Innovative Eyewear(LUCY) - 2025 Q1 - Quarterly Report

Part I. Financial Information Item 1. Condensed Financial Statements (Unaudited) This section presents the unaudited condensed financial statements for the quarter ended March 31, 2025, compared to prior periods Condensed Balance Sheets Total assets decreased to $7.94 million as of March 31, 2025, due to maturing investments that increased cash reserves Condensed Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $5,258.2 | $2,629.0 | | Investments | $0.0 | $4,895.2 | | Total Current Assets | $7,329.2 | $9,238.2 | | Total Assets | $7,941.3 | $9,838.3 | | Liabilities & Equity | | | | Total Current Liabilities | $447.2 | $737.7 | | Total Liabilities | $447.2 | $743.2 | | Total Stockholders' Equity | $7,494.0 | $9,095.1 | Condensed Statements of Operations The company reported Q1 2025 revenues of $454,501 and a reduced net loss of $1.78 million, with significant gross profit improvement Q1 2025 vs. Q1 2024 Statement of Operations | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues, net | $454,501 | $383,471 | | Gross Profit | $220,533 | $6,951 | | Total Operating Expenses | ($2,124,324) | ($2,021,542) | | Net Loss | ($1,778,703) | ($1,971,311) | | Loss per share, basic and diluted | ($0.72) | ($2.59) | Condensed Statements of Changes in Stockholders' Equity Stockholders' equity decreased by approximately $1.6 million to $7.49 million in Q1 2025, primarily driven by the quarterly net loss - Total stockholders' equity decreased by approximately $1.6 million during Q1 2025, mainly due to the net loss for the period[15] Condensed Statements of Cash Flows Cash and cash equivalents increased by $2.63 million in Q1 2025, driven by cash from investing activities offsetting cash used in operations Q1 2025 vs. Q1 2024 Cash Flow Summary | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash from operating activities | ($2,311,049) | ($1,467,355) | | Net cash from investing activities | $4,940,232 | ($95,538) | | Net cash from financing activities | $0 | ($75,988) | | Net Change In Cash | $2,629,183 | ($1,638,881) | Notes to the Financial Statements Notes detail the smart eyewear business, a subsequent warrant transaction, significant royalty commitments, and a new related-party loan facility - The company develops and sells smart eyewear and has exclusive license rights for the Lucyd brand and rights to sell branded eyewear under the Nautica, Eddie Bauer, and Reebok brands[20] - In April 2025, the company closed a warrant inducement transaction for gross proceeds of approximately $1.8 million[50][79] Future Minimum Royalty Payments Under License Agreements | Year | Minimum Payment | | :--- | :--- | | 2025 | $60,000 | | 2026 | $834,000 | | 2027 | $1,290,000 | | 2028 | $1,543,000 | | 2029 | $1,778,000 | | Thereafter (through 2033) | $8,129,000 | | Total | $13,634,000 | - In April 2025, the company established a new intercompany loan facility, agreeing to lend up to $500,000 to Tekcapital Europe, Ltd[81] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 19% YoY revenue increase, significant gross margin expansion, new product lines, and sufficient liquidity for the next year - Revenues for Q1 2025 improved 19% YoY, while gross margins expanded significantly from 2% to 49%[90] - The company has launched several new product lines, including Lucyd Armor safety glasses and Reebok sport smart sunglasses, and plans to offer over 40 total smart eyewear SKUs by the end of 2025[90][98] - The Lucyd app, featuring ChatGPT integration, is a key part of the company's strategy to enhance user experience and create new revenue streams through a 'Pro' subscription model[92][93] - The company is actively monitoring new U.S. tariffs on goods from China but notes that smart eyewear currently faces a lower effective duty rate (27.5%) compared to traditional eyewear (155%), which could be a competitive advantage[105][120] Results of Operations Q1 2025 revenue grew 19% YoY to $454,501, with gross margin surging to 49% due to lower costs, while operating expenses rose 5% Q1 2025 vs. Q1 2024 Operational Results | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues, net | $454,501 | $383,471 | 19% | | Cost of Goods Sold | ($233,968) | ($376,520) | -38% | | Gross Profit | $220,533 | $6,951 | n/m | | Gross Margin | 49% | 2% | 47 p.p. | | Total Operating Expenses | ($2,124,324) | ($2,021,542) | 5% | - The increase in revenue was primarily due to higher sales volumes from new product lines (Nautica, Eddie Bauer, Lucyd Armor) and improved pricing strategies[108][109][110] - The significant decrease in cost of goods sold was driven by greater economies of scale in manufacturing and engaging a new, lower-cost lens supplier[115][116] Liquidity and Capital Resources The company holds $5.3 million in cash with no debt, and a recent $1.8 million financing ensures sufficient liquidity for the next twelve months - As of March 31, 2025, cash and cash equivalents were approximately $5.3 million, and the company had no debt obligations[130][131] - In April 2025, a warrant inducement transaction closed, providing gross proceeds of approximately $1.8 million for working capital and general corporate purposes[137][138] - Management believes existing cash and access to a related-party credit facility will be sufficient to fund operations for at least the next twelve months[139] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company is not required to provide these disclosures as a smaller reporting company - This disclosure is not required for smaller reporting companies[143] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of March 31, 2025, due to material weaknesses - Management concluded that due to material weaknesses in internal control over financial reporting, the company's disclosure controls and procedures were not effective as of March 31, 2025[144] - No changes in internal control over financial reporting occurred during the first quarter of 2025 that materially affected, or are reasonably likely to materially affect, internal controls[145] Part II. Other Information Item 1. Legal Proceedings The company is not currently involved in any material pending legal proceedings - The company is not currently the subject of any material pending legal proceedings[147] Item 1A. Risk Factors There have been no material changes to risk factors from those disclosed in the 2024 Annual Report on Form 10-K - There have been no material changes in risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[148] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds An April 2025 warrant inducement transaction generated $1.8 million in gross proceeds through the issuance of new unregistered warrants - On April 11, 2025, the company entered into inducement agreements with certain warrant holders, allowing them to exercise warrants for cash at a reduced price of $2.60 per share[149][150] - The transaction closed on April 14, 2025, with gross proceeds of approximately $1.8 million[153] - The newly issued Series G and H warrants, along with the underlying shares, were sold without registration under the Securities Act, in reliance on exemptions provided by Section 4(a)(2) and Rule 506[155] Item 3. Defaults Upon Senior Securities The company reports no defaults upon its senior securities - None[156] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not Applicable[157] Item 5. Other Information The company reports no other information for this period - None[158] Item 6. Exhibits This section lists filed exhibits, including Sarbanes-Oxley certifications and Inline XBRL financial data files - The filing includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, along with various Inline XBRL documents[159]