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 have also recently started to 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 six months ended June 30, 2026 and 2025:

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 $24,225 and $14,669 as June 30, 2026 and December 31, 2025, respectively.

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 six months ended June 30, 2025, we recognized $7,500 and $15,000 of revenue, respectively, that was included in the contract liability balance of $47,950 as of January 1, 2025. There was no comparable balance of such deferred revenue as of December 31, 2025 or June 30, 2026, and no such revenue recognized or deferred during the three and six months ended June 30, 2026.

The balance of revenue for orders received but not yet fulfilled that has been deferred on our balance sheet as a contract liability was $55,383 as of December 31, 2025. During the six months ended June 30, 2026, we recognized $55,383 of revenue related to these instances, all of which was included in the contract liability balance of $55,383 as of January 1, 2026. There was no comparable balance of such deferred revenue related to these instances as of June 30, 2026.

The balance of unearned revenue related to app subscriptions that has been deferred on our balance sheet as a contract liability was $4,691 and $4,506 as of June 30, 2026 and December 31, 2025, respectively. During the six months ended June 30, 2026 and 2025, we recognized $3,212 and $1,938 of revenue, respectively, that was included in the contract liability balance of $4,506 as of January 1, 2026 and $2,401 as of January 1, 2025, respectively.

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 $22,804 as of June 30, 2026, of which $15,180 was classified as current and $7,624 was classified as non-current.

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 six months ended June 30, 2026 and 2025 is as follows: