Innovative Eyewear Inc

Previous wording

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Current wording

I****tem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Previous wording

Our current product portfolio consists of 30 different models across the traditional, sport, and safety categories. Most styles are available with 100+ different lens and prescription options, resulting in thousands of sellable variations of products currently available. With Lucyd Lyte and our Nautica® and Eddie Bauer® lines (traditional), Reebok® (sport), and Lucyd Armor (safety), we believe we are the first smart-eyewear company with products concurrently in traditional, sport, and safety eyewear. Our brand partnerships enable us to offer a more diversified product portfolio and help us reach distinct consumer segments and demographics (for example, Nautica® skews more fashion-forward than Lucyd Lyte, Eddie Bauer® reaches an older demographic, and Reebok® attracts younger, more active customers).

Current wording

Our current product portfolio consists of 35 different models across the traditional, sport, and safety categories. Most styles are available with 100+ different lens and prescription options, resulting in thousands of sellable variations of products currently available. With Lucyd Lyte and our Nautica®and Eddie Bauer® lines (traditional), Reebok® (sport), and Lucyd Armor (safety), we believe we are the first smart-eyewear company with products concurrently in traditional, sport, and safety eyewear. Our brand partnerships enable us to offer a more diversified product portfolio and help us reach distinct consumer segments and demographics (for example, Nautica®skews more fashion-forward than Lucyd Lyte, Eddie Bauer® reaches an older demographic, and Reebok® attracts younger, more active customers).

Previous wording

In February 2025, we updated the Lucyd app’s Walkie feature, enabling premium subscribers access to secure and private walkie channels, providing businesses and organizations with a powerful tool to communicate confidentially and seamlessly through Lucyd smart eyewear. In May 2025, we announced additional updates to the Lucyd app, including new voice prompts and further enhancements for the app’s Walkie feature. We plan to launch more new features for the Lucyd app in the future, such as an audio equalizer enabling the user to optimize sound output for different types of content such as calls and podcasts, translation features, and touch control customizations.

Current wording

In February 2025, we updated the Lucyd app’s Walkie feature, enabling premium subscribers access to secure and private walkie channels, providing businesses and organizations with a powerful tool to communicate confidentially and seamlessly through Lucyd smart eyewear. In May 2025, we announced additional updates to the Lucyd app, including new voice prompts and further enhancements for the app’s Walkie feature. Most recently, in September 2025, we announced the addition of a new translation feature to the Lucyd app, which allows for voice-based translation between 17 languages in real time. We plan to launch more new features for the Lucyd app in the future.

Previous wording

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 30 different models of glasses 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.

Current wording

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 35 different models of glasses and several accessories, including cobranded eyewear with well-known brands like Nautica, Reebok, and Eddie Bauer.

Previous wording

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 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.

Current wording

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 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 the near future.

Previous wording

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 Reebok styles carry a 4.5/5 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.

Current wording

The Company’s latest products are receiving very favorable ratings online, indicating that customers are appreciative of improvements in product design, functionality, and build quality. 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.

Previous wording

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 three and six months ended June 30, 2025.

Current wording

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 nine months ended September 30, 2025.

Previous wording

During the second quarter of 2025, we took 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:

Current wording

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:

Previous wording

While our actions taken to date are expected to result in improvements in gross profit margins in subsequent quarters, 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.

Current wording

The actions taken by management to date to mitigate the impacts of tariffs have been largely successful thus far, and restored our third quarter 2025 gross profit margins to a level that is 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. 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.

Previous wording

Our revenues for the three months ended June 30, 2025 were $579,230, representing an increase of 88% as compared to revenues of $308,682 during the three months ended June 30, 2024. This increase is primarily attributable to significant volume increases, partially offset by the impacts of higher discounts on products sold.

Current wording

Our revenues for the three months ended September 30, 2025 were $668,128, representing an increase of 163% as compared to revenues of $253,599 during the three months ended September 30, 2024. This increase is primarily attributable to significant volume increases, partially offset by the impacts of higher discounts on products sold.

Previous wording

For the three months ended June 30, 2025, approximately 56% of sales were processed on our online store (Lucyd.co), 41% on Amazon.com, and 2% through reseller partners, with 1% of our net revenues generated from Lucyd “Pro” app subscriptions. The decline in the proportional share of reseller sales versus the prior year quarter reflects the combination of (i) the uncertainty of the current economic environment in light of the current tariff and international trade situation 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. For the three months ended June 30, 2025, we generated an aggregate of $423,185 of revenue from sales of non-prescription smartglasses and accessories, $152,827 from sales of smartglasses with prescription lenses, and $3,218 of revenue from app subscriptions. All of the sales generated on Amazon.com were for non-prescription smartglasses and accessories (as we only offer prescription lenses through our website), while $152,827 of the online sales generated through Lucyd.co was related to smartglasses with prescription lenses.

Current wording

For the three months ended September 30, 2025, approximately 56% of sales were processed on our online store (Lucyd.co), 40% on Amazon.com, and 4% through reseller partners. The decline in the proportional share of reseller sales versus the prior year quarter 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. For the three months ended September 30, 2025, we generated an aggregate of $499,083 of revenue from sales of non-prescription smartglasses and accessories, $165,832 from sales of smartglasses with prescription lenses, and $3,213 of revenue from app subscriptions. All of the sales generated on Amazon.com were for non-prescription smartglasses and accessories (as we only offer prescription lenses through our website), while online sales generated through Lucyd.co related to smartglasses both with and without prescription lenses.

Previous wording

Overall, e-commerce sales remain to be the most material portion of our sales 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. 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 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 the latter half of 2025. In order to support the launch and expansion of our Reebok® Powered by Lucyd and Lucyd Armor lines, we recently expanded our sales team with the addition of individuals who have significant experience in optical sales and hardware sales. In addition, and in light of the current tariff situation, we also plan to focus more on international expansion during the current year.

Current wording

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.

Previous wording

Our total cost of goods sold increased to $591,895 for the three months ended June 30, 2025, as compared to $253,506 for the prior year quarter. This year-over-year increase of 133% was primarily driven by 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.

Current wording

Our total cost of goods sold increased to $423,291 for the three months ended September 30, 2025, as compared to $194,255 for the prior year quarter. This year-over-year increase of 118% was primarily driven by volume increases, partially offset by lower product sourcing costs for both frames and prescription lenses.

Previous wording

Cost of goods sold for the three months ended June 30, 2025 included but was not limited to the cost of frames (inclusive of the cost of tariffs, importation costs, and other inventory adjustments) of $494,236; the cost of prescription lenses incurred with our third-party vendor of $71,097; and commissions, affiliate referral fees, and e-commerce platform fees of $28,209. Cost of goods sold for the three months ended June 30, 2024 included but was not limited to the cost of frames (inclusive of inventory adjustments) of $146,033; the cost of prescription lenses incurred with our third-party vendor of $54,714; and commissions, affiliate referral fees, and e-commerce platform fees of $27,205.

Current wording

Cost of goods sold for the three months ended September 30, 2025 included but was not limited to the cost of frames (inclusive of the cost of tariffs, importation costs, and other inventory adjustments) of $324,030; the cost of prescription lenses incurred with our third-party vendor of $45,365; commissions, affiliate referral fees, and e-commerce platform fees of $30,759; and shipping and logistics costs of $23,137. Cost of goods sold for the three months ended September 30, 2024 included but was not limited to the cost of frames (inclusive of inventory adjustments) of $107,469; the cost of prescription lenses incurred with our third-party vendor of $38,247; commissions, affiliate referral fees, and e-commerce platform fees of $25,957; and shipping and logistics costs of $22,512.

Previous wording

We had a gross deficit for the current quarter of $(12,665), as compared to a gross profit of $55,176 for the prior year quarter. Our gross profit margin was -2% in the current quarter and 18% in the prior year quarter, representing a decrease of approximately 20 percentage points from the prior year period. This decrease in profitability was predominantly attributable to the aforementioned impact of tariffs and importation costs, and to a lesser extent was also driven by the aforementioned higher discounts stemming from planned promotions during the current quarter. Such impacts were partially offset by the product sourcing cost improvements described above.

Current wording

We had gross profit for the current quarter of $244,837, as compared to $59,344 for the prior year quarter. Our gross profit margin was 37% in the current quarter and 23% in the prior year quarter, representing an increase of approximately 14 percentage points from the prior year period. This increase in profitability was predominantly attributable to the aforementioned product sourcing cost improvements described above.

Previous wording

As previously discussed, management took decisive actions during the current quarter regarding diversification of our supply chain and logistics network to significantly reduce our dutiable volume and monthly tariff expenses. These actions are expected to result in improvements in gross profit margins in subsequent quarters as compared with the current quarter. Management continues to monitor trade policy and has contingency sourcing options in Southeast Asia should the U.S.-China tariff conditions materially change.

Current wording

During the second quarter of 2025, management took decisive actions to respond to and attempt to mitigate the impacts of recently enacted increased tariffs on goods imported from various countries to the U.S., which included diversification of our supply chain and logistics network to significantly reduce our dutiable volume and monthly tariff expenses. These actions have been largely successful thus far, and restored our third quarter 2025 gross profit margins to a level that is 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.

Previous wording

In the near to medium term, we anticipate further growth in revenues in future quarters, largely in part due to the recent launch of our new Reebok® Powered by Lucyd product line, and the introduction of further variants of the popular Lucyd Armor product, 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.

Current wording

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.

Previous wording

Our operating expenses increased by 6% to $2,158,407 for the three months ended June 30, 2025, as compared to $2,029,534 for the three months ended June 30, 2024. This increase was primarily due to the following:

Current wording

Our operating expenses increased by 19% to $2,165,664 for the three months ended September 30, 2025, as compared to $1,821,407 for the three months ended September 30, 2024. This increase was primarily due to the following:

Previous wording

Non-cash expenses – including depreciation, amortization, and stock-based compensation – comprised approximately 6% and 11% of our total general and administrative expenses in the current quarter and prior year quarter, respectively.

Current wording

Non-cash expenses – including depreciation, amortization, and stock-based compensation – comprised approximately 6% and 9% of our total general and administrative expenses in the current quarter and prior year quarter, respectively.

Previous wording

In the near to medium term, we expect that our sales and marketing expenses will scale up 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 / selling fees associated with e-commerce sales, and as a result typically carries a lower sales and 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.

Current wording

In the near to medium term, we expect that our sales and marketing expenses will continue to scale up 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 / selling fees associated with e-commerce sales, and as a result typically carries a lower sales and 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.

Previous wording

Total other income (expense), net was $64,978 in the current quarter and $25,959 in the prior year quarter. These amounts were primarily comprised of dividends from our investments in money market funds. The increase in other income (expense), net from the prior year quarter to the current quarter was primarily attributable to higher average investment balances in the current quarter.

Current wording

Total other income (expense), net was $84,560 in the current quarter and $41,386 in the prior year quarter. These amounts were primarily comprised of dividends from our investments in money market funds. The increase in other income (expense), net from the prior year quarter to the current quarter was primarily attributable to higher average investment balances in the current quarter.

Previous wording

The following table summarizes our results of operations for the six months ended June 30, 2025 (the “current six months”) and the six months ended June 30, 2024 (the “prior year six months”):

Current wording

The following table summarizes our results of operations for the nine months ended September 30, 2025 (the “current nine months”) and the nine months ended September 30, 2024 (the “prior year nine months”):

Previous wording

Our revenues for the six months ended June 30, 2025 were $1,033,731, representing an increase of 49% as compared to revenues of $692,153 during the six months ended June 30, 2024. This increase is primarily attributable to significant volume increases, as well as improved pricing on products sold.

Current wording

Our revenues for the nine months ended September 30, 2025 were $1,701,859, representing an increase of 80% as compared to revenues of $945,752 during the nine months ended September 30, 2024. This increase is primarily attributable to significant volume increases, partially offset by the impacts of higher discounts on products sold and shifts in product price/mix.

Previous wording

For the six months ended June 30, 2025, approximately 55% of sales were processed on our online store (Lucyd.co), 40% on Amazon.com, and 4% through reseller partners, with 1% of our net revenues generated from Lucyd “Pro” app subscriptions. The decline in the proportional share of reseller sales versus the prior year quarter reflects the combination of (i) the uncertainty of the current economic environment in light of the current tariff and international trade situation 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. For the six months ended June 30, 2025, we generated an aggregate of $714,251 of revenue from sales of non-prescription smartglasses and accessories, $313,432 from sales of smartglasses with prescription lenses, and $6,048 of revenue from app subscriptions. All of the sales generated on Amazon.com were for non-prescription smartglasses and accessories (as we only offer prescription lenses through our website), while $313,432 of the online sales generated through Lucyd.co was related to smartglasses with prescription lenses.

Current wording

For the nine months ended September 30, 2025, approximately 55% of sales were processed on our online store (Lucyd.co), 40% on Amazon.com, and 4% through reseller partners, with 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. For the nine months ended September 30, 2025, we generated an aggregate of $1,213,333 of revenue from sales of non-prescription smartglasses and accessories, $479,264 from sales of smartglasses with prescription lenses, and $9,262 of revenue from app subscriptions. All of the sales generated on Amazon.com were for non-prescription smartglasses and accessories (as we only offer prescription lenses through our website), while online sales generated through Lucyd.co related to smartglasses both with and without prescription lenses.

Previous wording

Our total cost of goods sold increased to $825,863 for the six months ended June 30, 2025, as compared to $630,026 for the prior year six months. This year-over-year increase of 31% was primarily driven by 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 product certification costs.

Current wording

Our total cost of goods sold increased to $1,249,154 for the nine months ended September 30, 2025, as compared to $824,281 for the prior year nine months. This year-over-year increase of 52% was driven by 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 product certification costs.

Previous wording

Incremental custom duties and tariff costs accounted for the vast majority 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 current quarter. We also incurred significantly higher shipping costs during the current quarter 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 the 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, Montreal, and Rotterdam, and by switching to a just-in-time U.S. inventory replenishment model, we reduced our current quarter-to-date dutiable volume by approximately 70 % after the initial shipments. As a result, by the end of the quarter, we had reduced our tariff expense to a run rate of less than $15,000 per month, which is expected to restore gross profit margins to a level consistent with our pre-tariff business plan. Management continues to monitor trade policy and has contingency sourcing options in Southeast Asia should the U.S.-China tariff conditions materially change.

Current wording

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 quarter 2025 gross profit margins to a level that is 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.

Previous wording

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

Current wording

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

Previous wording

Cost of goods sold for the six months ended June 30, 2025 included but was not limited to the cost of frames (inclusive of the cost of tariffs, importation costs, and other inventory adjustments) of $566,936; the cost of prescription lenses incurred with our third-party vendor of $139,148; commissions, affiliate referral fees, and e-commerce platform fees of $59,252; and shipping and logistics costs of $42,763. Cost of goods sold for the six months ended June 30, 2024 included but was not limited to the cost of frames (inclusive of inventory adjustments) of $327,407; cost of prescription lenses incurred with our third-party vendor of $157,782; commissions, affiliate referral fees, and e-commerce platform fees of $69,895; shipping and logistics costs of $40,668; and product certification costs of $29,100.

Current wording

Cost of goods sold for the nine months ended September 30, 2025 included but was not limited to the cost of frames (inclusive of the cost of tariffs, importation costs, and other inventory adjustments) of $890,966; the cost of prescription lenses incurred with our third-party vendor of $184,513; commissions, affiliate referral fees, and e-commerce platform fees of $90,011; and shipping and logistics costs of $65,901. Cost of goods sold for the nine months ended September 30, 2024 included but was not limited to the cost of frames (inclusive of inventory adjustments) of $434,876; cost of prescription lenses incurred with our third-party vendor of $196,030; commissions, affiliate referral fees, and e-commerce platform fees of $95,852; shipping and logistics costs of $63,180; and product certification costs of $29,100.

Previous wording

Our gross profit for the current six months was $207,868, as compared to $62,127 for the prior year six months. Our gross profit margin was 20% in the current six months and 9% in the prior year six months, representing an increase of approximately 11 percentage points from the prior year period. This improvement in profitability was the primarily attributable to measures that we took in 2024 to reduce our costs per sale and increase our average order value, including changing lens suppliers, 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 six months.

Current wording

Our gross profit for the current nine months was $452,705, as compared to $121,471 for the prior year nine months. Our gross profit margin was 27% in the current nine months and 13% in the prior year nine months, representing an increase of approximately 14 percentage points from the prior year period. This improvement in profitability was the primarily attributable to measures that we took in 2024 to reduce our costs per sale and increase our average order value, including changing lens suppliers, 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 nine months.

Previous wording

In the near to medium term, we anticipate further growth in revenues in future quarters, largely in part due to the recent launch of our new Reebok® Powered by Lucyd product line, and the introduction of further variants of the popular Lucyd Armor product, 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.

Current wording

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.

Previous wording

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 are only just now recognizing 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 the launches of new product lines in the latter half of 2025 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.

Current wording

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 are only just now recognizing 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.

Previous wording

Our operating expenses increased by 6% to $4,282,731 for the six months ended June 30, 2025, as compared to $4,051,076 for the six months ended June 30, 2024. This increase was primarily due to the following:

Current wording

Our operating expenses increased by 10% to $6,448,395 for the nine months ended September 30, 2025, as compared to $5,872,483 for the nine months ended September 30, 2024. This increase was primarily due to the following:

Previous wording

Our general and administrative expenses were $2,402,213 for the six months ended June 30, 2025, or essentially flat as compared to $2,404,245 for the prior year six months. This minimal overall change was mainly attributable to the net result of a combination of multiple factors, including (i) higher compensation and benefit costs (approximately $133,000), (ii) an increase in legal costs of approximately $73,000, (iii) higher payments due under our multi-year license agreements, which increased our licensing expense by approximately $158,000, and (iv) higher IT and software costs (approximately $81,000). Partially offsetting these higher costs were (i) the fact that in the prior year six months 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 (ii) reductions in investor relations costs of approximately $131,000.

Current wording

Our general and administrative expenses were $3,679,521 for the nine months ended September 30, 2025, representing an increase of approximately $153,304 or approximately 4% compared to $3,526,217 for the prior year nine months. This modest increase in costs was mainly attributable to the net result of a combination of multiple factors, including (i) higher compensation (including stock-based compensation) and benefit costs (approximately $283,000), (ii) higher payments due under our multi-year license agreements, which increased our licensing expense by approximately $231,000, and (iii) higher IT and software costs (approximately $103,000). Partially offsetting these higher costs were (i) the fact that in the prior year nine months 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 (ii) reductions in investor relations costs of approximately $134,000.

Previous wording

Non-cash expenses – including depreciation, amortization, and stock-based compensation – comprised approximately 10% and 16% of our total general and administrative expenses in the current six months and prior year six months, respectively.

Current wording

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 nine months and prior year nine months, respectively.

Previous wording

Our sales and marketing expenses increased $227,990 or approximately 21% to $1,331,718 for the six months ended June 30, 2025 from $1,103,728 for the six months ended June 30, 2024. This increase was primarily driven by the combination of (i) higher advertising costs, largely related to the launch of our new Reebok® Powered by Lucyd product line during the current six months, and (ii) increased spending on events and trade shows, as we seek to grow and expand our network of potential B2B business partners. We continue to make significant investments in paid ads in order to build brand awareness, attract new customers, and increase our market share.

Current wording

Our sales and marketing expenses increased $418,296 or approximately 26% to $2,055,090 for the nine months ended September 30, 2025 from $1,636,794 for the nine months ended September 30, 2024. This increase was primarily driven by the combination of (i) higher advertising costs, largely related to the launch of our new Reebok® Powered by Lucyd product line during the current nine months, and (ii) increased spending on events and trade shows, as we grow and expand our network of potential business partners and retailers. To date this year, we have participated at both Vision Expo East and Vision Expo West in North America, the MIDO Eyewear Show in Italy, 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.

Previous wording

In the near to medium term, we expect that our sales and marketing expenses will 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.

Current wording

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.

Previous wording

Our research and development costs were $478,800 for the six months ended June 30, 2025, as compared to $473,103 for the six months ended June 30, 2024, representing a year-over-year increase of approximately 1% or essentially flat compared to the prior year period.

Current wording

Our research and development costs were $608,784 for the nine months ended September 30, 2025, as compared to $604,472 for the nine months ended September 30, 2024, representing a year-over-year increase of approximately 1% or essentially flat compared to the prior year period.

Previous wording

Our related party management fee was $70,000 for each of the six-month periods ended June 30, 2025 and 2024, based on the terms of the management services agreement between us and Tekcapital.

Current wording

Our related party management fee was $105,000 for each of the nine-month periods ended September 30, 2025 and 2024, based on the terms of the management services agreement between us and Tekcapital.

Previous wording

Total other income (expense), net was $190,066 for the six months ended June 30, 2025. This amount was primarily comprised of the combination of (i) realized gains on U.S. Treasury bills originally purchased in September 2024 which matured in March 2025 and (ii) dividends from our investments in money market funds.

Current wording

Total other income (expense), net was $274,626 for the nine months ended September 30, 2025. This amount was primarily comprised of interest and dividends earned on our investments in U.S. Treasury bills and money market funds.

Previous wording

Total other income (expense), net in the six months ended June 30, 2024 was $69,239. This amount was primarily comprised of dividends from our investments in money market funds, and, to a lesser extent, interest income earned on a short-term loan to a related party.

Current wording

Total other income (expense), net in the nine months ended September 30, 2024 was $110,625. This amount was primarily comprised of dividends from our investments in money market funds, and, to a lesser extent, interest income earned on a short-term loan to a related party.