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Item 1. Financial Statements

2025-11-13 compared with 2025-08-14 · 523 added, 657 removed, 238 unchanged (83% of the section changed)

Financial Statements

Technologies, Inc.

Consolidated Balance Sheets

thousands, except par value and share amounts)

June 30, 2025

December 31, 2024

Wrap Technologies, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value and share amounts)

September 30, 2025 December 31, 2024

Current Assets:

Cash and cash equivalents $ 5,965 $ 3,610

Accounts receivable and contract assets, net

Accounts receivable, net 1,822 513

Inventories, net 5,461 6,170

Prepaid expense and other current assets

Prepaids and deposits 334 178

Total Current Assets 13,582 10,471

Property and equipment, net 138 146

Operating lease right-of-use asset, net

Operating lease right of use assets, net 2,242 1,964

Intangible assets, net 2,147 2,354

Other long-term assets

Other assets, net 128 186

Total Assets $ 18,237 $ 15,121

LIABILITIES AND STOCKHOLDERS' EQUITY

5 unchanged sentences

Operating lease liability - short term 305 567

Warrants- short term - 10,131

Total Current Liabilities 1,907 13,203

3 unchanged sentences

Total Liabilities $ 4,111 $ 14,871

Commitments and contingencies (Note 13)

Commitments and Contingencies

Stockholders' Equity

1 unchanged sentence

par value $ 0.0001 per share;

0 shares issued and outstanding at June 30, 2025, and December 31, 2024

12,707 shares issued and outstanding at September 30, 2025, and December 31, 2024 - -

Common stock - 150,000,000 authorized;

par value $ 0.0001 per share;

50,728,535 and 47,101,631 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively

Convertible Preferred Stock - 10,000 authorized, par value $ 0.0001 per share;

8,207 shares issued and outstanding at June 30, 2025 and December 31, 2024

Preferred Stock

51,497,710 and 47,101,631 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively $ 5 $ 5

Series A convertible preferred stocks - 10,000 authorized, par value $ 0.0001 per share;

8,207 shares issued and outstanding at September 30, 2025 and December 31, 2024 - -

Series B convertible preferred stocks - 4,500 authorized, par value $ 0.0001 per share, 4,500 and 0 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively - -

Additional paid-in capital 126,085 105,326

2 unchanged sentences

Total Liabilities and Stockholders' Equity $ 18,237 $ 15,121

accompanying notes are an integral part of these financial statements.

Technologies, Inc.

Consolidated Statements of Operations and Comprehensive Loss

thousands, except share and per share amounts)

Three Months ended June 30,

Six Months ended June 30,

The accompanying notes are an integral part of these financial statements.

Wrap Technologies, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Product sales 1,743 $ 434 2,293 $ 3,012

1 unchanged sentence

Technology enabled services 37 159 265 630

Total revenues

Total revenues, gross 2,022 593 3,799 3,642

Sales returns and allowances ( 531 ) - ( 531 ) -

Total revenues, net 1,491 593 3,268 3,642

Cost of revenues 608 358 1,303 1,587

Gross profit 883 235 1,965 2,055

Operating Expenses:

6 unchanged sentences

Change in fair value of warranty liabilities - 5,600 3,158 12,517

Other ( 14 ) ( 5 ) ( 14 ) ( 15 )

Total other income / (expense), net ( 12 ) 5,616 3,150 12,656

Net (loss) income $ ( 2,773 ) $ 1,990 $ ( 6,391 ) $ 1,722

convertible preferred stock dividends ( 164 ) ( 317 ) ( 492 ) ( 1,017 )

Net loss attributable to common stockholders

Net loss per basic and diluted common share

Weighted average common shares used to compute net loss per basic and diluted common share

Comprehensive loss:

Comprehensive loss

accompanying notes are an integral part of these financial statements.

Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

thousands, except share amounts)

Months Ended June 30, 2025

Preferred Stock

Additional Paid-In

Total Stockholders’

Balance at April 1, 2025

$ ( 105,136 )

Net (loss) income attributable to common stockholders $ ( 2,937 ) $ 1,673 $ ( 6,883 ) $ 705

Net (loss) income per basic and diluted share of Common Stock $ ( 0.06 ) $ 0.04 $ ( 0.14 ) $ 0.02

Weighted average common shares used to compute net loss per basic and diluted shares of Common Stock 51,096,292 45,861,208 49,998,057 45,067,793

Comprehensive (loss) income:

Net (loss) income $ ( 2,773 ) $ 1,990 $ ( 6,391 ) $ 1,722

Comprehensive (loss) income $ ( 2,773 ) $ 1,990 $ ( 6,391 ) $ 1,722

The accompanying notes are an integral part of these financial statements.

Wrap Technologies, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

Three Months Ended September 30, 2025

Series A Convertible Series B Convertible Additional Total

Common Stock Preferred Stock Preferred Stock Paid-in Accumulated Stockholders’

Shares Amount Shares Amount Shares Amount Capital Deficit Equity

Balance at July 1, 2025 50,728,535 $ 5 8,207 $ - - $ - $ $ 120,783 $ ( 109,027 ) $ 11,761

Share-based compensation expense - - - - - - 638 - 638

1 unchanged sentence

Common Stock issued upon vesting of restricted stock units 615,766 - - - - - - - -

Common Stock issued with Private Placement

Series B Convertible Preferred Stock issuance - - - - 4,500 - 4,500 - 4,500

Reclassification of warrant liability due to warrant amendment - - - - - - - - -

Net loss for the period - - - - - - - ( 2,773 ) ( 2,773 )

Balance at June 30, 2025

$ ( 109,027 )

Six months Ended June 30, 2025

Balance at September 30, 2025 51,497,710 5 8,207 $ - 4,500 $ - $ 126,085 $ ( 111,964 ) $ 14,126

Nine months Ended September 30, 2025

Balance at January 1, 2025 47,101,631 $ 5 8,207 $ - - $ - $ 105,326 $ ( 105,081 ) $ 250

$ ( 105,081 )

Share-based compensation expense - - - - - - 3,073 - 3,073

1 unchanged sentence

Common Stock issued upon vesting of restricted stock units 773,368 - - - - - - - -

Series B Convertible Preferred Stock issuance - - - - 4,500 - 4,500 - 4,500

Common Stock issued with Private Placement 3,216,666 - - - - - 543 - 543

1 unchanged sentence

Net loss for the period - - - - - - - ( 6,391 ) ( 6,391 )

Balance at June 30, 2025

$ ( 109,027 )

months Ended June 30, 2024

Preferred Stock

Additional Paid-In

Stockholders’

Balance at April 1, 2024

Balance at September 30, 2025 51,497,710 $ 5 8,207 $ - 4,500 $ - $ 126,085 $ ( 111,964 ) $ 14,126

The accompanying notes are an integral part of these financial statements.

Wrap Technologies, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

Three Months Ended September 30, 2024

Series A Convertible Series B Convertible Additional Total

Common Stock Preferred Stock Preferred Stock Paid-in Accumulated Stockholders’

Shares Amount Shares Amount Shares Amount Capital Deficit Equity

Balance at July 1, 2024 45,793,112 $ 4 8,207 $ - - $ - $ 102,793 $ ( 98,956 ) $ 3,841

Share-based compensation expense - - - - - - 896 - 896

2 unchanged sentences

Common Stock issued upon vesting of restricted stock units 76,278 - - - - - - - -

Net loss for the period

Balance at June 30, 2024

Six months Ended June 30, 2024

Net income for the period - - - - - - - 1,990 1,990

Balance at September 30, 2024 45,869,390 $ 4 8,207 $ - - $ - $ 103,685 $ ( 97,283 ) $ 6,406

Nine months Ended September 30, 2024

Balance at January 1, 2024 43,855,503 $ 4 9,898 $ - - $ - $ 101,147 $ ( 97,988 ) $ 3,163

4 unchanged sentences

Common Stock issued upon vesting of restricted stock units 262,390 - - - - - - - -

Net loss for the period

Balance at June 30, 2024

accompanying notes are an integral part of these financial statements.

Technologies, Inc.

Consolidated Statements of Cash Flows

Six Months ended June 30,

Net income for the period - - - - - - - 1,722 1,722

Balance at September 30, 2024 45,869,390 $ 4 8,207 $ - - $ - $ 103,685 $ ( 97,283 ) $ 6,406

The accompanying notes are an integral part of these financial statements.

Wrap Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

Nine Months ended September 30,

Cash Flows From Operating Activities:

Net (loss) income $ ( 6,391 ) $ 1,722

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 455 646

Loss on disposition of assets 9 -

Share-based compensation 3,073 1,814

3 unchanged sentences

Provision for doubtful accounts 35 ( 89 )

Write-off accounts receivables

Inventory obsolescence reserve ( 397 ) 12

1 unchanged sentence

Accounts receivable ( 1,344 ) 2,337

Inventories 1,106 ( 529 )

Prepaid expenses and other current assets ( 156 ) 666

14 unchanged sentences

Proceeds from exercise of stock options - 588

Proceeds from issuance of Series B convertible preferred stock 4,500 -

Proceeds from issuance of warrants and common stock, net of offering costs 5,728 -

1 unchanged sentence

Net cash provided by financing activities 10,228 468

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents 2,355 912

Cash and cash equivalents, beginning of period 3,610 3,955

2 unchanged sentences

Reclassification of warrant liabilities to additional paid in capital $ 12,151 $ 94

Change in unrealized gain on short-term investments

Dividends on convertible preferred stock $ ( 492 ) $ ( 1,017 )

Dividends settled with common stock $ 492 $ 140

accompanying notes are an integral part of these financial statements.

Technologies, Inc.

to Condensed Consolidated Interim Financial Statements

thousands, except per share and share amounts)

The accompanying notes are an integral part of these financial statements.

Wrap Technologies, Inc.

Notes to Condensed Consolidated Interim Financial Statements

(in thousands, except per share and share amounts)

ORGANIZATION, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT DEVELOPMENTS

and Business Description

Technologies, Inc., a Delaware corporation (the “Company”, “we”, “us”, and “our”), is

a publicly traded company with its common stock, par value $ 0.0001 per share (“Common Stock”), listed on the Nasdaq Capital

Market (“Nasdaq”) under the trading symbol “WRAP.” The Company is a developer and supplier of public safety products

and training services for law enforcement and security personnel.

The Company’s primary product is the BolaWrap® remote restraint

The principal markets for the Company’s proprietary products and services are in North and South America, Europe, Middle

East and Asia.

of Presentation

Company’s unaudited interim condensed consolidated financial statements included herein have been prepared in accordance with the

instructions to Form 10-Q and Article 8 of Regulation S-X and the rules and regulations of the Securities and Exchange Commission (“ SEC ”).

Organization and Business Description

Wrap Technologies, Inc., a Delaware corporation (the “Company”, “we”, “us”, and “our”), is a publicly traded company with its common stock, par value $ 0.0001 per share (“Common Stock”), listed on the Nasdaq Capital Market (“Nasdaq”) under the trading symbol “WRAP.” The Company is a developer and supplier of public safety products and training services for law enforcement and security personnel.

The Company’s primary product is the BolaWrap® remote restraint device.

The principal markets for the Company’s proprietary products and services are in North and South America, Europe, Middle East and Asia.

Basis of Presentation

The Company’s unaudited interim condensed consolidated financial statements included herein have been prepared in accordance with the instructions to

Form 10-Q and Article 8 of Regulation S-X and the rules and regulations of the Securities and Exchange Commission (“ SEC ”).

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.

generally accepted

accounting principles (“ U.S.

generally accepted accounting principles (“ U.S.

GAAP ”) have been condensed or omitted pursuant to such rules and regulations.

In management’s

opinion, the accompanying financial statements reflect adjustments necessary to present fairly the financial position, results of operations,

and cash flows for those periods indicated, and contain adequate disclosure to make the information presented not misleading.

included herein are of a normal, recurring nature unless otherwise disclosed in the footnotes.

The condensed consolidated financial statements

and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto for the year

ended December 31, 2024, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “ Annual

Report ”), as filed with the SEC on March 31, 2025 and as amended on April 25, 2025.

The accompanying condensed consolidated

balance sheet as of June 30, 2025 has been derived from the audited consolidated balance sheet as of December 31, 2024, contained in

the Annual Report.

In management’s opinion, the accompanying financial statements reflect adjustments necessary to present fairly the

financial position, results of operations, and cash flows for those periods indicated, and contain adequate disclosure to make the information presented not misleading.

Adjustments included herein are of a normal, recurring nature unless otherwise

disclosed in the footnotes.

The condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2024, included in the

Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “ Annual Report ”), as filed with the SEC on March 31, 2025 and as amended on April 25, 2025.

The accompanying unaudited condensed consolidated balance sheet as of September 30,

2025 has been derived from the audited consolidated balance sheet as of December 31, 2024, contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.

necessary, the prior year’s information has been reclassified to conform to the current year’s presentation.

of Consolidation

Company has three

wholly owned subsidiaries, Wrap Reality, Inc., that sells a virtual reality (“ VR ”) training system primarily

targeting law enforcement agencies and Intrensic, LLC (“Intrensic”), specializing in Body Worn Camera and Digital

Evidence Management solutions.

The condensed consolidated financial statements include the accounts of these subsidiaries

after elimination of intercompany transactions and accounts.

and Related Information

Company operates as a single segment.

The Company’s chief operating decision maker is Scot Cohen, the Company’s Executive

Chairman and Chief Executive Officer, who manages operations for purposes of allocating resources.

Where necessary, the prior year’s information has been reclassified to conform to the current year’s presentation.

Principles of Consolidation

The Company has three wholly owned subsidiaries, Wrap Reality, Inc., that sells a virtual reality (“ VR ”) training system primarily targeting law enforcement agencies, Intrensic, LLC (“Intrensic”), specializing in Body Worn Camera and Digital Evidence Management solutions and Wrap Federal, LLC.

The condensed consolidated financial statements include the accounts of these subsidiaries after elimination of intercompany transactions and accounts.

Segment and Related Information

The Company operates as a single segment.

The Company’s chief operating decision maker is Scot Cohen, the Company’s Executive Chairman and Chief Executive Officer, who manages operations for purposes of allocating resources.

Refer to Note 15.

Major Customers

and Related Information for further discussion.

represents the difference, if any, between the aggregate consideration paid for an acquisition and the fair values of the underlying

net assets and liabilities assumed from an acquired business.

Major Customers and Related Information for further discussion.

Goodwill represents the difference, if any, between the aggregate consideration paid for an acquisition and the fair values of the underlying net assets

and liabilities assumed from an acquired business.

Goodwill is not amortized but instead is tested for impairment.

tests goodwill for impairment on an annual basis during the fourth quarter, or more frequently if conditions indicate that such impairment

The Company evaluates qualitative factors to determine if it is more likely than not that the fair value of a reporting

unit is less than its carrying value and whether it is necessary to perform goodwill impairment process.

Definite-lived

Intangible Assets

Definite-lived

intangible assets represent certain trade names, patents, licenses, software, acquired technology and customer relationships.

Definite-lived

intangible assets are recorded at cost less any accumulated amortization and accumulated impairment losses, if any.

Definite-lived intangible

assets acquired through the business combination are measured at fair value at the acquisition date.

The Company amortizes these acquired

definite-lived intangibles assets with a finite life on a straight-line basis, over 6 years for technology;

between 3 and 7 years for

customer relationships;

The Company tests goodwill for impairment on an annual basis during the fourth quarter, or more frequently if conditions indicate that

such impairment could exist.

The Company evaluates qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying value and whether it is necessary to perform goodwill impairment

Definite-lived Intangible Assets

Definite-lived intangible assets represent certain trade names, patents, licenses, software, acquired technology and customer relationships.

Definite-lived intangible assets are recorded at cost less any accumulated amortization and accumulated impairment losses, if any.

Definite-lived intangible assets acquired through the business combination are measured at fair value at the acquisition date.

The Company amortizes these acquired definite-lived intangibles assets with a finite life on a straight-line basis, over 6 years for technology;

between 3 and 7 years for customer relationships;

and 8 years for trademarks and trade names.

preparation of financial statements in conformity with U.S.

Use of Estimates

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions (e.g., stock-based

compensation valuation, allowance for doubtful accounts, valuation of inventory and intangible assets, warranty reserve, accrued expense,

valuation of warrants, and recognition and measurement of contingencies) that affect the reported amounts of assets and liabilities,

and disclosure of contingent assets and liabilities at the date of the financial statements and affect the reported amounts of revenue

and expense during the reporting period.

Actual results could materially differ from those estimates.

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”).

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.

issued warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial

fair value on the date of issuance, and each balance sheet date thereafter.

The Company accounts for the warrants issued in accordance

with the guidance contained in ASC 815-40-15-7C, under which the warrants do not meet the criteria for equity treatment and must be recorded

as liabilities.

Accordingly, the Company classifies the warrants as liabilities at their fair value and adjusts the warrants to fair

value at each reporting period.

This liability is subject to re-measurement at each balance sheet date until exercised, and any change

in fair value is recognized in the Company’s condensed consolidated statement of operations.

June 30, 2025, the Company entered into the Series A Warrant Amendment (as defined herein) and

the 2025 Warrant Amendment (as defined herein).

As a result, the Series A Warrants (as defined here) and the PIPE Warrants (as defined

herein), each satisfy the requirements outlined

in ASC 815-10-15-74(a)(1) and in ASC 815-10-15-74(a)(2).

compensation valuation, allowance for doubtful accounts, valuation of inventory and intangible assets, warranty reserve, accrued expense, valuation of warrants, and recognition and measurement of contingencies) that affect the reported amounts of

assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and affect the reported amounts of revenue and expense during the reporting period.

Actual results could materially differ from those

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.

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.

For issued warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on

the date of issuance, and each balance sheet date thereafter.

The Company accounts for the warrants issued in accordance with the guidance contained in ASC 815-40-15-7C, under which the warrants do not meet the criteria for equity treatment and must

be recorded as liabilities.

Accordingly, the Company classifies the warrants as liabilities at their fair value and adjusts the warrants to fair value at each reporting period.

This liability is subject to re-measurement at each balance sheet date

until exercised, and any change in fair value is recognized in the Company’s condensed consolidated statement of operations.

On June 30, 2025, the Company entered into the Series A Warrant Amendment (as defined herein) and the 2025 Warrant Amendment (as defined herein).

result, the Series A Warrants (as defined herein) and the PIPE Warrants (as defined herein), each satisfy the requirements outlined in ASC 815-10-15-74(a)(1) and in ASC 815-10-15-74(a)(2).

Under ASC 815-40-35-10, the amended instruments qualify for

equity-classification on a prospective basis.

The effective date of the relating reclassification from warrant liabilities to

additional paid-in capital was June, 30, 2025.

The effective date of the relating reclassification from warrant liabilities to additional paid-in capital was June, 30, 2025.

See Footnote 8:

Warrants for additional detail.

A Preferred Stock

Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 480 and ASC 815

to determine if those instruments or embedded components of those instruments qualify as derivatives and are subject to bifurcation accounting.

The Company determines that the economic characteristics and risks of the embedded derivative instrument are clearly and closely related

to the economic characteristics and risks of the host contract.

The convertible instruments are accounted for as a single hybrid instrument.

Additionally, the convertible instruments do not have any redemption features that would preclude permanent equity classification in

accordance with the guidance contained in ASC 480-10-S99.

Company issued the Series A Warrants (as defined herein), which are classified as liabilities and measured at fair value on a

recurring basis, and the Series A Convertible Preferred Stock (the “Series A Preferred Stock”) in one transaction.

issuance proceeds were allocated by using the with-and-without method.

Under this method, the Company first allocated the issuance

proceeds to the Series A Warrants based on their initial fair value measurement and then allocated the remaining proceeds to the

Series A Preferred Stock

On June 30, 2025, the Company and Holders of the Series A Warrants (as defined herein) amended the Series A Warrants, which allowed the Company to account for the Series A Warrants as equity under ASC 480 and a reclassification was recorded from

warrant liability to additional paid-in-capital.

Company recognizes revenue under ASC Topic 606 - Revenue from Contracts with Customers (“ASC 606”).

Revenue is recognized

when control of the promised goods or performance obligations for services is transferred to the Company’s customers, in an amount

that reflects the consideration the Company expects to be entitled to in exchange for the goods or services.

Company enters into contracts that include various combinations of products, accessories, software and services, each of which are

generally distinct and are accounted for as separate performance obligations.

Product sales include BolaWrap products and

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 480 and ASC 815 to determine if

those instruments or embedded components of those instruments qualify as derivatives and are subject to bifurcation accounting.

The Company determines that the economic characteristics and risks of the embedded derivative instrument are clearly and

closely related to the economic characteristics and risks of the host contract.

The convertible instruments are accounted for as a single hybrid instrument.

Additionally, the convertible instruments do not have any redemption features that would

preclude permanent equity classification in accordance with the guidance contained in ASC 480-10-S99.

The Company issued the Series A Warrants (as defined herein), which are classified as liabilities and measured at fair value on a recurring basis, and the Company's Series A Convertible Preferred Stock, par value $ 0.0001 per share (the “Series A Preferred Stock”) in one transaction.

The proceeds from the issuances were allocated by using the with-and-without method.

Under this method, the Company first allocated the proceeds to the Series A Warrants based on their initial fair value measurement and then allocated the remaining proceeds to the Series A Preferred Stock.

On June 30, 2025, the Company and holders of the Series A Warrants amended the Series A Warrants, which allowed the Company to account for the Series A Warrants as equity under ASC 480 and a reclassification was recorded from warrant liability to additional paid-in-capital.

Revenue Recognition

The Company recognizes revenue under ASC Topic 606 - Revenue from Contracts with Customers (“ASC 606”).

Revenue is recognized when control of the

promised goods or performance obligations for services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the goods or services.

The Company enters into contracts that include various combinations of products, accessories, software and services, each of which are generally distinct

and are accounted for as separate performance obligations.

Product sales include BolaWrap products and accessories.

Managed services revenue represents the consulting services provided to customers of W1 Global, LLC (“W1”).

1 unchanged sentence

revenues, service, training and shipping revenues.

timing of revenue recognition may differ from the timing of invoicing to customers.

The Company generally has an unconditional right

to consideration when customers are invoiced, and a receivable is recorded.

A contract asset is recognized when revenue is recognized

prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized after invoicing.

The Company recognizes

an asset if there are incremental costs of obtaining a contract with a customer such as commissions.

These costs are ascribed to or allocated

to the underlying performance obligations in the contract.

The Company may receive consideration, per terms of a contract, from customers

prior to transferring goods to the customer.

The timing of revenue recognition may differ from the timing of invoicing to customers.

The Company generally has an unconditional right to consideration

when customers are invoiced, and a receivable is recorded.

A contract asset is recognized when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized after invoicing.

recognizes an asset if there are incremental costs of obtaining a contract with a customer such as commissions.

These costs are ascribed to or allocated to the underlying performance obligations in the contract.

The Company may receive consideration,

per the terms of a contract, from customers prior to transferring goods to the customer.

The Company records customer deposits as a contract liability.

Additionally, the Company

may receive payments, most typically for service and warranty contracts, at the onset of the contract and before the services have been

Additionally, the Company may receive payments, most typically for service and warranty contracts, at

the onset of the contract and before the services have been completed.

In such instances, a deferred revenue liability is recorded.

The Company recognizes these contract liabilities as revenue

after all revenue recognition criteria are met.

costs for the Company’s standard warranty, generally one-year, are charged to cost of products sold when revenue is recorded for

the related product.

The Company recognizes these contract liabilities as revenue after all revenue recognition criteria are met.

Estimated costs for the Company’s standard warranty, generally one-year, are charged to cost of products sold when revenue is recorded for the related

Royalties are also charged to the cost of products sold.

loss per share (EPS) is computed by dividing net loss, less any dividends, accretion or decretion, redemption or induced conversion,

if any, on the Company’s Series A Preferred Stock, by the weighted average number of shares outstanding during the reported period.

computing diluted EPS, we adjust the numerator used in the basic EPS computation, subject to anti-dilution requirements, to add back

the dividends (declared or cumulative undeclared) applicable to the Series A Preferred Stock.

Such add-back would also include any adjustments

to equity in the period to accrete the Series A Preferred Stock to its redemption price, or recorded upon a redemption or induced conversion,

We adjust the denominator used in the basic EPS computation, subject to anti-dilution requirements, to include the dilution from

potential shares resulting from the issuance of the Series A Preferred Stock, restricted stock units, and stock options.

Stock options

and restricted stock units exercisable or issuable for a total of 2,413,595 shares and 4,903,951 shares of Common Stock were outstanding

as of June 30, 2025 and 2024, respectively.

These securities are not included in the computation of diluted net loss per common share

for the periods presented as their inclusion would be antidilutive due to losses incurred by the Company.

Issued Accounting Guidance Not Yet Effective

November 2024, the FASB issued ASU No.

2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation

Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires disaggregation

of certain costs and expenses, including employee compensation, and requires other improvements to disclosures.

The amendments in this

update are effective for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15,

Loss per Share

Basic loss per share (EPS) is computed by dividing net loss, less any dividends, accretion or decretion, redemption or induced conversion, if any, on the

Company’s Series A Preferred Stock, by the weighted average number of shares outstanding during the reported period.

In computing diluted EPS, the Company adjusts the numerator used in the basic EPS computation, subject to anti-dilution requirements, to add back the dividends (declared or cumulative undeclared) applicable to the Series A Preferred Stock.

Such add-back would also include any adjustments to equity in the period to accrete the Series A Preferred Stock to its redemption price, or recorded upon a redemption or induced conversion, if any.

The Company adjusts the denominator used in the basic EPS computation, subject to anti-dilution requirements, to include the dilution from potential shares resulting from the issuance of the Series A Preferred Stock, restricted stock units, and stock options.

Stock options and restricted stock units exercisable or issuable for a total of 7,089,678 shares and 4,979,745 shares of Common Stock were outstanding as of September 30, 2025 and 2024, respectively.

These securities are not included in the computation of diluted net loss per share of Common Stock for the periods presented as their inclusion would be antidilutive due to losses incurred by the Company.

Recently Issued Accounting Guidance Not Yet Effective

In November 2024, the FASB issued ASU No.

2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic

Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires disaggregation of certain costs and expenses, including employee compensation, and requires other improvements to disclosures.

The amendments in this update

are effective for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027.

The update may be applied on a prospective or retrospective basis.

The Company is evaluating the impact of ASU 2024-03 on the Company’s notes to

the consolidated financial statements.

The Company is evaluating the impact of ASU 2024-03

on the Company’s notes to the consolidated financial statements.

REVENUE AND PRODUCT COSTS

consists of product revenue, technology enabled services, and managed services.

Revenue consists of product revenue, technology enabled services, and managed services.

Product sales include BolaWrap products and accessories.

Technology enables services includes VR revenue, service, training and shipping revenue.

Managed services revenue includes consulting

services delivered to third parties and billed on an agreed hourly fee basis when enforceable right to payment exists.

timing of revenue recognition may differ from the timing of invoicing to customers.

The Company generally has an unconditional right

to consideration when customers are invoiced, and a receivable is recorded.

A contract asset is recognized when revenue is recognized

prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized subsequent to invoicing.

The Company recognizes

an asset if there are incremental costs of obtaining a contract with a customer such as commissions.

These costs are ascribed to or allocated

to the underlying performance obligations in the contract.

The Company may receive consideration, per terms of a contract, from customers

prior to transferring goods to the customer.

Technology enabled services includes VR revenue, service, training and shipping revenue.

Managed services revenue includes consulting services delivered to third parties and billed on an agreed hourly fee basis when enforceable right to payment

The timing of revenue recognition may differ from the timing of invoicing to customers.

The Company generally has an unconditional right to consideration

when customers are invoiced, and a receivable is recorded.

A contract asset is recognized when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized subsequent to invoicing.

recognizes an asset if there are incremental costs of obtaining a contract with a customer such as commissions.

These costs are ascribed to or allocated to the underlying performance obligations in the contract.

The Company may receive consideration,

per the terms of a contract, from customers prior to transferring goods to the customer.

The Company records customer deposits as a contract liability.

Additionally, the Company

may receive payments, most typically for service and warranty contracts, at the onset of the contract and before the services have been

Additionally, the Company may receive payments, most typically for service and warranty contracts, at

the onset of the contract and before the services have been completed.

In such instances, a deferred revenue liability is recorded.

The Company recognizes these contract liabilities as revenue

after all revenue recognition criteria are met.

Estimated costs for the Company’s standard warranty, generally one-year, are charged

to cost of products sold when revenue is recorded for the related product.

The Company recognizes these contract liabilities as revenue after all revenue recognition criteria are met.

costs for the Company’s standard warranty, generally one-year, are charged to cost of products sold when revenue is recorded for the related product.

Royalties are also charged to the cost of products sold.

table below details the activity in our contract liabilities during the six months ended June 30, 2025.

The table below details the activity in our contract liabilities during the nine months ended September 30, 2025.

SCHEDULE OF CONTRACT LIABILITIES

Customer Deferred

Deposits Revenue

Balance at January 1, 2025 $ 27 $ 505

1 unchanged sentence

Transfer to revenue - ( 596 )

Balance at June 30, 2025

Balance at September 30, 2025 $ 61 $ 400

Current portion $ 61 $ 382

Long-term portion $ - $ 18

of June 30, 2025, the Company’s deferred revenue of $ 325 consisted of Technology Enabled Services.

As of September 30, 2025, the Company’s deferred revenue of $ 400 consisted of $ 15 related to BolaWrap extended warranties and services, $ 20 related to WRAP Ready, $ 289 related to Intrensic extended warranties and services, $ 39 related to VR, and $ 37 related to training.

FINANCIAL INSTRUMENTS

and liabilities recorded at fair value on a recurring basis in the Condensed Consolidated Balance Sheets and assets and liabilities measured

at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs

used to measure their fair values.

The accounting guidance for fair value provides a framework for measuring fair value and requires

certain disclosures about how fair value is determined.

Fair value is defined as the price that would be received upon the sale of an

asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.

The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to

measure fair value based upon whether such inputs are observable or unobservable.

Observable inputs reflect market data obtained from

independent sources, while unobservable inputs reflect market assumptions made by the reporting entity.

The three-level hierarchy for

the inputs to valuation techniques is briefly summarized as follows:

1 -Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

2 -Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for

identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated

by observable market data for substantially the full term of the related assets or liabilities;

3 -Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by

little or no market data.

following table shows the Company’s short-term investments by significant investment category as of June 30, 2025, and December

SCHEDULE OF SHORT TERM INVESTMENTS

As of June 30, 2025

Assets and liabilities recorded at fair value on a recurring basis in the Condensed Consolidated Balance Sheets and assets and liabilities measured at

fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values.

The accounting guidance for fair value provides a framework for measuring fair

value and requires certain disclosures about how fair value is determined.

Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market

participants at the measurement date.

The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or

unobservable.

Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity.

The three-level hierarchy for the inputs to valuation techniques is briefly

summarized as follows:

Level 1 -Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2 -Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for

identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities;

Level 3 -Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or

no market data.

The following table shows the Company’s short-term investments by significant investment category as of September 30, 2025, and December 31, 2024.

As of September 30, 2025

Adjusted Unrealized Unrealized Market

Cost Gains Losses Value

Money Market Funds $ 637 $ - $ - $ 637

1 unchanged sentence

As of December 31, 2024

Adjusted Unrealized Unrealized Market

Cost Gains Losses Value

Money Market Funds $ 631 $ - $ - $ 631

Total Financial Assets $ 631 $ - $ - $ 631

gains or losses resulting from our short-term investments are recorded in accumulated other comprehensive gain or loss as they are classified

Unrealized gains or losses resulting from our short-term investments are recorded in accumulated other comprehensive gain or loss as they are classified

as available for sale.

During the six months ended June 30, 2025, as well as the six months ended June 30, 2024, no gain (loss) was recorded

to comprehensive loss.

warrant liabilities are measured at fair value on a recurring basis.

The subsequent measurement of the warrant liabilities as of June

30, 2025, is classified as Level 3 due to the use of an observable market quote in a non-active market and the management’s assumption

of the expected stock price volatility.

following table presents the fair value in the beginning of the period, the changes in the fair value, and the fair value at the end

of the period of warrant liabilities:

During the nine months ended September 30, 2025, as well as the nine months ended September 30, 2024, no gain (loss) was recorded to comprehensive loss.

The warrant liabilities are measured at fair value on a recurring basis.

The subsequent measurement of the warrant liabilities as of September 30, 2025, is

classified as Level 3 due to the use of an observable market quote in a non-active market and the management’s assumption of the expected stock price volatility.

The following table presents the fair value in the beginning of the period, the changes in the fair value, and the fair value at the end of the period of the warrant liabilities:

SCHEDULE OF FAIR OF WARRANT LIABILITIES

June 30, 2025

December 31, 2024

Fair value at inception for December 31, 2024 or the beginning of the period for June 30, 2025

September 30, 2025 December 31, 2024

Fair value at inceptions for December 31, 2024 or the beginning of the period for September 30, 2025 $ ( 10,131 ) $ ( 19,703 )

Warrants issued with Private Placement ( 5,178 ) -

2 unchanged sentences

Fair value as of period end $ - $ ( 10,131 )

Company used a Monte Carlo simulation to estimate the fair value of warrant liabilities as of June 30, 2025, being the date the

Company entered into the Series A Warrant Amendment and the 2025 Warrant Amendment.

The valuation was performed based on the amended

terms of the Series A Warrants and PIPE Warrants.

The following table summarizes the assumptions used to compute the fair value of the

Company’s warrants:

SCHEDULE OF BLACK SCHOLES OPTION PRICING MODEL OF WARRANT LIABILITIES

CARLO SIMULATION MODEL – PIPE WARRANTS

The Company used a Monte Carlo simulation to estimate the fair value of warrant liabilities as of June 30, 2025, being the date the Company entered into the Series A Warrant Amendment and the 2025 Warrant Amendment.

Under ASC 815-40-35-10, the amended instruments qualify for equity-classification on a prospective basis.

The effective date of the relating reclassification from warrant liabilities to additional paid-in capital was June, 30, 2025 (the "Reclassification Date").

The valuation was performed based on the amended terms of the Series A Warrants and PIPE Warrants.

The following table summarizes the assumptions used to compute the fair value of the Company’s warrants:

MONTE CARLO SIMULATION MODEL – PIPE WARRANTS

June 30, 2025

Reclassification Date

Expected stock price volatility 86 %

1 unchanged sentence

Dividends yield 0 %

Terms (years) 4.5

Strike Price $ 1.45

Stock Price $ 1.56

Fair Value Per Warrant Share $ 1.235

CARLO SIMULATION MODEL – 2025 WARRANTS

MONTE CARLO SIMULATION MODEL – 2025 WARRANTS

June 30, 2025

Reclassification Date

Expected stock price volatility 89 %

1 unchanged sentence

Dividends yield 0 %

Terms (years) 5.15

Strike Price $ 1.8

Stock Price $ 1.56

Fair Value Per Warrant Share $ 1.132

Company used the modified Black-Scholes option pricing model to determine the fair value of warrant liabilities as of December 31, 2024.

The following table summarizes the assumptions used to compute the fair value of the Company’s warrants:

The Company used the modified Black-Scholes option pricing model to determine the fair value of warrant liabilities as of December 31, 2024.

following table summarizes the assumptions used to compute the fair value of the Company’s warrants:

December 31, 2024

4 unchanged sentences

Weighted average exercise price $ 1.45

other financial instruments also include accounts receivable, accounts payable, accrued liabilities and customer deposits.

short-term nature of these instruments, their fair values approximate their carrying values on the balance sheet.

is recorded at the lower of cost or net realizable value.

The cost of substantially all the Company’s inventory is determined by

the FIFO cost method.

Our other financial instruments also include accounts receivable, accounts payable, accrued liabilities and customer deposits.

Due to the short-term

nature of these instruments, their fair values approximate their carrying values on the balance sheet.

Inventory is recorded at the lower of cost or net realizable value.

The cost of substantially all the Company’s inventory is determined by the FIFO cost method.

Inventories consisted of the following:

SCHEDULE OF INVENTORY

September 30, 2025 December 31, 2024

Finished goods $ 3,746 $ 4,387

2 unchanged sentences

Inventories - net $ 5,461 $ 6,170

Inventory reserve expense was $ 169 and $ 187

for the three and six months ended June 30, 2025, respectively, and $ 12 and $ 12 for the three and six months ended June 30, 2024, respectively.

Inventory reserve expense was $ 83 and $ 270 for the three and nine months ended September 30, 2025, respectively, and $ 0 and $ 12 for the three and nine months ended September 30, 2024, respectively.

PROPERTY AND EQUIPMENT, NET

and equipment consisted of the following:

Property and equipment consisted of the following:

SCHEDULE OF PROPERTY AND EQUIPMENT

June 30, 2025

December 31, 2024

September 30, 2025 December 31, 2024

Production and lab equipment $ 391 $ 432

Tooling 570 570

Computer equipment 175 229

Furniture, fixtures and improvements 78 120

Property and equipment, gross

$ 1,214 $ 1,351

Accumulated depreciation ( 1,076 ) ( 1,205 )

Property and equipment, net $ 138 $ 146

expense was $ 27 and

three and six months ended June 30, 2025, respectively, and $ 114 and $ 230 for the three and six months ended June 30, 2024,

respectively.

Depreciation expense was $ 25 and $ 92 for the three and nine months ended September 30, 2025, respectively, and $ 82 and $ 312 for the three and nine months ended September 30, 2024, respectively.

INTANGIBLE ASSETS

assets, net consisted of the following:

SCHEDULE OF FINITE-LIVED INTANGIBLE ASSETS

June 30, 2025

December 31, 2024

Intangible Assets, net

Intangible assets, net consisted of the following:

September 30, 2025 December 31, 2024

Amortizable intangible assets:

Patents $ 1,093 $ 1,013

Trademarks 339 264

Purchased software and technology 1,752 1,752

Customer Relationships 160 160

Amortizable intangible assets, gross

$ 3,344 $ 3,189

Accumulated amortization ( 1,618 ) ( 1,256 )

2 unchanged sentences

Total intangible assets, net $ 2,147 $ 2,354

expense was $ 123 and $ 238 for the three and six months ended June 30, 2025, respectively, and $ 113 and $ 220 for the three and six months

ended June 30, 2024, respectively.

of June 30, 2025, future amortization expense is as follows:

SCHEDULE OF FINITE-LIVED INTANGIBLE ASSETS, FUTURE AMORTIZATION EXPENSE

Amortization expense was $ 125 and $ 362 for the three and nine months ended September 30, 2025, respectively, and $ 114 and $ 334 for the three and nine months ended September 30, 2024, respectively.

The Company recognized impairment charges for Customer Relationships of $ 54 and $ 54 for the three and nine months ended September 30, 2025, respectively, related to the managed services realignment.

No impairment charges were recognized in the three and nine months ended September 30, 2024.

As of September 30, 2025, future amortization expense is as follows:

2025 (3 months) 111

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

liabilities consist of the following:

Thereafter 622

ACCOUNTS PAYABLE AND

ACCRUED LIABILITIES

Accrued liabilities consist of the following:

SCHEDULE OF ACCRUED LIABILITIES

June 30, 2025

December 31, 2024

September 30, 2025 December 31, 2024

Patent and legal costs $ 133 $ 60

1 unchanged sentence

Warranty costs 112 83

Royalty 79 81

Contract settlement 31 300

Accrued purchases 7 584

Accrued lease payable

Taxes and other 63 174

in our estimated product warranty costs were as follows:

SCHEDULE OF PRODUCT WARRANTY LIABILITY

Six Months Ended June 30,

Total $ 563 $ 1,403

Changes in our estimated product warranty costs were as follows:

Nine Months Ended September 30,

Balance, beginning of period $ 83 $ 72

2 unchanged sentences

Balance, end of period $ 112 $ 35

June 29, 2023, the Company entered into a Securities Purchase Agreement (the “Series A Purchase Agreement”) with certain

directors of the Company and certain accredited and institutional investors (collectively, the “Series A Investors”), pursuant

to which it agreed to sell to the Series A Investors in a registered direct offering (the “Series A Offering”):

(i) an aggregate

of 10,000 shares of the Company’s newly-designated Series A Convertible Preferred Stock, with par value $ 0.0001 per share and a

stated value of $ 1,000 per share (the “Series A Preferred Stock”), initially convertible into up to 6,896,553 shares of Common

Stock, at an initial conversion price of $ 1.45 per share (the “Conversion Price”), and (ii) warrants to acquire up to an

aggregate of 6,896,553 shares of Common Stock (the “Series A Warrants”).

Series A Warrant has an exercise price of $ 1.45 per share, became exercisable after the date that was six months from the date of issuance

and will expire 5 years following the date of issuance.

The exercise price is subject to customary adjustments for stock dividends, stock

splits, reclassifications and the like, and subject to price-based adjustment, on a “full ratchet” basis, in the event of

any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable

exercise price (subject to certain exceptions).

SCHEDULE OF PRODUCT WARRANTY LIABILITY

On June 29, 2023, the Company entered into a Securities Purchase Agreement (the “Series A Purchase Agreement”) with certain directors of the Company and certain accredited and institutional investors (collectively, the “Series A Investors”), pursuant to which it agreed to sell to the Series A Investors in a registered direct offering (the “Series A Offering”):

(i) an aggregate of 10,000 shares of the Company’s newly-designated Series A Convertible Preferred Stock, with par value $ 0.0001 per share and a stated value of $ 1,000 per share (the “Series A Preferred Stock”), initially convertible into up to 6,896,553 shares of Common Stock, at an initial conversion price of $ 1.45 per share (the “Conversion Price”), and (ii) warrants to acquire up to an aggregate of 6,896,553 shares of Common Stock (the “Series A Warrants”).

Each Series A Warrant has an exercise price of $ 1.45 per share, became exercisable after the date that was six months from the date of issuance and will expire 5 years following the date of issuance.

The exercise price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable exercise price (subject to certain exceptions).

The closing of the Series A Offering occurred on July 3, 2023.

The aggregate gross proceeds

from the Series A Offering were $ 10,000 , of which $ 7,717 was allocated to the Series A Warrants.

February 24, 2025, the Company entered into a securities purchase agreement (the “PIPE Purchase Agreement”) with certain

accredited investors (collectively, the “PIPE Purchasers”) for the issuance and sale in a private placement (the “Private

Placement”) of an aggregate of 3,216,666 shares (the “Common Shares”) of Common Stock and accompanying warrants (“PIPE

Warrants”) to purchase up to 3,216,666 shares of Common Stock, with an exercise price of $ 1.80 per share.

The purchase price for

one Common Share and accompanying PIPE Warrant was $ 1.80 .

The gross proceeds to the Company were $ 5,790 before estimated offering expenses

payable by the Company, of which $ 5,185 was allocated to the PIPE Warrants.

June 30, 2025, the Company entered into a warrant amendment (the “Series A Warrant Amendment”) with the Required Holders

(as defined in the Series A Purchase Agreement), pursuant to which, the Required Holders agreed to amend the terms of the Series A Warrants

to make certain adjustments to the definition of “Black Scholes Value” in each of the Series A Warrants, as described in

the Series A Warrant Amendment, such that the underlying price per share as used in such calculation equals the sum of the price per

share being offered in cash in the applicable Fundamental Transaction (as defined in the Series A Warrants), if any, plus the value of

the non-cash consideration being offered in the applicable Fundamental Transaction, if any.

As consideration for entering into the Series

A Warrant Amendment, the Company and the Required Holders agreed to amend the term of the Series A Warrants to be six and one-half years

from the date of issuance.

Additionally,

on June 30, 2025, the Company entered into a warrant amendment (the “2025 Warrant Amendment”) with certain of the PIPE Purchasers,

pursuant to which, such PIPE Purchasers agreed to amend the terms of their respective PIPE Warrants to make certain adjustments to the

definition of “Black Scholes Value,” as described in the 2025 Warrant Amendment, such that the underlying price per share

as used in such calculation equals the sum of the price per share being offered in cash in the applicable Fundamental Transaction (as

defined in the PIPE Warrants), if any, plus the value of the non-cash consideration being offered in the applicable Fundamental Transaction,

As consideration for entering into the 2025 Warrant Amendment, the Company and the applicable PIPE Purchasers agreed to amend

the term of their respective 2025 Warrants to be five and one-half years from the date of issuance.

ASC 815-40-35-10, upon effective amendment on June 30, 2025, each of the Series A Warrants and PIPE Warrants qualify for

equity-classification.

Immediately before the equity reclassification, such warrants were each revalued at fair value with the

resulting gain or loss being recorded in the Statement of Operations.

After fair value remeasurement, the reclassification from

warrant liabilities to additional paid-in capital was completed.

The aggregate gross proceeds from the Series A Offering were $ 10,000 , of which $ 7,717 was allocated to the Series A Warrants.

On February 24, 2025, the Company entered into a securities purchase agreement (the “PIPE Purchase Agreement”) with certain accredited investors (collectively, the “PIPE Purchasers”) for the issuance and sale in a private placement (the “Private Placement”) of an aggregate of 3,216,666 shares (the “Common Shares”) of Common Stock and accompanying warrants (“PIPE Warrants”) to purchase up to 3,216,666 shares of Common Stock, with an exercise price of $ 1.80 per share.

The purchase price for one Common Share and accompanying PIPE Warrant was $ 1.80 .

The gross proceeds to the Company were $ 5,790 before estimated offering expenses payable by the Company, of which $ 5,185 was allocated to the PIPE Warrants.

On June 30, 2025, the Company entered into a warrant amendment (the “Series A Warrant Amendment”) with the Required Holders (as defined in the Series A Purchase Agreement), pursuant to which, the Required Holders agreed to amend the terms of the Series A Warrants to make certain adjustments to the definition of “Black Scholes Value” in each of the Series A Warrants, as described in the Series A Warrant Amendment, such that the underlying price per share as used in such calculation equals the sum of the price per share being offered in cash in the applicable Fundamental Transaction (as defined in the Series A Warrants), if any, plus the value of the non-cash consideration being offered in the applicable Fundamental Transaction, if any.

As consideration for entering into the Series A Warrant Amendment, the Company and the Required Holders agreed to amend the term of the Series A Warrants to be six and one-half years from the date of issuance.

Additionally, on June 30, 2025, the Company entered into a warrant amendment (the “2025 Warrant Amendment”) with certain of the PIPE Purchasers, pursuant to which, such PIPE Purchasers agreed to amend the terms of their respective PIPE Warrants to make certain adjustments to the definition of “Black Scholes Value,” as described in the 2025 Warrant Amendment, such that the underlying price per share as used in such calculation equals the sum of the price per share being offered in cash in the applicable Fundamental Transaction (as defined in the PIPE Warrants), if any, plus the value of the non-cash consideration being offered in the applicable Fundamental Transaction, if any.

As consideration for entering into the 2025 Warrant Amendment, the Company and the applicable PIPE Purchasers agreed to amend the term of their respective 2025 Warrants to be five and one-half years from the date of issuance.

Under ASC 815-40-35-10, upon effective amendment on June 30, 2025, each of the Series A Warrants and PIPE Warrants qualify for equity-classification.

Immediately before the equity reclassification, such warrants were each revalued at fair value with the resulting gain or loss being recorded in the Statement of Operations.

After fair value remeasurement, the reclassification from warrant

liabilities to additional paid-in capital was completed.

See Footnote 3:

Financial Instruments for details of the fair value

measurement and impact on the Statement of Operations.

Company determines if an arrangement is a lease at inception.

The guidance in FASB ASC Topic 842, Leases defines a lease as a

contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an

identified asset) for a period of time in exchange for consideration.

Operating lease right of use (“ROU”) assets and

lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement

Financial Instruments for details of the fair value measurement and impact on the Statement of Operations.

On August 18, 2025, the

Company entered into a securities purchase agreement (the “Series B Purchase

Agreement”) with certain accredited investors (collectively, 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

newly-designated Series B Convertible Preferred Stock, with a par value of

$ 0.0001 per share and a stated value of $ 1,000 per share, initially convertible

into up to 3,000,000 shares of Common Stock, at an initial conversion price of

$ 1.50 per share (the “Series B Preferred Stock”), and (ii) accompanying

warrants (“Series B Warrants”) to purchase up to 3,000,000 shares of Common

Stock, with an initial exercise price of $ 1.50 per share.

The Series B Warrants

and the shares of Series B Preferred Stock will be exercisable or convertible,

respectively, into shares of Common Stock (“Series B Conversion Shares”)

beginning on the effective date of stockholder approval of (i) under Nasdaq

Stock Market Rule 5635(d), the issuance of shares of Common Stock in excess of

19.99% of the Company’s issued and outstanding shares of Common Stock at prices

below the “Minimum Price” (as defined in Rule 5635 of the Rules of the Nasdaq

Stock Market) on the date of the Series B Purchase Agreement pursuant to the

terms of the Series B Preferred Stock and the Series B Warrants, and (ii) an

increase in the authorized shares of the Company (the “Series B Stockholder

As of the date of this Quarterly Report on Form 10-Q, the Company

has not obtained the Series B Stockholder Approval.

However, the Company plans

to hold a special meeting of its stockholders on December 12, 2025, to, among

other things, obtain the Series B Stockholder Approval.

The Series B Warrants

will expire five years from the effective date of the Series B Stockholder

The Company determines if an arrangement is a lease at inception.

The guidance in FASB ASC Topic 842, Leases defines a lease as a contract, or part of a

contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.

Operating lease right of use (“ROU”) assets and lease liabilities are recognized

based on the present value of future minimum lease payments over the lease term at commencement date.

The Company’s leases do not provide an implicit rate.

Due to a lack of financing history or ability, the Company uses an

estimate of low-grade debt rate published by the Federal Reserve Bank as its incremental borrowing rate based on the information

available at the commencement date in determining the present value of future payments.

The ROU asset includes any lease payments

made and excludes lease incentives and initial direct costs incurred.

leases beginning on or after January 1, 2019, lease components are accounted for separately from non-lease components for all asset classes.

On January 21, 2023, the Company’s lease was amended to extend the expiration date to July 31, 2025.

Upon execution of the amendment,

which was deemed a lease modification, the Company reassessed the lease liability using the discount rate determined at the modification

date and recorded an additional ROU asset for the same amount.

The Company’s lease contains renewal provisions and escalating rental

clauses and generally requires the Company to pay utilities, insurance, taxes and other operating expenses.

The renewal provisions of

the existing lease agreement were not included in the determination of the operating lease liabilities and the ROU assets.

also reassessed the lease classification and concluded that the lease continues to be an operating lease.

expense was $ 84

for the three and six months ended June 30, 2025, respectively, and $ 72

for the three and six months ended June 30, 2024, respectively.

Operating lease expense for capitalized operating leases included in

operating activities was $ 156

for the three and six months ended June 30, 2025, respectively, and $ 166

for the three months and six months ended June 30, 2024.

lease obligations recorded on the balance sheet at June 30, 2025 are:

Due to a lack of financing history or ability, the Company uses an estimate of low-grade debt

rate published by the Federal Reserve Bank as its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.

The ROU asset includes any lease payments made and excludes

lease incentives and initial direct costs incurred.

For leases beginning on or after January 1, 2019, lease components are accounted for separately from non-lease components for all asset classes.

January 21, 2023, the Company’s lease was amended to extend the expiration date to July 31, 2025.

Upon execution of the amendment, which was deemed a lease modification, the Company reassessed the lease liability using the discount rate determined at

the modification date and recorded an additional ROU asset for the same amount.

The Company’s lease contains renewal provisions and escalating rental clauses and generally requires the Company to pay utilities, insurance, taxes and other operating

The renewal provisions of the existing lease agreement were not included in the determination of the operating lease liabilities and the ROU assets.

The Company also reassessed the lease classification and concluded that the lease continues

to be an operating lease.

Amortization expense was $ 76 and $ 204 for the three and nine months ended September 30, 2025, respectively, and $ 74 and $ 217 for the three and nine months ended September 30, 2024, respectively.

Operating lease expense for capitalized operating leases included in operating activities was $ 154 and $ 463 for the three and nine months ended September 30, 2025, respectively, and $ 154 and $ 463 for the three months and nine months ended September 30, 2024, respectively.

Operating lease obligations recorded on the balance sheet at September 30, 2025 are:

SCHEDULE OF OPERATING LEASE OBLIGATIONS

2 unchanged sentences

Total Operating Lease Liability $ 2,491

lease payments included in the measurement of lease liabilities on the balance sheet at June 30, 2025 for future periods are as follows:

SCHEDULE OF OPERATING LEASE, LIABILITY, TO BE PAID, MATURITY

Future lease payments included in the measurement of lease liabilities on the balance sheet at September 30, 2025 for future periods are as follows:

2025 (3 months) $ 155

Thereafter 813

Total future minimum lease payments $ 3,569

Less imputed interest ( 1,078 )

weighted average remaining lease term is 5.73 years, and the weighted average discount rate is 15.00 % .

leases contain provisions for payment of real estate taxes, insurance and maintenance costs by the Company.

These expenses are

treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred.

variable lease expenses for the three and six months ended June 30, 2025, respectively, and $ 14

for the three and six months ended June 30, 2024, respectively.

Company had $ 0 and $ 0 short-term lease expense for the three and six months ended June 30, 2025, respectively, and $ 4 and $ 15 for

the three and six months ended June 30, 2024, respectively.

Total $ 2,491

The weighted average remaining lease term is 5.37 years, and the weighted average discount rate is 13.50 % .

Certain leases contain provisions for payment of real estate taxes, insurance and maintenance costs by the Company.

These expenses are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred.

The Company had $ 2 and $ 33 variable lease expenses for the three and nine months ended September 30, 2025, respectively, and $ 23 and $ 41 variable lease expenses for the three and nine months ended September 30, 2024, respectively.

The Company had no short-term lease expenses for the three and nine months ended September 30, 2025, respectively, and had $ 1 and $ 16 in short-term lease expenses for the three and nine months ended September 30, 2024, respectively.

The Company does not have any finance leases.

STOCKHOLDERS’ EQUITY

Company’s authorized capital consists of 150,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, par value

$ 0.0001 per share (“Preferred Stock”), of which 10,000 are designated as Series A Preferred Stock.

July 3, 2023, the Company filed the Certificate of Designations of the Series a Preferred Stock (the “Certificate of Designations”)

with the Secretary of State of the State of Delaware, designating 10,000 shares of its Preferred Stock as Series A Convertible Preferred

The terms of the Series A Preferred Stock are as set forth in the form of Certificate of Designations of the Series A Preferred

Stock (the “Certificate of Designations”).

The Series A Preferred Stock is convertible into shares of Common Stock (the “Conversion

Shares”) at the election of the holder at any time at an initial conversion price of $ 1.45 (the “Conversion Price”).

The Conversion Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject

to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for common

stock, at a price below the then-applicable Conversion Price (subject to certain exceptions).

holders of the Series A Preferred Stock are entitled to dividends of 8 % per annum, compounded monthly, which are payable in cash or shares

of Common Stock, or a combination thereof, at the Company’s option in accordance with the terms of the Certificate of Designations.

Upon the occurrence and during the continuance of a Triggering Event (as defined in the Certificate of Designations), the Series A Preferred

Stock will accrue dividends at the rate of 20 % per annum.

If the Company elects to pay any dividends in shares of Common Stock, the Conversion

Price used to calculate the number of shares issuable will be equal to the lower of (i) the then applicable Conversion Price and (ii)

85% of the arithmetic average of the three (3) lowest closing prices of the Company’s Common Stock during the twenty (20) consecutive

trading day period ending on the trading day immediately preceding the dividend payment date, provided that such price shall not be lower

than the lower of (x) $0.2828 (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other

similar events ) and (y) 20% of the “Minimum Price” (as defined in Nasdaq Stock Market Rule 5635) on the date of the Stockholder

Approval (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) or,

in any case, such lower amount as permitted, from time to time, by the Nasdaq Stock Market.

August 19, 2024, the Company entered into an Amendment Agreement (the “August 2024 Amendment”) with the Required Holders

(as defined in the Certificate of Designations).

Pursuant to the August 2024 Amendment, the Required Holders agreed that (A) the unpaid

and accrued dividends on the Series A Preferred Stock due July 1, 2024 (the “July Delinquent Dividend Amount”), shall be

payable, at the option of the Company, in (i) cash and/or (ii) shares of Common Stock, at a price per share of Common Stock equal to

the lower of (x) $ 1.00 and (y) the Dividend Conversion Price (as defined in the Certificate of Designations), using July 1, 2024, as

the applicable date of determination in accordance with the Certificate of Designations;

(B) the dividends due on October 1, 2024 (the

“October Dividend Amount” and, together with the July Delinquent Dividend Amount, the “Delinquent Dividend Amounts”),

shall be payable in shares of Common Stock based on a per share price of Common Stock equal to 80% of the arithmetic average of the three

(3) lowest closing sale prices of the Common Stock during the month of September 2024;

and (C) such Delinquent Dividend Amounts and any

Dividend Balance Shares (as defined in the Certificate of Designations), with respect thereto, if applicable, shall be delivered on October

The Company and the Required Holders further agreed pursuant to the August 2024 Amendment to amend (i) the Certificate of Designations,

as described below, by filing a Certificate of Amendment to the Certificate of Designations (the “August 2024 Certificate of Amendment”)

and (ii) the Series A Purchase Agreement to amend the definition of “Excluded Securities.” The August 2024 Certificate of

Amendment amends the Certificate of Designations to, among other things, (A) allow for the payment of dividends in the form of Common

Stock to a holder of the Series A Preferred Stock who serves as a director, officer or employee of the Company;

provided that such issuance

is approved by the Company’s stockholders prior to such issuance, and (B) amend certain conditions required for (i) a mandatory

conversion of the Series A Preferred Stock (as described below), and (ii) the Company’s right to redeem, all or a portion, of the

Series A Preferred Stock outstanding pursuant to an optional redemption (as described below), in each case, pursuant to the terms of

the Certificate of Designations.

to the August 2024 Certificate of Amendment, the Company may require holders to convert their shares of Series A Preferred Stock into

shares of Common Stock if the closing price of the Company’s Common Stock exceeds $ 8.00 per share (subject to adjustment for stock

splits, stock dividends, stock combinations, recapitalizations or other similar events) for 20 consecutive trading days and the daily

dollar trading volume of the Common Stock exceeds $ 2,000,000 per day during the same period, provided that certain equity conditions

described in the Certificate of Designations are satisfied.

to the August 2024 Certificate of Amendment, at any time beginning 18 months from the date of the issuance, provided that the Company

has filed all reports required to be filed by it pursuant to the Exchange Act on a timely basis for a continuous period of one year and

provided further that certain equity conditions described in the Certificate of Designations are satisfied, the Company has the right

to redeem in cash all or some of the shares of the Series A Preferred Stock outstanding at such time at a redemption price equal to the

product of (x) 125% multiplied by (y) the sum of (A) the stated value of the Series A Preferred Stock plus (B) all declared and unpaid

Dividends on such Preferred Stock and any other unpaid amounts then due and payable hereunder with respect to such Series A Preferred

Stock, plus (C) the make-whole amount, plus (D) any accrued and unpaid late charges with respect to such stated value and amounts payable

pursuant to clause (B) as of such date of determination.

October 14, 2024, the Company entered into an Amendment Agreement with the Required Holders (as defined in the Certificate of Designations),

pursuant to which, the Required Holders agreed to amend the Certificate of Designations of the Company’s Series A Preferred Stock,

as described below, by filing a Certificate of Amendment to the Certificate of Designations (the “October 2024 Certificate of Amendment”).

The October 2024 Certificate of Amendment amends the Certificate of Designations to, among other things, provide that, except as required

by applicable law, the holders of the Series A Preferred Stock will be entitled to vote with holders of the Common Stock on an as converted

basis, with the number of votes to which each holder of Series A Preferred Stock is entitled to be calculated assuming a conversion price

of $ 1.414 per share, which was the Minimum Price (as defined in Rule 5635 of the Rule of the Nasdaq Stock Market) applicable immediately

before the execution and delivery of the Series A Purchase Agreement, subject to certain beneficial ownership limitations as set forth

in the Certificate of Designations.

The October 2024 Certificate of Amendment further provides that (i) certain holders of the Series

A Preferred Stock will not be subject to certain beneficial ownership limitations as described in the Certificate of Designations, and

(ii) stockholder approval will not be required in connection with the payment of dividends in the form of Common Stock to a holder of

the Series A Preferred Stock who serves as a director, officer or employee of the Company.

The October 2024 Certificate of Amendment

was filed with the Secretary of State of the State of Delaware, effective as of October 14, 2024.

The holders of the Series A Preferred

Stock have no voting rights, other than with respect to certain matters affecting the rights of the Series A Preferred Stock.

November 25, 2024, the Company entered into an Amendment and Agreement with the Series A Investors (the “November 2024 Amendment

Agreement”), pursuant to which, (i) the Series A Investors agreed to amend the Certificate of Designations, as described below,

by filing a Certificate of Amendment to the Certificate of Designations with the Secretary of State (the “November 2024 Certificate

of Amendment”), and (ii) the Series A Investors and the Company agreed that all payment amounts that have accrued and are unpaid

as of November 25, 2024, pursuant to the Certificate of Designations and the August 2024 Amendment will be satisfied by delivery of shares

of Common Stock on or prior to November 25, 2024, with each Series A Investor entitled to receive the number of shares of Common Stock

specified below such Series A Investor’s name on its respective signature page thereto.

The November 2024 Certificate of Amendment

amends the Certificate of Designations to provide that upon the occurrence of a Triggering Event (as defined in the Certificate of Designations),

the Series A Preferred Stock will accrue dividends compounded monthly at the rate of 20 % per annum.

The Certificate of Amendment became

effective with the Secretary of State on December 6, 2024.

the time of issuance, $ 2,036 of the net proceeds less transaction cost of the Series A Purchase Agreement was allocated to the 10,000

shares of Series A Preferred Stock initially issued.

As of December 31, 2024, a total of 1,793 shares of Series A Preferred Stock were

converted into approximately 1,468,000 shares of Common Stock.

There were no additional conversions in the six months end June 30, 2025.

As of June 30, 2025, the Company has authorized, declared and paid $ 328 in dividends in the form of shares of the Company’s Common

Stock during the six months ended June 30, 2025.

For the six months ended June 30, 2024, authorized and declared dividends totaling $ 189 ,

of which $ 60 was paid in cash, $ 129 was paid in shares of the Company’s Common Stock.

SHARE-BASED COMPENSATION

March 28, 2017 , the Company adopted, and the Company’s stockholders approved, the Wrap Technologies, Inc.

2017 Equity Incentive

Plan (the “2017 Plan”), which was adopted by the Board on November 12, 2024, subject to stockholder approval.

Under the 2017

Plan as originally adopted, the Company initially reserved 2,000,000 shares of Common Stock for issuance as awards under the 2017 Plan.

The 2017 Plan was amended by the First Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance

under the 2017 Plan to 4,100,000 shares, which was adopted by the Board on March 16, 2019, and by stockholders on May 23, 2019.

Plan was also amended by the Second Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under

the 2017 Plan to 6,000,000 shares which was adopted by the Board on April 8, 2020, and by stockholders on June 5, 2020.

The 2017 Plan

was also amended by the Third Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the

2017 Plan to 7,500,000 shares which was adopted by the Board on April 23, 2021, and by stockholders on June 22, 2021.

The 2017 Plan was

also amended by the Fourth Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017

Plan to 9,000,000 shares which was adopted by the Board on April 22, 2022, and by our stockholders on June 23, 2022.The 2017 Plan was

amended by the Fifth Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan

to 16,500,000 shares which was adopted by the Board on November 12, 2024, and by our stockholders on December 23, 2024.

of June 30, 2025, there were 4,004,187 shares of Common Stock remaining available for grant under the 2017 Plan.

following table summarizes stock option activity for the six months ended June 30, 2025:

The Company’s authorized capital consists of 150,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, par value $ 0.0001 per share (“Preferred Stock”), of which 10,000 and 4,500 are designated as Series A and Series B Preferred Stock, respectively.

Series A Preferred Stock

On July 3, 2023, the Company filed the Certificate of Designations of the Series A Preferred Stock (the “Certificate of Designations”) with the Secretary of State of the State of Delaware, designating 10,000 shares of its Preferred Stock as Series A Convertible Preferred Stock.

The terms of the Series A Preferred Stock are as set forth in the form of Certificate of Designations of the Series A Preferred Stock (the “Certificate of Designations”).

The Series A Preferred Stock is convertible into shares of Common Stock (the “Conversion Shares”) at the election of the holder at any time at an initial conversion price of $ 1.45 (the “Conversion Price”).

The Conversion Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for common stock, at a price below the then-applicable Conversion Price (subject to certain exceptions).

The holders of the Series A Preferred Stock are entitled to dividends of 8 % per annum, compounded monthly, which are payable in cash or shares of Common Stock, or a combination thereof, at the Company’s option in accordance with the terms of the Certificate of Designations.

Upon the occurrence and during the continuance of a Triggering Event (as defined in the Certificate of Designations), the Series A Preferred Stock will accrue dividends at the rate of 20 % per annum.

If the Company elects to pay any dividends in shares of Common Stock, the Conversion Price used to calculate the number of shares issuable will be equal to the lower of (i) the then applicable Conversion Price and (ii) 85 % of the arithmetic average of the three (3) lowest closing prices of the Company’s Common Stock during the twenty (20) consecutive trading day period ending on the trading day immediately preceding the dividend payment date, provided that such price shall not be lower than the lower of (x) $ 0.2828 (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events ) and (y) 20% of the “Minimum Price” (as defined in Nasdaq Stock Market Rule 5635) on the date of the Stockholder Approval (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) or, in any case, such lower amount as permitted, from time to time, by the Nasdaq Stock Market.

On August 19, 2024, the Company entered into an Amendment Agreement (the “August 2024 Amendment”) with the Required Holders (as defined in the Certificate of Designations).

Pursuant to the August 2024 Amendment, the Required Holders agreed that (A) the unpaid and accrued dividends on the Series A Preferred Stock due July 1, 2024 (the “July Delinquent Dividend Amount”), shall be payable, at the option of the Company, in (i) cash and/or (ii) shares of Common Stock, at a price per share of Common Stock equal to the lower of (x) $ 1.00 and (y) the Dividend Conversion Price (as defined in the Certificate of Designations), using July 1, 2024, as the applicable date of determination in accordance with the Certificate of Designations;

(B) the dividends due on October 1, 2024 (the “October Dividend Amount” and, together with the July Delinquent Dividend Amount, the “Delinquent Dividend Amounts”), shall be payable in shares of Common Stock based on a per share price of Common Stock equal to 80 % of the arithmetic average of the three (3) lowest closing sale prices of the Common Stock during the month of September 2024;

and (C) such Delinquent Dividend Amounts and any Dividend Balance Shares (as defined in the Certificate of Designations), with respect thereto, if applicable, shall be delivered on October 1, 2024.

The Company and the Required Holders further agreed pursuant to the August 2024 Amendment to amend (i) the Certificate of Designations, as described below, by filing a Certificate of Amendment to the Certificate of Designations (the “August 2024 Certificate of Amendment”) and (ii) the Series A Purchase Agreement to amend the definition of “Excluded Securities.” The August 2024 Certificate of Amendment amends the Certificate of Designations to, among other things, (A) allow for the payment of dividends in the form of Common Stock to a holder of the Series A Preferred Stock who serves as a director, officer or employee of the Company;

provided that such issuance is approved by the Company’s stockholders prior to such issuance, and (B) amend certain conditions required for (i) a mandatory conversion of the Series A Preferred Stock (as described below), and (ii) the Company’s right to redeem, all or a portion, of the Series A Preferred Stock outstanding pursuant to an optional redemption (as described below), in each case, pursuant to the terms of the Certificate of Designations.

Pursuant to the August 2024 Certificate of Amendment, the Company may require holders to convert their shares of Series A Preferred Stock into shares of Common Stock if the closing price of the Company’s Common Stock exceeds $ 8.00 per share (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) for 20 consecutive trading days and the daily dollar trading volume of the Common Stock exceeds $ 2,000,000 per day during the same period, provided that certain equity conditions described in the Certificate of Designations are satisfied.

Pursuant to the August 2024 Certificate of Amendment, at any time beginning 18 months from the date of the issuance, provided that the Company has filed all reports required to be filed by it pursuant to the Exchange Act on a timely basis for a continuous period of one year and provided further that certain equity conditions described in the Certificate of Designations are satisfied, the Company has the right to redeem in cash all or some of the shares of the Series A Preferred Stock outstanding at such time at a redemption price equal to the product of (x) 125 % multiplied by (y) the sum of (A) the stated value of the Series A Preferred Stock plus (B) all declared and unpaid Dividends on such Preferred Stock and any other unpaid amounts then due and payable hereunder with respect to such Series A Preferred Stock, plus (C) the make-whole amount, plus (D) any accrued and unpaid late charges with respect to such stated value and amounts payable pursuant to clause (B) as of such date of determination.

On October 14, 2024, the Company entered into an Amendment Agreement with the Required Holders (as defined in the Certificate of Designations), pursuant to which, the Required Holders agreed to amend the Certificate of Designations of the Company’s Series A Preferred Stock, as described below, by filing a Certificate of Amendment to the Certificate of Designations (the “October 2024 Certificate of Amendment”).

The October 2024 Certificate of Amendment amends the Certificate of Designations to, among other things, provide that, except as required by applicable law, the holders of the Series A Preferred Stock will be entitled to vote with holders of the Common Stock on an as converted basis, with the number of votes to which each holder of Series A Preferred Stock is entitled to be calculated assuming a conversion price of $ 1.414 per share, which was the Minimum Price (as defined in Rule 5635 of the Rule of the Nasdaq Stock Market) applicable immediately before the execution and delivery of the Series A Purchase Agreement, subject to certain beneficial ownership limitations as set forth in the Certificate of Designations.

The October 2024 Certificate of Amendment further provides that (i) certain holders of the Series A Preferred Stock will not be subject to certain beneficial ownership limitations as described in the Certificate of Designations, and (ii) stockholder approval will not be required in connection with the payment of dividends in the form of Common Stock to a holder of the Series A Preferred Stock who serves as a director, officer or employee of the Company.

The October 2024 Certificate of Amendment was filed with the Secretary of State of the State of Delaware, effective as of October 14, 2024.

The holders of the Series A Preferred Stock have no voting rights, other than with respect to certain matters affecting the rights of the Series A Preferred Stock.

On November 25, 2024, the Company entered into an Amendment and Agreement with the Series A Investors (the “November 2024 Amendment Agreement”), pursuant to which, (i) the Series A Investors agreed to amend the Certificate of Designations, as described below, by filing a Certificate of Amendment to the Certificate of Designations with the Secretary of State (the “November 2024 Certificate of Amendment”), and (ii) the Series A Investors and the Company agreed that all payment amounts that have accrued and are unpaid as of November 25, 2024, pursuant to the Certificate of Designations and the August 2024 Amendment will be satisfied by delivery of shares of Common Stock on or prior to November 25, 2024, with each Series A Investor entitled to receive the number of shares of Common Stock specified below such Series A Investor’s name on its respective signature page thereto.

The November 2024 Certificate of Amendment amends the Certificate of Designations to provide that upon the occurrence of a Triggering Event (as defined in the Certificate of Designations), the Series A Preferred Stock will accrue dividends compounded monthly at the rate of 20 % per annum.

The Certificate of Amendment became effective with the Secretary of State on December 6, 2024.

At the time of issuance, $ 2,036 of the net proceeds less transaction cost of the Series A Purchase Agreement was allocated to the 10,000 shares of Series A Preferred Stock initially issued.

As of December 31, 2024, a total of 1,793 shares of Series A Preferred Stock were converted into approximately 1,468,000 shares of Common Stock.

There were no additional conversions in the nine months ended September 30, 2025.

As of September 30, 2025, the Company has authorized, declared and paid $ 492 in dividends in the form of shares of the Company’s Common Stock during the nine months ended September 30, 2025.

For the nine months ended September 30, 2024, authorized and declared dividends totaling $ 1,017 , of which $ 60 was paid in cash, $ 129 was paid in shares of the Company’s Common Stock.

Series B Preferred Stock

On August 18, 2025, the Company entered into the Series B Purchase Agreement with the Series B Purchasers for the issuance and sale in a 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, at an initial conversion price of $ 1.50 per share, and (ii) accompanying Series B Warrants to purchase up to 3,000,000 shares of Common Stock, with an initial exercise price of $ 1.50 per share.

The Series B Warrants and the shares of Series B Preferred Stock will be exercisable or convertible, respectively, into shares of Common Stock beginning on the effective date of stockholder approval of (i) under Nasdaq Stock Market Rule 5635(d), the issuance of shares of Common Stock in excess of 19.99 % of the Company’s issued and outstanding shares of Common Stock at prices below the “Minimum Price” (as defined in Rule 5635 of the Rules of the Nasdaq Stock Market) on the date of the Series B Purchase Agreement pursuant to the terms of the Series B Preferred Stock and the Series B Warrants, and (ii) an increase in the authorized shares of the Company.

As of the date of this Quarterly Report on Form 10-Q, the Company has not obtained the Series B Stockholder Approval.

However, the Company plans to hold a special meeting of its stockholders on December 12, 2025, to, among other things, obtain the Series B Stockholder Approval.

The Series B Warrants will expire five years from the effective date of the Series B Stockholder Approval.

On August 20, 2025, the Company filed the Series B Certificate of Designations, thereby creating the Series B Preferred Stock.

The Series B Certificate of Designations became effective with the Secretary of State of the State of Delaware upon filing.

The terms of the Series B Convertible Preferred Stock are as set forth in the Series B Certificate of Designations.

The Series B Preferred Stock are convertible into the Series B Conversion Shares at the election of the holders of the Series B Preferred Stock at any time at an initial conversion price of $ 1.50 per share.

The conversion price is subject to customary adjustments for stock dividends, stock splits, reclassifications, stock combinations and the like (subject to certain exceptions).

Holders of the Series B Preferred Stock shall be entitled to receive dividends when and as declared by the Board, from time to time, in its sole discretion, which dividends will be paid by the Company out of funds legally available therefor, payable, subject to the conditions and other terms of the Series B Certificate of Designations, in cash, in securities of the Company or using assets as determined by the Board on the stated value of such Series B Preferred Stock.

Except as otherwise provided in the Series B Certificate of Designations or as otherwise required by law, the Series B Preferred Stock has no voting rights.

However, as long as any shares of Series B Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of Series B Preferred Stock of a majority of the then outstanding shares of the Series B Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the of the Series B Preferred Stock or alter or amend the Series B Certificate of Designations, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series B Preferred Stock, (c) increase the number of authorized shares of the Series B Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.

There is no established public trading market for the Series B Preferred Stock and the Company does not intend to list the Series B Preferred Stock on any national securities exchange or nationally recognized trading system.

On March 28, 2017 , the Company adopted, and the Company’s stockholders approved, the Wrap Technologies, Inc.

2017 Equity Incentive Plan (the “2017 Plan”), which was adopted by the Board on November 12, 2024, subject to stockholder approval.

Under the 2017 Plan as originally adopted, the Company initially reserved 2,000,000 shares of Common Stock for issuance as awards under the 2017 Plan.

The 2017 Plan was amended by the First Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 4,100,000 shares, which was adopted by the Board on March 16, 2019, and by stockholders on May 23, 2019.

The 2017 Plan was also amended by the Second Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 6,000,000 shares which was adopted by the Board on April 8, 2020, and by stockholders on June 5, 2020.

The 2017 Plan was also amended by the Third Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 7,500,000 shares which was adopted by the Board on April 23, 2021, and by stockholders on June 22, 2021.

The 2017 Plan was also amended by the Fourth Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 9,000,000 shares which was adopted by the Board on April 22, 2022, and by our stockholders on June 23, 2022.The 2017 Plan was amended by the Fifth Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 16,500,000 shares which was adopted by the Board on November 12, 2024, and by our stockholders on December 23, 2024.

As of September 30, 2025, there were 4,654,885 shares of Common Stock remaining available for grant under the 2017 Plan.

Stock Options

The following table summarizes stock option activity for the nine months ended September 30, 2025:

SCHEDULE OF STOCK OPTION ACTIVITY

Weighted Average

Options on Remaining Aggregate

Common Exercise Contractual Intrinsic

Shares Price Term Value

Outstanding January 1, 2025 3,944,284 $ 2.12 8.30 $ 1,486

Granted 4,113,927 1.82 - -

Exercised - - - -

Forfeited, cancelled, expired ( 2,024,762 ) 5.21 - -

Outstanding June 30, 2025

Exercisable June 30, 2025

of June 30, 2025, there were 5,571,545 service-based stock options outstanding, and 1,290,166 performance-based stock options outstanding

which were granted in October 2023 to the Company’s current Chief Executive Officer, subject to vesting based on future market

capitalization targets.

Company uses the Black-Scholes option pricing model to determine the fair value of the service-based options that have been granted.

Outstanding September 30, 2025 6,033,449 $ 1.91 8.38 $ 3,541

Exercisable September 30, 2025 1,625,078 $ 2.43 6.56 $ 856

As of September 30, 2025, there were 4,743,283 service-based stock options outstanding, and 1,290,166 performance-based stock options outstanding which were granted in October 2023 to the Company’s current Chief Executive Officer, subject to vesting based on future market capitalization targets.

The Company uses the Black-Scholes option pricing model to determine the fair value of the service-based options that have been granted.

The following table summarizes the assumptions used to compute the fair value of options granted to employees and non-employees:

SCHEDULE OF STOCK OPTION ACTIVITY, FAIR VALUE OF ASSUMPTIONS

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Expected stock price volatility 76 % 76 %

3 unchanged sentences

Weighted-average fair value of options granted $ 1.28 $ 1.48

volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected

life of awards.

The Company’s estimated volatility was based on an average of the historical volatility of peer entities whose

stock prices were publicly available.

The Company’s calculation of estimated volatility is based on the historical stock prices

of these peer entities over a period equal to the expected life of the awards.

The Company uses the historical volatility of peer entities

due to the lack of sufficient historical data of its stock price.

Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of awards.

The Company’s estimated volatility was based on an average of the historical volatility of peer entities whose stock prices were publicly available.

The Company’s calculation of estimated volatility is based on the historical stock prices of these

peer entities over a period equal to the expected life of the awards.

The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price.

The Company records forfeitures as they are incurred.

risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S.

Treasury bonds whose maturity period is

appropriate for the term of the options.

The dividend yield of zero 0 is based on the fact that the Company has never paid cash dividends

and has no present intention of paying cash dividends.

The Company calculates the expected life of the options using the Simplified Method

for the employee stock options as the Company does not have sufficient historical exercise data.

option expense was $ 477 and ($ 33 ) for the three months ended June 30, 2025 and 2024, respectively.

Stock option expense was $ 864 and $ 434

for the six months ended June 30, 2025 and 2024, respectively.

Plan provides for the grant of restricted stock units (“RSUs”).

RSUs are settled in shares of the Company’s Common

Stock as the RSUs vest.

The following table summarizes RSU activity for the six months ended June 30, 2025:

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S.

Treasury bonds whose maturity period is appropriate for the term of the options.

The dividend yield of zero 0 is based on the fact that the Company has never paid cash dividends and has no present intention of paying cash dividends.

The Company calculates the expected life of the options using the Simplified Method for the employee stock options as the Company does not have sufficient historical exercise data.

Stock option expense was $ 295 and $ 341 for the three months ended September 30, 2025 and 2024, respectively.

Stock option expense was $ 1,158 and $ 776 for the nine months ended September 30, 2025 and 2024, respectively.

Restricted Stock Units

The Plan provides for the grant of restricted stock units (“RSUs”).

RSUs are settled in shares of the Company’s Common Stock as the RSUs vest.

The following table summarizes RSU activity for the nine months ended September 30, 2025:

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

Service-Based

Date Fair Value

Weighted Weighted

Service-Based Average Grant Average Vesting

RSU's Date Fair Value Period (Years)

Unvested at January 1, 2025 988,102 $ 2.25 3.67

Granted-service based 841,495 1.86 -

Vested ( 773,368 ) 1.91 -

Forfeited and cancelled - - -

Unvested at June 30, 2025

Company used the Monte Carlo Simulation Model to value at the grant date the aggregate of 632,911 market condition performance RSUs granted

in January 2024 to the Company’s Chief Executive Officer.

The assumptions used in the Monte Carlo Simulation were stock price on

the date of grant equal to $ 3.40 , a contract term of 10 years, expected volatility of 78 % and risk-free interest rate of 4.10 %.

is based on sustained market capitalization of $ 1 billion, and the derived service period is 4.3 years.

expense was $ 293 and $ 275 for the three months ended June 30, 2025 and 2024, respectively.

RSU expense was $ 1,571 and $ 484 for the six

months ended June 30, 2025 and 2024, respectively

Compensation Expense

Company recorded share-based compensation for options and RSUs in its statements of operations for the relevant periods as follows:

Unvested at September 30, 2025 1,056,229 $ 2.19 2.31

The Company used the Monte Carlo Simulation Model to value at the grant date the aggregate of 632,911 market condition performance RSUs granted in January 2024 to the Company’s Chief Executive Officer.

The assumptions used in the Monte Carlo Simulation were stock price on the date of grant equal to $ 3.40 , a contract term of 10 years, expected volatility of 78 % and risk-free interest rate of 4.10 %.

Vesting is based on sustained market capitalization of $ 1 billion, and the derived service period is 4.3 years.

RSU expense was $ 343 and $ 555 for the three months ended September 30, 2025 and 2024, respectively.

RSU expense was $ 1,915 and $ 1,038 for the nine months ended September 30, 2025 and 2024, respectively.

Share-Based Compensation Expense

The Company recorded share-based compensation for options and RSUs in its statements of operations for the relevant periods as follows:

SCHEDULE OF SHARE-BASED COMPENSATION FOR OPTIONS AND RESTRICTED STOCK UNITS

Three Months Ended June 30,

Six Months Ended June 30,

Three months ended September 30, Nine months ended September 30,

2025 2024 2025 2024

Selling, general, and administrative $ 632 $ 878 $ 3,004 $ 1,735

1 unchanged sentence

Total share-based expense $ 638 $ 896 $ 3,073 $ 1,814

of June 30, 2025, total estimated compensation cost of stock options granted and outstanding but not yet vested was $ 5,591 which is expected

to be recognized over the weighted average period of 3.03 years.

of June 30, 2025, total estimated compensation cost of RSUs granted and outstanding but not yet vested was $ 1,368 , which is expected

to be recognized over the weighted average period of 2.56 years.

As of September 30, 2025, total estimated compensation cost of stock options granted and outstanding but not yet vested was $ 3,974 which is expected to be recognized over the weighted average period of 3.01 years.

As of September 30, 2025, total estimated compensation cost of RSUs granted and outstanding but not yet vested was $ 1,282 , which is expected to be recognized over the weighted average period of 2.31 years.

DEFINED CONTRIBUTION PLAN

Company has a defined contribution savings plan for all eligible U.S.

employees established under the provisions of Section 401(k) of

the Internal Revenue Code.

The Company has a defined contribution savings plan for all eligible U.S.

employees established under the provisions of Section 401(k) of the Internal Revenue Code.

This plan was formed on January 1, 2022.

Eligible employees may contribute a percentage of their salary subject

to certain limitations.

The Company’s contributions for each of the six months ended June 30, 2025 and 2024 was $ 23 and $ 0 , respectively.

Eligible employees may contribute a percentage of their salary subject to certain limitations.

The Company’s contributions for each of the nine months ended September 30, 2025 and 2024 was $ 23 and $ 0 , respectively.

COMMITMENTS AND CONTINGENCIES

of June 30, 2025, the Company was committed for approximately $ 508

for future component deliveries that are generally subject

to modification or rescheduling in the normal course of business.

Indemnifications

and Guarantees

officers and directors are indemnified as to personal liability as provided by Delaware law and the Company’s articles of incorporation

Purchase Commitments

As of September 30, 2025, the Company was committed for approximately $ 391 for future component deliveries that are generally subject to modification or rescheduling in the normal course of business.

Indemnifications and Guarantees

Our officers and directors are indemnified as to personal liability as provided by Delaware law and the Company’s certificate of incorporation and bylaws.

The Company may also undertake indemnification obligations in the ordinary course of business related to its operations.

The Company is unable to estimate with any reasonable accuracy the liability that may be incurred pursuant to any such indemnification

obligations now or in the future.

Because of the uncertainty surrounding these circumstances, the Company’s current or future indemnification

obligations could range from immaterial to having a material adverse impact on its financial position and its ability to continue in

the ordinary course of business.

The Company is unable to estimate with any reasonable accuracy the liability that may be incurred pursuant to any such

indemnification obligations now or in the future.

Because of the uncertainty surrounding these circumstances, the Company’s current or future indemnification obligations could range from immaterial to having a material adverse impact on its financial

position and its ability to continue in the ordinary course of business.

The Company has no liabilities recorded for such indemnities.

Company is subject to oversight from regulatory agencies regarding firearms that arise in the ordinary course of its business.

Company is subject to litigation and other claims in the ordinary course of business.

The Company records a provision for a liability

relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

These provisions are reviewed and adjusted to include the impacts of negotiations, estimated settlements, legal rulings, advice of legal

counsel, and other information and events pertaining to a particular matter.

As of June 30, 2025, the Company had no provision for liability

under existing litigation.

Company entered into a facility lease agreement for its new production facility based in Norton, Virginia.

initial term of the agreement is for five years and commences on October 1, 2025.

total cash payments to the lessor during the term are $ 600 .

Regulatory Agencies

The Company is subject to oversight from regulatory agencies regarding firearms that arise in the ordinary course of its business.

The Company is subject to litigation and other claims in the ordinary course of business.

The Company records a provision for a liability relating to

legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

These provisions are reviewed and adjusted to include the impacts of negotiations, estimated settlements, legal rulings,

advice of legal counsel, and other information and events pertaining to a particular matter.

As of September 30, 2025, the Company had no provision for liability under existing litigation.

Facility lease

The Company entered into a facility lease agreement for its new production facility based in Norton, Virginia.

The initial term of the agreement is for five years and commenced on October 1, 2025 (the "Term").

The Company was granted early occupancy of the facility for use beginning on August 18, 2025.

The total cash payments to the lessor during the Term are $ 600 .

RELATED PARTY TRANSACTIONS

A Preferred Stock

June 29, 2023, the Company entered into the Series A Purchase Agreement with certain investors, including Scot Cohen, the Company’s

Chief Executive Officer, and V4 Global LLC (“V4”).

Cohen has voting and dispositive control with respect to the securities

and is deemed to be the beneficial owner of the securities held by V4.

Pursuant to the Series A Purchase Agreement, the Company issued

Cohen and V4 an aggregate of 3,000 shares of Series A Preferred Stock and Series A Warrants to purchase up to an aggregate of 2,068,966

shares of Common Stock for aggregate gross proceeds of $ 3,000 .

For the six months ended June 30, 2025, Mr.

Cohen earned dividends totaling

$ 60 on his Series A Preferred Stock.

February 24, 2025, the Company entered into the PIPE Purchase Agreement with certain accredited including:

V4 Global, LLC (“V4”),

an entity controlled by Mr.

Series A Preferred Stock

On June 29, 2023, the Company entered into the Series A Purchase Agreement with certain investors, including Scot Cohen, the Company’s Chief Executive Officer, and V4 Global LLC (“V4”).

Cohen has voting and dispositive control with respect to the securities and is deemed to be the beneficial owner of the securities held by V4.

Pursuant to the Series A Purchase Agreement, the Company issued Mr.

Cohen and V4 an aggregate of 3,000 shares of Series A Preferred Stock and Series A Warrants to purchase up to an aggregate of 2,068,966 shares of Common Stock for aggregate gross proceeds of $ 3,000 .

For the nine months ended September 30, 2025, Mr.

Cohen earned dividends totaling $ 120 on his Series A Preferred Stock.

PIPE Financing

On February 24, 2025, the Company entered into the PIPE Purchase Agreement with certain accredited including:

V4 Global, LLC (“V4”), an entity controlled by Mr.

Cohen, the Company’s Chief Executive Officer;

Continuum Ventures, LLC (“Continuum”), an

entity controlled by Jared Novick, the Company’s President and Chief Operating Officer;

and Savbo Investments LLC (“Savbo”),

an entity controlled by Marc Savas, a member of the Company’s Board, pursuant to which, the Company issued and sold in a private

placement an aggregate of 3,216,666 shares of Common Stock and PIPE Warrants with an exercise price of $ 1.80 per share, to purchase up

to 3,216,666 shares of Common Stock (the “Private Placement”).

Pursuant to the Private Placement, the Company sold to (i)

V4 1,100,000 shares of Common Stock and PIPE Warrants to purchase up to an aggregate of 1,100,000 shares of Common Stock, for aggregate

gross proceeds of $ 1,980 , (ii) Continuum an aggregate of 275,000 shares of Common stock and PIPE Warrants to purchase up to an aggregate

of 275,000 shares of Common Stock for aggregate gross proceeds of $ 495 and (iii) Savbo an aggregate of 50,000 shares of Common stock

and PIPE Warrants to purchase up to an aggregate of 50,000 shares of Common Stock for aggregate gross proceeds of $ 90 .

Continuum Ventures, LLC (“Continuum”), an entity controlled by Jared Novick, the Company’s President and Chief Operating Officer;

and Savbo Investments LLC (“Savbo”), an entity controlled by Marc Savas, a member of the Company’s Board, pursuant to which, the Company issued and sold in a private placement an aggregate of 3,216,666 shares of Common Stock and PIPE Warrants with an exercise price of $ 1.80 per share, to purchase up to 3,216,666 shares of Common Stock (the “Private Placement”).

Pursuant to the PIPE Private Placement, the Company sold to (i) V4 1,100,000 shares of Common Stock and PIPE Warrants to purchase up to an aggregate of 1,100,000 shares of Common Stock, for aggregate gross proceeds of $ 1,980 , (ii) Continuum an aggregate of 275,000 shares of Common stock and PIPE Warrants to purchase up to an aggregate of 275,000 shares of Common Stock for aggregate gross proceeds of $ 495 and (iii) Savbo an aggregate of 50,000 shares of Common stock and PIPE Warrants to purchase up to an aggregate of 50,000 shares of Common Stock for aggregate gross proceeds of $ 90 .

On August 18, 2025, the Company entered into the Series B Purchase Agreement with the Series B Purchasers, including V4, pursuant to which, the Company issued and sold in a private placement 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, at an initial conversion price of $ 1.50 per share, and (ii) accompanying Series B Warrants to purchase up to 3,000,000 shares of Common Stock, with an initial exercise price of $ 1.50 per share.

Pursuant to the Series B Private Placement, the Company sold to V4 1,000 shares of Series B Preferred Stock and 666,667 Series B Warrants for aggregate gross proceeds of $ 100 .

MAJOR CUSTOMERS AND RELATED INFORMATION

the three months ended June 30, 2025, revenue from three

customers accounted for approximately 32 % , 23 %

of revenue, respectively, with no other single customer accounting for more than 10% of total revenue.

For the three months ended June

30, 2024, revenue from one

distributor accounted for approximately 39 %

of revenue, with no other single customer accounting for more than 10 %

of total revenue.

For the three months

ended June 30, 2025, revenue from one

customer accounted for approximately 16 %

of revenue, with no other single customer accounting for more than 10% of total revenue.

For the six months ended June

30, 2024, revenue from two

distributors accounted for approximately 33 %

of revenue, respectively, with no other single customer accounting for more than 10 %

of total revenue.

June 30, 2025, accounts receivable from four customers

accounted for 15 %, 13 %, 11 %, 10 %, respectively,

of net accounts receivable with no other single customer accounting for more than 10 %

of the accounts receivable balance.

At December 31, 2024, accounts receivable from two distributors

accounted for 11 %

respectively, of net accounts receivable, with no other single customer accounting for more than 10 %

of the accounts receivable balance.

following table summarizes revenue by geographic region.

For the three months ended September 30, 2025, revenue from one customer accounted for approximately 93 % of revenue, with no other single customer accounting for more than 10% of total revenue.

For the three months ended September 30, 2024, revenue from one distributor accounted for approximately 20 % with no other single customer accounting for more than 10 % of total revenue.

For the nine months ended September 30, 2025, revenue from three distributors accounted for approximately 42 %, 11 %, and 10 % of revenue, respectively, with no other single customer accounting for more than 10% of total revenue.

For the nine months ended September 30, 2024, revenue from two distributors accounted for approximately 28 % and 17 % of revenue, respectively, with no other single customer accounting for more than 10 % of total revenue.

At September 30, 2025, accounts receivable from one customer accounted for 76 %,

of net accounts receivable with no other single customer accounting for more than 10 % of the accounts receivable balance.

At December 31, 2024, accounts receivable from two distributors accounted for 11 % and 10 %, respectively, of net accounts receivable with no other single customer accounting for more than 10 % of the accounts receivable balance.

The following table summarizes revenue by geographic region.

Revenue is attributed to countries based on customer’s delivery location:

SCHEDULE OF DISAGGREGATION OF REVENUE

For the Three Months

For the Six Months

Ended June 30,

For the Three Months For the Nine Months

Ended September 30, Ended September 30,

2025 2024 2025 2024

Americas $ ( 70 ) $ 585 $ 1,522 $ 3,583

Europe, Middle East and Africa 1,540 7 1,725 51

Asia Pacific 21 1 21 8

Total revenues $ 1,491 $ 593 $ 3,268 $ 3,642

W1 ACQUISITION

February 18, 2025, the Company and W1, entered into an Asset Purchase Agreement, dated as of February 18, 2025 pursuant which, subject to the terms and conditions set forth therein, the Company agreed to acquire substantially

all the assets of W1 used in, held for use in or relating to the business of advisory and investigative professional services which related

to specific identified customer contracts.

The Company recorded the transaction as an Asset Acquisition in accordance with ASC 805 and

recorded $ 54 as intangible assets included in Customer Relationships (See Note 6 “Intangible Assets” above).

has preliminarily assigned a three-year life to such Customer Relationships.

On February 18, 2025, the Company and W1, entered into an Asset Purchase Agreement, dated as of February 18, 2025 pursuant to which, subject to the terms and conditions set forth therein, the Company agreed to acquire substantially all the assets of W1 used in, held for use in or relating to the business of advisory and investigative professional services which related to specific identified customer contracts.

The Company recorded the transaction as an Asset Acquisition in accordance with ASC 805 and recorded $ 54 as intangible assets included in Customer Relationships (See Note 6 “Intangible Assets” above).

The Company has preliminarily assigned a three-year life to such Customer Relationships.

The Company acquired W1 Global to integrate technology enablement into its core offerings and expand into managed technology services supporting the BolaWrap go-to-market strategy.

Following a third-quarter evaluation, the company determined that W1’s investigative services were not essential to Wrap’s domestic or international expansion;

however, customers strongly valued managed services related to policy and training.

As a result, Wrap will continue focusing on managed services in policy governance and training to advance the next era of non-lethal technology development, delivering an integrated response package that combines technology with the support, policy alignment, and governance needed for adoption at the state and federal levels.

SUBSEQUENT EVENTS

Company has reviewed activities through August 14, 2025, and determined that there are no subsequent events that require disclosure in

accordance with ASC 855-10-25-1.

Mutual Separation with Jerry Ratigan and Appointment of Scot Cohen

On October 21, 2025, the Company and Jerry Ratigan, who served as the Company’s Chief Financial Officer, Principal Accounting Officer and Principal Financial Officer, mutually agreed to the separation of Mr.

Ratigan from such roles, effective as of October 24, 2025.

The terms of Mr.

Ratigan’s separation from the Company have been memorialized pursuant to a General Release and Severance Agreement, dated as of October 21, 2025, which was executed by the Company and Mr.

Ratigan on October 24, 2025 (the “Separation Agreement”).

Pursuant to the Separation Agreement, Mr.

Ratigan is entitled to receive a severance payment in an amount equal to $ 50,000 , representing three months of Mr.

Ratigan’s base salary, less all lawful and authorized withholdings and deductions, payable in a lump sum on the Company’s first regular pay date following the Effective Date (as defined in the Separation Agreement).

In exchange for the consideration provided to Mr.

Ratigan in the Separation Agreement, Mr.

Ratigan agreed to waive and release any claims in connection with Mr.

Ratigan’s employment and separation from the Company.

On October 25, 2025, the board of directors of the Company appointed Scot Cohen, who serves as the Company’s Chief Executive Officer and Principal Executive Officer, to the position of Chief Executive Officer, Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer, effective immediately.

Appointment of John Shulman to the Board of Directors

On October 25, 2025, the Board increased the size of the Board to six ( 6 ) members and appointed John Shulman to serve as a member of the Company’s Board, to serve until the Company’s next annual meeting of stockholders or until his successor is duly elected and qualified.

Shulman will be entitled to the standard compensation paid by the Company to all its nonemployee directors under the Company’s director compensation program.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements