Innovative Eyewear(LUCY) - 2025 Q4 - Annual Report

Financial Performance - Revenues for the year ended December 31, 2025, were $2,661,669, representing a 63% increase compared to $1,636,440 in 2024[236] - Gross profit for 2025 was $567,451, a 164% increase from $215,190 in 2024[236] - Total cost of goods sold increased to $2,094,218 in 2025 from $1,421,250 in 2024, primarily due to higher volumes and increased custom duties and tariffs[247] - Gross profit rose to $567,451 in 2025, with a gross profit margin of 21%, up from 13% in the prior year, reflecting an 8 percentage point improvement[251] - Operating expenses totaled $9,062,415 in 2025, representing a 340% increase compared to $8,138,892 in 2024[236] - Operating expenses increased by approximately 11% to $9,062,415 in 2025, driven by higher general and administrative expenses, including a 17% rise in compensation and benefits costs[255] - Sales and marketing expenses grew by approximately 10% to $2,971,193 in 2025, influenced by increased spending on events and trade shows to expand the business network[259] - Research and development costs decreased by approximately 11% to $725,388 in 2025, primarily related to the development of new smartglass variants and improvements to the Lucyd app[262] - Net cash flows from operating activities were $(7,275,301) in 2025, compared to $(6,739,630) in 2024, reflecting ongoing net losses[267] - Net working capital as of December 31, 2025, was $8,389,807, a decline of approximately 1% from $8,500,498 in 2024[268] Product Performance - The Lucyd Armor product line sold over 12,000 units in 2025, accounting for approximately 50% of total smartglass units sold[238] - The company launched four alternate variants of the Lucyd Armor product line to cater to a wider range of safety glass users[238] - Customer ratings for the latest products have improved, indicating positive feedback on design and functionality[232] - Lucyd Armor smartglasses and Reebok® Powered by Lucyd smartglasses are expected to drive significant revenue growth in 2026, with a focus on international expansion in the UK, EU, Canada, and Latin America starting in late 2025[246] Sales Channels - Approximately 51% of sales in 2025 were processed through the online store (Lucyd.co), 40% on Amazon.com, and 8% through reseller partners[242] - The company increased the number of retail store locations from over 350 at the beginning of 2025 to over 400 by the end of 2025[231] Financial Strategy - A minor price increase of $15 was instituted for most custom lens orders to help offset new tariff expenses[235] - The company opened three new fulfillment centers in Europe, Canada, and China to improve international business fluidity[235] - The company sold 606,377 shares of common stock from August 15, 2025, to December 12, 2025, generating approximately $1.2 million in gross proceeds for working capital and corporate purposes[273] - The Company entered into inducement letter agreements to exercise existing warrants for cash, resulting in gross proceeds of approximately $1.8 million on April 14, 2025, and $2.2 million on June 24, 2025, with net proceeds of approximately $1.5 million and $1.8 million respectively, intended for working capital and general corporate purposes[274][275] - During May and June 2025, the Company received gross cash proceeds of approximately $2.6 million from the exercise of Series G and Series H Warrants, also designated for working capital and general corporate purposes[276] - The Company has a financing agreement with Lucyd Ltd. allowing for up to $1,250,000 in services or cash, with a convertible note bearing 10% interest and maturing on September 1, 2027[277] - The Company anticipates continued operating losses as it invests in business expansion, but believes existing cash and cash equivalents will fund operations for at least the next twelve months[279] - Future capital requirements will depend on factors such as growth in retail store customers and e-commerce needs, with potential for additional equity or debt financing if current liquidity sources are insufficient[280] Inventory and Returns - As of December 31, 2025, the Company recorded provisions for excess inventory of $59,000, up from $0 in 2024, indicating a need for inventory management[285] - Revenue is primarily generated from sales of optical glasses and subscriptions to the "Pro" version of the Lucyd app, with a deferred revenue balance of $4,506 as of December 31, 2025[287][294] - The Company recorded an allowance for sales returns of $14,669 as of December 31, 2025, slightly down from $15,746 in 2024, reflecting historical return trends[296] Stock Compensation - Stock-based compensation expenses are recognized based on the grant date fair value, with the Black-Scholes-Merton model used for estimating fair value of stock options[297][298]