WRAP 10-K & 10-Q changes, risk factors and insider trading
Wrap Technologies, Inc. · Nasdaq · Ordnance & Accessories, (No Vehicles/guided Missiles) · CIK 1702924 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “RISK FACTOR SUMMARY”
New heading “Some components of our products pose potential safety risks, and our devices and related training products may be used in inherently dangerous situations, which expose us to personal injury and other liability claims that could harm our reputation and adversely affect our sales and financial condition.”
New heading “The effectiveness of our products depends on customer training, policies, and implementation practices, which we do not control.”
New heading “Our subscription-based revenue model may result in revenue volatility, delayed recognition and customer churn.”
New heading “The use of certain of our solutions may be perceived as, or determined by the courts to be, in violation of privacy rights and related laws. Any such perception or determination could adversely affect our financial results and results of operations.”
New heading “Contracting with government entities, including police departments, can be complex, expensive, and time-consuming.”
New heading “Our recent expansion into drone and counter-UAS technologies may not be successful, and we may fail to achieve commercial adoption or generate meaningful revenue from these initiatives.”
New heading “Our business strategy depends heavily on government and law-enforcement customers, who are subject to lengthy procurement cycles, budget constraints, and shifting priorities.”
New heading “Our drone and aerial-interdiction systems are subject to evolving regulatory, legal and liability risks that could restrict our operations or expose us to claims.”
New heading “We may face manufacturing and supply-chain challenges as we expand production of new technologies. To support our entry into drone-related markets, we are increasing production capacity, including at our new Virginia facility.”
New heading “We may not be able to protect our intellectual property rights throughout the world.”
New heading “If we are unable to maintain effective proprietary rights for our technologies or commercial products, we may not be able to compete effectively in our markets.”
New heading “Obtaining and maintaining patent protection depends on compliance with various procedures, document submissions, fee payments and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated in case of non-compliance with these requirements.”
New heading “The Certificate of Designations of the Series B Convertible Preferred Stock provides for the payment of cumulative dividends in shares of our Common Stock which will require us to have shares of Common Stock available to pay the dividends.”
New heading “The Series B Warrants contain certain anti-dilution provisions, which may dilute the interests of our stockholders, depress the price of our Common Stock, and make it difficult for us to raise additional capital.”
Removed heading “As a result of our failure to timely file certain reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months, we are currently ineligible to file a registration statement on Form S-3, which may impair our ability to raise capital on terms favorable to us, in a timely manner or at all.”
Removed heading “Our Company may be positively or negatively impacted by continued social unrest, protests against racial inequality, and movements like “Defund the Police.””
Removed heading “We may be unable to raise capital by offering shares of our common stock because we do not currently have enough authorized shares available for such a transaction.”
Largest changes
“In Europe, a new unitary patent system, which took effect on June 1, 2023, may significantly impact European patent enforcement actions, including those granted before the introduction of the new system. Under the new system, Applicants can, upon grant of a patent, opt for that patent to become a Unitary Patent which will be subject to the jurisdiction of a new Unitary Patent Court (UPC). Patents granted before the implementation of the new system can be opted out of UPC jurisdiction, remaining as national patents in the UPC countries. …”see in full comparison
“A delisting of our Common Stock from the Nasdaq Capital Market could materially reduce the liquidity of our Common Stock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities.”see in full comparison
Nasdaq’s continued listing standards for our Common Stock require, among other things, that we maintain a closing bid price for our Common Stock of at least $1.00,see in full comparisonweandmaintaineither (A) stockholders’ equity of $2.5 million; (B) market value of listed securities of $35 million; or (C) net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years, and that we timely file all required reports with the SEC or risk delisting, which would have a material adverse effect on our business.A delisting of our Common Stock from Nasdaq could materially reduce the liquidity of our Common Stock and result in a corresponding material reduction in the price of our Common Stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities.
“Our ability to enforce our patent rights depends on our ability to detect infringement. It is difficult to detect infringers who do not advertise the components that are used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product, particularly in litigation in countries other than the U.S. that do not provide an extensive discovery procedure. …”see in full comparison
“Certain events may reduce the exercise price of the warrants issued concurrently with the Series B Preferred Stock (the "Series B Warrants"), which in turn may lead to further dilution to the holders of our Common Stock. In addition, the perceived risk of dilution may cause our stockholders to be more inclined to sell their Common Stock, which may in turn depress the price of shares of our Common Stock regardless of our business performance. …”see in full comparison
“Our drone-based and counter-UAS technologies may be regulated by multiple federal and international authorities, including the FAA and U.S. export-control agencies. As these regulatory frameworks evolve, new restrictions, certification requirements, or licensing limitations could arise that delay product approvals, increase compliance costs or limit deployment opportunities. Because these systems are designed for public-safety and defense use, any operational incident, misuse, or unintended injury could lead to product-liability claims, investigations, or negative publicity. …”see in full comparison
Full comparison: every changed paragraph (157)
RISK FACTOR SUMMARY
We
have a history of operating losses and expect to incur additional losses until we achieve sufficient revenue and resultingoperating margins to
offset our operating costs. Our net loss for the years ended December 31, 2024,2025 and 20232024 was $5.9approximately $10.3 million and $30.2$5.9 million, respectively.
Our decreaseThe increase in net lossesloss in 20242025 was primarily attributable to lower non-cash other income of approximately $9.6 million related to changes in the change
infair value of our warrant liabilityliabilities from December 31, 2023compared to December 31, 2024, as comparedwell toas acontinued non-cashoperating chargelosses incurred while we invested in product development, commercialization initiatives, and expansion of approximatelyour $12.0
milliontechnology inplatform, 2023despite related to the change in value as of December 31, 2023 of the same warrant liability initially recorded as part of the
Series A Preferred Stock (as defined herein) issuance in July 2023. Additionally, as a result of the Company’songoing cost containment
efforts in 2024, our operating expenses were reduced by $3.6 million in 2024 as compared to 2023.efforts. Our ability to achieve future profitability
is dependentdepends on a varietynumber of factors, many of which are outside of our control.control, Failureand failure to achieve profitability or sustain profitability,
if achieved,profitability may require us to raise additional capital, which could result in dilution to stockholders and have a material negativeadverse impacteffect on the market value of our Common
Stock.
failure of product sales and services to meet planned projections;
government spending levels impacting sales of our products;
working capital requirements to support business growth;
our ability to integrate acquisitions;
our ability to control spending;
our ability to collect accounts receivable; and acceptance of our products and services in planned markets.
As
a result of our failure to timely file certain reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding
12 months, we are currently ineligible to file a registration statement on Form S-3, which may impair our ability to raise capital on
terms favorable to us, in a timely manner or at all.
Form
S-3 permits eligible issuers to conduct registered offerings using a short form registration statement that allows the issuer to incorporate
by reference its past and future filings and reports made under the Exchange Act. In addition, Form S-3 enables eligible issuers to conduct
primary offerings “off the shelf” under Rule 415 of the Securities Act. The shelf registration process, combined with the
ability to forward incorporate information, allows issuers to avoid delays and interruptions in the offering process and to access the
capital markets in a more expeditious and efficient manner than raising capital in a standard registered offering pursuant to a Registration
Statement on Form S-1. The ability to register securities for resale may also be limited as a result of the loss of Form S-3 eligibility.
If we are unable to raise capital through a registered offering, we would be required to conduct our equity financing transactions on a private placement basis, which may be subject to pricing, size and other limitations imposed under the Nasdaq Capital Market ("Nasdaq Capital Market" or "Nasdaq") rules, or seek other sources of capital. The foregoing limitations on our financing approaches could have a material adverse effect on our results of operations, liquidity, and financial position.
Grow our commercialization of the BolaWrap product, and develop additional future products and accessories for commercialization;
Maintain required regulatory approvals for our products in global market locations;
Expand, and as required, enforce our intellectual property portfolio for the BolaWrap product and other future products;
Maintain sales, distribution and marketing capabilities, and/or enter into strategic partnering arrangements to access such capabilities; and Grow market acceptance for the BolaWrap product line and/or other future products.
We
continue to invest substantial funds in further developing and commercializing our Wrap Reality product line which is highly competitive.
The commercial launch of the Wrap Reality Virtual Training product is in the early stages in a new marketplace for 3D Virtual Reality
training that competes with a legacy 2D virtual training environment. We expect 2D virtual training companies to either try to buy out
companies like ours or choose to have to build 3D Virtual reality to compete with us. As one of the only companies with both on premise
3D Virtual Reality and full cloud 3D Virtual Reality we plan to compete on both fronts; however, our ability to commercialize this 3D
Virtual Reality product line may be influenced by many factors, including:
our ability to continue to develop new products and new content;
our ability to obtain, set up and service new VR customers;
our ability to achieve and maintain market acceptance;
the impact of competition; and our ability to attract and retain talent.
A
substantial number of law enforcement agencies may not purchase our remote restraint product. In addition, if our product is not widely
accepted by the law enforcement market or we do not meet their expectations, we may not be able to expand sales of our product into other
markets. Law enforcement agencies may be influenced by claims or perceptions that our product is not effective or may be used in an abusive
manner. Our reputation could be damaged if we do not meet customer expectations for performance, value and quality. Sales of our product
to agencies may be delayed or limited by such claims or perceptions or to any negative publicity or damage to our reputation. We now
receive earned media that is often positive and helps our sales and growth and having negative earned media will create the opposite
effect.
Some components of our products pose potential safety risks, and our devices and related training products may be used in inherently dangerous situations, which expose us to personal injury and other liability claims that could harm our reputation and adversely affect our sales and financial condition.
Our BolaWrap non-lethal devices and related training products including WrapTactics, WrapReady, and Wrap Reality are used by law enforcement, corrections, probation and other public-safety personnel in situations that may involve the use of force against individuals. Some of the components of our products contain elements that may pose potential safety risks. While our products are designed to provide officers with a proactive, non-lethal option to gain control of encounters earlier and reduce the risk of injury to both officers and subjects, there is always a chance that use could result in injury to those involved. In addition to these risks, there can be no assurance that accidents in the facilities that use our products will not occur. If an incident occurs in which a BolaWrap device or our training products are alleged to have malfunctioned, been defective, lacked adequate instructions or warnings or been insufficient to prevent injury, we may be subject to product liability claims, negligence claims, wrongful death claims, regulatory investigations, or other legal proceedings.
Even if we ultimately prevail, the cost of defending such claims could be substantial and could divert management attention and resources. Adverse judgments, settlements, increased insurance premiums, or negative publicity arising from such incidents could harm our reputation, reduce demand for our products and adversely affect our business, financial condition, and results of operations.
The effectiveness of our products depends on customer training, policies, and implementation practices, which we do not control.
The effectiveness of our devices and training solutions depends significantly on how customers implement our products, including the adequacy of customer policies, supervision, instructor quality, training frequency and adherence to recommended procedures. Our training offerings including WrapTactics, WrapReady and Wrap Reality are designed to support proper deployment of our products, but customers may choose not to adopt, fully implement, or consistently follow our training or policy recommendations.
If customers fail to properly train personnel, implement appropriate policies, or integrate our products into their operational workflows, outcomes may differ from expectations and may result in incidents, reduced customer satisfaction, contract disputes, or non-renewals. Negative outcomes attributed to improper use or insufficient training could nevertheless harm our reputation and adversely affect demand for our products.
Our subscription-based revenue model may result in revenue volatility, delayed recognition and customer churn.
A portion of our revenue is derived from subscription and recurring arrangements, including WrapReady, WrapTactics, Wrap Reality and certain WrapVision services. Revenue from these arrangements is generally recognized over the contract term and may not align with the timing of sales efforts, bookings, or customer deployments. Implementations may be delayed due to customer procurement processes, IT and security reviews, staffing constraints, or integration timelines.
Additionally, many of our customers are governmental entities that depend on annual appropriations, grants or discretionary funding. Contracts may be canceled, reduced, or not renewed due to budget changes or shifting priorities. Any increase in customer churn, delays in deployment, or reductions in public-sector spending could cause fluctuations in revenue and adversely affect our financial results.
The use of certain of our solutions may be perceived as, or determined by the courts to be, in violation of privacy rights and related laws. Any such perception or determination could adversely affect our financial results and results of operations.
Because of the nature of certain of our products, including those used to access, collect, review, store, share and support digital evidence, the general public could perceive that the use of our solutions may result in violations of individual privacy rights. In addition, certain courts or regulatory authorities could determine that the use of our software solutions violates privacy laws. Any such determination or perception by potential customers, the general public, government entities or judicial authorities could harm our reputation, may result in reduced usage or adoption rates of our platforms by our customers and adversely affect our reputation, revenue, financial condition and results of operations. While we dedicate resources to ensure our compliance with applicable privacy laws, we are responsible and liable for personal data which our customers entrust in our platforms and we process as part of the services we provide. We require our customers to comply with applicable privacy laws when using our products; however we may still be held responsible and even liable for the manner in which our customer uses such data, including if the customer uses the data in a way that is a violation of privacy related laws or any of our agreements.
Contracting with government entities, including police departments, can be complex, expensive, and time-consuming.
The procurement process for government entities is in many ways more challenging than contracting in the private sector. We must comply with laws and regulations relating to the formation, administration, performance and pricing of contracts with government entities, including U.S. federal, state and local governmental bodies. These laws and regulations may impose added costs on our business or prolong or complicate our sales efforts, and failure to comply with these laws and regulations or other applicable requirements could lead to claims for damages from our customers, penalties, termination of contracts and other adverse consequences. Any such damages, penalties, disruptions or limitations in our ability to do business with government entities could have a material adverse effect on our business, operating results and financial condition.
Government entities often require highly specialized contract terms that may differ from our standard arrangements. Compliance with these special standards or satisfaction of such requirements could complicate our efforts to obtain business or increase the cost of doing so. Even if we do meet these special standards or requirements, the increased costs associated with providing our solutions to government customers could harm our margins. Additionally, even once we have secured a government contract, the renewal process can be lengthy and as time-consuming as the initial sale, and we may be providing our service for months past the contract expiration date without certainty if the renewal agreement will be signed or not.
Changes in the underlying regulatory conditions, political landscape or required procurement procedures that affect these types of customers could be introduced prior to the completion of our sales cycle, making it more difficult or costly to finalize a contract with a new customer or expand or renew an existing customer relationship. For example, customers may require a competitive bidding process with extended response deadlines, review or appeal periods, or customer attention may be diverted to other government matters, postponing the consideration of the purchase of our products. Such delays could harm our ability to provide our solutions efficiently and to grow or maintain our customer base.
Our recent expansion into drone and counter-UAS technologies may not be successful, and we may fail to achieve commercial adoption or generate meaningful revenue from these initiatives.
We have recently expanded beyond our core BolaWrap products into new areas such as drone payload systems, drone-first-responder technologies, and counter-unmanned aerial systems. These initiatives are in early stages, and their success depends on our ability to complete development, meet regulatory and technical standards, and achieve customer adoption. The markets for drone and C-UAS solutions are emerging, highly competitive, and subject to rapid technological change, and we face established and well-funded competitors. If our new products fail to perform as expected, experience development delays, or do not achieve meaningful market traction, our anticipated growth, brand reputation, and financial results could be materially adversely affected. There can be no assurance that our investments in these technologies will generate the expected returns or lead to sustainable revenue growth.
Our business strategy depends heavily on government and law-enforcement customers, who are subject to lengthy procurement cycles, budget constraints, and shifting priorities.
We expect that much of the demand for our new drone and C-UAS solutions will come from U.S. and international government, defense, and law-enforcement agencies. These customers face complex approval processes, long evaluation periods, and budget limitations that can delay or reduce procurement decisions. Political and policy changes, including shifts in funding for public safety or defense, may reduce demand or delay adoption of new technologies like ours. Furthermore, changes in public perception regarding the use of drones or non-lethal force tools could impact purchasing decisions or restrict deployment. As a result, even strong interest from these customers may not translate into timely or predictable revenue, and any sustained reduction in public-sector demand could materially affect our results of operations.
Our drone and aerial-interdiction systems are subject to evolving regulatory, legal and liability risks that could restrict our operations or expose us to claims.
Our drone-based and counter-UAS technologies may be regulated by multiple federal and international authorities, including the FAA and U.S. export-control agencies. As these regulatory frameworks evolve, new restrictions, certification requirements, or licensing limitations could arise that delay product approvals, increase compliance costs or limit deployment opportunities. Because these systems are designed for public-safety and defense use, any operational incident, misuse, or unintended injury could lead to product-liability claims, investigations, or negative publicity. Any regulatory action, litigation, or reputational harm related to these risks could materially and adversely affect our business and financial condition.
We may face manufacturing and supply-chain challenges as we expand production of new technologies. To support our entry into drone-related markets, we are increasing production capacity, including at our new Virginia facility.
Scaling manufacturing for new and technically complex products requires reliable suppliers, quality control systems, and efficient production processes. We may face challenges securing critical components, many of which come from limited sources or may be subject to long lead times. Disruptions in the supply chain, cost increases, or quality issues could delay deliveries, increase expenses, and impact customer satisfaction. If we are unable to scale production effectively or control manufacturing costs, our margins, liquidity, and ability to meet demand could be adversely affected.
Our Company may be positively or negatively
impacted by continued social unrest, protests against racial inequality, and movements like “Defund the Police.”
Our Company may be positively or negatively
impacted by continued social unrest, protests against racial inequality, and movements like “Defund the Police.” Such unrest
may be further fueled by misleading information or negative publicity about our solutions. We believe our solutions are the answer to
reducing use of force and driving safer outcomes for officers and the citizens they interact with each day. Although the intensity of
these events may have subsided, some may still indirectly or directly, influence police agency budgets and the funding available to current
and potential customers. In addition, participants in these events may attempt to create the impression that our solutions are contributing
to the perceived problems, potentially harming our business and operations, including our revenues, earnings, and cash flows from operations.
Changes in tariff regulations;
Foreign currency exchange rate fluctuations;
Establishing and maintaining relationships with local distributors, agents and dealers;
Lengthy shipping times and accounts receivable payment cycles;
Import and export control and licensing requirements;
Compliance with a variety of US laws, ATF regulations, US Department of Commerce regulations and the Foreign Corrupt Practices Act, by us or key subcontractors or agents;
Compliance with a variety of foreign laws and regulations, including unexpected changes in taxation and regulatory requirements;
Greater difficulty in safeguarding intellectual property abroad than in the US; and Difficulty in staffing and managing geographically diverse operations.
Our business may be impacted by global economic conditions, which have been volatile in recent years. Geopolitical conflict, such as the current conflict in Ukraine, and related international economic sanctions and their impact may exacerbate this volatility. Specifically, our revenues and gross margins depend significantly on global economic conditions and the demand by foreign governments and agencies for the BolaWrap and Wrap Reality in many of our target markets. Economic weakness and uncertainty in these markets have resulted, and may result in the future, in decreased revenue attributable to these markets, gross margin, earnings or growth rates, and difficulty managing inventory levels. Sustained uncertainty about global economic conditions and geopolitical events may adversely affect demand for the BolaWrap and could cause demand to differ materially from our expectations as foreign governments and agencies curtail or delay spending. Economic weakness and uncertainty also make it more difficult for us to make accurate forecasts of revenues, gross margins and expenses.
Substantially
all our employees are located in the US. In addition to our employees, we rely on (i) distributors, agents, and third-party logistics
providers in connection with product sales and distribution and (ii) raw material and component suppliers in the US,U.S., Canada, Europe and
Asia. If we, or any of these third-party partners encounter any disruptions to our or their respective operations or facilities, or if
we or any of these third-party partners were to shut down for any reason, including by pandemic, fire, natural disaster, such as a hurricane,
tornado or severe storm, power outage, systems failure, labor dispute, or other unforeseen disruption, then we or they may be prevented
or delayed from effectively operating our or their business, respectively. Any losses or damages we incur could have a material adverse
effect on our financial results and our ability to conduct business as expected.
Our
product isproducts intendedare designed to begive usedofficers ina confrontationsproactive, tonon-lethal de-escalateoption thethat situation andcan reduce the chancerisk forof injury to both officers and thesubjects subjects
thatin theydynamic interact with.encounters. There is always a chance that use could result in injury to those involved. Our product may cause or be associated
with such injuries. A person injured in a confrontation or otherwise in connection with the use of our product may bring legal action
against us to recover damages based on theories including personal injury, wrongful death, negligent design, dangerous product, or inadequate
warning. We may also be subject to lawsuits involving allegations of misuse of our product. If successful, personal injury, misuse, and
other claims could have a material adverse effect on our operating results and financial condition. Although we carry product liability
insurance, significant litigation could also result in a diversion of management’s attention and resources, negative publicity,
and an award of monetary damages in excess of our insurance coverage.
Our
solutions are used to assist law enforcement and first responders in volatile encounters. Even when our device works as intended, incidents
can lead to injury, loss of life and other negative outcomes, and such events are likely to receive negative publicity even if not directly
caused by BolaWrap. If our product fails to helpperform de-escalateas intended during an encounter, related adverse outcomes may receive negative media attention.
At times, body or dash camera images or other images of use of our product may become a matter of public record due to legal or other
obligations (for example, because of public-records requests or subpoenas to provide information or to testify in court), and we may
receive negative media attention as a result.
We
may be subject to criticism and unflattering media coverage regarding the effectiveness of our remote restraintnon-lethal solutions and the cost
of our solutions to our customers, or the appropriateness of use on persons in crisis or the mentally ill. Such negative publicity could
have an adverse impact on new sales, which would adversely impact our financial results and prospects.
Our
distribution strategy is to pursue sales through multiple channels with an emphasis on direct sales, as well as independent distributors,
domestically and internationally. Our inability to recruit and retain sales personnel and maintain and add police equipment distributors
who can successfully sell our products could adversely affect our sales. If we do not competitively price our products, provide high
quality bigbug free products and solutions, meet the requirements of any end-users, provide adequate marketing support, or comply with the
terms of any distribution arrangements, such distributors may fail to aggressively market our product or may terminate their relationships
with us. These developments would likely have a material adverse effect on our sales. Our reliance on the sales of our products by distributors
for a large portion of our sales also makes it more difficult to predict our revenue, cash flow and operating results.
Management's Discussion & Analysis (MD&A)
New heading “Wrap Reality™ Virtual Reality Training”
New heading “WrapTactics™ Digital Training Platform”
New heading “WrapVision™ Body-Worn Camera and Digital Evidence Management”
New heading “Counter-Unmanned Aircraft Systems (C-UAS) and Defense Applications”
New heading “February 2026 Warrants”
New heading “February 2026 Registration Rights Agreement”
New heading “Business Trends”
New heading “Year Ended December 31, 2025 Compared to year ended December 31, 2024”
New heading “February 2025 Offering”
New heading “Series B Offering”
New heading “Series B Preferred Stock”
New heading “Series B Warrants”
New heading “Series B Registration Rights Agreement”
New heading “February 2026 Purchase Agreement”
New heading “February 2026 Warrants”
New heading “February 2026 Registration Rights Agreement”
Removed heading “W1 Global, LLC Acquisition”
Removed heading “Recent Accounting Pronouncements”
Removed heading “Year Ended December 31, 2024 Compared to year ended December 31, 2023”
Removed heading “Series A Preferred Stock”
Largest changes
“The Company has experienced increased costs related to labor and materials, which management attributes in part to inflationary pressures. These cost increases have been driven primarily by higher wage rates, competitive labor market conditions, and increased supplier pricing for certain materials and services. While inflationary pressures persisted during 2025, the Company has taken steps to mitigate the impact through cost containment initiatives, workforce reductions, supply chain management efforts, and selective pricing actions where appropriate. …”see in full comparison
“In December 2024, the Company determined that the assessment of the Intrensic Membership Interests (as defined herein) fair value indicated that its carrying value exceeded its fair value by $1.6 million and therefore the Company recorded a $1.6 million impairment charge related to the goodwill initially recorded from the acquisition. In December 2023, it was determined that the intangible related to development of proprietary software by Lumeto, Inc. would not have future economic value and was written down; the Company recognized an impairment loss of $700 thousand as a result.”see in full comparison
“Based on our current operating plan, existing cash balances, and expected cash flows, management believes that the Company has sufficient liquidity to fund its operations for at least the next twelve months. However, our ability to continue as a going concern is dependent on our ability to increase revenues, manage operating expenses, and access additional capital as needed. Liquidity constraints and access to capital markets could negatively affect our liquidity and require changes to our operating or investment strategy.”see in full comparison
“We have experienced net losses and negative cash flows from operations since our inception. As of December 31, 2024, we had cash and cash equivalents of approximately $3.6 million, negative working capital of approximately $2.7 million primarily reflecting the approximate $10.1 million value of the Series A Warrants (as defined herein) recorded in connection with the issuance of the Series A Preferred Stock in July 2023, and had sustained cumulative losses attributable to stockholders of approximately $105.1 million. …”see in full comparison
“During year ended December 31, 2024, net cash used in operating activities was approximately $8.1 million. The net loss of approximately $5.9 million was increased by non-cash other income of approximately $9.6 million related to the change in fair value of warrant liabilities and was decreased by share-based compensation expense of approximately $2.4 million and an impairment charge related to goodwill of $1.6 million. …”see in full comparison
“We are subject to extensive regulation, including firearms classification, export controls, procurement requirements, and data privacy and cybersecurity regulations. Changes in regulatory interpretation or enforcement could adversely affect our ability to manufacture, sell, or distribute our products.”see in full comparison
Full comparison: every changed paragraph (208)
We are a global public safety technology and services company focused on delivering integrated non-lethal solutions for law enforcement, corrections, defense, and other public safety organizations worldwide. Our mission is to enable safer outcomes by providing officers and agencies with the tools, training, and tactics to gain proactive, lawful control of encounters, reducing risk to both officers and subjects, while preserving tactical advantage.
We began sales of our first public safety product, the BolaWrap® 100 device, in late 2018. In the first quarter of 2022, we introduced the BolaWrap® 150, a next generation, electronically deployed device that is more robust, smaller, lighter, and simpler to deploy than the BolaWrap 100, which has since been phased out. In December 2020, we acquired NSENA Inc., a provider of immersive virtual reality training for law enforcement utilizing proprietary software-enabled content and computer graphics simulation. This acquisition provided the foundation for Wrap Reality™, our virtual reality (“VR”) training platform designed for law enforcement simulation training and correctional reentry scenarios.
In August 2023, we acquired Intrensic, a Delaware limited liability company, which added body worn camera and digital evidence management capabilities to our portfolio.
During 2025, we continued our transition from a single-product company into a diversified public safety technology and services company delivering integrated non-lethal solutions that combine tools, training, and tactics. This transition included expanding our product portfolio, advancing our training and software platforms, entering adjacent defense and homeland security markets, and strengthening our commercial and leadership infrastructure. While we continued to incur operating losses during the year, we implemented cost containment initiatives and focused on aligning our operating structure with our near- and long-term strategic priorities.
We expanded our product portfolio with the launch of WrapTactics™, a digital training platform designed to integrate human-factors awareness, decision-making under stress, and tactical proficiency agency-wide; and WrapVision™, a North America assembled body worn camera solution designed to meet federal procurement and data sovereignty requirements. We also advanced several counter unmanned aircraft system initiatives, including the MERLIN™ program, which apply our proprietary tether deployment technology to non-lethal drone interdiction and defense applications. These initiatives are intended to broaden our addressable market beyond traditional policing into defense, homeland security, and critical infrastructure protection, while maintaining our core focus on providing integrated tools, training, and tactics that give officers proactive, lawful control of encounters and support safer outcomes for officers, subjects and the communities they serve.
On September 19, 2025, we formed a new wholly-owned subsidiary of the Company, Wrap Federal, under the laws of the State of Delaware. Wrap Federal was established for the purpose of supporting U.S. federal government clients in the Department of Defense, Department of Homeland Security, and other federal agencies. We believe a continued focus on integrating our systems into existing federal frameworks supports our goal of becoming a fully integrated federal public safety and defense technology enterprise.
We
are a global public safety technology and services company that delivers safe and effective policing solutions to law enforcement and
security personnel worldwide. We are leading the movement for safer outcomes by equipping law enforcement with safer, non-painful compliance
tools and immersive training for modern society. We began sales of our first public safety product, the BolaWrap 100 remote restraint
device, in late 2018. In late 2020 we added a new solution to our public safety technologies, which is our virtual reality (“VR”)
training platform, Wrap Reality. Wrap Reality is now sold to law enforcement agencies for simulation training as well as corrections
departments for the societal reentry scenarios. In the first quarter of 2022 we delivered a new generation product, the BolaWrap 150.
The BolaWrap 150 is electronically deployed and is more robust, smaller, lighter and simpler to deploy than the BolaWrap 100 that has
been phased out.
Our
target market for our solutions includes approximately 900,000 full-time sworn law enforcement officers in over 18,000 federal, state,
and local law enforcement agencies in the U.S. and over 12 million police officers in more than 100 countries. Additionally, we are exploring
opportunities in other domestic markets, such as military and private security. Our international focus is on countries with the largest
police forces. According to 360iResearch, a market research consulting firm, our non-lethal products are part of a global market segment
expected to grow to $16.1 billion by 2027.
We
focus our efforts on the following productsProducts and services:Services
Our core product and service offerings are designed to provide officers and agencies with integrated non-lethal tools, training, and tactics that support safer outcomes, and sustained readiness across the public safety ecosystem. We focus our efforts on the following:
BolaWrap®
Our BolaWrap product line is a handheld, non-lethal device designed to give officers a proactive tactical option by deploying a Kevlar® tether that entangles the arms and/or legs, limiting a subject's mobility and balance. The BolaWrap 150 employs electronic deployment, improved reliability, enhanced durability, and reduced weight compared to prior generations. Upon deployment, the device creates a controlled interruption through sight, sound, and sensation, giving officers time, space, and tactical advantage to intervene earlier and manage encounters before contact distance collapses. BolaWrap is sold with proprietary cassettes that are consumed upon each deployment and must be replaced, providing a recurring consumable revenue stream.
Wrap Reality™ Virtual Reality Training
Wrap Reality is an immersive VR training platform providing scenario-based training focused on human-factors awareness, decision making under stress, and use of force judgment. The platform is designed to build and sustain the cognitive and tactical skills officers need to recognize intervention points, manage distance and positioning, and apply proportional, lawful responses in dynamic environments. Wrap Reality supports law enforcement, corrections, and societal reentry training and offers a growing library of configurable scenarios, including 45 scenarios for law enforcement and corrections and 15 scenarios for societal reentry. Wrap Reality may be deployed on premises or through cloud enabled environments and supports data capture, replay, and performance review.
WrapTactics™ Digital Training Platform
Launched in 2025, WrapTactics is a subscription based digital training and performance platform aimed at delivering short form, scenario-based instruction focused on non-lethal response tactics, decision-making under stress, and follow-on lawful control techniques. The platform is designed to prevent skill decay by providing continuous, low-burden training that reinforces the tactical fundamentals (distance, positioning, timing, and force decision-making) that officers rely on in dynamic encounters. WrapTactics complements our hardware and VR offerings and supports recurring revenue opportunities through bundled training and service offerings.
WrapVision™ Body-Worn Camera and Digital Evidence Management
WrapVision, launched in 2025, is a body-worn camera solution assembled in North America and designed to meet federal procurement and data-sovereignty requirements. WrapVision replaces our prior-generation Intrensic X2 camera hardware and serves as the front-end capture device within our digital evidence management ecosystem. Our cloud-based DEM platform provides unlimited video storage along with video and evidence uploading, search, retrieval, redaction, and evidence sharing capabilities, reducing the resources agencies require to manage digital evidence. Together, WrapVision and our DEM platform provide agencies with integrated accountability and transparency tools that complement our non-lethal and training solutions. WrapVision builds on the Intrensic acquisition and reflects our strategy to deliver integrated solutions for public safety.
Counter-Unmanned Aircraft Systems (C-UAS) and Defense Applications
During 2025, we expanded research, development, and demonstration efforts applying our tether deployment technology to counter C-UAS applications. MERLIN is designed to leverage the same self-contained cassette architecture underlying the BolaWrap platform, adapting it for non-lethal drone interdiction capabilities across defense, homeland security, and critical-infrastructure protection missions. These initiatives remain in various stages of development and evaluation and are subject to government testing, funding, and procurement timelines.
BolaWrap
Remote Restraint Device – a hand-held remote restraint device that discharges a seven and half-foot Kevlar tether to entangle
an individual at a range of 10-25 feet. BolaWrap assists law enforcement to safely and effectively control encounters early without resorting
to painful force options.
Wrap
Reality – a law enforcement 3D training system employing immersive computer graphics VR with proprietary software-enabled content.
It allows up to two participants to enter a simulated training environment simultaneously, and customized weapons controllers enable
trainees to engage in strategic decision making along the force continuum. Wrap Reality has 43 scenarios for law enforcement and corrections
and 15 scenarios for societal reentry. Wrap Reality is one of the most robust 3D Virtual Reality solutions on the market for law enforcement
and societal reentry today.
Wrap
Intrensic – a Body-Worn Camera (“BWC”) and Digital Evidence Management (“DEM”) solutions
provider. BWC and DEM play crucial role in capturing, storing, and managing digital evidence, such as video and audio recordings for
various purposes, including criminal investigations and maintaining transparency in public interactions. The Wrap Intrensic X2 camera
hardware and storage and data management capability, along with awareness of front-line operations, provides customers with a solution
to meet their challenges. Wrap Intrensic Evidence on Cloud provides an unlimited video storage platform that includes video and other
evidence uploading, search, retrieval, redaction, and evidence sharing while reducing the need for resources required to manage this
evidence.
In
addition to the US law enforcement market, we have shipped our restraint products to 62 countries. We have established an active distributor
network representing 50 states and one dealer representing the US territory of Puerto Rico. We have distribution agreements with international
distributors covering 75 countries. We focus significant sales, training and business development efforts to support our distribution
network in addition to our internal sales team.
We
focus significant resources on research and development innovations and continue to enhance our products and plan to introduce new products.
We believe we have established a strong brand and market presence globally and have established significant competitive advantages in
our markets.
Since
December 31, 2024, the Company accomplished the following:
W1
Global, LLC Acquisition
On
February 18, 2025, the Company and W1 Global, LLC, a Delaware limited liability company (“W1 Global”), entered into an Asset
Purchase Agreement, dated as of February 18, 2025 (the “W1 Purchase Agreement”), pursuant which, subject to the terms and
conditions set forth therein, the Company agreed to acquire substantially all the assets of W1, including, among others, all of W1’s
right, title and interest in and to W1’s properties, business, and assets of W1 used in, held for use in or relating to the business
of advisory and investigative professional services, as more specifically set forth in the W1 Purchase Agreement (collectively, the “Acquired
Assets”), which excludes the Excluded Assets (as defined in the W1 Purchase Agreement), and assume certain Assumed Liabilities
(as defined in the W1 Purchase Agreement), upon the terms and subject to the conditions set forth in the W1 Purchase Agreement (the “Acquisition”),
for a nominal purchase price equal to $100.00. This acquisition is expected to advance the Company’s capabilities and integrate
into Company’s Managed Safety and Response (MSR) Connected Ecosystem, expanding its reach and service offerings.
February
2025 Private2026 PlacementPurchase Agreement
On
February 24,2, 2025,2026, the Companywe entered into a securities purchase agreement (the “PIPEFebruary 2026 Purchase Agreement”) with certain
accreditedthe investors signatory thereto (collectively, the “PIPEFebruary 2026 Purchasers”) for the issuance and sale in a private placement (the “February 2026 Private
Placement”) of (i) an aggregate of 3,216,6661,700,000 shares of Common Stock, (ii) pre-funded warrants (the “CommonFebruary Shares”)2026 ofPre-Funded Common Stock and accompanying warrants (“PIPE
Warrants”) to purchase up to 3,216,666800,000 shares of Common Stock, with an exercise price of $1.80$0.0001 per share, and (iii) warrants (the “February 2026 Investor Warrants” and, together with the February 2026 Pre-Funded Warrants, the “February 2026 Warrants”) to purchase up to 2,500,000 shares of Common Stock, with an exercise price of $2.30 per share. The purchase price for
one share of Common ShareStock and accompanying PIPEFebruary 2026 Common Warrant was $1.80.$2.00 The estimated gross proceeds toand the Companypurchase wereprice $5.8for million, before estimated
offering expenses payable by the Company. The closing of the Private Placement occurred onone February 28,2026 2025Pre-Funded Warrant and Marchaccompanying 7,February 2025.2026 Common Warrant was $1.9999.
The closing of the February 2026 Private Placement (the “February 2026 Closing”) occurred on February 3, 2026. The aggregate gross proceeds from the February 2026 Closing were approximately $5.0 million, prior to deducting offering expenses payable by us.
The February 2026 Purchase Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the February 2026 Purchasers, including for liabilities under the Securities Act and other obligations of the parties and termination provisions.
February 2026 Warrants
The February 2026 Common Warrants are exercisable for shares of Common Stock immediately at an exercise price of $2.30 per share and expire five years from the date of issuance. The February 2026 Pre-Funded Warrants are exercisable for shares of Common Stock immediately and expire when exercised in full.
A holder of the February 2026 Warrants may not exercise any portion of such holder’s February 2026 Warrants to the extent that the holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s outstanding shares of Common Stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to the Company, the holder may increase the beneficial ownership limitation to up to 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise.
February 2026 Registration Rights Agreement
On February 2, 2026, in connection with the February 2026 Private Placement, the Company entered into a registration rights agreement (the “February 2026 Registration Rights Agreement”) with the February 2026 Purchasers, pursuant to which the Company agreed to prepare and file a registration statement with the SEC registering the resale of the shares of Common Stock and shares of Common Stock underlying the February 2026 Warrants no later than 60 days following the date of the February 2026 Registration Rights Agreement, and to use best efforts to have the registration statement declared effective as promptly as practical thereafter, and in any event no later than 90 days following the date of the February 2026 Registration Rights Agreement (or 120 days following the date of the February 2026 Registration Rights Agreement in the event of a “full review” by the SEC). On February 9, 2026, the Company filed the registration statement pursuant to the February 2026 Registration Rights Agreement, which was declared effective by the SEC on February 13, 2026.
Business
Outlook and Challenges
We believe demand for integrated non-lethal solutions will continue to be influenced by public expectations for proportional and accountable use of force, evolving legal and policy standards, and increased emphasis on officer safety, community trust, and sustained operational readiness. Modern policing operates under continuous public and legal scrutiny, creating a need for tools, training, and tactics that give officers defensible, proportional options in dynamic encounters. Our business outlook is shaped by our ability to increase adoption of our core products, deepen customer relationships through programmatic training and service delivery, expand recurring revenue, and selectively enter adjacent markets while managing costs and capital resources.
In 2026, our near-term focus is on expanding agency-wide deployments of BolaWrap, increasing utilization of our training and subscription-based offerings, including Wrap Reality and WrapTactics, and advancing commercialization efforts for WrapVision. We also expect to continue evaluating development and demonstration opportunities related to our counter-unmanned aircraft system initiatives, although the timing and scale of any resulting revenues remain uncertain and dependent on government testing, funding, and procurement decisions.
Our results will continue to be influenced by government budget cycles, procurement processes, and the availability of grant funding at the federal, state, and local levels. We also expect international sales to remain uneven due to centralized procurement processes and the timing of large orders. While we have implemented cost containment initiatives and continue to evaluate our operating structure, we expect to continue incurring operating losses until we achieve sufficient scale, margin improvement, and recurring revenue to offset our fixed costs.
Business Trends
Our ability to execute our strategy and improve our financial performance is subject to a number of risks and challenges, many of which are outside of our control.
A significant portion of our revenues is derived from government customers, which exposes us to extended sales cycles, budget constraints, procurement delays, and changes in public policy or funding priorities. These factors can result in variability in the timing and amount of revenue recognized and may make it difficult to predict future operating results.
We are subject to extensive regulation, including firearms classification, export controls, procurement requirements, and data privacy and cybersecurity regulations. Changes in regulatory interpretation or enforcement could adversely affect our ability to manufacture, sell, or distribute our products.
The Company has experienced increased costs related to labor and materials, which management attributes in part to inflationary pressures. These cost increases have been driven primarily by higher wage rates, competitive labor market conditions, and increased supplier pricing for certain materials and services. While inflationary pressures persisted during 2025, the Company has taken steps to mitigate the impact through cost containment initiatives, workforce reductions, supply chain management efforts, and selective pricing actions where appropriate. However, continued inflationary pressures could result in higher operating costs in future periods, and there can be no assurance that the Company will be able to fully offset such increases through operational efficiencies or pricing adjustments.
We
believe our Company’s products and solutions are gaining global recognition and awareness through various channels such as social
media, trade shows, and media exposure, among others. In part, this recognition and awareness can be attributed to positive feedback
from law enforcement agencies and the successful deployment of our products. As a result, we believe our brand is becoming increasingly
recognized on a global scale as a leader in remote restraint and non-lethal solutions.
In
addition, we are focused on marketing and public relations efforts. We believe there are market opportunities for our remote restraint
and virtual reality solutions in the law enforcement and security sectors worldwide. These opportunities are driven by the increasing
demand for less-lethal policing.
In
the law enforcement sector, our BolaWrap product has been successfully deployed in the field, as reported by many agencies. BolaWrap
is now in use by over 900 US law enforcement agencies and in 62 countries. Due to its safe remote restraint capabilities, some agencies
do not deem its usage a categorical reportable use of force and rather place it underneath early use of force such as handcuffs. In our
strategic roadmap, we clarified that law enforcement agencies deploy BolaWrap when verbal commands breakdown but long before there is
justifiable escalation to pepper spray, pepper ball, batons, bean bags, tasers or Conducted Electrical Weapons (CEW’s) or firearms.
Some
agencies voluntarily report usage to Wrap but many do not. In the usage reports we have been provided, officers have reported successful
outcomes in 84% of the use cases. This percentage is higher than what is often seen with less lethal tools. From the information we have
been provided, the most common BolaWrap use case is for individuals with behavioral health issues, and the second most common BolaWrap
use case is during domestic violence calls. 26% percent of the reported persons who are wrapped with the BolaWrap are thought to be under
the influence of alcohol or drugs.
There
are many reasons why we may not receive reports on all the use of the BolaWrap, including, when uses of BolaWrap are considered evidence
in ongoing criminal cases, are controlled by local policy or regulation, or require officer and union permission to be shared with us.
However, some agencies have shared bodycam footage of successful field deployments with us, which we may use in our training and education
efforts. We believe that as the reports of BolaWrap’s effectiveness in de-escalation continue to increase, it will contribute to
our future revenue growth.
We
anticipate and believe that our portfolio of safe, remote restraint products and training services has a strong and expanding pipeline
of market opportunities in the law enforcement, military, corrections, and homeland security sectors both domestically and internationally.
With the increasing demand for more humane and safer policing practices, we expect a continued surge in our global business. Currently,
we are exploring major international business prospects while simultaneously seeking to establish relationships with large police agencies
in the US. However, we acknowledge that it is challenging to predict the exact timeline for closing these deals, or whether they will
ultimately materialize.
As
part of our efforts to expand our sales and distribution operations, we provide a comprehensive training program for law enforcement
officers and trainers in using the BolaWrap. This training equips them with knowledge about the appropriate use and limitations of BolaWrap
in tandem with modern policing techniques for de-escalation of encounters. We now focus on also teaching when and why BolaWrap should
be used, including the specific area of success, such as after verbal commands break down and before the law enforcement officer is ready
to escalate to less lethal pain compliance tools. We believe that law enforcement trainers and officers who have been trained to use
our products, or have witnessed demonstrations, are more inclined to support the acquisition and deployment of our products by their
respective departments to drive successful outcomes. As of December 31, 2024, over 1,540 agencies have received BolaWrap training with
over 5,450 training officers at those agencies certified as BolaWrap instructors and qualified to train the rest of their departments,
representing a 1% increase in agencies and a 1% increase in trained officers as compared to December 31, 2023.
Operating
expenses for the year ended December 31, 2024 totaled $18.0 million representing a 17 % reduction as compared to 2023 expenses
totaling $21.6 million. Our new management team has prioritized reducing operating expenses, and in the second quarter of 2024,
conducted a thorough top to bottom assessment of all aspects of the business. We expect to realize the full year benefits in 2025 of
the cost reduction actions taken throughout 2024 as we expect to continue to reduce our cost profile. This assessment culminated in
the creation of a strategic roadmap aimed at achieving sustainable growth and delivering long-term value to our stockholders. Our
strategic roadmap centers on expanding our sales by building repeatable domestic BolaWrap sales, increasing international sales of
the new BolaWrap 150, and expanding the deployment of BolaWrap to full patrol-wide utilization via a customer success function.
Additionally, we have established a dedicated inside sales leader to increase our velocity on new leads. To catalyze sales growth,
we are expanding our distributor and partner relationships while simultaneously diversifying and innovating our product offerings.
As part of our strategic roadmap, we have made the decision to improve the pricing on BolaWrap 150 devices and cassettes, given the
product’s success as a significant upgrade for law enforcement. We believe these increased margins could drive us to breakeven
and profitability more quickly. We also began charging for our respected training services.
We
believe the synergy in BolaWrap to de-escalate and reduce uses of force and the immersive 3D Virtual Reality training for law enforcement
and corrections create a unique and well positioned law enforcement technology company that is prepared for modern policing and driving
safe outcomes. With our key focus on where BolaWrap and Wrap Reality fit into the Force Factor diagram below in Figure X, agencies are
likely to see significant increased usage where BolaWrap has shown to be a tool that could appropriately de-escalate dangerous situations
and save the lives and careers of officers and the individuals they interact with in such situations.
Management
believes that implementing these strategic changes may lead to substantial sales growth and put us on a path towards sustainable profitability.
Although geopolitical tensions and macroeconomic challenges have affected our quarterly results in the past and may in the future, we
believe our company is uniquely positioned to provide lifesaving technologies and training that enable law enforcement officers worldwide
to conduct safe and effective encounters while reducing the use of force. With an increasing addressable market, the Company offers what
we believe is a unique value proposition. Our improved pricing strategy, coupled with reduced operating expenses and our growing sales
outlook, is expected to help reduce losses and improve cash flow in the future.
We
have continued to invest in our VR system while working to continue to develop real-world scenarios into our robust Wrap Reality platform.
We plan to increase marketing activities for our VR solution to both law enforcement and corrections throughout 2023 and expect to launch
the cloud-based version in mid-2023.
As
of December 31, 2024, we had backlog of approximately $64 thousand was delivered in the first quarter of 2025. Additionally, we had
deferred revenue of approximately $505 thousand expected to be recognized generally over the next four years. Our deferred revenue
is generally from Wrap Reality subscription and other revenue. Distributor and customer orders for future deliveries are generally
subject to modification, rescheduling or in some instances, cancellation, in the normal course of business.
Since
inception, we have generated significant losses from operations and anticipate that we will continue to generate significant losses from
operations for the foreseeable future. We believe that we have adequate financial resources to sustain our operations for the twelve
months. For the year ended December 31, 2024, our net loss from operations decreased by approximately $3.2 million compared to the year
ended December 31, 2023. Net cash used in operations during the year ended December 31, 2024, was approximately $8.6 million less than
cash used in operations during the year ended December 31, 2023. This decrease in cash used in operations reflects a lower net operating
loss in 2024 along with a decrease in accounts receivable during the period compared to the year ended December 31, 2023.
We
expect that we will continue to innovate new applications for our public safety technology, open new geographies, develop new products
and technologies to meet diverse customer requirements and identify and develop new markets for our products.
What changed in the latest 10-Q
Risk Factors
New heading “We depend on technology licensed from Frenel Imaging Ltd. for the detection layer of our WrapShield platform, and any loss or limitation of that license, or any failure of the underlying technology to perform as expected, could impair our platform strategy.”
New heading “Our exclusive license from Frenel is subject to minimum performance milestones, and if we fail to meet them, we could lose exclusivity and the anticipated benefits of the arrangement.”
New heading “Our minority investment in Frenel, a privately held company organized in Israel, is illiquid and subject to risks that could result in a partial or total loss of the investment.”
New heading “Our expanding defense and international activities subject us to complex export control and trade regulations, and any failure to comply could result in penalties and restrict our ability to sell our products.”
New heading “The involvement of our Chief Executive Officer and our President is a condition of our Frenel license, and the loss or reduced involvement of either could adversely affect that arrangement.”
New heading “Our WrapShield platform strategy is in an early stage, and we may not be able to integrate, commercialize, or achieve market adoption of the platform.”
Largest changes
“Our expanding defense and international activities subject us to complex export control and trade regulations, and any failure to comply could result in penalties and restrict our ability to sell our products.”see in full comparison
“Our platform strategy and our activities with Frenel involve products and technologies that may be subject to U.S. export control and trade regulations, including the International Traffic in Arms Regulations, the Export Administration Regulations, and regulations administered by the Office of Foreign Assets Control, as well as Foreign Military Financing and Foreign Military Sales processes for NATO customers. Compliance is complex and costly, and violations could result in civil or criminal penalties, loss of export privileges, and reputational harm. …”see in full comparison
“Our minority investment in Frenel, a privately held company organized in Israel, is illiquid and subject to risks that could result in a partial or total loss of the investment.”see in full comparison
“We depend on technology licensed from Frenel Imaging Ltd. for the detection layer of our WrapShield platform, and any loss or limitation of that license, or any failure of the underlying technology to perform as expected, could impair our platform strategy.”see in full comparison
“The involvement of our Chief Executive Officer and our President is a condition of our Frenel license, and the loss or reduced involvement of either could adversely affect that arrangement.”see in full comparison
“Our exclusive license from Frenel is subject to minimum performance milestones, and if we fail to meet them, we could lose exclusivity and the anticipated benefits of the arrangement.”see in full comparison
Full comparison: every changed paragraph (15)
The following description of risk factors includes any material changes to, and supersedes the description of, risk factors associated with our business, financial condition and results of operations previously disclosed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 26, 2026. Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause our actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and stock price.
The following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding other statements in this Form 10-Q. The following information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q.
We depend on technology licensed from Frenel Imaging Ltd. for the detection layer of our WrapShield platform, and any loss or limitation of that license, or any failure of the underlying technology to perform as expected, could impair our platform strategy.
The detection capability of our WrapShield platform relies on Frenel's proprietary polarimetric thermal imaging software, which we license on an exclusive basis in the United States and for specified NATO channels. Frenel retains ownership of the underlying intellectual property. If the technology does not perform as expected, if Frenel fails to maintain or support it, if our license is terminated or converted to a non-exclusive license, or if Frenel is unable to protect its intellectual property, our ability to develop and commercialize WrapShield could be delayed or impaired. We may not be able to obtain an adequate substitute on acceptable terms or at all.
Our exclusive license from Frenel is subject to minimum performance milestones, and if we fail to meet them, we could lose exclusivity and the anticipated benefits of the arrangement.
Our exclusivity under the Frenel license depends on satisfying specified minimum annual commitment milestones over the initial four-year term, including establishing a U.S. value chain, completing product demonstrations and pilots, executing customer agreements, and generating specified cumulative revenue for Frenel. If we do not meet these milestones within the applicable periods or after any cure periods, the license would automatically convert to a non-exclusive license for the remainder of the term. Loss of exclusivity could reduce our competitive position and the return on our investment, and there is no assurance that we will achieve the milestones on the anticipated timeline or at all.
Our minority investment in Frenel, a privately held company organized in Israel, is illiquid and subject to risks that could result in a partial or total loss of the investment.
In July 2026 we invested $2.0 million in preferred shares of Frenel, a privately held company organized under the laws of Israel, and we hold a right to invest up to an additional $2.5 million. Our investment is illiquid and has no public market, and its value depends on Frenel's performance, financing needs, and ability to execute its business plan, over which we have limited control. As a minority holder, our information and governance rights are limited, and our rights are governed by Frenel's organizational documents and by Israeli law, which may differ from the protections available under U.S. law. Conditions in the region in which Frenel operates could also affect its business. The value of our investment could decline, and we could lose all or part of it.
Our expanding defense and international activities subject us to complex export control and trade regulations, and any failure to comply could result in penalties and restrict our ability to sell our products.
Our platform strategy and our activities with Frenel involve products and technologies that may be subject to U.S. export control and trade regulations, including the International Traffic in Arms Regulations, the Export Administration Regulations, and regulations administered by the Office of Foreign Assets Control, as well as Foreign Military Financing and Foreign Military Sales processes for NATO customers. Compliance is complex and costly, and violations could result in civil or criminal penalties, loss of export privileges, and reputational harm. Changes in these regulations, in licensing determinations, or in the classification of our products could restrict or delay our ability to sell into defense and international markets.
The involvement of our Chief Executive Officer and our President is a condition of our Frenel license, and the loss or reduced involvement of either could adversely affect that arrangement.
Under the Frenel license, Scot Cohen, our Chief Executive Officer and Chairman, and Jared Novick, our President and Chief Operating Officer, are required to remain materially and actively involved in our performance under the agreement. A material reduction in the involvement of either person that is not resolved within the prescribed period would permit Frenel to convert our exclusive license to a non-exclusive license. The loss of the services of either executive, or a reduction in their involvement, could therefore harm our operations generally and our rights under the Frenel arrangement in particular.
Our WrapShield platform strategy is in an early stage, and we may not be able to integrate, commercialize, or achieve market adoption of the platform.
We introduced WrapShield in 2026 as a strategy to integrate threat detection, decision support, and proportionate response into a single architecture, with an initial focus on counter-unmanned aircraft system applications. The platform is in an early stage of development and depends on integrating technologies developed by third parties, including Frenel, with our own products. We may encounter technical, regulatory, funding, or procurement obstacles, and the timing and scale of any resulting revenue are uncertain. There is no assurance that WrapShield will achieve commercialization or market adoption, and our investments in the platform may not yield a return.
For information regarding the Company's material known risk factors which could materially adversely affect the Company, its business, financial condition, or results of operations, see "Risk Factors" in Part I, Item 1A of the Company's 2025 Annual Report on Form 10-K. There have been no material changes to the risk factors as previously disclosed in Item 1A to the Annual Report.
Management's Discussion & Analysis (MD&A)
New heading “ATF Ruling 2026-2”
New heading “Strategic Investment in Frenel Imaging Ltd.”
New heading “WrapShield Platform”
New heading “Wraptor MX and Early Adopter Program”
New heading “Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025 (Unaudited)”
New heading “Series B Offering”
New heading “Series B Preferred Stock”
New heading “Series B Warrants”
Largest changes
“We are subject to extensive regulation, including firearms classification, export controls, procurement requirements, and data privacy and cybersecurity regulations. In July 2026, the ATF classified the BolaWrap 150 as an instrument of restraint rather than a firearm, which management believes may reduce certain regulatory friction for that product. …”see in full comparison
“We are subject to extensive regulation, including firearms classification, export controls, procurement requirements, and data privacy and cybersecurity regulations. Changes in regulatory interpretation or enforcement could adversely affect our ability to manufacture, sell, or distribute our products.”see in full comparison
“Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025 (Unaudited)”see in full comparison
“On August 18, 2025, the Company entered into a Securities Purchase Agreement (the “Series B Purchase Agreement”) with certain accredited investors (the “Series B Purchasers”) for the issuance and sale in a private placement (the “Series B Private Placement”) of an aggregate of (i) 4,500 shares of the Company’s Series B Preferred Stock initially convertible into up to 3,000,000 shares of Common Stock (the “Series B Conversion Shares”), at an initial conversion price of $1.50 per share, and (ii) accompanying warrants (the “Series B Warrants”) to purchase up to 3,000,000 shares of Common Stock …”see in full comparison
“Technology-enabled services revenue was $0.5 million for the six months ended June 30, 2026, compared to $1.4 million for the six months ended June 30, 2025, a decrease of $0.9 million, or 62%. The decrease reflects the strategic restructuring of our managed services offerings following the Company's decision to wind down certain advisory and investigative service arrangements associated with the W1 asset acquisition in February 2025, which are not necessarily representative of the ongoing business. …”see in full comparison
Full comparison: every changed paragraph (85)
We are a global public safety technology company that delivers non-lethal public safety solutions to law enforcement and security personnel worldwide. Management is pursuing a strategy to expand the Company from a provider of individual non-lethal products toward a provider of an integrated public safety platform that the Company refers to as WrapShield™. WrapShield is designed to connect threat detection, AI-assisted decision support, and proportionate response, with human decision-makers remaining in control. The initial focus for the platform is counter-unmanned aircraft system (“counter-UAS”) applications, and management intends to extend the architecture over time to additional public safety, critical infrastructure, and defense applications. The Company’s current commercial foundation remains the BolaWrap® 150 remote restraint device and its related products and services, and is a critical piece of the platform strategy.
Our product and service portfolio includes the BolaWrap® device, cassettes and related accessories. We also offer technology-enabled services including Wrap Reality VR training simulator, WrapTactics digital training platform, and WrapVision™ body-worn camera and digital evidence management solution, managed services and policy support.
Our core offerings are designed to provide officers and agencies with integrated non-lethal tools, training, and tactics that support safer outcomes and sustained readiness across the public safety ecosystem. BolaWrap gives officers a proactive, non-lethal tactical option through a tether deployment system sold with recurring consumable cassettes. In July 2026, the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives (the “ATF”) issued a ruling classifying the BolaWrap® 150 as an instrument of restraint rather than a firearm or an “any other weapon.” Our non-lethal response offerings are designed to function as a family of instruments of restraint. In addition to the handheld BolaWrap® 150, the Company completed a first operational prototype of Wraptor MX™, a multi-shot restraint platform intended for tactical, corrections, and security environments, and is developing the DFR-X™ drone-deployed restraint system. Wraptor MX and DFR-X are in development and are not yet commercially available.
Wrap Reality and WrapTactics are designed to deliver immersive VR and subscription-based digital training focused on decision-making under stress, use of force judgment, and non-lethal response tactics. WrapVision provides a body-worn camera and cloud-based digital evidence management platform designed to meet federal procurement and data-sovereignty requirements.
We are also expanding our tether deployment technology into counter UAS and defense applications through our MERLIN program, which management expects to advance within the WrapShield platform, and which targets non-lethal drone interdiction capabilities for defense, homeland security, and critical-infrastructure protection missions.
To establish an advanced-sensing detection capability for the platform, in July 2026 the Company made a strategic investment in Frenel and obtained an exclusive license to its thermal-polarimetric imaging technology for the United States and NATO markets, as further described below under Recent Developments.
We are a global public safety technology and services company that delivers safe and effective policing solutions to law enforcement and security personnel worldwide. Our product and service portfolio includes the BolaWrap® device, Wrap Reality VR training simulator, WrapTactics digital training platform, and WrapVision™ body-worn camera and digital evidence management solution. We also offer technology-enabled services including managed services and policy support. Our core offerings are designed to provide officers and agencies with integrated non-lethal tools, training, and tactics that support safer outcomes and sustained readiness across the public safety ecosystem. BolaWrap gives officers a proactive, non-lethal tactical option through a tether deployment system sold with recurring consumable cassettes. Wrap Reality and WrapTactics are designed to deliver immersive VR and subscription-based digital training focused on decision-making under stress, use of force judgment, and non-lethal response tactics. WrapVision provides a body-worn camera and cloud-based digital evidence management platform designed to meet federal procurement and data-sovereignty requirements. We are also expanding our tether deployment technology into counter-unmanned aircraft systems and defense applications through our MERLIN program, which targets non-lethal drone interdiction capabilities for defense, homeland security, and critical-infrastructure protection missions. We serve law enforcement, corrections, and security personnel across domestic and international markets.
The following developments occurred subsequent to June 30, 2026. Except as otherwise noted, they did not affect the Company’s financial position or results of operations for the periods presented, and their effect on future results is uncertain.
ATF Ruling 2026-2
In July 2026, ATF Ruling 2026-2 became effective, classifying the BolaWrap® 150 as an instrument of restraint and determining that it is neither a “firearm” under the Gun Control Act or an “any other weapon” under the National Firearms Act. The ruling supersedes prior ATF classifications of the BolaWrap 150. Management believes the ruling may reduce federal regulatory ambiguity that has historically complicated BolaWrap procurement in certain corrections, civilian-safety, and international channels, and may support broader adoption. The ruling addresses the BolaWrap 150 only and does not extend to the Company’s other products.
Strategic Investment in Frenel Imaging Ltd.
In July 2026, the Company made a strategic investment in Frenel, an advanced-sensing company, and obtained an exclusive license to commercialize Frenel’s TPiCore® thermal-polarimetric imaging technology in the United States and NATO markets. The Company intends to use this technology as the detection layer of the WrapShield platform. The investment and license are in an early stage, and the timing and amount of any resulting revenue are uncertain.
WrapShield Platform
In July 2026, the Company introduced WrapShield™, a platform strategy intended to integrate threat detection, AI-assisted decision support, command-and-control, and proportionate response into a single operating architecture, with an initial application in counter-UAS. WrapShield is in an early stage of development, and its commercialization, integration, and market adoption are subject to significant uncertainty.
Wraptor MX and Early Adopter Program
In July 2026, the Company completed a first operational prototype of Wraptor MX™, a multi-shot non-lethal restraint platform, and opened an early adopter program to select a limited number of law enforcement agencies for pre-commercial access. Wraptor MX is a prototype and is not commercially available. Participation in the early adopter program may not result in orders or revenue.
Private Placement
On February 2, 2026, we entered into a securities purchase agreement (the “February 2026 Purchase Agreement”) with certain accredited investors (“February 2026 Purchasers”) for a private placement offering (the “February 2026 Private Placement”) of an aggregate of (i) 1,700,000 shares of Common Stock, (ii) pre-funded warrants to purchase up to 800,000 shares of Common Stock (“Pre-Funded Warrants”), and (iii) common warrants to purchase up to 2,500,000 shares of Common Stock (“Common Warrants” and, together with the Pre-Funded Warrants, the “February 2026 Warrants”). The purchase price was $2.00 per share (or $1.9999 per Pre-Funded Warrant), with the Common Warrants having an exercise price of $2.30 per share and a five-year term.
The gross proceeds from the February 2026 Private Placement were approximately $5.0 million before deducting offering expenses. The securities were issued in transactions exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) and Regulation D thereunder.
In 2026, our near-term focus is on expanding agency-wide deployments of BolaWrap, increasing utilization of our training and subscription-based offerings, including Wrap Reality and WrapTactics, and advancing commercialization efforts for WrapVision. Management believes the recent ATF ruling classifying the BolaWrap 150 as an instrument of restraint may support adoption in certain corrections, civilian-safety, and international channels, although the effect on future results is uncertain.
Management also intends to advance the WrapShield platform strategy, including the integration of Frenel’s thermal-polarimetric sensing technology and the continued development of the Wraptor MX and DFR-X non-lethal response systems. These initiatives are in early stages, and the timing and scale of any resulting revenue are uncertain and depend on product development, testing, funding, and government procurement decisions. We also expect to continue evaluating development and demonstration opportunities related to our counter-unmannedcounter aircraft systemUAS initiatives, although the timing and scale of any resulting revenues remain uncertain and dependent on government testing, funding, and procurement decisions.
We are subject to extensive regulation, including firearms classification, export controls, procurement requirements, and data privacy and cybersecurity regulations. In July 2026, the ATF classified the BolaWrap 150 as an instrument of restraint rather than a firearm, which management believes may reduce certain regulatory friction for that product. This classification applies to the BolaWrap 150 only and does not extend to our other products, and our expansion into advanced sensing, counter-UAS, and defense applications may subject us to additional regulatory regimes, including export controls under the International Traffic in Arms Regulations and the Export Administration Regulations and applicable aviation regulations. Changes in regulatory interpretation or enforcement could adversely affect our ability to manufacture, sell, or distribute our products. Our platform strategy also depends in part on technologies developed by third parties, including Frenel, and on our ability to integrate, commercialize, and support new products.
We are subject to extensive regulation, including firearms classification, export controls, procurement requirements, and data privacy and cybersecurity regulations. Changes in regulatory interpretation or enforcement could adversely affect our ability to manufacture, sell, or distribute our products.
The Company operates as a single segment. The Company’sCompany's chief operating decision maker is Scot Cohen, the Company’sCompany's Executive Chairman and Chief Executive Officer, who manages operations for purposes of allocating resources. See Note 15, Segment Information, to the condensed consolidated financial statements for the significant expense categories regularly reviewed by the CODM and the reconciliation to consolidated loss from operations.
Three Months Ended MarchJune 31,30, 2026, Compared to Three Months Ended MarchJune 31,30, 2025 (Unaudited)
We reported net revenue of $1.1$2.1 million for the three months ended MarchJune 31,30, 2026, as compared to $765$1.0 thousandmillion for the three months ended MarchJune 31,30, 2025, representing an increase of $346$1.0 thousand,million, or 45%.103%. The increase reflects higher product sales, partially offset by a decline in technology-enabled services revenue.
Product sales were $0.9$1.7 million for the three months ended MarchJune 31,30, 2026, compared to $0.3$50 millionthousand for the three months ended MarchJune 31,30, 2025, an increase of $0.6$1.7 million, or 186%.million. The increase reflects higher shipments of BolaWrap 150 devices and cassettes to both domestic and international customerscustomers, as order flow improvedcontinued to improve following the transition to a more direct, agency-focused go-to-market approach. Cassettes and consumables represented a growing component of product revenue, consistent with the expanding base of BolaWrap devices in active field use. Product sales for the three months ended June 30, 2025 reflected an unusually low level of shipments as compared to more typical quarterly volumes.
Technology-enabled services revenue was $0.2$0.3 million for the three months ended MarchJune 31,30, 2026, compared to $0.5$1.0 million for the three months ended MarchJune 31,30, 2025, a decrease of $0.2$0.7 million, or 50%.68%. The decrease reflects the strategiccontinued restructuringwind-down of ourthe managed services offerings following the Company's decision to wind down certainand advisory and investigative service arrangements associated with the W1 asset acquisition completed in February 20252025, which contributed a higher level of revenue in the prior-year quarter and are not necessarily representative of the ongoing business. This decline was partially offset by growth in WrapVision body-worn camera and related software revenue. The Company iscontinues focusingto focus its technology-enabled services revenue on its higher-margin subscription and software-based offerings, including WrapTactics and Wrap Reality, as well as WrapVision evidence management subscriptions. The timing of subscription renewals and new contract activations also contributed to the year-over-year decline in this revenue category for the three months ended MarchJune 31,30, 2026.
Gross profit was $0.7$1.5 million for the three months ended MarchJune 31,30, 2026, compared to $0.6$0.5 million for the three months ended MarchJune 31,30, 2025, an increase of $0.1$1.1 million, or 16%.217%. Gross margin was 62.2%75.3% for the three months ended MarchJune 31,30, 2026, compared to 77.8% for three months ended March 31, 2025. The decline in gross margin percentage reflects the shift in revenue mix toward hardware product sales, which carry lower margins than software subscriptions and managed services. BolaWrap devices and cassettes represent the majority of revenues48.1% for the three months ended MarchJune 31,30, 2026,2025. The improvement in gross margin percentage primarily reflects the higher volume of product sales, which absorbed fixed manufacturing overhead more efficiently, and whilea productmore marginsfavorable remainoverall solid,mix, they are lower than the margins generated by technology-enabled services inas the prior-year period.quarter included a higher proportion of lower-margin managed services revenue associated with the W1 wind-down. Cost of revenues increaseddecreased $0.3$18 thousand to $0.5 million to $0.4 million, consistent withdespite the higher productsales volume.volume, reflecting improved production efficiencies. We expect gross margins to improvecontinue asto be influenced by the relative mix of product sales and technology-enabled services revenue growsin asfuture a proportion of total revenue throughout 2026.periods.
Selling, general and administrative (“SG&A”) expense was $5.4$3.6 million for the three months ended MarchJune 31,30, 2026, compared to $4.1$3.2 million for the three months ended MarchJune 31,30, 2025, an increase of $1.2$0.5 million, or 29%.15%. The increase was driven primarily by higher non-cash share-based compensation expense.
Share-based compensation allocated to SG&A was $2.4$1.2 million for the three months ended MarchJune 31,30, 2026, compared to $1.6$0.8 million for the three months ended MarchJune 31,30, 2025, reflecting grants issued to new and existing employees and officers in connection with the grants of equity incentive awards granted in 2025.
Cash-based SG&A costs, including salaries and burden, occupancy, marketing, and professional fees were $3.0 million for the three months ended March 31, 2026, compared to $2.5 million for the three months ended MarchJune 31,30, 2026, compared to $2.4 million for the three months ended June 30, 2025. The increase of $0.5approximately million,$49 thousand, or 20.3%,2%, was primarily due to increased professional feesfees, andlargely offset by overallongoing declinescost indiscipline across office expense and other general and administrative expenses as the Company maintained ongoing cost discipline.expenses.
Research and development expense was $105$152 thousand for the three months ended MarchJune 31,30, 2026, compared to $378$162 thousand for the three months ended MarchJune 31,30, 2025, a decrease of $273$10 thousand, or 72%. The decrease reflects the Company's shift to a more variable-cost development model and reduced headcount dedicated to6%. R&D activities,spending remained at a modest level as the Company's primary platforms — BolaWrap 150, WrapTactics, WrapVision, and Wrap Reality — have advanced beyond the primary development phase and are nowremain in commercial deployment.deployment, R&Dwith continued investment is expected to continue at a more modest level in 2026, focused on incremental product enhancements, the WrapTactics content library, and counter-UAS development activities for the MERLIN program.
Loss from operations was $4.8$2.3 million for the three months ended MarchJune 31,30, 2026, compared to $3.9$2.9 million for the three months ended MarchJune 31,30, 2025.2025, an improvement of $0.6 million, or 21%. The increaseddecreased operating loss reflected higher operatinggross expenses,profit driven primarily by anincreased increaseproduct in non-cash share-based compensation expense,sales, partially offset by increasedhigher grossSG&A profit.expense.
Total other income,expense, net was $229$6 thousand for the three months ended MarchJune 31,30, 2026, compared to $4.0total millionother expense, net of $871 thousand for the three months ended MarchJune 31,30, 2025, a decrease in expense of $3.8$865 million.thousand. The year-over-year change is primarily attributable to the non-recurrence of thea non-cash gainloss from the change in fair value of warrant liabilities that was recorded during the three months ended MarchJune 31,30, 2025, partiallyprior offset by a non-cash gain on lease termination duringto the threewarrants' monthsreclassification endedto Marchpermanent 31, 2026.equity.
Gain on Lease Termination. During the three months ended March 31, 2026, the Company recognized aThe $227 thousand non-cash gain on lease termination inrelated connection withto the early termination of the office lease at 3480 Main Highway, Suite 202, Miami, Florida (Coconut Grove). Onwas Februaryrecognized 13, 2026,during the Companythree enteredmonths intoended March 31, 2026 in connection with a Termination and Mutual Release Agreement entered into with the landlord,landlord terminatingon February 13, 2026. No gain or loss on lease termination was recognized during the leasethree effectivemonths asended ofJune that30, date. Under ASC 842, upon termination the Company derecognized the carrying value of the operating lease right-of-use asset and the corresponding lease liability, resulting in the $227 thousand non-cash gain representing the excess of the liability extinguished over the right-of-use asset derecognized as of the termination date. The gain is non-cash and non-recurring in nature.2026.
Change in Fair Value of Warrant Liabilities. During the three months ended MarchJune 31,30, 2025, the Company recognized aan $4.0$871 millionthousand non-cash gainloss attributable to thean decreaseincrease in the fair value of outstanding warrant liabilities.liabilities prior to their reclassification to permanent equity. On June 30, 2025, the Company amended its warrants issued in connection with the Series A Preferred Stock offering (the “Series A Warrants”) and its warrants issued in the February 2025 private placement (the “PIPE Warrants”), resulting in their reclassification from warrant liabilities to permanent equity under ASC 815-40. Following this reclassification, the Company no longer carries warrant liabilities on its balance sheet and does not record non-cash income or expense related to changes in warrant fair value. Accordingly, no such gain or loss was recognized during the three months ended MarchJune 31,30, 2026, and no comparable item is expected in future periods.
Interest Income. Interest income was $2 thousand for the three months ended June 30, 2026, consistent with $2 thousand for the three months ended June 30, 2025.
Interest Income. Interest income was $1 thousand for the three months ended March 31, 2026, compared to $2 thousand for the three months ended March 31, 2025, reflecting a lower average balance of interest-bearing money market funds during the period.
Net Loss. Net loss was $4.5$2.3 million for the three months ended MarchJune 31,30, 2026, compared to net incomeloss of $109$3.7 thousandmillion for the three months ended MarchJune 31,30, 2025. The change from net income todecreased net loss primarily reflects the non-recurrence of the $4.0$871 millionthousand non-cash warrantloss on the change in fair value gain,of partiallywarrant offsetliabilities recorded in the prior-year quarter, together with the improvement in operating results driven by thehigher $227product thousand non-cash gain on lease termination.sales.
Net loss attributable to common stockholders was $4.8$2.4 million, or $(0.090.04) per basic and diluted share, for the three months ended MarchJune 31,30, 2026, compared to a net loss attributable to common stockholders of $55$3.9 thousand,million, or $0.00$(0.07) per basic and diluted share, for the three months ended MarchJune 31,30, 2025. The weighted average common shares used in the calculation were approximately 54.055.7 million for the three months ended MarchJune 31,30, 2026, compared to 48.450.6 million for the three months ended MarchJune 31,30, 2025, reflecting shares issued in the February 2025 private placement, the February 2026 private placement,placement and other equity issuances.
Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025 (Unaudited)
The following table sets forth for the periods indicated certain items of our condensed consolidated statement of operations. The financial information and the discussion below should be read in conjunction with the financial statements and notes contained in this Quarterly Report on Form 10-Q.
Revenue
We reported net revenue of $3.2 million for the six months ended June 30, 2026, as compared to $1.8 million for the six months ended June 30, 2025, representing an increase of $1.4 million, or 78%. The increase reflects higher product sales, partially offset by a decline in technology-enabled services revenue.
Product sales were $2.6 million for the six months ended June 30, 2026, compared to $0.4 million for the six months ended June 30, 2025, an increase of $2.3 million, or 633%. The increase reflects higher shipments of BolaWrap 150 devices and cassettes to both domestic and international customers as order flow continued to improve following the transition to a more direct, agency-focused go-to-market approach. Cassettes and consumables represented a growing component of product revenue, consistent with the expanding base of BolaWrap devices in active field use.
Technology-enabled services revenue was $0.5 million for the six months ended June 30, 2026, compared to $1.4 million for the six months ended June 30, 2025, a decrease of $0.9 million, or 62%. The decrease reflects the strategic restructuring of our managed services offerings following the Company's decision to wind down certain advisory and investigative service arrangements associated with the W1 asset acquisition in February 2025, which are not necessarily representative of the ongoing business. This decline was partially offset by growth in WrapVision body-worn camera and related software revenue. The Company is focusing its technology-enabled services revenue on its higher-margin subscription and software-based offerings, including WrapTactics and Wrap Reality, as well as WrapVision evidence management subscriptions. The timing of subscription renewals and new contract activations contributed to the year-over-year decline in this revenue category for the six months ended June 30, 2026.
Prior period "Managed services" and "Other revenue" have been reclassified into "Technology enabled services" to conform to the current period presentation.
Gross Profit
Gross profit was $2.2 million for the six months ended June 30, 2026, compared to $1.1 million for the six months ended June 30, 2025, an increase of $1.2 million, or 106%. Gross margin was 70.7% for the six months ended June 30, 2026, compared to 60.9% for the six months ended June 30, 2025. The improvement in gross margin percentage reflects the significantly higher volume of product sales, which absorbed fixed manufacturing overhead more efficiently, partially offset by a shift in revenue mix away from higher-margin technology-enabled services. Cost of revenues increased $232 thousand to $0.9 million, consistent with the higher product volume. We expect gross margins to continue to be influenced by the relative mix of product sales and technology-enabled services revenue in future periods.
Selling, General and Administrative Expense
SG&A expense was $9.0 million for the six months ended June 30, 2026, compared to $7.3 million for the six months ended June 30, 2025, an increase of $1.7 million, or 24%. The increase was driven primarily by higher non-cash share-based compensation expense.
Share-based compensation allocated to SG&A was $3.6 million for the six months ended June 30, 2026, compared to $2.4 million for the six months ended June 30, 2025, reflecting grants issued to new and existing employees and officers in connection with equity incentive awards granted in 2025.
Cash-based SG&A costs, including salaries and burden, occupancy, marketing, and professional fees were $5.4 million for the six months ended June 30, 2026, compared to $4.9 million for the six months ended June 30, 2025. The increase of approximately $0.5 million, or 11%, was primarily due to increased professional fees, partially offset by overall declines in office expense and other general and administrative expenses as the Company maintained ongoing cost discipline.
Research and Development Expense
Research and development expense was $257 thousand for the six months ended June 30, 2026, compared to $594 thousand for the six months ended June 30, 2025, a decrease of $337 thousand, or 57%. The decrease reflects the Company's shift to a more variable-cost development model and reduced headcount dedicated to R&D activities, as the primary platforms — BolaWrap 150, WrapTactics, WrapVision, and Wrap Reality — have advanced beyond the primary development phase and are now in commercial deployment. R&D investment is expected to continue at a more modest level in 2026, focused on incremental product enhancements, the WrapTactics content library, and counter-UAS development activities for the MERLIN program.
Operating Loss
Loss from operations was $7.0 million for the six months ended June 30, 2026, compared to $6.8 million for the six months ended June 30, 2025, an increase of $243 thousand, or 4%. The increased operating loss reflected higher operating expenses, driven primarily by an increase in non-cash share-based compensation expense, substantially offset by increased gross profit.
Other Income (Expense), Net
Total other income, net was $223 thousand for the six months ended June 30, 2026, compared to $3.2 million for the six months ended June 30, 2025, a decrease of $2.9 million. The year-over-year change is primarily attributable to the non-recurrence of the net non-cash gain from the change in fair value of warrant liabilities that was recorded during the six months ended June 30, 2025, partially offset by a non-cash gain on lease termination recognized during the six months ended June 30, 2026.
Gain on Lease Termination. During the six months ended June 30, 2026, the Company recognized a $227 thousand gain on lease termination in connection with the early termination of the office lease at 3480 Main Highway, Suite 202, Miami, Florida (Coconut Grove). On February 13, 2026, the Company entered into a Termination and Mutual Release Agreement with the landlord, terminating the lease effective as of that date. Under ASC 842, upon termination the Company derecognized the carrying value of the operating lease right-of-use asset and the corresponding lease liability, resulting in the $227 thousand non-cash gain representing the excess of the liability extinguished over the right-of-use asset derecognized as of the termination date. The gain is non-cash and non-recurring in nature.
WRAP insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 3 Form 4 filings (2 insiders, 1 trade date, 331,093 shares, about $364.2K) and open-market sales in 1 filing (1 insider, 5 trade dates, 189,095 shares, about $363.8K). Net open-market shares: 141,998 (purchases minus sales); net value about $382.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-04 | Cohen Scot |
Grant/award | 27,344 | — | — |
| 2026-09-04 | Cohen Scot |
Grant/award | 19,532 | — | — |
| 2026-09-02 | Novick Jared |
Grant/award | 2,000,000 | — | — |
| 2026-09-02 | Cohen Scot |
Grant/award | 4,000,000 | — | — |
| 2026-07-08 | Cohen Scot |
Open-market purchase | 209,353 | $1.10 | $230.3K |
| 2026-07-08 | Shulman John D |
Open-market purchase | 100,000 | $1.10 | $110.0K |
| 2026-07-08 | Cohen Scot |
Open-market purchase | 21,740 | $1.10 | $23.9K |
| 2026-07-07 | Cohen Scot |
Grant/award | 4,576 | — | — |
| 2026-07-07 | Cohen Scot |
Grant/award | 6,408 | — | — |
| 2026-06-05 | Cohen Scot |
Grant/award | 21,740 | — | — |
| 2026-06-05 | Cohen Scot |
Grant/award | 30,435 | — | — |
| 2026-04-01 | Shulman John D |
Grant/award | 19,643 | — | — |
| 2026-04-01 | Szymanski Timothy |
Grant/award | 19,643 | — | — |
| 2026-04-01 | Srinivasan Rajiv |
Grant/award | 19,643 | — | — |
| 2026-04-01 | Savas Marc |
Grant/award | 19,643 | — | — |
| 2026-04-01 | Bernstein Bruce |
Grant/award | 19,643 | — | — |
| 2026-02-10 | Norris Elwood G |
Open-market sale | 27,104 | $1.82 | $49.3K |
| 2026-02-09 | Norris Elwood G |
Open-market sale | 35,000 | $1.82 | $63.7K |
| 2026-02-06 | Norris Elwood G |
Open-market sale | 75,000 | $1.87 | $140.2K |
| 2026-02-03 | Norris Elwood G |
Open-market sale | 20,000 | $2.20 | $44.0K |
| 2026-02-02 | Norris Elwood G |
Open-market sale | 31,991 | $2.08 | $66.5K |
Well-known investors holding WRAP (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Renaissance Technologies | 2026-06-30 | 358,100 | $461.9K | 0.0% | Added 13% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 163,077 | $210.4K | 0.0% | Added 55% |