at the date of issuance, was $81,900, which we recognized in full during the year ended December 31, 2024.

On April 1, 2024, we entered into a brand ambassador agreement with an individual for a two-year term. As compensation for the first year of the agreement, we issued the individual 4,500 shares of our common stock. The value of the consideration transferred, measured using the fair value of our common stock at the date of issuance, was $21,690. During the year ended December 31, 2024, we recognized $16,268 of expense related to this arrangement, and will recognize the remaining expense for these shares awarded of $5,422 during the first three months of 2025.

Restricted Stock Unit Awards

On December 3, 2023, we entered into an endorsement agreement with an influencer for a one-year term, which included the award of an aggregate of 3,261 restricted stock units. These restricted stock units vest according to the following schedule: 815 shares on December 3, 2023, 815 shares on March 2, 2024, 815 shares on May 31, 2024, and 816 shares on August 29, 2024. Total stock-based compensation related to this award, based on the market price of the Company’s common stock on the date of grant, amounts to $27,066. We recognized $8,458 and $18,608 of expense related to this award during the years ended December 31, 2023 and 2024, respectively.

On November 26, 2024, the Company awarded an aggregate of 33,600 restricted stock units to non-management employees, of which 1/3 vested immediately, 1/3 shall vest on November 26, 2025, and the remaining 1/3 shall vest on November 26, 2026. We recognized $83,477 of expense related to these awards during the year ended December 31, 2024, and will recognize the remaining expense of $147,691 on a straight-line basis over the next 23 months.

On December 13, 2024, the Company awarded an aggregate of 212,400 restricted stock units to the Company’s officers and management, of which 1/6 shall vest on each April 2 and August 19, commencing with April 2, 2025 and concluding on August 19, 2027. We recognized $20,278 of expense related to these awards during the year ended December 31, 2024, and will recognize the remaining expense of $1,277,486 on a straight-line basis over the next 31.5 months.

NOTE 10 –EARNINGS PER SHARE

The Company calculates earnings/(loss) per share data by calculating the quotient of earnings/(loss) divided by the weighted average number of common shares outstanding during the respective period as required by ASC 260-10-50. Due to the net losses for the years ended December 31, 2024 and 2023, all shares underlying common stock warrants, common stock options, and related party convertible debt were excluded from the earnings per share calculation due to their anti-dilutive effect.

Calculation of basic and diluted net earnings per common share is as follows:

NOTE 11 –SUBSEQUENT EVENTS

Extension of New Lucyd Ltd. Financing Agreement

On March 1, 2025, the Company and Lucyd Ltd. entered into an amendment of the March 1, 2024 convertible note financing agreement (see Note 6), 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, and the Company has not borrowed any amounts under this agreement.