WRAP TECHNOLOGIES, INC.

Previous wording

You should read the following discussion in conjunction with the financial statements and other financial information included elsewhere in this Quarterly Report on Form 10-Q (this“Report”) and with our audited financial statements and other information presented in our Annual Report on Form 10-K for the year ended December 31, 2023 (the“Annual Report”). This Report may contain or incorporate by reference forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the“Exchange Act”). Such forward-looking statements are based upon management’s assumptions, expectations, projections, intentions and beliefs about future events. Except for historical information, the use of predictive, future-tense or forward-looking words such as“expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “continue,” “may,” “will,” “could,” “would,”or the negative or plural of such words and similar expressions or variations of such words are intended to identify forward-looking statements but are not the only means of identifying forward-looking statements. Such forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Report and in our other filings with the Securities and Exchange Commission (“SEC”), including particularly matters set forth under Part I, Item 1A (Risk Factors) of the Annual Report. Furthermore, such forward-looking statements speak only as of the date of this Report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Current wording

You should read the following discussion in conjunction with the financial statements and other financial information included elsewhere in this Quarterly Report on Form 10-Q (this“Report”) and with our audited financial statements and other information presented in our Annual Report on Form 10-K for the year ended December 31, 2024 (as amended, the“Annual Report”). This Report may contain or incorporate by reference forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the“Exchange Act”). Such forward-looking statements are based upon management’s assumptions, expectations, projections, intentions and beliefs about future events. Except for historical information, the use of predictive, future-tense or forward-looking words such as“expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “continue,” “may,” “will,” “could,” “would,”or the negative or plural of such words and similar expressions or variations of such words are intended to identify forward-looking statements but are not the only means of identifying forward-looking statements. Such forward-looking statements are subject to several risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Report and in our other filings with the Securities and Exchange Commission (“SEC”), including particularly matters set forth under Part I, Item 1A (Risk Factors) of the Annual Report. Furthermore, such forward-looking statements speak only as of the date of this Report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Previous wording

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.

Current wording

Our target market for our product and technology enabled services 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 to increase our presence in other adjacent 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.

Previous wording

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.

Current wording

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 use of force options.

Previous wording

In addition to the U.S. 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 U.S. territory of Puerto Rico. We have distribution agreements with 35 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.

Current wording

In addition to the U.S. law enforcement market, we have shipped our restraint products to 62 countries. We have distribution agreements with 22 international distributors covering 43 countries. We focus significant sales, training and business development efforts to support our distribution network in addition to our internal sales team.

Previous wording

On February 18, 2025, we 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, we acquired substantially all the assets of W1 used in, held for use in or relating to the business of advisory and investigative professional services, which were primarily the customer contracts assigned at the closing, for a nominal purchase price.

Current wording

On February 18, 2025, we entered into an Asset Purchase Agreement, dated as of February 18, 2025, pursuant to which, subject to the terms and conditions set forth therein, we acquired substantially all the assets of W1 Global, LLC, (“W1”) used in, held for use in or relating to the business of advisory and investigative professional services, which were primarily the customer contracts assigned at the closing, for a nominal purchase price.

Previous wording

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.

Current wording

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 Pre-Escalation and non-lethal solutions.

Previous wording

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.

Current wording

In addition, we are focused on sales, marketing, public and investor relations efforts. We believe there are increasing market opportunities for our products and solutions in the law enforcement and security sectors worldwide. These opportunities are driven by the increasing demand for less-lethal policing.

Previous wording

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 U.S. 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.

Current wording

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 U.S. law enforcement agencies and in 62 countries. Due to its non-lethal, non-pain-based-compliance 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.

Previous wording

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% of the reported persons who are wrapped with the BolaWrap are thought to be under the influence of alcohol or drugs.

Current wording

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 85% 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 or experiencing behavioral health issues, and the second most common BolaWrap use case is during domestic violence calls.

Previous wording

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.

Current wording

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 Pre-Escalation continue to increase, it will contribute to our future revenue growth.

Previous wording

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 U.S. However, we acknowledge that it is challenging to predict the exact timeline for closing these deals, or whether they will ultimately materialize.

Current wording

We anticipate and believe that our portfolio of non-lethal, non-pain-based compliance 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 U.S. However, we acknowledge that it is challenging to predict the exact timeline for closing these deals, or whether they will ultimately materialize.

Previous wording

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 March 31, 2024, over 1,530 agencies have received BolaWrap training with over 5,400 training officers at those agencies certified as BolaWrap instructors and qualified to train the rest of their departments, representing an 10% increase in agencies and a 10% increase in trained officers as compared to March 31, 2024.

Current wording

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 June 30, 2025, over 1,580 agencies have received BolaWrap training with over 5,520 training officers at those agencies certified as BolaWrap instructors and qualified to train the rest of their departments, representing a 4% increase in agencies and a 3% increase in trained officers as compared to June 30, 2024.

Previous wording

Operating expense of $4.5 million for the three months ended March 31, 2025 decreased by $458 thousand, when compared to $5.0 million for the three months ended March 31, 2024, as a result of the Company’s cost containment initiatives enacted beginning during the first half of 2024.

Current wording

Operating expense of $3.3 million for the three months ended June 30, 2025 decreased by $0.9 million, when compared to $4.2 million for the three months ended June 30, 2024, as a result of the Company’s cost containment initiatives enacted beginning during the first half of 2024. Operating expense of $7.9 million for the six months ended June 30, 2025 decreased by $1.2 million, when compared to $9.1 million for the six months ended June 30, 2024.

Previous wording

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. If departments follow our Use of Force Guarantee requirements, we have offered to buy back their BolaWrap devices if their reportable use of force is not reduced by 10%. 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.

Current wording

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.

Previous wording

As of March 31, 2025, we had backlog of approximately $64 thousand which was expected to be delivered in the second quarter of 2025. Additionally, as of March 31, 2025, we had deferred revenue of $350 thousand consisting of $57 thousand related to VR, $234 thousand related to Intrensic, $54 thousand related to BolaWrap extended warranties and services and $5 thousand related to training. Distributor and customer orders for future deliveries are generally subject to modification, rescheduling or in some instances, cancellation, in the normal course of business.

Current wording

As of June 30, 2025, we had backlog of approximately $60 thousand which was expected to be delivered in the third quarter of 2025. Additionally, as of June 30, 2025, we had deferred revenue of $325 thousand consisting of $30 thousand related to VR, $226 thousand related to Intrensic, $50 thousand related to BolaWrap extended warranties and services and $19 thousand related to training. Distributor and customer orders for future deliveries are generally subject to modification, rescheduling or in some instances, cancellation, in the normal course of business.

Previous wording

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. We recorded net income of $109 thousand during the three months ended March 31, 2025, which was in-line with the net income of $117 thousand for the three months ended March 31, 2024. Net cash used in operations during the three months ended March 31, 2025, was $0.7 million less than net cash used in operations during the three months ended March 31, 2024. This decrease in net cash used in operations during the three months ended March 31, 2024, was primarily driven by the Company’s continued cost containment efforts.

Current wording

We believe that we have adequate financial resources to sustain our operations for the twelve months. We recorded net loss from operations of $2.9 million during the three months ended June 30, 2025, compared to a net loss from operations of $3.2 million for the three months ended June 30, 2024; primarily driven by a decrease in operating expenses.. For the six months ended June 30, 2025 and June 30, 2024, we recorded net loss from operations of $3.8 and $7.3 million, respectively; primarily driven by a decrease in operating expenses. Net cash used in operations improved by $2.2 million, from a net cash used in operating activities of $7.2 million for the six months ended June 30, 2024, to net cash used in operating activities $5.0 million for the six months ended June 30, 2025. This positive change was primarily driven by the Company’s continued cost containment efforts and operational improvements.

Previous wording

Supply chain disruptions also affected our operations and could negatively impact our ability to source materials, manufacture and distribute products in the future. Moreover, financial markets continue to experience significant volatility, which could potentially affect our ability to enter into or modify favorable terms and conditions regarding equity and debt financing activities. Nevertheless, we had $6.2 million in cash and cash equivalents as of March 31, 2025. We therefore believe we have sufficient capital to fund our operations for the next twelve months following this Report on Form 10-Q. However, we may require additional working capital and liquidity constraints and access to capital markets could still negatively affect our liquidity and may require changes to our plan of operations.

Current wording

Supply chain disruptions could also affect our operations and could negatively impact our ability to source materials, manufacture and distribute products in the future. Moreover, financial markets continue to experience significant volatility, which could potentially affect our ability to enter or modify favorable terms and conditions regarding equity and debt financing activities. Nevertheless, we had $4.2 million in cash and cash equivalents as of June 30, 2025 as compared to $3.6 million as of December 31, 2024.. We therefore believe we have sufficient capital to fund our operations for the next twelve months following this Report on Form 10-Q. However, we may require additional working capital and liquidity constraints and access to capital markets could still negatively affect our liquidity and may require changes to our plan of operations.

Previous wording

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.

Current wording

Our Company may be positively or negatively impacted by continued social unrest and protests against law enforcement. 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.

Previous wording

Some of our accounting policies require higher degrees of judgment than others in their application. These include share-based compensation and contingencies and areas such as revenue recognition, allowance for doubtful accounts, valuation of inventory and intangible assets, estimates of product line exit costs, warranty liabilities and impairments.

Current wording

Some of our accounting policies require higher degrees of judgment than others in application. These include share-based compensation and contingencies and areas such as revenue recognition, allowance for doubtful accounts, valuation of inventory and intangible assets, warranty liabilities and impairments.

Previous wording

Allowance for Doubtful Accounts. Our products are sold to customers in many different markets and geographic locations. We estimate our bad debt reserve on a case-by-case basis and the aging of accounts due to a limited number of customers mostly government agencies or well-established distributors. We base these estimates on many factors including customer credit worthiness, past transaction history with the customer, current economic industry trends and changes in customer payment terms. Our judgments and estimates regarding collectability of accounts receivable have an impact on our financial statements.

Current wording

Allowance for Doubtful Accounts. Our products are sold to customers in many different markets and geographic locations. We estimate our bad debt reserve on a case-by-case basis and the aging of accounts due to a limited number of customers, mostly government agencies or well-established distributors. We base these estimates on many factors including customer creditworthiness, past transaction history with the customer, current economic industry trends and changes in customer payment terms. Our judgments and estimates regarding the collectability of accounts receivable have an impact on our financial statements.

Previous wording

Accrued Expense. We establish a warranty reserve based on anticipated warranty claims at the time product revenue is recognized. This reserve requires us to make estimates regarding the amount and costs of warranty repairs we expect to make over a period of time. Factors affecting warranty reserve levels include the number of units sold, anticipated cost of warranty repairs, and anticipated rates of warranty claims. We have very limited history to make such estimates and warranty estimates have an impact on our financial statements. Warranty expense is recorded in cost of revenue. We evaluate the adequacy of this reserve each reporting period.

Current wording

Accrued Expense. We establish a warranty reserve based on anticipated warranty claims at the time product revenue is recognized. This reserve requires us to make estimates regarding the amount and costs of warranty repairs we expect to make over a period of time. Factors affecting warranty reserve levels include the number of units sold, anticipated cost of warranty repairs, and anticipated rates of warranty claims. We have a very limited history to make such estimates and warranty estimates have an impact on our financial statements. Warranty expense is recorded in cost of revenue. We evaluate the adequacy of this reserve each reporting period.

Previous wording

*Warrants.*The Company accounts for warrants as liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares of Common Stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

Current wording

*Warrants.*The Company accounts for warrants as liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares of Common Stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. As of June 30, 2025, all warrants are classified as equity-classified instruments.

Previous wording

Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results. Other than the warrants and business combination described above, there were no significant changes or modification of our critical accounting policies and estimates involving management valuation adjustments affecting our results for the period ended March 31, 2025. Our accounting policies are more fully described in Note 1. Organization and Summary of Significant Accounting Policies in the notes to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 31, 2025.

Current wording

Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results. Other than the warrants and business combination described above, there were no significant changes or modification of our critical accounting policies and estimates involving management valuation adjustments affecting our results for the period ended June 30, 2025. Our accounting policies are more fully described in Note 1. Organization and Summary of Significant Accounting Policies in the notes to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 31, 2025, as amended on April 25, 2025.

Previous wording

We expect our operating costs will continue to stabilize or decline slightly from the first quarter of 2025 as a result of the changes from ongoing cost containment efforts. We may incur additional non-cash share-based compensation costs depending on future options and restricted stock unit grants that are impacted by stock prices and other valuation factors. Historical expenditures are not indicative of future expenditures.

Current wording

We expect our operating costs to remain flat or slightly increase depending on the scope of additional sales and marketing initiatives. We may incur additional non-cash share-based compensation costs depending on future options and restricted stock unit grants that are impacted by stock prices and other valuation factors. Historical expenditures are not indicative of future expenditures.

Previous wording

We reported net revenue of $765 thousand for the three months ended March 31, 2025, as compared to $1.5 million for the three months ended March 31, 2024, or a 48% decrease. The decrease for the three months ended March 31, 2025, as compared to March 31, 2024, is primarily a result of lower product orders offset by the added managed services revenue from the acquisition of the W1 business.

Current wording

We reported net revenue of $0.2 million for the three months ended June 30, 2025, as compared to $1.3 million for the three months ended June 30, 2024, or an 84% decrease. The decrease for the three months ended June 30, 2025, as compared to June 30, 2024, is primarily a result of lower product orders offset by the added managed services revenue from the acquisition of the W1 business.

Previous wording

Our gross profit for the three months ended March 31, 2025, was $595 thousand, or a gross margin of 78%. Our gross profit for the three months ended March 31, 2024, was $836 thousand, or a gross margin of 57%. The decrease in gross profit represented a 29% decrease compared to the three months ended March 31, 2024, as a result of lower volume of the Bola Wrap 150 product sales offset by the added high-margin revenue from the Company’s Intrensic acquisition in August 2023 and acquisition ofW1 in February 2025.

Current wording

Our gross profit for the three months ended June 30, 2025, was $0.5 million, or a gross margin of 48%. Our gross profit for the three months ended June 30, 2024, was $1.0 million, or a gross margin of 63%. The decrease in gross profit represented a 51% decrease compared to the three months ended June 30, 2024, because of lower volume of the Bola Wrap 150 product sales offset by the added high-margin revenue from the Company’s acquisition of W1 in February 2025.

Previous wording

Selling, general and administrative (“SG&A”) expense of $4.1 million for the three months ended March 31, 2025, was reduced by $0.1 million when compared to $4.2 million for the three months ended March 31, 2024. The decrease in SG&A expense was primarily the result of the Company’s cost containment initiatives enacted beginning during the first half of 2024 which were offset by an increase of $1.0 million in share-based compensation as well as by increased occupancy expenses related to the new the office space in Florida.

Current wording

Selling, general and administrative (“SG&A”) expense of $3.2 million for the three months ended June 30, 2025, was reduced by $0.3 million when compared to $3.5 million for the three months ended June 30, 2024. The decrease in SG&A expense was primarily the result of the Company’s cost containment initiatives enacted beginning during the first half of 2024 which were offset by an increase of $0.5 million in share-based compensation as well as by increased occupancy expenses related to the new the corporate office.

Previous wording

Share-based compensation costs allocated to SG&A totaled $1.6 million thousand for the three months ended March 31, 2025, compared to $675 thousand for the three months ended March 31, 2024, primarily due to options and grants issued to new employees as a result of the acquisition of W1 in February 2025, as well as incentives provided to certain key senior level management in 2025.

Current wording

Share-based compensation costs allocated to SG&A totaled $0.8 million for the three months ended June 30, 2025, compared to $0.2 million for the three months ended June 30, 2024, primarily due to options and grants issued to new employees as a result of the acquisition of W1 Global, LLC (“W1”) in February 2025, as well as incentives provided to certain key senior level management in 2025.

Previous wording

Research and development expense totaling $378 thousand decreased by $377 thousand for the three months ended March 31, 2025, when compared to the three months ended March 31, 2024. We incurred a $309 thousand period-over-period decrease in compensation expense as well as a $34 thousand period-over-period increase in share-based compensation expense allocated to research and development expense as a result of reduction of personnel. Outside consulting costs decreased by $21 thousand for the three months ended March 31, 2025, when compared to the three months ended March 31, 2024, primarily due to the Company’s move to a more variable cost model.

Current wording

Research and development expenses totaling $162 thousand decreased by $511 thousand for the three months ended June 30, 2025, when compared to the three months ended June 30, 2024. We incurred a $375 thousand period-over-period decrease in compensation expense as well as a $18 thousand period-over-period increase in share-based compensation expense allocated to research and development expense because of reduction of personnel. Outside consulting costs decreased by $134 thousand for the three months ended June 30, 2025, when compared to the three months ended June 30, 2024, primarily due to the Company’s cost reduction initiatives.

Previous wording

Loss from operations of $3.9 million during the three months ended March 31, 2025, was a decrease of $0.2 million compared to loss from operations of $4.1 million during the three months ended March 31, 2024, primarily reflecting the reduced revenues offset by lower operating costs from the Company’s cost containment efforts.

Current wording

Loss from operations of $2.9 million during the three months ended June 30, 2025, was an improvement of $0.3 million compared to loss from operations of $3.2 million during the three months ended June 30, 2024, primarily reflecting the reduced revenues offset by lower operating costs from the Company’s cost containment efforts.

Previous wording

As our revenue history is limited, historical margins may not accurately reflect future margins. However, we expect higher margins with the production of the BolaWrap 150 compared to previous production due to design changes and improved pricing as well as our higher margin revenue from the Intrensic product offerings. Our margins are also subject to variations based on the sales channels and product mix through which our products are sold. At present, our cassettes have lower margins than BolaWrap devices. As we scale cassette production, we will look to reduce our costs and drive higher cassette margins. Cassettes were a total of 10% of our overall revenue in the three months ended March 31, 2025, and is expected to continue to grow as a recurring revenue base as more BolaWrap devices are in the field and the usage of BolaWrap increases due to the need of officers to de-escalate earlier to prevent injuries and use of higher levels of force. Additionally, we expect that gross margins will be impacted by the added managed services and software revenue contributions in the second half of 2025.

Current wording

Our margins are also subject to variations based on the sales channels and product mix through which our products are sold. At present, our cassettes have lower margins than BolaWrap devices. As we scale cassette production, we will look to reduce our costs and drive higher cassette margins. Cassettes were a total of 19% of our product sales and 6% of overall revenue in the six months ended June 30, 2025, and is expected to continue to grow as a recurring revenue base as more BolaWrap devices are in the field and the usage of BolaWrap increases due to the need of officers to de-escalate earlier to prevent injuries and use of higher levels of force.

Previous wording

Salaries and burden costs of $799 thousand for the three months ended March 31, 2025, were approximately $0.6 million lower than the three months ended March 31, 2024. This reduction reflects the reduction in the Company’s workforce including a reduction of certain C-Level positions. During the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, we decreased professional and consulting fees by $95 thousand reflecting the Company’s cost containment efforts. We expect expenditures for SG&A expenses in 2025 to increase from the first quarter’s run-rate as a result of the W1 acquisition.

Current wording

Salaries and burden costs of $1.9 million for the six months ended June 30, 2025, were $564 thousand lower than the $1.0 million for the six months ended June 30, 2024. This reduction reflects the reduction in the Company’s workforce including a reduction of certain executive management positions. During the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, reflecting the Company’s cost containment efforts.

Previous wording

Advertising and promotion costs were $81 thousand for the three months ended March 31, 2025, or a decrease of $182 thousand as compared to $263 thousand during the three months ended March 31, 2024. The changes in advertising costs were primarily related to reduced trade show costs offset by slight increases in digital marketing campaigns.

Current wording

Advertising and promotion costs were $189 thousand for the six months ended June 30, 2025, or a decrease of $281 thousand as compared to $470 thousand during the six months ended June 30, 2024. The changes in advertising costs were primarily related to reduced trade show costs offset by slight increases in digital marketing campaigns.

Previous wording

Our primary source of liquidity to date has been funding from our stockholders from the sale of equity securities and the exercise of derivative securities, consisting of options and warrants. We expect our primary source of future liquidity will be from the sale of products, exercise of stock options and warrants and from future equity or debt financings.

Current wording

Our primary source of liquidity to date has been funding from our stockholders from the sale of equity securities and the exercise of derivative securities, consisting of options and warrants. We expect our primary source of future liquidity will be from the sale of products, exercise of stock options and warrants and future equity or debt financing.

Previous wording

We have experienced net losses and negative cash flows from operations since our inception. As of March 31, 2025, we had cash of $6.2 million, negative working capital of $0.3 million including the $11.3 million of the Series A Warrants recorded in connection with the issuance of the Series A Preferred Stock in July 2023 as well as the PIPE Warrants (as defined herein) issued in connection with the Private Placement (as defined herein), and had sustained cumulative losses attributable to stockholders of $105.1 million. Our working capital net of the warrants-short term as of March 31, 2025, was $3.6 million higher compared to December 31, 2024, primarily as a result of the cash received in the Private Placement offset by operating losses of $3.9 million for the three months ended March 31, 2025. We believe we have sufficient capital to fund our operations for the next twelve months from the date of this Quarterly Report on Form 10-Q. However, liquidity constraints and access to capital markets could still negatively affect our liquidity and may require changes to our investment strategy.

Current wording

We have experienced net losses and negative cash flows from operations since our inception. As of June 30, 2025, we had cash and cash equivalents of $4.2 million and had sustained cumulative losses attributable to stockholders of $105.1 million. Our working capital net of the warrants-short term as of June 30, 2025, was $3.6 million higher compared to December 31, 2024, primarily as a result of the cash received in the Private Placement offset by operating losses of $6.8 million for the six months ended June 30, 2025. We believe we have sufficient capital to fund our operations for the next twelve months from the date of this Quarterly Report on Form 10-Q. However, liquidity constraints and access to capital markets could still negatively affect our liquidity and may require changes to our investment strategy.

Previous wording

During the three months ended March 31, 2025, net cash used in operating activities was $3.1 million. The net income of $109 thousand was decreased by non-cash income of $4.0 million related to the change in fair value of warrants and increased by non-cash expense of $1.9 million consisting primarily of share-based compensation expense of $1.7 million and depreciation and amortization of $155 thousand. Other major component changes using operating cash included an increase of $404 thousand in prepaids and a $184 thousand increase in accounts receivable as well as a decrease in both accounts payable of $115 thousand and accrued liabilities of $272 thousand.

Current wording

During the six months ended June 30, 2025, net cash used in operating activities was $5.0 million. The net loss of $3.6 million was decreased by non-cash income of $3.2 million related to the change in fair value of warrants and increased by non-cash expense of $8.2 million consisting primarily of share-based compensation and depreciation and amortization of $304 thousand. Other major component changes using operating cash included a decrease of $156 thousand in prepaids and a $453 thousand decrease in accounts receivable as well as a decrease in accrued liabilities of $523 thousand.

Previous wording

During the three months ended March 31, 2024, net cash used in operating activities was $3.7 million. The net income of $117 thousand was decreased by non-cash income of $4.2 million related to the change in fair value of warrants and increased by non-cash expense of $1.1 million consisting primarily of share-based compensation expense of $848 thousand. Other major component changes using operating cash included an increase of $584 thousand in inventories and a decrease in accounts receivable of $683 thousand.

Current wording

During the six months ended June 30, 2024, net cash used in operating activities was $7.2 million. The net loss of $268 thousand was decreased by non-cash income of $6.9 million related to the change in fair value of warrants and increased by non-cash expense of $918 thousand consisting primarily of share-based compensation expense. Other major component changes using operating cash included a decrease of $707 thousand in inventories and a decrease in accounts receivable of $236 thousand.

Previous wording

During the three months ended March 31, 2025, we used $54 thousand of cash for the acquisition of W1 and invested $47 thousand in patents.

Current wording

During the six months ended June 30, 2025, net cash used in investing activities was $152 thousands of cash for the acquisition of W1 and investment in patents.

Previous wording

During the three months ended March 31, 2024, we had proceeds from maturities of short-term investments of $2.5 million. During the three months ended March 31, 2024, we used $14 thousand cash for the purchase of property and equipment and invested $66 thousand in patents and equipment.

Current wording

During the six months ended June 30, 2024, we had net cash provided by investing activities totaling $4.9 million from proceeds from maturities of short-term investments of $5.0 million. During the six months ended June 30, 2024, we used $13 thousand cash for the purchase of property and equipment and invested $97 thousand in patents and equipment.

Previous wording

During the three months ended March 31, 2024, we received $588 thousand in proceeds from the exercise of previously issued stock options and paid $60 thousand in cash dividends on the Company’s Series A Preferred Stock.

Current wording

During the six months ended June 30, 2024, net cash provided by financing activities was $468 thousand because of proceeds from the exercise of previously issued stock options of $588 thousand offset $120 thousand in cash dividends paid on the Company’s Series A Preferred Stock.