Innovative Eyewear Q3 net loss widens 25% to $2.29M
Nasdaq gave LUCY until April 7, 2027, to regain bid-price compliance; stockholders are scheduled to consider a reverse-split authorization.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Rhea-AI Filing Summary
Innovative Eyewear, Inc. (LUCY) reported third-quarter revenue of $1,009,696, up 51% year over year, while net loss increased 25% to $2,287,141. For the first nine months, revenue rose 64% to $2,793,776 and net loss increased 10% to $6,267,327. Q3 wholesale revenue was $223,305, versus $25,796 a year earlier. Gross margin fell to 32% from 37%, as provisions for excess and slow-moving inventory on certain cobranded products weighed on results.
As of September 30, 2026, total liquidity was approximately $4.5 million, including $3,197,061 of cash and cash equivalents; management believes liquidity plus related-party borrowing availability will fund operations for at least 12 months. The company received net proceeds of approximately $1,411,000 from January at-the-market sales and $2,562,000 from a July warrant inducement. On October 9, Nasdaq notified the company that its bid price had been below $1.00 for 30 consecutive business days, giving it 180 calendar days, through April 7, 2027, to regain compliance. Stockholders are scheduled to vote November 16, 2026, on a proposal authorizing the board to effect a 1-for-2 to 1-for-12 reverse split.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointRevenue grew 51% in Q3 and 64% year to date.
Negative
- Major pointNasdaq bid-price notice gives LUCY until April 7, 2027.
- Moderate pointNet loss rose 25% in Q3 and 10% year to date.
- Moderate pointGross margin declined to 32% from 37% in Q3.
Filing Explained
The one million two hundred fifty thousand dollar related-party facility remains undrawn, so it is capacity—not cash raised—and conversion remains contingent.
This 10-Q reports an October 23 amendment to Innovative Eyewear's related-party facility: it remains undrawn, but permits up to
If drawn and a note is issued, it retains 10% interest and an
Separately, on
Key Figures
Key Terms
at-the-market offering financial
warrant inducement transaction financial
contract liability financial
held-to-maturity financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much revenue did LUCY report in the third quarter of 2026?
Why did LUCY's gross margin decline in Q3 2026?
What is LUCY's Nasdaq compliance deadline?
What are the terms of LUCY's amended Lucyd financing agreement?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from __________ to __________
Commission file number
|
|
| (Exact name of registrant as specified in its charter) |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices, including zip code) |
| ( |
| (Registrant’s telephone number, including area code) |
| Not Applicable |
| (Former name, former address and former fiscal year, if changed since last report) |
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files.)
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated Filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
As of November 9, 2026, there were shares of the registrant’s common stock issued and outstanding.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The discussions in this Quarterly Report on Form 10-Q contain forward-looking statements reflecting our current expectations that involve risks and uncertainties. These forward-looking statements include, but are not limited to, our strategy, competition, future operations and production capacity, our supply chain and logistics, future financial position, future revenues, projected costs, profitability, expected cost reductions, capital adequacy, expectations regarding demand and acceptance for our technologies, growth opportunities and trends in the market in which we operate, prospects and plans, and objectives of management. The words “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions, and expectations disclosed in the forward-looking statements that we make. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 2025, and in our other filings with the Securities and Exchange Commission. We do not assume any obligation to update any forward-looking statements except as required by law.
INNOVATIVE EYEWEAR, Inc.
Table of Contents
| Page No. | ||||
| Part I. Financial Information | 1 | |||
| Item 1. | Condensed Financial Statements (Unaudited) | 1 | ||
| Condensed Balance Sheets as of September 30, 2026 (Unaudited) and December 31, 2025 | 1 | |||
| Condensed Statements of Operations for the three and nine months ended September 30, 2026 and 2025 (Unaudited) | 2 | |||
| Condensed Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2026 and 2025 (Unaudited) | 3 | |||
| Condensed Statements of Cash Flows for the nine months ended September 30, 2026 and 2025 (Unaudited) | 4 | |||
| Notes to the Condensed Financial Statements (Unaudited) | 5 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 29 | ||
| Item 4. | Controls and Procedures | 29 | ||
| Part II. Other Information | 30 | |||
| Item 1. | Legal Proceedings | 30 | ||
| Item 1A. | Risk Factors | 30 | ||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 30 | ||
| Item 3. | Defaults Upon Senior Securities | 30 | ||
| Item 4. | Mine Safety Disclosures | 31 | ||
| Item 5. | Other Information | 31 | ||
| Item 6. | Exhibits | 32 | ||
| Signatures | 33 | |||
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INNOVATIVE EYEWEAR, INC.
CONDENSED BALANCE SHEETS
September 30, 2026 (Unaudited) and December 31, 2025
| 2026 | 2025 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Investments | ||||||||
| Accounts receivable, net | ||||||||
| Prepaid expenses | ||||||||
| Inventory prepayments | ||||||||
| Inventory, net | ||||||||
| Due from Tekcapital and Affiliates | ||||||||
| Other current assets | ||||||||
| Total Current Assets | ||||||||
| Non-Current Assets | ||||||||
| Intangible assets, net | ||||||||
| Property and equipment, net | ||||||||
| Other non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Liabilities | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Deferred revenue | ||||||||
| Total Current Liabilities | ||||||||
| Non-Current Liabilities | ||||||||
| Long-term payment plan with vendor | ||||||||
| Deferred revenue | ||||||||
| TOTAL LIABILITIES | ||||||||
| Commitments and contingencies (see Note 9) | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock (par value $, shares authorized: and shares issued and outstanding as of September 30, 2026 and December 31, 2025, respectively) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying Notes to the Unaudited Condensed Financial Statements.
1
INNOVATIVE EYEWEAR, INC.
CONDENSED STATEMENTS OF OPERATIONS
For the three and nine months ended September 30, 2026 and 2025
(Unaudited)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues, net | $ | $ | $ | $ | ||||||||||||
| Less: Cost of Goods Sold | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||
| General and administrative | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Sales and marketing | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Research and development | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Related party management fee | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total Operating Expenses | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other Income (Expense), net | ||||||||||||||||
| Net Loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted average number of shares outstanding | ||||||||||||||||
| Loss per share, basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
See accompanying Notes to the Unaudited Condensed Financial Statements.
2
INNOVATIVE EYEWEAR, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For the three and nine months ended September 30, 2026 and 2025
(Unaudited)
| Common Stock | Additional Paid In |
Accumulated | Total Stockholders’ |
|||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balances as of January 1, 2026 | $ | $ | $ | ( |
) | $ | ||||||||||||||
| At-the-Market Offerings | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||||
| Balances as of March 31, 2026 | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Issuance of shares related to vesting of restricted share units | ( |
) | ||||||||||||||||||
| Issuance of shares to influencer | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||||
| Balances as of June 30, 2026 | $ | $ | $ | ( |
) | $ | ||||||||||||||
| July 2026 Warrant Inducement Transaction | ||||||||||||||||||||
| Issuance of shares related to vesting of restricted share units | ( |
) | ||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||||
| Balances as of September 30, 2026 | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Balances as of January 1, 2025 | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Cancellation of shares by stockholder | ( |
) | ||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||||
| Balances as of March 31, 2025 | $ | $ | $ | ( |
) | $ | ||||||||||||||
| April 2025 Warrant Inducement Transaction | ||||||||||||||||||||
| June 2025 Warrant Inducement Transaction | ||||||||||||||||||||
| Other exercises of warrants in ordinary course | ||||||||||||||||||||
| Issuance of shares to brand ambassador | ||||||||||||||||||||
| Issuance of shares related to vesting of restricted share units | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||||
| Balances as of June 30, 2025 | $ | $ | $ | ( |
) | $ | ||||||||||||||
| At-the-Market Offerings | ||||||||||||||||||||
| Issuance of shares related to vesting of restricted share units | ||||||||||||||||||||
| Additional costs related to Warrant Inducement Transactions | - | ( |
) | ( |
||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||
| Net loss | - | ( |
) | ( |
) | |||||||||||||||
| Balances as of September 30, 2025 | $ | $ | $ | ( |
) | $ | ||||||||||||||
See accompanying Notes to the Unaudited Condensed Financial Statements.
3
INNOVATIVE EYEWEAR, INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2026 and 2025
(Unaudited)
| 2026 | 2025 | |||||||
| Operating Activities | ||||||||
| Net Loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Interest income on loan to Tekcapital Europe, Ltd. | ( |
) | ||||||
| Interest income on debt securities (U.S. Treasury bills) | ( |
) | ( |
) | ||||
| Realized gains on debt securities (U.S. Treasury bills) | ( |
) | ( |
) | ||||
| Stock-based compensation | ||||||||
| Nonemployee stock-based payment expense | ||||||||
| Expenses paid by Tekcapital and Affiliates | ||||||||
| Provision for doubtful accounts | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( |
) | ||||||
| Accounts payable and accrued expenses | ( |
) | ( |
) | ||||
| Prepaid expenses | ( |
) | ( |
) | ||||
| Inventory prepayments | ( |
) | ||||||
| Inventory | ( |
) | ( |
) | ||||
| Other assets | ( |
) | ||||||
| Contract assets and deferred revenue | ||||||||
| Net cash flows from operating activities | ( |
) | ( |
) | ||||
| Investing Activities | ||||||||
| Purchases of debt securities (U.S. Treasury bills) | ( |
) | ( |
) | ||||
| Proceeds from redemption of debt securities (U.S. Treasury bills) | ||||||||
| Loans made to Tekcapital Europe, Ltd. | ( |
) | ( |
) | ||||
| Repayment of amounts loaned to Tekcapital Europe, Ltd. | ||||||||
| Patent costs | ( |
) | ( |
) | ||||
| Purchases of property and equipment | ( |
) | ||||||
| Net cash flows from investing activities | ( |
) | ||||||
| Financing Activities | ||||||||
| Proceeds from at-the-market offerings of common stock | ||||||||
| Proceeds from exercises of warrants | ||||||||
| Proceeds from sale of common stock withheld from employees to cover withholding taxes on vested restricted share units | ||||||||
| Incurrence of obligation under long-term payment plan with vendor | ||||||||
| Payments made under long-term payment plan with vendor | ( |
) | ( |
) | ||||
| Repayment of amounts due to Tekcapital and Affiliates | ( |
) | ( |
) | ||||
| Net cash flows from financing activities | ||||||||
| Net Change in Cash and cash equivalents | ( |
) | ||||||
| Cash and cash equivalents at Beginning of Period | $ | $ | ||||||
| Cash and cash equivalents at End of Period | $ | $ | ||||||
| Significant Non-Cash Transactions | ||||||||
| Expenses paid for by Tekcapital and Affiliates, reported as change in Due to/from Tekcapital and Affiliates | ||||||||
| Issuance of shares for prepayment to brand ambassador | ||||||||
See accompanying Notes to the Unaudited Condensed Financial Statements.
4
INNOVATIVE EYEWEAR, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
September 30, 2026 and 2025 (Unaudited)
NOTE 1 – GENERAL INFORMATION
Company Description
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 smart eyewear – including prescription eyeglasses, ready-to-wear sunglasses, safety glasses, and sport glasses – which are designed to allow our customers to remain connected to their digital lives. We sell smart eyewear under our own Lucyd brand, which includes the Lucyd Lyte® and Lucyd Armor product lines, as well as cobranded smart eyewear under the Nautica® Powered by Lucyd, Eddie Bauer® Powered by Lucyd, and Reebok® Powered by Lucyd product lines.
The Company was originally 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 3% of our issued and outstanding shares of common stock as of September 30, 2026.
Basis of Presentation
The accompanying condensed balance sheet as of December 31, 2025 (which has been derived from audited financial statements) and the unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X promulgated by the United States Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. These unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 25, 2026.
In the opinion of management, all adjustments considered necessary for the fair presentation of the financial statements for the periods presented have been included. The results of operations for the three and nine months ended September 30, 2026 are not necessarily indicative of the results to be expected for future periods or the full year.
Reclassifications
Certain prior period amounts have been reclassified to conform to current period presentation – specifically, $
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, particularly given the significant uncertainties associated with the current state of international trade and the overall economic environment.
5
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 single-segment basis. The accounting policies of our single reportable segment are the same as those for the Company as a whole.
The Company’s chief operating decision maker, as such term is defined under GAAP, is our Chief Executive Officer. 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 total net loss. The measure of segment assets is reported on the balance sheet as total assets. The Company does not have intra-entity sales or transfers.
NOTE 2 – LIQUIDITY
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 nine months ended September 30, 2026, the Company raised approximately $
NOTE 3 – REVENUE AND ACCOUNTS RECEIVABLE
Revenue
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 also 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.
The following table presents disaggregated revenue for the three and nine months ended September 30, 2026 and 2025:
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| E-commerce channels | $ | $ | $ | $ | ||||||||||||
| Wholesale channels | ||||||||||||||||
| App store subscriptions | ||||||||||||||||
| Total revenues, net | $ | $ | $ | $ | ||||||||||||
6
For
all of our product sales, at the time of sale, we establish a reserve for returns, based on historical experience and expected
future returns as well as review of individual returns received in the month following the balance sheet date; such reserve is
recorded as a reduction of sales. The Company recorded an allowance for sales returns of $
In instances where the collectability 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. With respect to such instances, during the three and nine months ended September 30, 2025, we recognized $
The
balance of revenue for orders received but not yet fulfilled that has been deferred on our balance sheet as a contract
liability was $
The balance of unearned revenue related to app subscriptions that has been deferred on our balance sheet as a contract liability was $
The balance of unearned revenue related to extended product service warranties purchased by customers that have been deferred on our balance sheet as a contract liability was $
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 credit losses. The allowance for credit losses 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 collectability and collection efforts. Management continuously assesses the collectability of receivables and adjusts estimates based on actual experience and future expectations. Receivable balances are written-off against the allowance when such balances are deemed to be uncollectable.
A roll forward of the allowance for credit losses for the nine months ended September 30, 2026 and 2025 is as follows:
| 2026 | 2025 | |||||||
| Balance at January 1 | $ | $ | ||||||
| Bad debt expense | ||||||||
| Write-offs | ( |
) | ( |
) | ||||
| Other | ||||||||
| Balance at September 30 | $ | $ | ||||||
7
NOTE 4 – INVENTORY
Our inventory predominantly 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. Also included within inventory as of both at September 30, 2026 and December 31, 2025 was $
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 $
Our
non-product inventory consists of virtual try-on kiosks, modular display systems, and interactive LCD fixtures that have not yet
been deployed at retailers, as well as certain accessories that are intended to be used as promotional items, rather than sold in
the normal course of business. These items are presented in the condensed balance sheet within other current assets as of
September 30, 2026, and the balance of such non-product inventory was $
NOTE 5 – INVESTMENTS
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.
As of January 1, 2025, the Company held investments in U.S. Treasury bills, which were purchased in September 2024 and matured in March 2025. These investments were classified as “held-to-maturity” and were recorded at amortized cost. Upon maturity of these investments, the Company recognized income of $
In April 2025, the Company purchased an investment
in U.S. Treasury bills for $
There were no amounts classified as “held-to-maturity” investments as of December 31, 2025.
In January 2026, the Company
purchased investments in U.S. Treasury bills, which matured in April 2026. These investments were classified as “held-to-maturity”
and were recorded at amortized cost. The Company recognized income related to these investments of $
In
April 2026, the Company purchased investments in U.S. Treasury bills, which will mature in October 2026. During the three and nine
months ended September 30, 2026, the Company recognized $
| Quoted prices in active markets for identical assets (Level 1) |
Significant observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
Total | |||||||||||||
| Investments in U.S. Treasury bills | $ | $ | $ | $ | ||||||||||||
8
NOTE 6 – TANGIBLE AND INTANGIBLE ASSETS
| September 30, | December 31, | |||||||
| Property & Equipment | 2026 | 2025 | ||||||
| Display Booths and Kiosks | $ | $ | ||||||
| Computer Equipment | ||||||||
| Office Equipment | ||||||||
| Internal-Use Software and Website Costs | ||||||||
| Property and equipment, gross | ||||||||
| Less: Accumulated depreciation | ( |
) | ( |
) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense for the three months ended September 30, 2026 and 2025 was $
Depreciation expense for the nine months ended September 30, 2026 and 2025 was $
| September 30, | December 31, | |||||||
| Finite-lived intangible assets | 2026 | 2025 | ||||||
| Patent Costs | $ | $ | ||||||
| Less: Accumulated amortization | ( |
) | ( |
) | ||||
| Intangible assets, net | $ | $ | ||||||
Amortization expense for the three months ended September 30, 2026 and 2025 was $
Amortization expense for the nine months ended September 30, 2026 and 2025 was $
NOTE 7 – INCOME TAXES
At
the end of each interim reporting period, the Company estimates its effective tax rate expected to be applied for the full year. This
estimate is used to determine the income tax provision or benefit on a year-to-date basis and may change in subsequent interim periods.
The Company has
NOTE 8 – RELATED PARTY TRANSACTIONS AND AGREEMENTS
Management Service Agreement
The Company is party to 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), which was originally entered into in 2020 and subsequently amended in 2022. While the agreement does not stipulate a specific maturity date, it can be terminated with 30 calendar days written notice by any party.
9
Under this agreement, the related party provides the following services to us, for which we are billed $35,000 per quarter:
| ● | Support and advice to the Company in accordance with their area of expertise; |
| ● | Research, technical and legal review, recruitment, software development, marketing, public relations, and advertisement; and |
| ● | Advice, assistance, and consultation services to support the Company or in relation to any other related matter. |
During the three months ended September 30, 2026 and 2025, the Company incurred $
Rent of Office Space
Since 2022, under an agreement between the Company and Tekcapital Europe, Ltd, Tekcapital bills 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, 2027. The Company recognized $
April 2025 Loan to Tekcapital Europe, Ltd.
On April 23, 2025, 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 agreed to make a loan facility available to Tekcapital Europe, Ltd. for up to a maximum of $
December 2025 Loan to Tekcapital Europe, Ltd.
On December 19, 2025, 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 agreed to make a loan facility available to Tekcapital Europe, Ltd. for up to a maximum of $
On
February 24, 2026, Tekcapital Europe, Ltd. repaid in full all of the outstanding balance of the loan that the Company had made
to Tekcapital on December 19, 2025. The total amount paid to the Company was $
2026 Loan to Tekcapital Europe, Ltd.
On July 21, 2026, the Company entered into a new 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 agreed to make a loan facility available to Tekcapital Europe, Ltd. for up to a maximum of $300,000. Tekcapital Europe, Ltd. was able to receive advances under this facility upon request through September 21, 2026; any amounts advanced to Tekcapital Europe, Ltd. bear simple interest at a rate of 12% per annum, and are required to be repaid on or before October 21, 2026. Tekcapital Plc executed the agreement as guarantor for Tekcapital Europe, Ltd. on the full amount of the loan.
10
On July 23, 2026, Tekcapital Europe, Ltd. borrowed
$
The Company recognized interest income on loans
to Tekcapital Europe, Ltd. of $
Lucyd Ltd. Financing Agreement
On March 1, 2024, the Company entered into an agreement with Lucyd Ltd. pursuant to which the Company could receive up to $
On March 1, 2025, the Company and Lucyd Ltd. entered into an amendment of this agreement, such that upon issuance, the convertible note would have a maturity date of September 1, 2026. There were no other changes to the terms and provisions of the agreement.
On March 11, 2026, the Company and Lucyd Ltd. entered into a further amendment of this agreement, such that upon issuance, the convertible note will have a maturity date of September 1, 2027. There were no other changes to the terms and provisions of the agreement.
The Company has not borrowed any amounts under this agreement with Lucyd Ltd.
NOTE 9 – COMMITMENTS AND CONTINGENCIES
License Agreements
In 2022 and 2023, 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 (i.e., 2027 and 2028).
The aggregate future minimum payments due under these license agreements are as follows:
| Remainder of 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter (through 2033) | ||||
| Total | $ |
11
If the Company were to exercise its cancellation rights during the fifth year of each agreement, the aggregate future minimum payments due under these license agreements would be reduced to $3,428,000.
The Company recognized $
Long-Term Payment Plan for Information Technology System and Services
The
Company entered into a long-term payment plan agreement with Oracle for the payment of costs related to the implementation of the Company’s
new ERP system (which went live in April 2025) and related cloud services. Under this agreement, the Company is obligated to make
payments of $4,035 per month through July 2027. As of September 30, 2026, the Company’s remaining obligation under this
arrangement was $
Leases
Our executive offices are located at 11900 Biscayne Blvd., Suite 630, Miami, Florida 33181. Our executive offices are provided to us by a related party (see Note 8). We consider our current office space adequate for our current operations.
Other Commitments
See related party management services agreement discussed in Note 8.
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.
International Trade and Tariffs
Beginning in April 2025, the U.S. government 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 developments negatively impacted our results of operations during the year ended December 31, 2025. Management has taken various actions to mitigate the negative impacts of tariffs on our financial results; these actions have been largely successful thus far. However, the current international geopolitical climate related to tariffs is fluid and continues to evolve, and we cannot provide any assurance that actions that have been taken by management or that may be taken by management in the future will be successful in future periods. As such, we cannot predict with certainty the ultimate impacts that international trade and tariff developments may have on our business and financial results in the future, but those impacts could be material.
In February 2026, the U.S. Supreme Court issued
a ruling invalidating some of the tariffs imposed by the U.S. government. During the three and nine months ended September 30, 2026, the
Company received refunds related to certain tariffs previously paid by the Company totaling $
The Company may be eligible to file additional claims for tariff refunds in the future; however, there is significant uncertainty as to the timing and amount that will ultimately be received from such claims. Accordingly, no amounts related to such claims for potential future refunds have been recognized in the Company’s condensed financial statements for the three and nine months ended September 30, 2026.
12
Stock Options
Summary information regarding stock options as of and during the nine months ended September 30, 2026 is as follows:
| Options (Number) |
Weighted Average Exercise Price per share ($) |
Weighted Average Remaining Contractual Life (Years) |
||||||||||
| As at January 1, 2026 | ||||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited / Expired | ||||||||||||
| As at September 30, 2026 | ||||||||||||
| Exercisable as at September 30, 2026 | ||||||||||||
During the three months ended September 30, 2026 and 2025, we recognized $ and $ of expense, respectively, related to stock options. During the nine months ended September 30, 2026 and 2025, we recognized $ and $ of expense, respectively, related to stock options. As of September 30, 2026, the aggregate intrinsic value for all options outstanding as well as all options exercisable was zero, and remaining unrecognized stock option expense was zero.
Restricted Stock Units
Summary information regarding restricted stock units as of and during the nine months ended September 30, 2026 is as follows:
| Restricted Stock Units (Number) |
Weighted Average Grant Date Fair Value ($) |
|||||||
| As at January 1, 2026 | ||||||||
| Granted | ||||||||
| Vested | ) | |||||||
| Forfeited | ) | |||||||
| As at September 30, 2026 | ||||||||
During the three months ended September 30, 2026 and 2025, we recognized $
13
Stock Grants
Effective April 1, 2024, pursuant to the terms of a brand ambassador agreement, we issued to an individual shares of our common stock as compensation for the first year of the agreement. The value of the consideration transferred, measured using the fair value of our common stock at the date of issuance, was $
Effective April 1, 2025, pursuant to the terms of a brand ambassador agreement, we issued to the same individual shares of our common stock as compensation for the second year of the agreement. The value of this consideration transferred, measured using the fair value of our common stock at the date of issuance, was $
Effective May 6, 2026, we issued to a nonemployee individual 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 $, and was fully recognized as an expense during the nine months ended September 30, 2026.
NOTE 11 – STOCKHOLDERS’ EQUITY
At-the-Market Offerings
The
Company entered into an at-the-market offering agreement with H.C. Wainwright & Co., LLC, as sales agent, relating to the sale
of common stock. In January 2026, the Company sold
shares of common stock and received approximately $
Warrants
On July 8, 2026, the
Company entered into an inducement letter agreement with a holder of certain of its existing Series G and Series I warrants to purchase
an aggregate of
Pursuant to the inducement
letter agreement, the holder agreed to exercise its existing Series G and Series I warrants for cash at a reduced exercise price of $
This transaction closed
on July 9, 2026, and the gross proceeds to the Company were approximately $
Also, during the nine months ended September 30, 2026, the following warrants expired unexercised:
| ● | Series B warrants to purchase an aggregate of |
| ● | Series D warrants to purchase an aggregate of |
| ● | Series F warrants to purchase an aggregate of |
| ● | certain underwriter / placement agent warrants to purchase |
14
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. Due to the net losses for all periods presented in the unaudited condensed statements of operations, all shares underlying the common stock options and common stock warrants were excluded from the earnings per share calculation due to their anti-dilutive effect.
The calculation of net earnings/(loss) per share for the three and nine months ended September 30, 2026 and 2025 is as follows:
| For the three months ended |
For the nine months ended | |||||||||||||||
| September 30, 2026 |
September 30, 2025 |
September 30, 2026 |
September 30, 2025 |
|||||||||||||
| Basic and diluted: | ||||||||||||||||
| Net loss | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted-average number of common shares | ||||||||||||||||
| Basic and diluted net loss per common share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
NOTE 13 – SUBSEQUENT EVENTS
International Trade and Tariffs
In October 2026, the Company filed additional claims for tariff refunds; however, significant uncertainty remains as to the timing and amount that will ultimately be received from such claims. Accordingly, no amounts related to such claims for potential future refunds have been recognized in the Company’s condensed financial statements for the three and nine months ended September 30, 2026.
2026 Loan to Tekcapital Europe, Ltd.
In October 2026, Tekcapital Europe, Ltd. repaid
in full all of the outstanding balance of the loan that the Company had made to Tekcapital. The total amount paid to the Company on or
before October 21, 2026 was $
Extension of Lucyd Ltd. Financing Agreement
On October 23, 2026, the Company and Lucyd Ltd. entered into an amendment of the financing agreement originally entered into on March 1, 2024 and previously amended on March 1, 2025 and March 11, 2026 (see Note 8 for details), such that upon issuance, the convertible note will have a maturity date of April 30, 2028. The amendment also gives the Company an irrevocable right to draw down up to $1,250,000, funded within ten business days of each request, and limits conversions to 19.99% of the Company’s common stock outstanding on the date of the amendment, and the holding of Lucyd Ltd. and its affiliates to 19.99%, in each case unless stockholder approval is obtained. The principal amount, the 10% interest rate, and the conversion events are unchanged, and no fee is payable. The Company has not borrowed any amounts under this agreement
15
Nasdaq Minimum Bid Price Notification
On October 9, 2026, the Company received a written
notice from the Listing Qualifications Department of The Nasdaq Stock Market stating that the Company is not in compliance with Nasdaq
Listing Rule 5550(a)(2) because the closing bid price of its common stock had been below $1.00 per share for 30 consecutive business days.
The Company has been provided 180 calendar days, or until April 7, 2027, to regain compliance. At the Company’s annual meeting of
stockholders scheduled for November 16, 2026, stockholders will vote on a proposal to authorize the Board of Directors to effect a reverse
stock split of the Company’s common stock at a ratio of between
Restricted Stock Unit Awards
On October 29, 2026, the Company awarded an aggregate of restricted stock units to its employees (360,000 units to the Company’s officers and management, and 70,000 units to non-management employees). Each of these awards shall vest in eight (8) equal installments on April 2 and August 19 of each year, commencing April 2, 2027 and ending August 19, 2030.
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes and the other financial information included elsewhere in this Quarterly Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report.
Overview
Executive Summary and Outlook
| ● | We achieved strong top-line growth in the third quarter of 2026, with revenues for the three months ended September 30, 2026 increasing by 51% as compared to the third quarter of 2025. On a year-to-date basis, our revenues for the first nine months of 2026 increased by 64% from the comparable period in 2025, which is in line with our full -year 2025 year-over-year growth rate of 63%, and demonstrates continued positive momentum for our business. For both the quarter and year-to-date periods, the growth in revenues was primarily driven by increases in unit volumes for our Lucyd Armor smart safety glasses, and also reflects notable growth in our wholesale channel, with significant shipments made to two new large retail partners in the U.S. and Canada in the third quarter of 2026. |
| ● | Our gross profit margin for the third quarter of 2026 was 32%, compared to 37% in the third quarter of 2025. This year-over-year decline was primarily attributable to the recognition of a large inventory reserve in the current quarter for certain excess cobranded inventory, partly offset by the receipt of tariff refunds during the current quarter, and continued improvements in product sourcing costs. On a year-to-date basis, our gross profit margin was essentially flat year-over-year. |
| ● | Operating expenses increased by 23% in the third quarter of 2026 as compared to the third quarter of 2025, while increasing by 11% on a nine-month basis. For both the quarter and year-to-date periods, most of the year-over-year increase was attributable to general and administrative expenses, which were primarily driven by the combination of higher payments due under our multi-year license agreements, and increased compensation and benefit costs due to additional staff to drive growth. Research and development costs also increased significantly for both the quarter and year-to-date periods, primarily driven by new investments to update and upgrade our award-winning and highly popular Lucyd Armor line of smart safety glasses. These increases were partially offset by more efficient spending on sales and marketing efforts. |
| ● | We believe we are strongly positioned to continue our momentum of growth in the fourth quarter of 2026 and beyond into 2027, based on the following: |
| ○ | New Product Launches – In April 2026, we launched the new Reebok® Powered by Lucyd optical collection, which is our highest average selling price frame collection to date, driving more profit on a single frame sale than ever before. In October 2026, we launched the new Lucyd Aero® collection, which represents our lightest and most advanced smartglasses to date. Management believes both of these product lines have strong growth potential, with Lucyd Aero particularly notable for its disruptive qualities in traditional optical channels. |
17
| ○ | Wholesale and International Expansion – In July 2026, we announced a significant new retail launch with FYihealth group, operators of the FYidoctors optical chain in Canada; we began shipping initial stock and demonstration units during the third quarter, and our products will be available across 345 locations across Canada by the end of the year. In September 2026, we received and fulfilled an initial purchase order from one of the largest big-box retailers in the U.S.; under this arrangement with this retailer, our products are scheduled to be sold in over 150 big-box stores across the U.S. starting in the fourth quarter of 2026. Also in September 2026, we received orders for more than 3,000 smart eyewear units from Directed Electronics, our new exclusive distributor for Australia and New Zealand, who plans to place our products in national electronics retail chains across the region; we expect to ship these units to Directed Electronics in the fourth quarter of 2026. |
| ○ | Anticipated New Corporate Customers and Partners – Several leading industrial and logistics companies are testing Lucyd products for their workforce use. Lucyd Armor is a unique workforce solution that bridges communication barriers on heavy industry teams, enabling hands-free open-ear communication and translations between teammates. We have launched a white-label offering and are in advanced negotiations with a major automotive retailer for our first white-label program; vendor onboarding is underway. |
General Product and Corporate Overview
We develop and sell cutting-edge smart eyewear – including prescription eyeglasses, ready-to-wear sunglasses, safety glasses, and sport glasses. Our smart eyewear products enable the wearer to listen to music, take and make calls, and use voice assistants and ChatGPT and/or Claude to perform many common smartphone tasks hands-free.
Our mission is to Upgrade Your Eyewear® by creating smart eyewear for all-day wear that looks like and is priced similarly to designer eyewear, but is also lightweight and comfortable, and enables the wearer to remain connected to their digital lives. Our smart eyewear is a fusion of headphones with glasses, bringing vision correction and protection together with digital connectivity and clear audio, while also offering a solution for listening to music outdoors (as compared to in-ear headphones). The convenience of having a Bluetooth headset and comfortable glasses in one, especially for those who are already accustomed to all-day eyewear use, offers a lifestyle upgrade at a price most consumers can afford.
Since the initial launch of Lucyd Lyte in 2021, we have sold thousands of our smartglasses, and have continued to expand our product offerings over the years – including the launch of Lucyd Lyte 2.0 and Lyte XL smartglasses in 2023, the launch of the Lucyd Armor, Nautica® Powered by Lucyd, and Eddie Bauer ® Powered by Lucyd smart eyewear collections in 2024, the launch of the Reebok® Powered by Lucyd sport collection in 2025, and the recent launch of the Reebok® Powered by Lucyd optical collection in April 2026. The variety of smartglasses we offer underpins our goal to provide a smart alternative for all of the major types of eyewear used by consumers, offering a seamless upgrade in styles of eyewear they already enjoy. We currently offer an expansive line of over 40 different models of glasses and several accessories.
Our products are currently sold through two major types of channels:
| 1. | E-commerce – primarily via our website (Lucyd.co) and Amazon.com, as well as through various other websites such as Walmart.com, Target.com, BestBuy.com, and DicksSportingGoods.com; and, |
| 2. | A growing network of retail stores, including independent eyewear stores and national eyewear chains – as of the end of 2025, we had over 400 retail stores selling our products (across over 300 unique wholesale accounts), and are continually working to expand our network. During 2026, we added two new large retail partners in the U.S. and Canada, such that we expect our products to be offered in approximately 900 retail locations across the U.S. and Canada by the end of 2026. |
18
All of our products are designed in Miami and manufactured in Asia. We view our business model as capital light, as we have elected not to build our own manufacturing facilities and Company-owned retail distribution, but rather leverage existing sources of production and retail distribution. This allows us to focus on our core competency of smart eyewear design.
Software and Apps
The Lucyd app, available for iOS and Android, is a free application that enables the user to converse with popular AI large language models (including ChatGPT, Claude, and Gemini) on our glasses, to instantly gain the benefit of some of the world’s most powerful AI assistants in a hands-free ergonomic interface. First launched in 2023, the app deploys powerful and unique integration with AI APIs, developed internally by the Company. The Company has filed a patent application related to this software.
In 2024, we added a “Pro” version of the app, which provides unlimited AI interactions and priority tech support for a monthly or annual fee. We also launched a new feature called “Walkie” for the Lucyd app in 2024, which enables thousands of users to join each other on walkie-talkie style communication channels. This feature was designed with our Lucyd Armor safety glass product in mind, to enable coworking teams to communicate freely on smart eyewear.
In 2025, we updated and enhanced 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. Also during 2025, we added a new translation feature to the Lucyd app, which allows for voice-based translation between multiple languages in real time.
In the first quarter of 2026, the Lucyd app received an overhaul to the user interface, with general improvements to usability. The app has been redeveloped as an “app store within an app,” enabling an expansive and highly customizable Lucyd software platform to be housed conveniently within the iOS and Android app stores. The Company envisions that this new structure of the app will support third party applet development for Lucyd eyewear partners and users in the near future, and help in attracting developer talent to the platform by giving them a way to monetize new features and content for Lucyd eyewear.
In July and August 2026, the Lucyd app was updated to provide for Claude and Gemini AI integration, and allow users to access Claude, Gemini, and ChatGPT from a single interface and switch between AI models during conversations. New features also include AI image generation, document analysis, conversation history, web-sourced responses, and an optional private chat mode. We also expanded that app’s hands-free voice interface, allowing users choose which AI model answers to the user’s verbal prompts.
We believe these developments make our Lucyd eyewear perhaps the smartest smartglasses available today, and represent a significant marketing opportunity for our core smartglass products. The Lucyd app delivers an updated user experience over time without requiring costly hardware changes. Additionally, the overall flexibility of Bluetooth connectivity and ability to connect to a variety of voice assistants, including device-native assistants and AI language models, make our glasses a “device- and AI- agnostic” peripheral suitable for use with almost any desktop or mobile computing platform. This aspect of our products makes them a highly compatible interface accessory and distinguishes them from accessories designed to enhance a specific platform, such as Apple AirPods for iOS or gaming headsets for desktop computers.
Kiosks and Retail Fixtures
We provide certain retail partners with point-of-sale display materials, including virtual try-on kiosks, modular display units, and interactive LCD fixtures designed to support in-store product education and demonstrations. Many of our retail fixtures allow for customization to suit our retail store partners’ needs, and our newer fixtures feature a proprietary kiosk app that we developed in-house.
19
We currently offer three key display systems: (1) Hero Displays, which are unpowered branding stands, (2) Counter Kiosks, which offer digital and interactive demo experiences, and (3) the Lucyd Kiosk, which is a freestanding screen for larger stores. Across all display systems offered by the Company, we have shipped approximately 100 display units to more than 30 retail customers as of September 30, 2026.
Key Performance Indicators
Store Count (B2B) – We believe that the number of retail stores selling our products is an important indicator of wholesale growth. The Company has increased the number of retail store locations in which its products are sold from over 350 at the beginning of 2025 to over 400 by the end of 2025. During 2026, we added two new large retail partners:
| ● | In July 2026, we began shipping to FYihealth Group for its network of approximately 345 FYidoctors, Visique, and Solis optical clinics in Canada, including in-store demonstration units for its clinics. |
| ● | In September 2026, we shipped an initial order of our products to one of the largest big-box retailers in the U.S. for its in-store program in more than 150 of its stores. Our products are scheduled to be sold in these stores in the fourth quarter of 2026. |
With these new partners, we expect our products to be offered in approximately 900 retail locations across the U.S. and Canada by the end of 2026.
Customer Ratings (B2C) – 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. 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.
International Trade and Tariffs
Beginning in April 2025, the U.S. government 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 developments negatively impacted our results of operations during the year ended December 31, 2025. Management has taken various actions to mitigate the negative impacts of tariffs on our financial results; these actions have been largely successful thus far. However, the current international geopolitical climate related to tariffs is fluid and continues to evolve, and we cannot provide any assurance that actions that have been taken by management or that may be taken by management in the future will be successful in future periods. As such, we cannot predict with certainty the ultimate impacts that international trade and tariff developments may have on our business and financial results in the future, but those impacts could be material.
In February 2026, the U.S. Supreme Court issued a ruling invalidating some of the tariffs imposed by the U.S. government. During the three months ended September 30, 2026, the Company received refunds related to certain tariffs previously paid by the Company totaling approximately $125,000; such amounts were recognized as a reduction to cost of goods sold in the Company’s condensed financial statements.
In October 2026, the Company filed additional claims for tariff refunds; however, significant uncertainty remains as to the timing and amount that will ultimately be received from these additional claims.
20
Results of Operations - Quarterly
The following table summarizes our results of operations for the three months ended September 30, 2026 (the “current quarter”) and the three months ended September 30, 2025 (the “prior year quarter”):
| Three months ended | Three months ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | ||||||||||||||||||||||
| Revenues, net | $ | 1,009,696 | 100 | % | $ | 668,128 | 100 | % | $ | 341,568 | 51 | % | ||||||||||||
| Less: Cost of Goods Sold | (688,786 | ) | 68 | % | (423,291 | ) | 63 | % | (265,495 | ) | 63 | % | ||||||||||||
| Gross Profit (Deficit) | 320,910 | 32 | % | 244,837 | 37 | % | 76,073 | 31 | % | |||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||
| General and administrative | (1,578,047 | ) | 156 | % | (1,277,308 | ) | 191 | % | (300,739 | ) | 24 | % | ||||||||||||
| Sales and marketing | (622,883 | ) | 62 | % | (723,372 | ) | 108 | % | 100,489 | -14 | % | |||||||||||||
| Research and development | (423,353 | ) | 42 | % | (129,984 | ) | 19 | % | (293,369 | ) | 226 | % | ||||||||||||
| Related party management fee | (35,000 | ) | 3 | % | (35,000 | ) | 5 | % | - | 0 | % | |||||||||||||
| Total Operating Expenses | (2,659,283 | ) | 263 | % | (2,165,664 | ) | 324 | % | (493,619 | ) | 23 | % | ||||||||||||
| Other Income (Expense), net | 51,232 | -5 | % | 84,560 | -13 | % | (33,328 | ) | -39 | % | ||||||||||||||
| Net Loss | $ | (2,287,141 | ) | 227 | % | $ | (1,836,267 | ) | 275 | % | $ | (450,874 | ) | 25 | % | |||||||||
Revenues
Our revenues for the three months ended September 30, 2026 were $1,009,696, representing an increase of 51% as compared to revenues of $668,128 during the three months ended September 30, 2025. The increase in revenue was predominantly attributable to significant volume increases, of which the majority related to the initial shipments to major new retail partners in the U.S. and Canada. The impact of volume increases on revenue was partially offset by unfavorable price/mix impacts.
Our unit volumes increased approximately 89% year-over-year, inclusive of approximately 1,100 demonstration units shipped to a new retail partner in Canada; excluding those units, unit volumes increased approximately 68% year-over-year. Overall, the increase in unit volumes was primarily driven by our award-winning and highly popular Lucyd Armor line of smart safety glasses. We sold approximately 7,800 units of Lucyd Armor smartglasses in the current quarter, representing an increase from the prior year quarter of 164%, of which approximately 2,300 units were related to the fulfilment of the initial purchase order from one of the largest big-box retailers in the U.S. Our cobranded Reebok smartglasses were also a significant driver of the current quarter volume increases, as we sold over 1,400 units of Reebok smartglasses in the current quarter, up from approximately 1,100 units of Reebok smartglasses in the prior year quarter; this volume increase was predominantly attributable to the April 2026 launch of the new Reebok optical collection. These strong increases in unit volumes for Lucyd Armor and Reebok smartglasses were partially offset by volume declines in our other product lines.
The unfavorable price/mix impacts were related to the combination of (i) the aforementioned demonstration units and (ii) channel mix. The unfavorable channel mix impact was driven by the significant number of products sold to our major new retail partners in the U.S. and Canada in the current quarter, as we earn lower revenue per unit on sales to retail partners due to the inherent nature of wholesale pricing, which is lower than pricing on direct-to-consumer sales generated through e-commerce channels.
For the three months ended September 30, 2026, approximately 48% of sales were processed on our online store (Lucyd.co), 29% on Amazon.com, and 22% through reseller partners, with approximately 1% of our net revenues generated from Lucyd “Pro” app subscriptions. 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.
21
The current quarter results notably reflect significant progress made over the past year towards our long-term goals of increasing revenue in the wholesale channel, with such revenues growing to more than eight times the prior year quarter in terms of absolute dollar amounts (from $25,796 in the third quarter of 2025 to $223,305 in the current quarter), and to more than five times the prior year quarter as a percentage of total sales. 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, and that the opportunity to grow volumes through the wholesale channel significantly outweighs the negative aspect of lower revenue per unit in that channel.
We expect that e-commerce channels (Lucyd.co and Amazon) will remain a larger proportional share of our revenue in the near to medium term, with wholesale contributions increasing over time. In the long term, we anticipate that wholesale sales will comprise a larger proportional share of our revenue, which should bring consistent, large-scale orders with minimal marketing costs.
Cost of Goods Sold
Our total cost of goods sold increased to $688,786 for the three months ended September 30, 2026, as compared to $423,291 for the prior year quarter. This year-over-year increase of 63% outpaced our 51% growth in revenues and was primarily driven by the recognition of significant provisions for excess and slow-moving inventory during the current quarter related to certain cobranded smart eyewear products; this was partially offset by the positive impact of tariff refunds received during the current quarter, which reduced our cost of goods sold. The impact of volume increases was essentially offset by ongoing improvements in product sourcing costs.
Cost of goods sold for the three months ended September 30, 2026 included but was not limited to the cost of frames (inclusive of the cost of tariffs, importation costs, and other inventory adjustments) of $359,976; tariff refunds of $(124,854); provisions for excess and slow-moving inventory of $301,341; the cost of prescription lenses incurred with our third-party vendor of $13,512; commissions, affiliate referral fees, and e-commerce platform fees of $83,762; shipping and logistics costs of $33,045; and product certification costs of $21,085.
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.
Gross Profit
Our gross profit for the current quarter was $320,910, compared to $244,837 for the prior year quarter. Our gross profit margin was 32% in the current quarter and 37% in the prior year quarter, representing a decrease of approximately 5 percentage points from the prior year period.
The year-over-year decrease in gross profit margin compared with the prior year quarter was predominantly attributable to the aforementioned provision recorded in the current quarter for excess and slow-moving inventory related to certain cobranded smart eyewear; this reduced gross profit margin by approximately 30 percentage points. Higher commissions, affiliate referral fees, and e-commerce platform fees also reduced gross profit margin by approximately 4 percentage points. Partially offsetting these negative impacts to gross profit were (i) the positive impact of tariff refunds received in the current quarter, which increased gross profit margin by approximately 12 percentage points, and (ii) ongoing improvements in product sourcing costs for both frames and prescription lenses – largely related to realization of greater economies of scale as our manufacturing order volumes have grown and our cost per unit has decreased – which increased gross profit margin by approximately 18 percentage points.
In the near to medium term, we anticipate growth in total cost of goods sold corresponding with anticipated future growth in revenues, and do not expect significant decreases in gross profit margins from current levels. We are continually refining our product mix with sales data, and anticipate further reducing our unit costs by focusing on the highest volume, market-tested styles. Additionally, we continue to monitor trade policy and have contingency sourcing options should conditions materially change.
22
Operating Expenses
Our operating expenses increased by 23% to $2,659,283 for the three months ended September 30, 2026, as compared to $2,165,664 for the three months ended September 30, 2025. This increase was primarily due to the following:
General and administrative expenses
Our general and administrative expenses increased by $300,739 or approximately 24% to $1,578,047 for the three months ended September 30, 2026, as compared to $1,277,308 for the prior year quarter. This increase was mainly attributable to the combination of (i) higher employee compensation and benefit costs, which increased by approximately $90,000 as compared to the prior year quarter, and which was mainly due to the addition of staff to drive growth, (ii) higher spending on public relations and branding initiatives, for which costs increased by approximately $53,000 as compared to the prior year quarter, and (iii) higher payments due under our multi-year license agreements, which increased our licensing expense by approximately $84,000, to approximately $209,000 for the current quarter.
Sales and marketing expenses
Our sales and marketing expenses for the current quarter decreased by $100,489 or approximately 14% to $622,883 for the current quarter, as compared to $723,372 for the prior year quarter. This decrease was primarily driven by more efficient spending in this area. We continue to strategically allocate our sales and marketing spending as needed and on a dynamic basis between a combination of key events and trade shows (to grow and expand our network of potential business partners and retailers), paid ads (to build brand awareness, attract new customers, and increase our market share), and supporting launches of new products. We utilize data-driven decision-making to refine and optimize our marketing campaigns, in order to make our spending in this area more efficient, thus maximizing returns on our marketing investments.
Research and development costs
Our research and development costs were $423,353 for the three months ended September 30, 2026, as compared to $129,984 for the three months ended September 30, 2025, representing a year-over-year increase of $293,369 or approximately 226%, primarily driven by development fees paid to third parties for new product development initiatives. Due to the overwhelming growth and success of the Lucyd Armor line, we are investing heavily in the advancement of this product line, with end-to-end hardware and software enhancements in development for an updated and upgraded collection in the first half of 2027. We are seeking to build a comprehensive enterprise offering on this platform, which will answer diverse needs for practical applications of smart safety eyewear in many workplaces. Our research and development resources are substantially invested in this new platform, alongside improvements to our optical lines.
Related party management fee
Our related party management fee was $35,000 for each of the three-month periods ended September 30, 2026 and 2025, based on the terms of the management services agreement between us and Tekcapital.
Other Income (Expense), net
Total other income (expense), net was $51,232 in the current quarter, reflecting a decline of $33,328 or approximately 39% from $84,560 in the prior year quarter. These amounts were primarily comprised of dividends from our investments in money market funds and interest income from investments in U.S. Treasury bills. The year-over-year decrease in other income (expense), net was primarily attributable to the combination of lower average cash equivalent and investment balances as compared to the prior year quarter, and lower dividend yields from money market funds and lower interest rates on U.S. Treasury bills as compared to the prior year quarter.
23
Results of Operations – Year to Date
The following table summarizes our results of operations for the nine months ended September 30, 2026 (the “current nine months” or the “current period”) and the nine months ended September 30, 2025 (the “prior year nine months” or the “prior year period”):
| Nine months ended | Nine months ended | |||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | ||||||||||||||||||||||
| Revenues, net | $ | 2,793,776 | 100 | % | $ | 1,701,859 | 100 | % | $ | 1,091,917 | 64 | % | ||||||||||||
| Less: Cost of Goods Sold | (2,054,906 | ) | 74 | % | (1,249,154 | ) | 73 | % | (805,752 | ) | 65 | % | ||||||||||||
| Gross Profit (Deficit) | 738,870 | 26 | % | 452,705 | 27 | % | 286,165 | 63 | % | |||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||
| General and administrative | (4,386,667 | ) | 157 | % | (3,679,521 | ) | 216 | % | (707,146 | ) | 19 | % | ||||||||||||
| Sales and marketing | (1,958,745 | ) | 70 | % | (2,055,090 | ) | 121 | % | 96,345 | -5 | % | |||||||||||||
| Research and development | (703,555 | ) | 25 | % | (608,784 | ) | 36 | % | (94,771 | ) | 16 | % | ||||||||||||
| Related party management fee | (105,000 | ) | 4 | % | (105,000 | ) | 6 | % | - | 0 | % | |||||||||||||
| Total Operating Expenses | (7,153,967 | ) | 256 | % | (6,448,395 | ) | 379 | % | (705,572 | ) | 11 | % | ||||||||||||
| Other Income (Expense), net | 147,770 | 5 | % | 274,626 | 16 | % | (126,856 | ) | -46 | % | ||||||||||||||
| Net Loss | $ | (6,267,327 | ) | 224 | % | $ | (5,721,064 | ) | 336 | % | $ | (546,263 | ) | 10 | % | |||||||||
Revenues
Our revenues for the nine months ended September 30, 2026 were $2,793,776, representing an increase of 64% as compared to revenues of $1,701,859 during the nine months ended September 30, 2025. This year-over-year growth rate in revenues is consistent with our full-year 2025 growth rate of approximately 63%, and reflects continued positive momentum across the Company’s smart eyewear portfolio.
The increase in revenue was predominantly attributable to significant volume increases, of which a significant portion related to the initial shipments to major new retail partners in the U.S. and Canada during the current nine months. Our unit volumes increased approximately 68% year-over-year, inclusive of approximately 1,100 demonstration units shipped to a new retail partner in Canada; excluding those units, unit volumes increased approximately 60% year-over-year. Overall, the increase in unit volumes was primarily driven by our award-winning and highly popular Lucyd Armor line of smart safety glasses. We sold approximately 16,600 units of Lucyd Armor smartglasses in the current nine months, representing a 119% increase from the prior year nine months, of which approximately 2,300 units were related to the fulfilment of the initial purchase order from one of the largest big-box retailers in the U.S. Additionally, according to a recent third-party analysis, Lucyd Armor holds an approximate 44% market share of smart safety glasses on Amazon.com, and to the Company’s knowledge, remains the only smart safety glass on the platform with full safety certification in the U.S., Canada, and the European Union. Our cobranded Reebok smartglasses were also a significant driver of the current period volume increases, as we sold nearly 3,400 units of Reebok smartglasses in the current nine months; this volume increase was predominantly attributable to the April 2026 launch of the new Reebok optical collection. These strong increases in unit volumes for Lucyd Armor and Reebok smartglasses were partially offset by volume declines in our other product lines.
24
Price/mix impacts had a minimal net effect on the year-over-year change in revenue, as (i) unfavorable impacts related to channel mix, driven by the higher proportion of sales at wholesale pricing due to the significant number of products sold to our major new retail partners in the U.S. and Canada in the current period, were largely offset by (ii) favorable impacts related to product mix, driven by increased sales of the higher-priced Lucyd Armor line following price increases implemented in 2026 and the April 2026 launch of the Reebok optical collection at premium price points.
For the nine months ended September 30, 2026, approximately 52% of sales were processed on our online store (Lucyd.co), 34% on Amazon.com, and 13% through reseller partners, with approximately 1% of our net revenues generated from Lucyd “Pro” app subscriptions. 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 current period results notably reflect significant progress made over the past year towards our long-term goals of increasing revenue in the wholesale channel, with such revenues growing to more than five times the prior year period in terms of absolute dollar amounts (from $70,405 in the prior year nine months to $358,443 in the current nine months), and more than tripling in terms of percentage of total sales. 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, and that the opportunity to grow volumes through the wholesale channel significantly outweighs the negative aspect of lower revenue per unit in that channel.
To date, several factors have constrained wholesale sell-through: (i) the optical retail ecosystem is fragmented and insurance-driven, which supports higher margins on conventional frames and can compress retailer margins on smart eyewear at mainstream price points; (ii) smart eyewear requires interactive merchandising and in-store demos to educate consumers, which lengthens onboarding lead times; and (iii) national retailers typically require category sell-through evidence, certifications, and planogram resets with long decision cycles. However, large national retailers have recently started to recognize smart eyewear as proven category and are starting to move in the direction of selling more smart eyewear. We are prioritizing larger retailers whose economics are more aligned with consumer electronics and safety categories, including home-improvement and big-box stores, and believe that we have the product and merchandising set needed to scale wholesale placements over time. Therefore, we expect that e-commerce channels (Lucyd.co and Amazon) will remain a larger proportional share of our revenue in the near to medium term, with wholesale contributions increasing over time. In the long term, we anticipate that wholesale sales will comprise a larger proportional share of our revenue, which should bring consistent, large-scale orders with minimal marketing costs.
Cost of Goods Sold
Our total cost of goods sold increased to $2,054,906 for the nine months ended September 30, 2026, as compared to $1,249,154 for the prior year nine months. This year-over-year increase of 65%, which was in line with our growth in revenues, was primarily driven by the combination (i) the increase in the volume of products sold, as discussed above, (ii) the recognition of significant provisions for excess and slow-moving inventory during the current nine months related to certain cobranded smart eyewear products, and (iii) higher costs related to platform / marketplace fees and commissions, partially offset by (iv) the positive impact of tariff refunds received during the current nine months, which reduced our cost of goods sold.
Cost of goods sold for the nine months ended September 30, 2026 included but was not limited to the cost of frames (inclusive of the cost of tariffs, importation costs, and other inventory adjustments) of $1,303,859; tariff refunds of $(124,854); provisions for excess and slow-moving inventory of $331,763; the cost of prescription lenses incurred with our third-party vendor of $134,533; commissions, affiliate referral fees, and e-commerce platform fees of $230,836; shipping and logistics costs of $91,826; and product certification costs of $59,228.
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.
25
Gross Profit
Our gross profit for the current nine months was $738,870, compared to $452,705 for the prior year nine months. Our gross profit margin was 26.4% in the current period and 26.6% in the prior year period, or essentially flat year-over-year.
The negligible net change year-over-year in gross profit margin was reflective of the combination of (i) the aforementioned provision recorded in the current period for excess and slow-moving inventory related to certain cobranded smart eyewear, which reduced gross profit margin by approximately 12 percentage points, and (ii) higher commissions, affiliate referral fees, and e-commerce platform fees, which reduced gross profit margin by approximately 3 percentage points, partially offset by (iii) ongoing improvements in product sourcing costs for both frames and prescription lenses – largely related to realization of greater economies of scale as our manufacturing order volumes have grown and our cost per unit has decreased – which increased gross profit margin by approximately 12 percentage points, and (iv) the positive impact of tariff refunds received in the current nine months, which increased gross profit margin by approximately 4 percentage points.
In the near to medium term, we anticipate growth in total cost of goods sold corresponding with anticipated future growth in revenues, and do not expect significant decreases in gross profit margins from current levels. We are continually refining our product mix with sales data, and anticipate further reducing our unit costs by focusing on the highest volume, market-tested styles. Additionally, we continue to monitor trade policy and have contingency sourcing options should trade conditions materially change.
Operating Expenses
Our operating expenses increased by 11% to $7,153,967 for the current period, as compared to $6,448,395 for the prior year period. This increase was primarily due to the following:
General and administrative expenses
Our general and administrative expenses increased by $707,146 or approximately 19% to $4,386,667 for the nine months ended September 30, 2026, as compared to $3,679,521 for the prior year nine months. This increase was mainly attributable to the combination of (i) higher employee compensation and benefit costs (approximately $181,000), mainly due to the addition of staff to drive growth, (ii) higher spending on public relations and branding initiatives (approximately $141,000), and (iii) higher payments due under our multi-year license agreements, which increased our licensing expense by approximately $239,000, to approximately $644,000 for the current period.
Sales and marketing expenses
Our sales and marketing expenses decreased by $96,345 or approximately 5% to $1,958,745 for the current nine months, as compared to $2,055,090 for the prior year nine months. This decrease was primarily driven by more efficient spending in this area. We continue to strategically allocate our sales and marketing spending as needed and on a dynamic basis between a combination of key events and trade shows (to grow and expand our network of potential business partners and retailers), paid ads (to build brand awareness, attract new customers, and increase our market share), and supporting launches of new products. We utilize data-driven decision-making to refine and optimize our marketing campaigns, in order to make our spending in this area more efficient, thus maximizing returns on our marketing investments.
Research and development costs
Our research and development costs were $703,555 for the nine months ended September 30, 2026, as compared to $608,784 for the nine months ended September 30, 2025, representing a year-over-year increase of approximately 16%. This increase was primarily driven by new product development cycles in the current nine months. Specifically, during the earlier portion of the current period, we incurred various costs to develop the Reebok optical collection, which launched in April 2026, and in the third quarter of 2026, we incurred significant development fees related to the planned update and upgrade to our Lucyd Armor line.
26
Due to the overwhelming growth and success of the Lucyd Armor line, we are investing heavily in the advancement of this product line, with end-to-end hardware and software enhancements in development for an updated and upgraded collection in the first half of 2027. We are seeking to build a comprehensive enterprise offering on this platform, which will answer diverse needs for practical applications of smart safety eyewear in many workplaces. Our research and development resources are substantially invested in this new platform, alongside improvements to our optical lines.
Related party management fee
Our related party management fee was $105,000 for each of the nine-month periods ended September 30, 2026 and 2025, based on the terms of the management services agreement between us and Tekcapital.
Other Income (Expense), net
Total other income (expense), net was $147,770 in the current period, reflecting a decline of approximately 46% from $274,626 in the prior year nine months. These amounts were primarily comprised of dividends from our investments in money market funds and interest income from investments in U.S. Treasury bills. The year-over-year decrease in other income (expense), net was primarily attributable to the combination of lower average cash equivalent and investment balances as compared to the prior year period, and lower dividend yields from money market funds and lower interest rates on U.S. Treasury bills as compared to the prior year period.
Liquidity and Capital Resources
As of September 30, 2026 and December 31, 2025, our cash and cash equivalents were approximately $3.2 million and $6.5 million, respectively. As of September 30, 2026 and December 31, 2025, our total overall liquidity (cash and cash equivalents plus investments in short-term U.S. Treasury bills), which management believes provides a more accurate depiction of the Company’s liquidity and economic position, was approximately $4.5 million and $6.5 million, respectively.
Our working capital (current assets less current liabilities) was approximately $6.7 million and $8.4 million as of September 30, 2026 and December 31, 2025, respectively.
The Company did not have any debt obligations as of September 30, 2026 or December 31, 2025.
We had previously entered into a financing agreement with Lucyd Ltd. (a related party), under which we could borrow up to $1,250,000 in exchange for issuing a convertible note to Lucyd Ltd (see Note 8 for details). On October 23, 2026, the Company and Lucyd Ltd. entered into an amendment of this financing agreement, such that upon issuance, the convertible note will have a maturity date of April 30, 2028. The amendment also gives the Company an irrevocable right to draw down up to $1,250,000, funded within ten business days of each request, and limits conversions to 19.99% of the Company’s common stock outstanding on the date of the amendment, and the holding of Lucyd Ltd. and its affiliates to 19.99%, in each case unless stockholder approval is obtained. The principal amount, the 10% interest rate, and the conversion events are unchanged, and no fee is payable. The Company has not borrowed any amounts under this agreement.
Contractual commitments for payments due under multi-year license agreements are scheduled to increase in future periods; payments due under such contracts are $45,000 for the remainder of 2026, $1,290,000 for fiscal year 2027, and $1,543,000 for fiscal year 2028. If the Company were to exercise its contractual cancellation rights during the fifth year of each agreement, the aggregate future minimum payments due under these license agreements would be reduced from $12,785,000 to $3,428,000, although there would be no change to the payments due in fiscal year 2027 and 2028.
We believe our total overall liquidity, plus the availability to borrow funds via our aforementioned financing agreement with Lucyd Ltd., will be sufficient to fund our operations for at least the next twelve months.
27
Cash Flow
| Nine months ended | Nine months ended | |||||||
| September 30, | September 30, | |||||||
| 2026 | 2025 | |||||||
| Net cash flows from operating activities | $ | (5,902,500 | ) | $ | (5,924,987 | ) | ||
| Net cash flows from investing activities | (1,355,554 | ) | 3,651,077 | |||||
| Net cash flows from financing activities | 3,944,079 | 6,344,438 | ||||||
| Net Change in Cash | $ | (3,313,975 | ) | $ | 4,070,528 | |||
Net cash flows used in operating activities for the nine months ended September 30, 2026 are primarily reflective of our net loss for the period, resulting from various operating costs to support and grow our business. We continue to make significant investments in marketing spending in order to build brand awareness, attract new customers, and increase our market share.
Total use of cash in operating activities during the current nine months was relatively consistent and comparable with the prior year nine months; however, the current period’s use of cash in operating activities notably reflects higher payments made under multi-year licensing agreements, whereas the prior year period’s use of cash in operating activities is more reflective of payments made to purchase inventory.
Net cash flows from investing activities in both the current nine months and prior year nine months primarily reflect the timing of purchases and redemptions of short-term U.S. Treasury bills, which do not impact our total overall liquidity (as previously defined above).
Net cash flows from financing activities for the current nine months are primarily attributable to at-the-market offerings of common stock and a warrant inducement transaction (both as described in more detail below), while net cash flows from financing activities for the prior year period are primarily attributable to multiple warrant inducement transactions and other warrant exercises.
Equity Transactions
At-the-Market Offerings
In January 2026, we sold 820,800 shares of common stock and received approximately $1.5 million of gross proceeds before deducting sales agent commissions and offering expenses. The net proceeds received by the Company from these transactions amounted to approximately $1.4 million, and will be used for working capital and general corporate purposes.
Currently, there is no remaining availability under the Company’s at-the-market facility for future sales of common stock. We may seek to open a new at-the-market facility by filing a new registration statement in the future, and raise additional funds under such facility in the future, if management believes it would be beneficial to do so.
July 2026 Warrant Inducement Transaction
In July 2026, we entered into an inducement letter agreement with a holder of certain of our existing Series G and Series I warrants to purchase an aggregate of 2,200,544 shares of the Company’s common stock, which were originally issued to the holder in April and June 2025, each having an original exercise price of $2.60 per share.
28
Pursuant to the inducement letter agreement, the holder agreed to exercise its existing Series G and Series I warrants for cash at a reduced exercise price of $1.35 per share in consideration of the Company’s agreement to issue new unregistered Series J warrants to purchase up to an aggregate of 6,601,632 shares of common stock. The Series J Warrants have an exercise price of $1.10 per share, are exercisable immediately upon issuance, and have a term of exercise equal to 24 months following the effective date of the Resale Registration Statement (as defined in the applicable agreement), which was subsequently filed by the Company and became effective August 7, 2026.
This transaction closed on July 9, 2026, and the gross proceeds to the Company were approximately $3.0 million prior to deducting placement agent fees and offering expenses. The Company intends to use the net proceeds from this transaction of approximately $2.6 million for working capital and general corporate purposes.
Other Factors
We expect that operating losses could continue in the foreseeable future as we continue to invest in the expansion and development of our business. We believe our existing cash and cash equivalents, plus the availability to borrow funds via the related party agreement with Lucyd Ltd., will be sufficient to fund our operations for at least the next twelve months. However, our future capital requirements will depend on many factors, including, but not limited to, growth in the number of retail store customers, licenses, the needs of our e-commerce business and retail distribution network, expansion of our product and software offerings, and the timing of investments in technology and personnel to support the overall growth of our business. We expect a modest increase in marketing and retail-support expenses over the next twelve months, with such investments being discretionary and adjustable as needed. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. There can be no assurances that we will be able to raise additional capital. In the event that additional financing is required from outside sources, we may not be able to negotiate terms acceptable to us or at all. Geopolitical and macroeconomic factors could cause disruption in the global financial markets, which could reduce our ability to access capital and negatively affect our liquidity in the future. If we are unable to raise additional capital when required, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations, financial condition, and cash flows would be adversely affected.
Off-Balance Sheet Arrangements
As of September 30, 2026, we did not have any off-balance sheet arrangements.
Critical Accounting Policies and Significant Estimates
There have been no material changes in our critical accounting policies and significant estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on March 25, 2026.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Exchange Act. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as a result of material weaknesses in our internal control over financial reporting, our disclosure controls and procedures were not effective as of September 30, 2026. The material weaknesses in our internal control over financial reporting are described in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2025.
There was no change in our internal control over financial reporting during the third quarter of fiscal year 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
29
Part II. Other Information
Item 1. Legal Proceedings
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.
Item 1A. Risk Factors
Other than noted below, there have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on March 25, 2026.
Our failure to meet the continued listing requirements of the Nasdaq Capital Market could result in a delisting of our common stock, which could negatively impact the market price and liquidity of our common stock and our ability to access the capital markets.
On October 9, 2026, we received a written notice from the Listing Qualifications Department of The Nasdaq Stock Market (“Nasdaq”), indicating that the Company is not in compliance with Nasdaq Listing Rule 5550(a)(2), which sets forth the minimum bid price requirement for continued listing on the Nasdaq Capital Market, as the bid price of our common stock had closed below $1.00 per share for 30 consecutive business days. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we are provided 180 calendar days to regain compliance with the minimum bid price requirement, or until April 7, 2027. To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for a minimum of 10 consecutive business days during this 180-day period.
If we do not regain compliance with the minimum bid price requirement by April 7, 2027, we may be eligible for an additional 180 calendar day compliance period so long as the Company satisfies the criteria for initial listing on the Nasdaq Capital Market (except the minimum bid price requirement) and the continued listing requirement for market value of publicly held shares, and the Company provides written notice to Nasdaq of our intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. In the event that Nasdaq does not believe that the Company will be able to cure the deficiency, or if the Company is not otherwise eligible for the second grace period, Nasdaq will provide written notice to the Company that our common stock is subject to delisting. However, in such event, we may request a hearing before the Nasdaq Hearings Panel, and such request would stay any further suspension or delisting action pending the conclusion of the hearing process and expiration of any extension that may be granted.
The Company intends to closely monitor the closing bid price of its common stock, and consider all available options to remedy the bid price deficiency to regain compliance with the minimum bid price requirement. However, there can be no assurance that the Company will be eligible for the additional 180 calendar day compliance period, if applicable, or that the Nasdaq would grant the Company’s request for continued listing subsequent to any delisting notification, or, if the Company does appeal the delisting determination, that such appeal would be successful, or that the Company will be able to regain compliance with the minimum bid price requirement or maintain compliance with the other Nasdaq listing requirements.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
None.
30
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5.
Insider Trading Arrangements
During the quarter ended September 30, 2026, none of the Company’s directors or officers adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” each as defined in Item 408 of Regulation S-K.
Sales under Rule 10b5-1 Trading Plans
During the quarter ended September 30, 2026, Harrison Gross, our Chief Executive Officer, sold an aggregate of 13,974 shares pursuant to the terms of a Rule 10b5-1 trading plan that was adopted on December 9, 2025.
During the quarter ended September 30, 2026, Konrad Dabrowski, our Chief AI and Growth Officer, sold an aggregate of 6,935 shares pursuant to the terms of a Rule 10b5-1 trading plan that was adopted on December 9, 2025.
During the quarter ended September 30, 2026, David Eric Cohen, our Chief Technology Officer, sold an aggregate of 9,856 shares pursuant to the terms of a Rule 10b5-1 trading plan that was adopted on December 9, 2025.
During the quarter ended September 30, 2026, Oswald Gayle, our Chief Financial Officer, sold an aggregate of 7,959 shares pursuant to the terms of a Rule 10b5-1 trading plan that was adopted on December 9, 2025.
During the quarter ended September 30, 2026, Joaquin Abondano, our Chief Operating Officer, sold an aggregate of 8,932 shares pursuant to the terms of a Rule 10b5-1 trading plan that was adopted on December 9, 2025.
31
Item 6. Exhibits
| 31.1 | Certification of Principal Executive Officer of Innovative Eyewear, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification of Principal Financial Officer of Innovative Eyewear, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certification of Principal Executive Officer of Innovative Eyewear, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2 | Certification of Principal Financial Officer of Innovative Eyewear, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS | Inline XBRL Instance Document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
32
Signatures
Pursuant to the requirements of the Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Innovative Eyewear, Inc. | ||
| (Registrant) | ||
| Date: November 9, 2026 | By: | /s/ Harrison Gross |
| Harrison Gross | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November 9, 2026 | By: | /s/ Oswald Gayle |
| Oswald Gayle | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) | ||
33