Innovative Eyewear(LUCY) - 2023 Q2 - Quarterly Report

Product Development and Launches - The company launched version 2.0 of Lucyd Lyte eyewear, increasing music playback and call time to 12 hours, a 50% improvement over version 1.0[76] - The flagship product line's price increased from $149 to $199 for acetate models and from $179 to $229 for titanium models with the launch of version 2.0[93] - The company plans to introduce eight styles of Nautica smart eyewear and six to twelve additional styles of Lucyd Lyte glasses in 2023[77] - The introduction of a new modular display system aims to enhance customer education and product sell-through in retail environments[84] Sales and Market Presence - As of June 30, 2023, the company has received 15,422 cumulative online orders since inception, indicating growth in e-commerce efforts[91] - The company added approximately 50 new retail partners in Q1 2023 and 25 new independent optical stores in Q2 2023, expanding its retail presence[83] - The company has over 300 retail stores selling Lucyd Lyte across 250+ unique wholesale accounts, indicating strong market penetration[88] - Approximately 32% of sales were processed on the online store (Lucyd.co), 36% on Amazon, and 32% with reseller partners for the three months ended June 30, 2023[111] - Approximately 33% of sales were processed on the online store (Lucyd.co), 34% on Amazon, and 33% with reseller partners for the six months ended June 30, 2023[130] Financial Performance - Revenues for the three months ended June 30, 2023, were $169,929, a decrease of approximately 17% compared to $204,741 for the same period in 2022[109] - Revenues for the six months ended June 30, 2023, were $314,850, a decrease of approximately 29% from $440,763 in the same period of 2022[129] - Gross deficit was $29,816 for the three months ended June 30, 2023, compared to a gross profit of $43,247 for the same period in 2022[118] - Gross deficit was $19,525 for the six months ended June 30, 2023, compared to a gross profit of $117,637 for the same period in 2022[137] Cost and Expenses - Cost of goods sold increased to $199,745 for the three months ended June 30, 2023, compared to $161,494 for the same period in 2022, primarily due to significant custom duties and higher Amazon fees[114] - Total cost of goods sold increased to $334,375 for the six months ended June 30, 2023, compared to $323,126 for the same period in 2022[133] - Operating expenses rose by 10% to $1,304,475 for the three months ended June 30, 2023, compared to $1,189,614 for the same period in 2022, driven by investments in growth and development[121] - Operating expenses rose by 66% to $2,743,713 for the six months ended June 30, 2023, from $2,452,190 in the same period of 2022[139] - General and administrative expenses increased by 36% to $968,354 for the three months ended June 30, 2023, due to higher employee-related costs and new executive agreements[121] - General and administrative expenses increased by 146% to $1,962,126 for the six months ended June 30, 2023, compared to $1,317,108 for the same period in 2022[139] - Sales and marketing expenses decreased by 74% to $103,643 for the three months ended June 30, 2023, primarily due to the reversal of previously recognized stock-based compensation[122] - Sales and marketing expenses decreased by 139% to $362,940 for the six months ended June 30, 2023, from $976,714 in the same period of 2022[140] Research and Development - Research and development costs increased by 276% to $197,478 for the three months ended June 30, 2023, compared to $52,560 for the same period in 2022[124] - Research and development costs increased by 59% to $348,647 for the six months ended June 30, 2023, compared to $88,367 for the same period in 2022[142] Cash Flow and Financing - Net cash flows from operating activities were $(3,270,960) for the six months ended June 30, 2023, compared to $(1,136,112) for the same period in 2022[146] - Net cash flows from investing activities were $(2,115,261) for the six months ended June 30, 2023, compared to $(97,754) for the same period in 2022[147] - Net cash flows provided by financing activities were $7,151,557 for the six months ended June 30, 2023, compared to $1,189,017 for the same period in 2022[148] Future Outlook - The company anticipates gross profit for the fiscal year ending December 31, 2023, to improve due to economies of scale from large anticipated wholesale and retail partner orders[119] - The company expects prescription lens costs to gradually decrease as a percentage of overall cost of goods sold as third-party retail stores become the primary sales channel[117] - The anticipated launch of the Nautica Powered by Lucyd line in 2024 represents significant revenue potential due to the partnership with Authentic Brands Group[135] - The company expects operating losses to continue in the foreseeable future as it invests in business expansion and development[149] App Development and Features - The Lucyd app for iOS/Android allows users to interact with ChatGPT AI, representing a significant marketing opportunity and potential revenue stream[79] - The company plans to enhance the Lucyd app with features such as AI access beyond ChatGPT and an audio content library[142] - The company aims to launch a peer-to-peer content marketplace through the Vyrb app, focusing on audio and wearable content[142] Tax and Compliance - The company has incurred taxable losses since inception but is current in its tax filing obligations[158] - As of June 30, 2023, the company did not have any off-balance sheet arrangements[151]