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Item 7. Management’s Discussion and Analysis

2026-03-26 compared with 2025-03-31 · 367 added, 665 removed, 15 unchanged (99% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

discussion and analysis set forth below should be read in conjunction with the information presented in other sections of this Annual

Report, including “ Item 1.

The discussion and analysis set forth below should be read in conjunction with the information presented in other sections of this Annual Report, including “ Item 1.

Business, ” “ Item 1A.

1 unchanged sentence

Financial Statements and Supplementary Data.

” The following discussion may contain forward-looking statements that reflect

our plans, estimates and beliefs.

Words such as “ expects, ” “ anticipates, ” “ intends, ”

“ plans, ” “ believes, ” “ seeks, ” “ estimates ” and similar

expressions or variations of such words are intended to identify forward-looking statements but are not the only means of identifying

forward-looking statements.

” The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs.

Words such as “ expects, ” “ anticipates, ” “ intends, ” “ plans, ” “ believes, ” “ seeks, ” “ estimates ” and similar expressions or variations of such words are intended to identify forward-looking statements but are not the only means of identifying forward-looking statements.

Our actual results could differ materially from those discussed in these forward-looking statements.

are a global public safety technology and services company that delivers safe and effective policing solutions to law enforcement and

security personnel worldwide.

We are leading the movement for safer outcomes by equipping law enforcement with safer, non-painful compliance

tools and immersive training for modern society.

We began sales of our first public safety product, the BolaWrap 100 remote restraint

device, in late 2018.

In late 2020 we added a new solution to our public safety technologies, which is our virtual reality (“VR”)

training platform, Wrap Reality.

Wrap Reality is now sold to law enforcement agencies for simulation training as well as corrections

departments for the societal reentry scenarios.

In the first quarter of 2022 we delivered a new generation product, the BolaWrap 150.

The BolaWrap 150 is electronically deployed and is more robust, smaller, lighter and simpler to deploy than the BolaWrap 100 that has

been phased out.

target market for our solutions includes approximately 900,000 full-time sworn law enforcement officers in over 18,000 federal, state,

and local law enforcement agencies in the U.S.

and over 12 million police officers in more than 100 countries.

Additionally, we are exploring

opportunities in other domestic markets, such as military and private security.

Our international focus is on countries with the largest

police forces.

According to 360iResearch, a market research consulting firm, our non-lethal products are part of a global market segment

expected to grow to $16.1 billion by 2027.

focus our efforts on the following products and services:

Remote Restraint Device – a hand-held remote restraint device that discharges a seven and half-foot Kevlar tether to entangle

an individual at a range of 10-25 feet.

BolaWrap assists law enforcement to safely and effectively control encounters early without resorting

to painful force options.

Reality – a law enforcement 3D training system employing immersive computer graphics VR with proprietary software-enabled content.

It allows up to two participants to enter a simulated training environment simultaneously, and customized weapons controllers enable

trainees to engage in strategic decision making along the force continuum.

Wrap Reality has 43 scenarios for law enforcement and corrections

and 15 scenarios for societal reentry.

Wrap Reality is one of the most robust 3D Virtual Reality solutions on the market for law enforcement

and societal reentry today.

Intrensic – a Body-Worn Camera (“ BWC ”) and Digital Evidence Management (“ DEM ”) solutions

BWC and DEM play crucial role in capturing, storing, and managing digital evidence, such as video and audio recordings for

various purposes, including criminal investigations and maintaining transparency in public interactions.

The Wrap Intrensic X2 camera

hardware and storage and data management capability, along with awareness of front-line operations, provides customers with a solution

to meet their challenges.

Wrap Intrensic Evidence on Cloud provides an unlimited video storage platform that includes video and other

evidence uploading, search, retrieval, redaction, and evidence sharing while reducing the need for resources required to manage this

addition to the US law enforcement market, we have shipped our restraint products to 62 countries.

We have established an active distributor

network representing 50 states and one dealer representing the US territory of Puerto Rico.

We have distribution agreements with international

distributors covering 75 countries.

We focus significant sales, training and business development efforts to support our distribution

network in addition to our internal sales team.

focus significant resources on research and development innovations and continue to enhance our products and plan to introduce new products.

We believe we have established a strong brand and market presence globally and have established significant competitive advantages in

December 31, 2024, the Company accomplished the following:

measures to improve operational efficiency and streamline costs;

the full deployment of BolaWrap by a prominent Midwest police department’s Crisis Intervention Team (CIT) and a pilot program

at a major West Coast agency;

Jared Novick as President and Chief Operating Officer, effective March 10 2025, to drive operational efficiency and expand its public

safety solutions.

Global, LLC Acquisition

February 18, 2025, the Company and W1 Global, LLC, a Delaware limited liability company (“W1 Global”), entered into an Asset

Purchase Agreement, dated as of February 18, 2025 (the “W1 Purchase Agreement”), pursuant which, subject to the terms and

conditions set forth therein, the Company agreed to acquire substantially all the assets of W1, including, among others, all of W1’s

right, title and interest in and to W1’s properties, business, and assets of W1 used in, held for use in or relating to the business

of advisory and investigative professional services, as more specifically set forth in the W1 Purchase Agreement (collectively, the “Acquired

Assets”), which excludes the Excluded Assets (as defined in the W1 Purchase Agreement), and assume certain Assumed Liabilities

(as defined in the W1 Purchase Agreement), upon the terms and subject to the conditions set forth in the W1 Purchase Agreement (the “Acquisition”),

for a nominal purchase price equal to $100.00.

This acquisition is expected to advance the Company’s capabilities and integrate

into Company’s Managed Safety and Response (MSR) Connected Ecosystem, expanding its reach and service offerings.

2025 Private Placement

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 estimated gross proceeds to the Company were $5.8 million, before estimated

offering expenses payable by the Company.

The closing of the Private Placement occurred on February 28, 2025 and March 7, 2025.

Outlook and Challenges

believe our Company’s products and solutions are gaining global recognition and awareness through various channels such as social

media, trade shows, and media exposure, among others.

In part, this recognition and awareness can be attributed to positive feedback

from law enforcement agencies and the successful deployment of our products.

As a result, we believe our brand is becoming increasingly

recognized on a global scale as a leader in remote restraint and non-lethal solutions.

addition, we are focused on marketing and public relations efforts.

We believe there are market opportunities for our remote restraint

and virtual reality solutions in the law enforcement and security sectors worldwide.

These opportunities are driven by the increasing

demand for less-lethal policing.

the law enforcement sector, our BolaWrap product has been successfully deployed in the field, as reported by many agencies.

is now in use by over 900 US law enforcement agencies and in 62 countries.

Due to its safe remote restraint capabilities, some agencies

do not deem its usage a categorical reportable use of force and rather place it underneath early use of force such as handcuffs.

strategic roadmap, we clarified that law enforcement agencies deploy BolaWrap when verbal commands breakdown but long before there is

justifiable escalation to pepper spray, pepper ball, batons, bean bags, tasers or Conducted Electrical Weapons (CEW’s) or firearms.

agencies voluntarily report usage to Wrap but many do not.

In the usage reports we have been provided, officers have reported successful

outcomes in 84% of the use cases.

This percentage is higher than what is often seen with less lethal tools.

From the information we have

been provided, the most common BolaWrap use case is for individuals with behavioral health issues, and the second most common BolaWrap

use case is during domestic violence calls.

26% percent of the reported persons who are wrapped with the BolaWrap are thought to be under

the influence of alcohol or drugs.

are many reasons why we may not receive reports on all the use of the BolaWrap, including, when uses of BolaWrap are considered evidence

in ongoing criminal cases, are controlled by local policy or regulation, or require officer and union permission to be shared with us.

However, some agencies have shared bodycam footage of successful field deployments with us, which we may use in our training and education

We believe that as the reports of BolaWrap’s effectiveness in de-escalation continue to increase, it will contribute to

our future revenue growth.

anticipate and believe that our portfolio of safe, remote restraint products and training services has a strong and expanding pipeline

of market opportunities in the law enforcement, military, corrections, and homeland security sectors both domestically and internationally.

With the increasing demand for more humane and safer policing practices, we expect a continued surge in our global business.

we are exploring major international business prospects while simultaneously seeking to establish relationships with large police agencies

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

ultimately materialize.

part of our efforts to expand our sales and distribution operations, we provide a comprehensive training program for law enforcement

officers and trainers in using the BolaWrap.

This training equips them with knowledge about the appropriate use and limitations of BolaWrap

in tandem with modern policing techniques for de-escalation of encounters.

We now focus on also teaching when and why BolaWrap should

be used, including the specific area of success, such as after verbal commands break down and before the law enforcement officer is ready

to escalate to less lethal pain compliance tools.

We believe that law enforcement trainers and officers who have been trained to use

our products, or have witnessed demonstrations, are more inclined to support the acquisition and deployment of our products by their

respective departments to drive successful outcomes.

As of December 31, 2024, over 1,540 agencies have received BolaWrap training with

over 5,450 training officers at those agencies certified as BolaWrap instructors and qualified to train the rest of their departments,

representing a 1% increase in agencies and a 1% increase in trained officers as compared to December 31, 2023.

expenses for the year ended December 31, 2024 totaled $18.0 million representing a 17 % reduction as compared to 2023 expenses

totaling $21.6 million.

Our new management team has prioritized reducing operating expenses, and in the second quarter of 2024,

conducted a thorough top to bottom assessment of all aspects of the business.

We expect to realize the full year benefits in 2025 of

the cost reduction actions taken throughout 2024 as we expect to continue to reduce our cost profile.

This assessment culminated in

the creation of a strategic roadmap aimed at achieving sustainable growth and delivering long-term value to our stockholders.

strategic roadmap centers on expanding our sales by building repeatable domestic BolaWrap sales, increasing international sales of

the new BolaWrap 150, and expanding the deployment of BolaWrap to full patrol-wide utilization via a customer success function.

Additionally, we have established a dedicated inside sales leader to increase our velocity on new leads.

To catalyze sales growth,

we are expanding our distributor and partner relationships while simultaneously diversifying and innovating our product offerings.

As part of our strategic roadmap, we have made the decision to improve the pricing on BolaWrap 150 devices and cassettes, given the

product’s success as a significant upgrade for law enforcement.

We believe these increased margins could drive us to breakeven

and profitability more quickly.

We also began charging for our respected training services.

believe the synergy in BolaWrap to de-escalate and reduce uses of force and the immersive 3D Virtual Reality training for law enforcement

and corrections create a unique and well positioned law enforcement technology company that is prepared for modern policing and driving

safe outcomes.

With our key focus on where BolaWrap and Wrap Reality fit into the Force Factor diagram below in Figure X, agencies are

likely to see significant increased usage where BolaWrap has shown to be a tool that could appropriately de-escalate dangerous situations

and save the lives and careers of officers and the individuals they interact with in such situations.

believes that implementing these strategic changes may lead to substantial sales growth and put us on a path towards sustainable profitability.

Although geopolitical tensions and macroeconomic challenges have affected our quarterly results in the past and may in the future, we

believe our company is uniquely positioned to provide lifesaving technologies and training that enable law enforcement officers worldwide

to conduct safe and effective encounters while reducing the use of force.

With an increasing addressable market, the Company offers what

we believe is a unique value proposition.

Our improved pricing strategy, coupled with reduced operating expenses and our growing sales

outlook, is expected to help reduce losses and improve cash flow in the future.

have continued to invest in our VR system while working to continue to develop real-world scenarios into our robust Wrap Reality platform.

We plan to increase marketing activities for our VR solution to both law enforcement and corrections throughout 2023 and expect to launch

the cloud-based version in mid-2023.

of December 31, 2024, we had backlog of approximately $64 thousand was delivered in the first quarter of 2025.

Additionally, we had

deferred revenue of approximately $505 thousand expected to be recognized generally over the next four years.

Our deferred revenue

is generally from Wrap Reality subscription and other revenue.

Distributor and customer orders for future deliveries are generally

subject to modification, rescheduling or in some instances, cancellation, in the normal course of business.

inception, we have generated significant losses from operations and anticipate that we will continue to generate significant losses from

operations for the foreseeable future.

We believe that we have adequate financial resources to sustain our operations for the twelve

For the year ended December 31, 2024, our net loss from operations decreased by approximately $3.2 million compared to the year

ended December 31, 2023.

Net cash used in operations during the year ended December 31, 2024, was approximately $8.6 million less than

cash used in operations during the year ended December 31, 2023.

This decrease in cash used in operations reflects a lower net operating

loss in 2024 along with a decrease in accounts receivable during the period compared to the year ended December 31, 2023.

expect that we will continue to innovate new applications for our public safety technology, open new geographies, develop new products

and technologies to meet diverse customer requirements and identify and develop new markets for our products.

customers were generally satisfied with the BolaWrap 100, many distributors were concerned with the Company’s ability to continue

to expand with the BolaWrap 100.

This device was completely discontinued in 2022 and product delays kept the BolaWrap 150 from being

fully delivered to customers until late early 2022.

This gap in having a product to sell as well as the unhappiness in phasing out the

first-generation product while it was still having success in the field, created significant work throughout 2022 to get the BolaWrap

150 approved by departments as well as by import and federal authorities for international countries.

We also had a much slower than

expected trade in the timeframe of BolaWrap 100 to BolaWrap 150 due to the customer affinity for our first to market device.

realized a rebound in sales of the BolaWrap 150 in the second half of 2022, following the full-scale production and sales of the BolaWrap

New device supply chain and product issues improved, but did not completely abate until the first half of 2023, at which point,

management was able to fully resume international travel and demonstrate the new and enhanced capabilities of the BolaWrap 150.

chain disruptions also affected our operations and could negatively impact our ability to source materials, manufacture and distribute

products in the future.

Moreover, financial markets continue to experience significant volatility, which could potentially affect our

ability to enter into or modify favorable terms and conditions regarding equity and debt financing activities.

Nevertheless, we had $3.6

million in cash and cash equivalents and short-term investments as of December 31, 2024, which together with our February 2025 $5.8 million

equity infusion, believe provides sufficient capital to fund our operations in the short-term and absorb the potential near-term impacts

of economic uncertainty.

However, we may require additional working capital and liquidity constraints and access to capital markets could

still negatively affect our liquidity and require changes to our plan of operations.

in our management and other critical personnel have the potential to positively or negatively affect our business.

Such disruptions could

have an adverse impact on our operations, programs, growth, financial condition, or results of operations.

On the other hand, improvements

in our operations, operating expenses, and go-to-market approaches could positively influence the success of our business in the future.

Accounting Policies and Estimates

preparation of financial statements in accordance with accounting principles generally accepted in the US (“ US GAAP ”)

requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense, and related

disclosure of contingent assets and liabilities.

We evaluate our estimates, on an on-going basis, including those estimates related to

recognition and measurement of contingencies and accrued expense.

We base our estimates on historical experience and on various other

assumptions we believe to be reasonable under the circumstances.

Actual results may differ from these estimates under different assumptions

or conditions.

part of the process of preparing our financial statements, we are required to estimate our provision for income taxes.

Significant management

judgment is required in determining our provision for income taxes, deferred tax assets and liabilities, tax contingencies, unrecognized

tax benefits, and any required valuation allowance, including taking into consideration the probability of the tax contingencies being

Management assesses this probability based upon information provided by its tax advisers, its legal advisers and similar tax

If later our assessment of the probability of these tax contingencies changes, our accrual for such tax uncertainties may increase

Our effective tax rate for annual and interim reporting periods could be impacted if uncertain tax positions that are not

recognized are settled at an amount which differs from our estimates.

of our accounting policies require higher degrees of judgment than others in their application.

These include share-based compensation

and contingencies and areas such as revenue recognition, allowance for doubtful accounts, valuation of inventory and intangible assets,

estimates of product line exit costs, warranty liabilities and impairments.

Recognition .

We sell our products to customers including law enforcement agencies, domestic distributors and international distributors

and revenue from such transactions is recognized in the periods that products are shipped (free on board (“ FOB ”) shipping

point) or received by customers (FOB destination), when the fee is fixed or determinable and when collection of resulting receivables

is reasonably assured.

We identify customer performance obligations, determine the transaction price, allocate the transaction price

to the performance obligations and recognize revenue as we satisfy the performance obligations.

Our primary performance obligations are

products/accessories and VR software licensing or sale.

Our customers do not have the right to return product unless the product is found

to be defective.

Compensation.

We follow the fair value recognition provisions issued by the Financial Accounting Standards Board (“ FASB ”)

in Accounting Standards Codification (“ ASC ”) Topic 718, Stock Compensation (“ ASC 718 ”) and we adopted

Accounting Standards Update (“ ASU ”) 2018-07 for share-based transactions with non-employees.

Share-based compensation

expense recognized includes stock option and restricted stock unit compensation expense.

The grant date fair value of stock options is

determined using the Black-Scholes option-pricing model.

The grant date is the date at which an employer and employee or non-employee

reach a mutual understanding of the key terms and conditions of a share-based payment award.

The Black-Scholes option-pricing model requires

inputs including the market price of the Company’s Common Stock on the date of grant, the term that the stock options are expected

to be outstanding, the implied stock volatilities of several publicly traded peers over the expected term of stock options, risk-free

interest rate and expected dividend.

Each of these inputs is subjective and generally requires significant judgment to determine.

grant date fair value of restricted stock units is based upon the market price of the Company’s Common Stock on the date of the

We determine the amount of share-based compensation expense based on awards that we ultimately expect to vest and account for

forfeitures as they occur.

The fair value of share-based compensation is amortized to compensation expense over the vesting term.

for Doubtful Accounts.

Our products are sold to customers in many different markets and geographic locations.

We estimate our bad

debt reserve on a case-by-case basis and the aging of accounts due to a limited number of customers mostly government agencies or well-established

distributors.

We base these estimates on many factors including customer credit worthiness, past transaction history with the customer,

current economic industry trends and changes in customer payment terms.

Our judgments and estimates regarding collectability of accounts

receivable have an impact on our financial statements.

of Inventory .

Our inventory is comprised of raw materials, assemblies and finished products.

We must periodically make judgments

and estimates regarding the future utility and carrying value of our inventory.

The carrying value of our inventory is periodically reviewed

and impairments, if any, are recognized when the expected future benefit from our inventory is less than carrying value.

of Intangible Assets.

Intangible assets consisted of (a) capitalized legal fees and filing expense related to obtaining patents and

trademarks, (b) customer agreements, tradenames, software, non-solicitation and non-compete agreements acquired in business combinations

and valued at fair value at the acquisition date, and (c) the purchase cost of indefinite-lived website domains.

We must make judgments

and estimates regarding the future utility and carrying value of intangible assets.

The carrying values of such assets are periodically

reviewed and impairments, if any, are recognized when the expected future benefit to be derived from an individual intangible asset is

less than carrying value.

This generally could occur when certain assets are no longer consistent with our business strategy and whose

expected future value has decreased.

We establish a warranty reserve based on anticipated warranty claims at the time product revenue is recognized.

requires us to make estimates regarding the amount and costs of warranty repairs we expect to make over a period of time.

Factors affecting

warranty reserve levels include the number of units sold, anticipated cost of warranty repairs, and anticipated rates of warranty claims.

We have very limited history to make such estimates and warranty estimates have an impact on our financial statements.

Warranty expense

is recorded in cost of revenues.

We evaluate the adequacy of this reserve each reporting period.

use the recognition criteria of FASB ASC Topic 450-20, Loss Contingencies, to estimate the amount of bonuses when it becomes probable

a bonus liability will be incurred and we recognize expense ratably over the service period.

We accrue bonus expense each quarter based

on estimated year-end results, and then adjust the actual in the fourth quarter based on our final results compared to targets.

Historically,

our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results.

Other than the planned production change requiring a new estimate of exit expense, there were no significant changes or modification

of our critical accounting policies and estimates involving management valuation adjustments affecting our results for the period ended

December 31, 2024.

Accounting Pronouncements

pronouncements issued for future implementation are discussed in Note 1 to our financial statements.

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.

Refer to Note 18, Major Customers

and Related Information, in our financial statements for further discussion.

operating expenses include (i) selling, general and administrative expense, (ii) research and development expense, (iii) and in the most

recent fiscal quarter, product line exit expense.

Research and development expense is comprised of the costs incurred in performing research

and development activities and developing production on our behalf, including compensation and consulting, design and prototype costs,

contract services, patent costs and other outside expense.

The scope and magnitude of our future research and development expense is

difficult to predict at this time and will depend on elections made regarding research projects, staffing levels and outside consulting

and contract costs.

The future level of selling, general and administrative expense will be dependent on staffing levels, elections regarding

expenditures on sales, marketing and customer training, the use of outside resources, public company and regulatory expense, and other

factors, some of which are outside of our control.

expect our operating costs will remain at comparable current levels in the near term.

We may also incur additional non-cash share-based

compensation costs depending on future option and restricted stock unit grants that are impacted by stock prices and other valuation

Historical expenditures are not indicative of future expenditures.

of Operations

Ended December 31, 2024 Compared to year ended December 31, 2023

following table and narrative sets forth for the periods indicated certain items of our statement of operations, expressed in thousands

The financial information and the discussion below should be read in conjunction with the financial statements and notes

contained in this Annual Report.

Ended December 31,

We are a global public safety technology and services company focused on delivering integrated non-lethal solutions for law enforcement, corrections, defense, and other public safety organizations worldwide.

Our mission is to enable safer outcomes by providing officers and agencies with the tools, training, and tactics to gain proactive, lawful control of encounters, reducing risk to both officers and subjects, while preserving tactical advantage.

We began sales of our first public safety product, the BolaWrap® 100 device, in late 2018.

In the first quarter of 2022, we introduced the BolaWrap® 150, a next generation, electronically deployed device that is more robust, smaller, lighter, and simpler to deploy than the BolaWrap 100, which has since been phased out.

In December 2020, we acquired NSENA Inc., a provider of immersive virtual reality training for law enforcement utilizing proprietary software-enabled content and computer graphics simulation.

This acquisition provided the foundation for Wrap Reality™, our virtual reality (“VR”) training platform designed for law enforcement simulation training and correctional reentry scenarios.

In August 2023, we acquired Intrensic, a Delaware limited liability company, which added body worn camera and digital evidence management capabilities to our portfolio.

During 2025, we continued our transition from a single-product company into a diversified public safety technology and services company delivering integrated non-lethal solutions that combine tools, training, and tactics.

This transition included expanding our product portfolio, advancing our training and software platforms, entering adjacent defense and homeland security markets, and strengthening our commercial and leadership infrastructure.

While we continued to incur operating losses during the year, we implemented cost containment initiatives and focused on aligning our operating structure with our near- and long-term strategic priorities.

We expanded our product portfolio with the launch of WrapTactics™, a digital training platform designed to integrate human-factors awareness, decision-making under stress, and tactical proficiency agency-wide;

and WrapVision™, a North America assembled body worn camera solution designed to meet federal procurement and data sovereignty requirements.

We also advanced several counter unmanned aircraft system initiatives, including the MERLIN™ program, which apply our proprietary tether deployment technology to non-lethal drone interdiction and defense applications.

These initiatives are intended to broaden our addressable market beyond traditional policing into defense, homeland security, and critical infrastructure protection, while maintaining our core focus on providing integrated tools, training, and tactics that give officers proactive, lawful control of encounters and support safer outcomes for officers, subjects and the communities they serve.

On September 19, 2025, we formed a new wholly-owned subsidiary of the Company, Wrap Federal, under the laws of the State of Delaware.

Wrap Federal was established for the purpose of supporting U.S.

federal government clients in the Department of Defense, Department of Homeland Security, and other federal agencies.

We believe a continued focus on integrating our systems into existing federal frameworks supports our goal of becoming a fully integrated federal public safety and defense technology enterprise.

Products and Services

Our core product and service offerings are designed to provide officers and agencies with integrated non-lethal tools, training, and tactics that support safer outcomes, and sustained readiness across the public safety ecosystem.

We focus our efforts on the following:

Our BolaWrap product line is a handheld, non-lethal device designed to give officers a proactive tactical option by deploying a Kevlar® tether that entangles the arms and/or legs, limiting a subject's mobility and balance.

The BolaWrap 150 employs electronic deployment, improved reliability, enhanced durability, and reduced weight compared to prior generations.

Upon deployment, the device creates a controlled interruption through sight, sound, and sensation, giving officers time, space, and tactical advantage to intervene earlier and manage encounters before contact distance collapses.

BolaWrap is sold with proprietary cassettes that are consumed upon each deployment and must be replaced, providing a recurring consumable revenue stream.

Wrap Reality™ Virtual Reality Training

Wrap Reality is an immersive VR training platform providing scenario-based training focused on human-factors awareness, decision making under stress, and use of force judgment.

The platform is designed to build and sustain the cognitive and tactical skills officers need to recognize intervention points, manage distance and positioning, and apply proportional, lawful responses in dynamic environments.

Wrap Reality supports law enforcement, corrections, and societal reentry training and offers a growing library of configurable scenarios, including 45 scenarios for law enforcement and corrections and 15 scenarios for societal reentry.

Wrap Reality may be deployed on premises or through cloud enabled environments and supports data capture, replay, and performance review.

WrapTactics™ Digital Training Platform

Launched in 2025, WrapTactics is a subscription based digital training and performance platform aimed at delivering short form, scenario-based instruction focused on non-lethal response tactics, decision-making under stress, and follow-on lawful control techniques.

The platform is designed to prevent skill decay by providing continuous, low-burden training that reinforces the tactical fundamentals (distance, positioning, timing, and force decision-making) that officers rely on in dynamic encounters.

WrapTactics complements our hardware and VR offerings and supports recurring revenue opportunities through bundled training and service offerings.

WrapVision™ Body-Worn Camera and Digital Evidence Management

WrapVision, launched in 2025, is a body-worn camera solution assembled in North America and designed to meet federal procurement and data-sovereignty requirements.

WrapVision replaces our prior-generation Intrensic X2 camera hardware and serves as the front-end capture device within our digital evidence management ecosystem.

Our cloud-based DEM platform provides unlimited video storage along with video and evidence uploading, search, retrieval, redaction, and evidence sharing capabilities, reducing the resources agencies require to manage digital evidence.

Together, WrapVision and our DEM platform provide agencies with integrated accountability and transparency tools that complement our non-lethal and training solutions.

WrapVision builds on the Intrensic acquisition and reflects our strategy to deliver integrated solutions for public safety.

Counter-Unmanned Aircraft Systems (C-UAS) and Defense Applications

During 2025, we expanded research, development, and demonstration efforts applying our tether deployment technology to counter C-UAS applications.

MERLIN is designed to leverage the same self-contained cassette architecture underlying the BolaWrap platform, adapting it for non-lethal drone interdiction capabilities across defense, homeland security, and critical-infrastructure protection missions.

These initiatives remain in various stages of development and evaluation and are subject to government testing, funding, and procurement timelines.

Recent Developments

February 2026 Purchase Agreement

On February 2, 2026, we entered into a securities purchase agreement (the “February 2026 Purchase Agreement”) with the investors signatory thereto (the “February 2026 Purchasers”) for the issuance and sale in a private placement (the “February 2026 Private Placement”) of (i) an aggregate of 1,700,000 shares of Common Stock, (ii) pre-funded warrants (the “February 2026 Pre-Funded Warrants”) to purchase up to 800,000 shares of Common Stock, with an exercise price of $0.0001 per share, and (iii) warrants (the “February 2026 Investor Warrants” and, together with the February 2026 Pre-Funded Warrants, the “February 2026 Warrants”) to purchase up to 2,500,000 shares of Common Stock, with an exercise price of $2.30 per share.

The purchase price for one share of Common Stock and accompanying February 2026 Common Warrant was $2.00 and the purchase price for one February 2026 Pre-Funded Warrant and accompanying February 2026 Common Warrant was $1.9999.

The closing of the February 2026 Private Placement (the “February 2026 Closing”) occurred on February 3, 2026.

The aggregate gross proceeds from the February 2026 Closing were approximately $5.0 million, prior to deducting offering expenses payable by us.

The February 2026 Purchase Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the February 2026 Purchasers, including for liabilities under the Securities Act and other obligations of the parties and termination provisions.

February 2026 Warrants

The February 2026 Common Warrants are exercisable for shares of Common Stock immediately at an exercise price of $2.30 per share and expire five years from the date of issuance.

The February 2026 Pre-Funded Warrants are exercisable for shares of Common Stock immediately and expire when exercised in full.

A holder of the February 2026 Warrants may not exercise any portion of such holder’s February 2026 Warrants to the extent that the holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s outstanding shares of Common Stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to the Company, the holder may increase the beneficial ownership limitation to up to 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise.

February 2026 Registration Rights Agreement

On February 2, 2026, in connection with the February 2026 Private Placement, the Company entered into a registration rights agreement (the “February 2026 Registration Rights Agreement”) with the February 2026 Purchasers, pursuant to which the Company agreed to prepare and file a registration statement with the SEC registering the resale of the shares of Common Stock and shares of Common Stock underlying the February 2026 Warrants no later than 60 days following the date of the February 2026 Registration Rights Agreement, and to use best efforts to have the registration statement declared effective as promptly as practical thereafter, and in any event no later than 90 days following the date of the February 2026 Registration Rights Agreement (or 120 days following the date of the February 2026 Registration Rights Agreement in the event of a “full review” by the SEC).

On February 9, 2026, the Company filed the registration statement pursuant to the February 2026 Registration Rights Agreement, which was declared effective by the SEC on February 13, 2026.

Business Outlook

We believe demand for integrated non-lethal solutions will continue to be influenced by public expectations for proportional and accountable use of force, evolving legal and policy standards, and increased emphasis on officer safety, community trust, and sustained operational readiness.

Modern policing operates under continuous public and legal scrutiny, creating a need for tools, training, and tactics that give officers defensible, proportional options in dynamic encounters.

Our business outlook is shaped by our ability to increase adoption of our core products, deepen customer relationships through programmatic training and service delivery, expand recurring revenue, and selectively enter adjacent markets while managing costs and capital resources.

In 2026, our near-term focus is on expanding agency-wide deployments of BolaWrap, increasing utilization of our training and subscription-based offerings, including Wrap Reality and WrapTactics, and advancing commercialization efforts for WrapVision.

We also expect to continue evaluating development and demonstration opportunities related to our counter-unmanned aircraft system initiatives, although the timing and scale of any resulting revenues remain uncertain and dependent on government testing, funding, and procurement decisions.

Our results will continue to be influenced by government budget cycles, procurement processes, and the availability of grant funding at the federal, state, and local levels.

We also expect international sales to remain uneven due to centralized procurement processes and the timing of large orders.

While we have implemented cost containment initiatives and continue to evaluate our operating structure, we expect to continue incurring operating losses until we achieve sufficient scale, margin improvement, and recurring revenue to offset our fixed costs.

Business Trends

Our ability to execute our strategy and improve our financial performance is subject to a number of risks and challenges, many of which are outside of our control.

A significant portion of our revenues is derived from government customers, which exposes us to extended sales cycles, budget constraints, procurement delays, and changes in public policy or funding priorities.

These factors can result in variability in the timing and amount of revenue recognized and may make it difficult to predict future operating results.

We are subject to extensive regulation, including firearms classification, export controls, procurement requirements, and data privacy and cybersecurity regulations.

Changes in regulatory interpretation or enforcement could adversely affect our ability to manufacture, sell, or distribute our products.

Effects of Inflation

The Company has experienced increased costs related to labor and materials, which management attributes in part to inflationary pressures.

These cost increases have been driven primarily by higher wage rates, competitive labor market conditions, and increased supplier pricing for certain materials and services.

While inflationary pressures persisted during 2025, the Company has taken steps to mitigate the impact through cost containment initiatives, workforce reductions, supply chain management efforts, and selective pricing actions where appropriate.

However, continued inflationary pressures could result in higher operating costs in future periods, and there can be no assurance that the Company will be able to fully offset such increases through operational efficiencies or pricing adjustments.

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.

Results of Operations

Year Ended December 31, 2025 Compared to year ended December 31, 2024

The following table and narrative sets forth for the periods indicated certain items of our statement of operations, expressed in thousands of dollars.

The financial information and the discussion below should be read in conjunction with the financial statements and notes contained in this Annual Report on Form 10-K.

Year Ended December 31, Change

2025 2024 $ %

(in thousands, except percentage change)

Product sales $ 3,507 $ 3,590 $ (83 ) (2.3 )%

Other revenue

Technology enabled services 1,696 917 779 85.0 %

Total revenues 5,203 4,507 696 15.4 %

Cost of revenues:

Products and services

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

Cost of revenue 1,973 2,042 (69 ) (3.4 )%

Gross profit 2,699 2,465 234 9.5 %

Operating Expenses:

3 unchanged sentences

Loss from operations $ (13,485 ) $ (15,567 ) $ 2,082 (13.4 )%

reported revenue of approximately $4.5 million for the year ended December 31, 2024, as compared to revenue of approximately $6.1 million

for the year ended December 31, 2023, an approximate 27% decrease.

International revenues decreased from approximately $2.3 million for

the year ended December 31, 2023, to approximately $84 thousand for the year ended December 31, 2024.

The decrease in international revenue

was driven by the prior year having certain large orders and continued stronger demand for our products in the EMEA region during 2023.

We incurred discounts of approximately $55 thousand during the year ended December 31, 2024, compared to approximately $169 thousand

during the year ended December 31, 2023, primarily as a result of promotional programs designed to encourage domestic customers to upgrade

to the BolaWrap 150.

We expect a decline to even lower discounts throughout 2025 as we have phased out our promotional upgrade offers.

International

revenue generally consists of larger orders with the end user being large, centralized government agencies.

These orders continue to

be lumpy and difficult to predict as to both timing and amount.

We anticipate a revenue increase in 2025 compared to 2024 for two key

(i) from an international perspective, there is growing demand for less-lethal alternatives like BolaWrap, especially in regions

where lethal force is often prohibited, and (ii) from a domestic perspective, despite a saturated market for less-lethal use-of-force

solutions, BolaWrap stands out as what we believe to be the only pain-free compliance tool.

incurred product promotional costs of approximately $92 thousand for the year ended December 31, 2024, related primarily to BolaWrap

150 demonstration products and the cost of training products and accessories delivered to law enforcement agencies that were expensed

as marketing costs.

We are responding to increased demand for training as a result of expanded product and brand awareness and increased

successful field use by agencies but due to awareness expect reductions in product promotional costs from 2023.

A total of approximately

$249 thousand of such product promotional costs were incurred during the year ended December 31, 2023.

of December 31, 2024, the Company’s deferred revenue of $505 thousand consisted of $76 thousand related to BolaWrap extended warranties

and services, $352 thousand related to Intrensic extended warranties and services, $73 thousand related to VR and $4 thousand related

of December 31, 2024, we had backlog of approximately $64 thousand, which was delivered in the first quarter of 2025.

Distributor and

customer orders for future deliveries are generally subject to modification, rescheduling or in some instance’s cancellation in

the normal course of business.

gross profit for the year ended December 31, 2024, was approximately $2.5 million, or a gross margin of 55%.

Our gross profit for year

ended December 31, 2023, was approximately $2.9 million, or a gross margin of 47%.

For the year ended December 31, 2024, gross profit

represented a 15% decrease compared to December 31, 2023, as a result of lower sales offset by continued cost containment efforts on

production reflected in the higher gross margin percentage in 2024.

our revenue history is limited, historical margins may not accurately reflect future margins.

However, we expect higher margins with

the production of the BolaWrap 150 compared to previous production due to design changes and improved pricing.

Our margins are also subject

to variations based on the sales channels and product mix through which our products are sold.

At present, our cassettes have lower margins

than the BolaWrap devices.

As we scale cassette production, we will look to reduce our costs and drive higher cassette margins.

were a total of 12.1% of our overall revenue in the year ended December 31, 2024, and may grow as a recurring revenue base as more BolaWrap

devices are used in the field and as the use of BolaWrap increases due to the need of officers to de-escalate to prevent injuries and

the use of higher levels of force.

regularly introduce updates and revisions to our products, which may include changes to raw materials and components, and can impact

our product costs.

Given our limited experience with warranty costs, our estimated future warranty expense may affect our gross margins.

General and Administrative Expense

general and administrative (“SG&A”) expense decreased by approximately $2.7 million during the year ended December 31,

2024, compared to the year ended December 31, 2023, primarily as a result of the Company’s cost containment initiatives enacted

in the first half of 2024.

and promotion costs were approximately $0.7 million during the year December 31, 2024, or a decrease of approximately $0.5 million as

compared to approximately $1.2 million during the year December 31, 2023.

The decrease in advertising costs was related to reductions

in consultants and other cost containment efforts.

compensation costs allocated to SG&A was $2.3 million for the year ended December 31, 2024, an increase of approximately $0.7 million,

compared to approximately $1.7 million for the year ended December 31, 2023.

The increase resulted primarily due to the full-year impact

of stock-based grants in late 2023 along with the increased value of non-cash awards granted in 2024 reflecting changes in the Company’s

and burden costs were $3.8 million for the year ended December 31, 2024, an approximately $2.2 million or 37% decrease compared to approximately

$6.0 million for year ended December 31, 2023.

During 2023, we recorded approximately $1.0 million of severance cost related to management

restructuring efforts that were included in salaries and burden.

During the year ended December 31, 2024, compared to December 31, 2023,

we decreased professional and consulting fees by approximately $0.9 million.

We expect expenditures for SG&A expense for the existing

business lines in 2025 to be slightly lower than 2024, as a result of restructuring actions taken in 2024.

December 2024, the Company determined that the assessment of the Intrensic Membership Interests (as defined herein) fair value indicated

that its carrying value exceeded its fair value by $1.6 million and therefore the Company recorded a $1.6 million impairment charge related

to the goodwill initially recorded from the acquisition.

In December 2023, it was determined that the intangible related to development

of proprietary software by Lumeto, Inc.

would not have future economic value and was written down;

the Company recognized an impairment

loss of $700 thousand as a result.

and Development Expense

and development expense was approximately $2.3 million for the year ended December 31, 2024, a decrease of approximately $0.9 million,

compared to $3.2 million for year ended December 31, 2023.

In 2024, we incurred a $152 thousand period over period decrease in share-based

compensation expense allocated to research and development expense as a result of personnel changes made from the Company’s cost

containment initiatives.

Outside consulting costs decreased by $133 thousand and prototype related costs decreased by $199 thousand for

the year ended December 31, 2024, primarily due to reduced costs related to the Company’s cost containment initiatives.

from operations during the year December 31, 2024, was approximately $15.6 million, a decrease of approximately $3.2 million compared

to approximately $18.7 million during the year December 31, 2023, primarily reflecting a decrease of $3.6 million in operating expenses

resulting from the Company’s cost containment initiatives during 2024.

and Capital Resources

primary source of liquidity to date has been funding from our stockholders from the sale of equity securities and the exercise of derivative

securities, consisting of options and warrants.

We expect our primary source of future liquidity will be from the sale of products, exercise

of stock options and warrants and from future equity or debt financings.

have experienced net losses and negative cash flows from operations since our inception.

As of December 31, 2024, we had cash and cash

equivalents of approximately $3.6 million, negative working capital of approximately $2.7 million primarily reflecting the approximate

$10.1 million value of the Series A Warrants (as defined herein) recorded in connection with the issuance of the Series A Preferred Stock

in July 2023, and had sustained cumulative losses attributable to stockholders of approximately $105.1 million.

Our working capital net

of the Warrants-short term at December 31, 2024 was approximately $7.4 million, a decrease of approximately $10.0 million compared to

December 31, 2023, as a result of the operating losses offset by a decrease in the warrant liability included in short term liabilities

totaling $9.6 million in 2024.

As a result, we had approximately $3.6 million in cash and cash equivalents as of December 31, 2024.

Additionally,

in February 2025, the Company issued common stock in a private placement of an aggregate of 3,216,666 Common Shares and accompanying

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 estimated gross proceeds to the Company were approximately $5.8 million.

therefore believes the Company has sufficient capital to fund its operations for the next twelve months.

However, liquidity constraints

and access to capital markets could still negatively affect our liquidity and require changes to our investment strategy.

future liquidity requirements or future capital needs will depend on, among other things, capital required to introduce new products

and the operational staffing and support requirements, as well as the timing and amount of future revenue and product costs.

We anticipate

that demands for operating and working capital may grow depending on decisions on staffing, development, production, marketing, training

and other functions and based on other factors outside of our control, including the timing of receipt of revenue.

future capital requirements, cash flows and results of operations could be affected by, and will depend on, many factors, some of which

are currently unknown to us, including, among other things:

future outbreaks pandemics or contagious diseases or fear of such outbreaks;

regarding staffing, development, production, marketing and other functions;

timing and extent of market acceptance of our products;

timing and outcome of planned production and required customer and regulatory compliance of our products;

of preparing, filing and prosecuting our patent applications and defending any future intellectual property-related claims;

and timing of additional product development;

timing and outcome of any future warranty claims or litigation against us associated with any of our products;

to collect accounts receivable;

and costs associated with any new financing.

factors that could affect our ability to obtain cash from external sources including from exercise of outstanding warrants and options

in the capital markets;

price and trading volume of our common stock.

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

investors, including the Company’s Executive Chairman and Chief Executive Officer (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 Series A Preferred Stock, initially convertible into up to 6,896,553 shares of the Company’s common

stock, at an initial conversion price of $1.45 per share, and (ii) warrants (the “Series A Warrants”) to acquire up to an

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

The conversion price of the Series A Preferred

Stock 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 closing of the Series A Offering occurred on

July 3, 2023.

The aggregate gross proceeds from the Series A Offering were $10 million.

The Company expects to use the net proceeds from

the Series A Offering for general corporate purposes.

Company engaged Katalyst Securities LLC (the “Placement Agent”) to act as exclusive placement agent in connection with the

Gross revenue for the year ended December 31, 2025 was $5.2 million, compared to $4.5 million for the year ended December 31, 2024, representing an increase of $0.7 million, or 15.4%.

The increase in 2025 was offset by sales returns and allowances of $0.5 million related to the return of product from a distributor in connection with a change in the Company’s go-to-market strategy.

Accordingly, the net revenue for the year ended December 31, 2025 was $4.7 million, compared to $4.5 million for the year ended December 31, 2024, representing an increase of $0.2 million, or 3.7%.

The increase in net revenue was primarily attributable to growth in technology-enabled and managed services revenue, partially offset by a modest decline in product sales.

Product sales were $3.5 million for the year ended December 31, 2025, compared to $3.6 million for the year ended December 31, 2024, representing a decrease of $0.1 million, or 2.3%.

The decrease in product sales was driven primarily by lower distributor orders and continued variability in international demand, partially offset by stable domestic demand for BolaWrap products.

Technology-enabled and managed services revenue increased to $1.7 million for the year ended December 31, 2025, compared to $0.9 million for the year ended December 31, 2024.

The increase was primarily attributable to the acquisition of W1 in February 2025 and the expansion of managed services offerings aligned with the Company’s go-to-market strategy.

International revenue continues to consist primarily of larger, less predictable orders from centralized government agencies and remains lumpy and difficult to forecast with respect to both timing and amount.

Domestic revenue continues to be driven by demand for non-lethal alternatives and training solutions, where BolaWrap remains differentiated as a non-lethal tool.

Cost of Revenue and Gross Profit

Cost of revenue was $2.0 million for both years ended December 31, 2025 and December 31, 2024.

For the year ended December 31, 2025, we had increases primarily related to costs associated with increased services revenue which were offset by decreases in cost of revenue primarily attributable to lower product volumes and continued cost containment efforts.

Gross profit for the year ended December 31, 2025 was $2.7 million, compared to $2.5 million for the year ended December 31, 2024, representing an increase of $0.2 million, or 9.5%.

Gross margin increased to 57.8% in 2025 from 54.7% in 2024, primarily due to improved product margins, favorable product and services mix, and continued cost discipline in manufacturing and sourcing.

As our revenue history remains limited, historical margins may not be indicative of future margins.

Our margins are subject to variations based on product mix, sales channels, and the relative mix of devices, cassettes, and services.

Cassettes continue to have lower margins than BolaWrap devices;

however, as cassette volumes increase, we expect to continue to pursue cost reductions to improve cassette margins over time.

Selling, General and Administrative Expense

Selling, general and administrative (“SG&A”) expense was $16.1 million for the year ended December 31, 2025, compared to $15.7 million for the year ended December 31, 2024, representing an increase of $0.4 million, or 2.8%.

The increase was primarily driven by increased share-based compensation expense and a non-cash impairment charge related to certain intangible assets, partially offset by the Company's ongoing cost containment initiatives, including reductions in salaries, advertising, and promotional spending.

Share-based compensation expense included in SG&A increased to $4.0 million in 2025 from $2.4 million in 2024, primarily due to options and grants issued to new employees as a result of the acquisition of W1 in February 2025, as well as incentives provided to certain key senior level management in 2025.

Salaries and related burden costs declined compared to the prior year due to the reduction in the Company’s workforce including a reduction of certain executive management positions.

Advertising and promotional costs declined as the Company reduced trade show participation and promotional spending.

Research and Development Expense

R&D expense was $56 thousand for the year ended December 31, 2025, compared to $2.3 million for the year ended December 31, 2024, representing a decrease of $2.3 million, or 97.6%.

The decrease was primarily attributable to reductions in personnel and consulting costs resulting from the Company’s cost containment initiatives and a strategic shift to focus development efforts on existing products and services.

Operating Loss

Loss from operations for the year ended December 31, 2025 was $13.5 million, compared to $15.6 million for the year ended December 31, 2024, representing an improvement of $2.1 million, or 13.4%.

The improvement was primarily driven by higher gross profit and lower operating expenses, reflecting the impact of cost containment initiatives implemented during 2024 and continued through 2025, partially offset by a one-time, non-cash impairment.

Operating Expense

Our operating expense includes (i) selling, general and administrative expense, (ii) research and development expense and (iii) product line exit expense.

Research and development expense is comprised of the costs incurred in performing research and development activities and developing production on our behalf, including compensation and consulting, design and prototype costs, contract services, patent costs and other outside expense.

The scope and magnitude of our future research and development expense is difficult to predict at this time and will depend on elections made regarding research projects, staffing levels and outside consulting and contract costs.

The future level of selling, general and administrative expense will be dependent on staffing levels, elections regarding expenditures on sales, marketing and customer training, the use of outside resources, public company and regulatory expense, and other factors, some of which are outside of our control.

We expect our operating costs to remain flat or slightly increase depending on the scope of additional sales and marketing initiatives.

We may incur additional non-cash share-based compensation costs depending on future options and restricted stock unit grants that are impacted by stock prices and other valuation factors.

Historical expenditures are not indicative of future expenditures.

Liquidity and Capital Resources

Our primary source of liquidity to date has been funding from our stockholders through the sale of equity securities and the exercise of derivative securities, including options and warrants.

We expect our primary sources of future liquidity in the long term to be derived from product and services revenue, the exercise of outstanding stock options and warrants, and future equity or debt financings.

We have incurred net losses and negative cash flows from operations since inception.

As of December 31, 2025, we had cash and cash equivalents of $3.5 million, compared to $3.6 million as of December 31, 2024.

Net cash used in operating activities was $10.3 million during the year ended December 31, 2025, compared to $8.1 million during the year ended December 31, 2024, primarily reflecting higher net losses and working capital changes.

During 2025, the Company completed multiple financing transactions, including the issuance of Common Stock and warrants in private placements and the issuance of Series B Preferred Stock, generating aggregate gross proceeds of $10.2 million.

In addition, during 2025 the Company amended certain warrant agreements, resulting in the reclassification of warrant liabilities to equity and eliminating future non-cash fair value adjustments related to those warrants.

Based on our current operating plan, existing cash balances, and expected cash flows, management believes that the Company has sufficient liquidity to fund its operations for at least the next twelve months.

However, our ability to continue as a going concern is dependent on our ability to increase revenues, manage operating expenses, and access additional capital as needed.

Liquidity constraints and access to capital markets could negatively affect our liquidity and require changes to our operating or investment strategy.

Capital Requirements

Our future capital requirements will depend on numerous factors, including the timing and extent of market acceptance of our products and services, investments in product development, sales and marketing activities, working capital requirements, and the timing and amount of future revenue.

We may seek to raise additional capital through equity or debt financings, strategic partnerships, or other arrangements.

There can be no assurance that such financing will be available on acceptable terms, or at all.

Our future capital requirements, cash flows and results of operations could be affected by, and will depend on, many factors, some of which are currently unknown to us, including, among other things:

Decisions regarding staffing, development, production, marketing and other functions;

The timing and extent of market acceptance of our products;

Costs, timing and outcome of planned production and required customer and regulatory compliance of our products;

Costs of preparing, filing and prosecuting our patent applications and defending any future intellectual property-related claims;

Costs and timing of additional product development;

Costs, timing and outcome of any future warranty claims or litigation against us associated with any of our products;

Ability to collect accounts receivable;

Timing and costs associated with any new financing.

Principal factors that could affect our ability to obtain cash from external sources including from exercise of outstanding warrants and options include:

Volatility in the capital markets;

Market price and trading volume of our Common Stock.

Series A Offering

Pursuant to an Engagement Letter with the Placement Agent, we paid to the Placement Agent or its designees (i) a cash

fee equal to 8% of the gross proceeds of the Series A Offering and (ii) warrants to purchase an aggregate of 551,725 shares of Common

Stock (equal to 8% of the shares of Common Stock underlying the Series A Preferred Stock sold in the Series A Offering) at an exercise

price of $1.45 per share.

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

Stock outstanding pursuant to an optional redemption, in each case, pursuant to the terms of the Certificate of Designations.

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.

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.

any time beginning 18 months from the date of the issuance, provided that provided that 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.

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, and (ii) the Company’s right to redeem, all or a portion, of the

Series A Preferred Stock outstanding pursuant to an optional redemption, in each case, pursuant to the terms of the Certificate of Designations.

is no established public trading market for the Series A Preferred Stock and we do not intend to list the Series A Preferred Stock on

any national securities exchange or nationally recognized trading system.

Company issued the Series A Warrants to purchase up to an aggregate of 6,896,553 shares of Common Stock.

Each Series A Warrant has an

exercise price of $1.45, 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).

Stockholder Approval

Company’s ability to issue Conversion Shares and Series A Warrant Shares using shares of Common Stock is subject to certain limitations

set forth in the Certificate of Designations.

Prior to receiving the Nasdaq Stockholder Approval, such limitations included a limit on

the number of shares that may be issued until the time, if any, that the Company’s stockholders have approved the issuance of more

than 19.99% of the Company’s outstanding shares of Common Stock in accordance with the rules of the Nasdaq Stock Market (the “Nasdaq

Stockholder Approval”).

On June 29, 2023, the Company entered into a Securities Purchase Agreement (“Series A Purchase Agreement”) with certain accredited investors, including Scot Cohen, the Company’s Executive Chairman and Chief Executive Officer (collectively, the “Series A Investors”), pursuant to which we 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 Series A Preferred Stock, initially convertible into up to 6,896,553 shares of the Company’s Common Stock, at an initial conversion price of $1.45 per share, and (ii) warrants (the “Series A Warrants”) to acquire up to an aggregate of 6,896,553 shares of Common Stock (the “Series A Warrant Shares”).

The conversion price of the Series A Preferred Stock 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 closing of the Series A Offering occurred on July 3, 2023.

The aggregate gross proceeds from the Series A Offering were approximately $10 million.

The Company engaged Katalyst Securities LLC (the “Placement Agent”) to act as exclusive placement agent in connection with the Series A Offering.

Pursuant to an engagement letter with the Placement Agent, we paid to the Placement Agent or its designees (i) a cash fee equal to 8% of the gross proceeds of the Series A Offering and (ii) warrants to purchase an aggregate of 551,725 shares of Common Stock (equal to 8% of the shares of Common Stock underlying the Series A Preferred Stock sold in the Series A Offering) at an exercise price of $1.45 per share.

Series A Preferred Stock

On July 3, 2023, the Company filed the Certificate of Designations of the Series A Preferred Stock (the “Series A 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 Series A Certificate of Designations.

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

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 Series A Certificate of Designations.

Upon the occurrence and during the continuance of a Triggering Event (as defined in the Series A 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 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 Nasdaq Stockholder Approval (as defined herein) (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 Series A 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 Series A Certificate of Designations), using July 1, 2024, as the applicable date of determination in accordance with the Series A 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 Series A 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 Series A Certificate of Designations, as described below, by filing a Certificate of Amendment to the Series A 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 Series A 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, and (ii) the Company’s right to redeem, all or a portion, of the Series A Preferred Stock outstanding pursuant to an optional redemption, in each case, pursuant to the terms of the Series A Certificate of Designations.

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

The October 2024 Certificate of Amendment amends the Series A 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 Series A 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 Series A 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 Series A Certificate of Designations, as described below, by filing a Certificate of Amendment to the Series A 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 Series A 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.

Pursuant to the November 2024 Amendment Agreement, 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 Series A Certificate of Designations are satisfied.

At any time beginning 18 months from the date of the issuance, provided that 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 Series A 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 Series A 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.

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

In addition, the November 2024 Certificate of Amendment amends the Series A 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, and (ii) the Company’s right to redeem, all or a portion, of the Series A Preferred Stock outstanding pursuant to an optional redemption, in each case, pursuant to the terms of the Series A Certificate of Designations.

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

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

Series A Warrants

The Company issued the Series A Warrants to purchase up to an aggregate of 6,896,553 shares of Common Stock.

Each Series A Warrant has an exercise price of $1.45, 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).

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.

Nasdaq Stockholder Approval

The Company’s ability to issue Series A Conversion Shares and Series A Warrant Shares using shares of Common Stock is subject to certain limitations set forth in the Certificate of Designations.

Prior to receiving the Nasdaq Stockholder Approval, such limitations included a limit on the number of shares that may be issued until the time, if any, that the Company’s stockholders have approved the issuance of more than 19.99% of the Company’s outstanding shares of Common Stock in accordance with the rules of the Nasdaq Stock Market (the “Nasdaq Stockholder Approval”).

Such Nasdaq Stockholder Approval was received at a special meeting of stockholders held on September 19, 2023.

Sheet Arrangements

have no off-balance sheet arrangements.

year ended December 31, 2024, net cash used in operating activities was approximately $8.1 million.

The net loss of approximately $5.9

million was increased by non-cash other income of approximately $9.6 million related to the change in fair value of warrant liabilities

and was decreased by share-based compensation expense of approximately $2.4 million and an impairment charge related to goodwill of $1.6

Other major component changes impacting operating cash included a decrease of approximately $2.4million in accounts receivable

and a decrease in customer deposits of $1.0 million.

the year ended December 31, 2023, net cash used in operating activities was approximately $16.7 million.

The net loss of approximately

$30.3 million was decreased by non-cash expense of approximately $16.8 million consisting primarily of change in fair value of warrant

liabilities of approximately $12.0 million and share-based compensation expense of approximately $2.0 million.

Other major component

changes using operating cash included an increase of approximately $2.2 million in inventories and an increase in customer deposits of

$1.0 million.

the year ended December 31, 2024, net cash provided by investing activities totaled approximately $7.3 million.

We used $156 thousand

of cash for the purchase of property and equipment and invested approximately $13 thousand in patents and trademarks.

During the year

ended December 31, 2024, we had proceeds from maturities of short-term investments of approximately $7.5 million.

the year ended December 31, 2023, we used approximately $10.0 million of cash to purchase short-term investments, $554 thousand of cash

for the purchase of Intrensic, $230 thousand of cash for the purchase of property and equipment and invested approximately $396 thousand

in patents and trademarks.

During the year ended December 31, 2023, we had proceeds from maturities of short-term investments of approximately

$16.4 million.

the year ended December 31, 2024, we received approximately $588 thousand in proceeds from the exercise of previously issued stock options

and paid out approximately $120 thousand in Series A Preferred Stock dividends.

the year ended December 31, 2023, we received approximately $10.0 million in gross proceeds from the issuance of securities, which is

reflected in cash and cash equivalents, with an offset to accrued expense, reflected in the Company’s Condensed Consolidated Balance

Sheet at December 31, 2023.

During year ended December 31, 2023, we received approximately $208 thousand in proceeds from the exercise

of previously issued stock options and paid out approximately $58 thousand in Series A Preferred Stock dividends.

Obligations and Commitments

to that certain exclusive Amended and Restated Intellectual Property License Agreement, dated September 30, 2016, by and between the

Company and Syzygy Licensing, LLC (“Syzyg y ”), we are obligated to pay to Syzygy a 4% royalty fee on future product

sales up to an aggregate amount of $1.0 million in royalty payments, or until September 30, 2026, whichever occurs earlier.

As of December

31, 2024 the Company has incurred the maximum amount of royalties under the terms of the agreement.

January 2022, the Company extended its facility lease in Tempe, AZ for three years through July 2025 and is committed to aggregate lease

payments on the facility lease of $75 thousand in 2025.

September 2023, the Company entered into a lease agreement for the lease of office space in Coconut Grove, Florida, in a multi-year term

concluding in 2031, which includes aggregate remaining lease payments totaling $3.3 million for 2025 through 2031.

of December 31, 2024, the Company was committed to approximately $0.6 million for future component deliveries and contract services

that are generally subject to modification or rescheduling in the normal course of business.

January 3, 2025, we signed a lease that will commence in October 2025, or upon the completion of the premises, whichever happens later,

for a manufacturing facility located at Pad 1A of the technology park at the intersection of US 23 and US 58 Alternate in Norton, Virginia.

The lease of the 20,000 square foot facility has an initial term of five years with the option to renew for an additional two years,

subject to adjustments based on the Consumer Price Index.

Monthly lease payments will be $10,000, calculated at $6 per gross square foot

Following two years of occupancy from the start of the lease, we may terminate the lease without penalty by providing sixty-days’

written notice.

2023 and 2024 we experienced increased costs in labor and materials due to inflation.

We believe in 2025 that low unemployment and higher

salaries will create higher payroll costs and increased operating expense in the business.

We have seen increases in costs from multiple

suppliers for materials as well as labor.

Accounting Pronouncements

have been no recent accounting pronouncements or changes in accounting pronouncements during the year ended December 31, 2024, or subsequently

thereto, that we believe are of potential significance to our financial statements.

February 2025 Offering

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 “February 2025 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 closing of the February 2025 Private Placement occurred on February 28, 2025, other than with respect to 380,555 Common Shares and 380,555 PIPE Warrants, which closed on or about March 7, 2025.

The PIPE Purchase Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the PIPE Purchasers, including for liabilities under the Securities Act, other obligations of the parties and termination provisions.

The gross proceeds to the Company were approximately $5,790 before estimated offering expenses payable by the Company.

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 PIPE Warrants to be five and one-half years from the date of issuance.

In connection with the February 2025 Private Placement, the Company entered into a registration rights agreement, dated as of February 24, 2025, with the PIPE Purchasers (the “PIPE Registration Rights Agreement”), pursuant to which the Company agreed to prepare and file a registration statement with the SEC registering the resale of the shares of Common Stock and the shares of Common Stock underlying the PIPE Warrants no later than 60 days following the date of the PIPE Registration Rights Agreement, and to use best efforts to have the registration statement declared effective as promptly as practical thereafter, and in any event no later than 90 days following the date of the PIPE Registration Rights Agreement (or 120 days following the date of the PIPE Registration Rights Agreement in the event of a “full review” by the SEC).

On April 25, 2025, the Company filed a resale registration statement on Form S-1 (File No.

333- 286782) with the SEC.

Series B Offering

On August 18, 2025, the Company entered into a Securities Purchase Agreement (the “Series B Purchase Agreement”) with certain accredited investors (the “Series B Purchasers”) for the issuance and sale in a private placement (the “Series B Private Placement”) of an aggregate of (i) 4,500 shares of the Company’s Series B Preferred Stock initially convertible into up to 3,000,000 shares of Common Stock (the “Series B Conversion Shares”), at an initial conversion price of $1.50 per share, and (ii) accompanying warrants (the “Series B Warrants”) to purchase up to 3,000,000 shares of Common Stock (the “Series B Warrant Shares”), 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.

On December 12, 2025, at the Company’s 2025 Annual Meeting of Stockholders, the Company obtained stockholder approval pursuant to the Series B Registration Rights Agreement (the “Series B Stockholder Approval”).

The Series B Warrants will expire five years from December 12, 2025, the effective date of the Series B Stockholder Approval.

Series B Preferred Stock

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 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 the Amended and Restated Certificate of Incorporation of the Company, as amended, 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.

Series B Warrants

A holder of the Series B Warrants may not exercise any portion of such holder’s Series B Warrants to the extent that the holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s outstanding shares of Common Stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to the Company, the holder may increase the beneficial ownership limitation to up to 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise.

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

The Series B Warrants will expire five years from December 12, 2025, the effective date of the Series B Stockholder Approval.

Series B Registration Rights Agreement

In connection with the Series B Private Placement, the Company entered into a registration rights agreement (the "Series B Registration Rights Agreement"), dated as of August 18, 2025, with the Series B Purchasers, pursuant to which the Company agreed to prepare and file a registration statement with the SEC registering the resale of the Series B Conversion Shares and Series B Warrant Shares no later than 60 days following the date of the Series B Registration Rights Agreement, and to use best efforts to have the registration statement declared effective as promptly as practical thereafter, and in any event no later than 90 days following the date of the Series B Registration Rights Agreement (or 120 days following the date of the Series B Registration Rights Agreement in the event of a “full review” by the SEC).

On October 17, 2025, the Company filed a resale registration statement on Form S-3 (File No.

333- 290946) with the SEC.

February 2026 Purchase Agreement

On February 2, 2026, we entered into the February 2026 Purchase Agreement with the February 2026 Purchasers for the issuance and sale in a private placement of (i) an aggregate of 1,700,000 shares of Common Stock, (ii) February 2026 Pre-Funded Warrants to purchase up to 800,000 shares of Common Stock, with an exercise price of $0.0001 per share, and (iii) February 2026 Investor Warrants to purchase up to 2,500,000 shares of Common Stock, with an exercise price of $2.30 per share.

The February 2026 Closing occurred on February 3, 2026.

The aggregate gross proceeds from the February 2026 Closing were approximately $5.0 million, prior to deducting offering expenses payable by us.

February 2026 Warrants

The February 2026 Common Warrants are exercisable for shares of Common Stock immediately at an exercise price of $2.30 per share and expire five years from the date of issuance.

The February 2026 Pre-Funded Warrants are exercisable for shares of Common Stock immediately and expire when exercised in full.

February 2026 Registration Rights Agreement

On February 2, 2026, in connection with the February 2026 Private Placement, the Company entered into the February 2026 Registration Rights Agreement with the February 2026 Purchasers, pursuant to which the Company agreed to prepare and file a registration statement with the SEC registering the resale of the shares of Common Stock and shares of Common Stock underlying the February 2026 Warrants no later than 60 days following the date of the February 2026 Registration Rights Agreement, and to use best efforts to have the registration statement declared effective as promptly as practical thereafter, and in any event no later than 90 days following the date of the February 2026 Registration Rights Agreement (or 120 days following the date of the February 2026 Registration Rights Agreement in the event of a “full review” by the SEC).

On February 9, 2026, the Company filed the registration statement pursuant to the February 2026 Registration Rights Agreement, which was declared effective by the SEC on February 13, 2026.

Operating Activities

Net cash used in operating activities was approximately $10.3 million for the year ended December 31, 2025, compared to approximately $8.1 million for the year ended December 31, 2024.

The increase in operating cash outflows year over year was driven primarily by higher net operating losses and changes in working capital, partially offset by higher non-cash charges.

For 2025, operating cash usage was primarily attributable to a net loss of $10.3 million, reflecting continued investment in the business and lower overall scale of revenues.

Non-cash items reduced operating cash usage, most notably share-based compensation of $4.0 million, depreciation and amortization of approximately $0.6 million, impairment of $0.6 million and a non-cash gain of $3.2 million related to changes in the fair value of warrant liabilities, prior to their reclassification to equity in mid-2025.

Working capital changes in 2025 also contributed to operating cash usage, driven primarily by a $2.2 million increase in accounts receivable, reflecting higher billings late in the year, and a $0.9 million decrease in accrued liabilities, largely due to the settlement of prior-year accruals.

These uses of cash were partially offset by a $1.2 million reduction in inventory, reflecting inventory management initiatives and lower production activity, as well as a modest decrease in prepaid expenses and other current assets.

In comparison, net cash used in operating activities for 2024 was approximately $8.1 million, despite the Company reporting a lower net loss of $5.9 million.

Operating cash usage in 2024 was significantly influenced by non-cash fair value adjustments to warrant liabilities of $9.6 million, which increased reported net income but had no impact on cash flows.

Non-cash expenses in 2024 included share-based compensation of $2.4 million and depreciation and amortization of approximately $0.8 million.

Working capital activity in 2024 provided net operating cash, primarily due to a $2.4 million decrease in accounts receivable and a $1.0 million reduction in customer deposits, partially offset by a $0.4 million increase in inventory.

Overall, the year-over-year increase in operating cash usage in 2025 reflects higher underlying operating losses and less favorable working capital movements compared to 2024.

Management expects operating cash usage to decline in 2026 and 2027 as a result of actions already implemented, including the substantial reduction in research and development spending, continued discipline in selling, general and administrative costs, lower cash requirements related to inventory and working capital, and the elimination of non-core activities, while seeking incremental revenue growth from higher-margin managed and technology-enabled services.

Investing Activities

Net cash used in investing activities was approximately $0.4 million for the year ended December 31, 2025, compared to net cash provided of $7.3 million for the year ended December 31, 2024.

Investing activity in 2025 consisted primarily of capital expenditures for property and equipment and investments in patents and trademarks, reflecting continued, but limited, investment in product development and intellectual property.

In contrast, investing activities in 2024 were dominated by $7.5 million of proceeds from the maturity of short-term investments, which significantly increased cash during the year.

Excluding these maturities, investing activity in 2024 was otherwise limited to routine capital expenditures and investments in patents, similar in nature to 2025.

Financing Activities

Net cash provided by financing activities was approximately $10.5 million for the year ended December 31, 2025, compared to approximately $0.5 million for the year ended December 31, 2024.

Financing activity in 2025 was driven primarily by private placement financings, including the issuance of Common Stock, warrants, and Series B Preferred Stock, which collectively generated significant new capital to fund operations.

In addition, the Company completed warrant amendments during 2025 that resulted in the reclassification of warrant liabilities to equity, eliminating future non-cash fair value adjustments, although this reclassification did not impact cash flows.

In comparison, financing activity in 2024 was limited and consisted primarily of proceeds from the exercise of stock options, partially offset by cash dividends paid on the Company’s Series A Preferred Stock.

The substantial increase in financing cash inflows in 2025 reflects management’s focus on strengthening liquidity and extending the Company’s operating runway.

Contractual Obligations and Commitments

Pursuant to that certain exclusive Amended and Restated Intellectual Property License Agreement, dated September 30, 2016, by and between the Company and Syzygy Licensing, LLC (“Syzygy”), we are obligated to pay to Syzygy a 4% royalty fee on future product sales up to an aggregate amount of $1.0 million in royalty payments, or until September 30, 2026, whichever occurs earlier.

As of December 31, 2024 the Company had incurred the maximum amount of royalties under the terms of the agreement.

As of December 31, 2025, the aggregate remaining royalty obligation is $99.

In September 2023, the Company entered into a lease for office space located in Coconut Grove, Florida, with a multi-year term concluding in 2031.

As of December 31, 2025, aggregate remaining minimum lease payments under this lease totaled approximate ly $2.8 million.

In February 2026, the Company terminated this lease, eliminating the remaining obligation.

As of December 31, 2025, the Company was committed to approximately $0.3 mi llion for future component deliveries and contract services.

These commitments relate primarily to inventory purchases and service agreements that are generally subject to modification or rescheduling in the normal course of business.

In August 2025, the Company entered into a lease for manufacturing and office space located in Southwest Virginia, with a multi-year term commencing in October 2025 and concluding in 2030.

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

As of December 31, 2025, aggregate remaining minimum lease payments under this lease totaled approximatel y $0.6 million.

In March 2026, the Company entered into a month-to-month service agreement for a business address located in Miami, Florida, at an approximate monthly cost of $165.

The agreement may be terminated by either party in accordance with its terms.

The Company does not have any material long-term debt obligations as of December 31, 2025.

Off-Balance Sheet Arrangements

The Company has not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties.

The Company has not entered into any derivative contracts that are indexed to the Company’s shares and classified as stockholders' equity or that are not reflected in the Company’s financial statements included in this Annual Report on Form 10-K.

Furthermore, the Company does not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.

The Company does not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.

Recent Accounting Pronouncements

There have been no recent accounting pronouncements or changes in accounting pronouncements during the year ended December 31, 2025, or subsequently thereto, that we believe are of potential significance to our financial statements.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as the disclosure of contingent assets and liabilities.

We evaluate our estimates on an ongoing basis, including those related to contingencies, accrued expenses, and asset valuations.

These estimates are based on historical experience and on various assumptions that management believes are reasonable under the circumstances.

Actual results could differ from these estimates under different assumptions or conditions.

Some of our accounting policies require a higher degree of judgment in their application than others.

The most significant of these policies include revenue recognition, valuation of warrant liabilities, share-based compensation, allowance for doubtful accounts, valuation of inventory, valuation and impairment of intangible assets, warranty liabilities, income taxes, and contingencies.

Revenue Recognition.

We recognize revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers.

Revenue is recognized when control of promised goods or services is transferred to customers in an amount that reflects the consideration we expect to receive in exchange for those goods or services.

We sell products and services to customers including law enforcement agencies, domestic distributors, and international distributors.

Revenue from product sales is generally recognized when products are shipped (free on board (FOB) shipping point) or received by customers (FOB destination), as applicable, when the transaction price is fixed or determinable and collectability is reasonably assured.

We identify performance obligations in customer contracts, determine the transaction price, allocate the transaction price to the performance obligations, and recognize revenue as the performance obligations are satisfied.

Our primary performance obligations include product and accessory sales, software licenses or subscriptions, and training services.

Our customers generally do not have the right to return products unless the products are defective.

Valuation of Warrant Liabilities .

We account for certain warrants as liabilities and measure them at fair value at each reporting date, with changes in fair value recognized in earnings.

The valuation of warrant liabilities requires the use of significant assumptions, including expected volatility, expected term, risk-free interest rates, and other market-based inputs.

Changes in these assumptions or market conditions can have a material impact on the fair value of warrant liabilities and our results of operations.

Share-Based Compensation.

We account for share-based compensation in accordance with ASC Topic 718, Stock Compensation, and ASU 2018-07 for share-based payments to non-employees.

Share-based compensation expense includes stock options and restricted stock units and is measured at grant date fair value.

The grant date fair value of stock options is determined using the Black-Scholes option-pricing model, which requires assumptions regarding the market price of our Common Stock on the date of grant, expected term, expected volatility, risk-free interest rate, and expected dividends.

These assumptions involve significant judgment.

The grant date fair value of restricted stock units is based on the market price of our Common Stock on the date of grant.

Share-based compensation expense is recognized over the vesting period and forfeitures are accounted for as they occur.

Allowance for Doubtful Accounts.

We estimate expected credit losses on accounts receivable based on a review of customer-specific factors and the aging of receivables.

Our customers are primarily government agencies and well-established distributors.

In estimating the allowance for doubtful accounts, we consider customer creditworthiness, historical collection experience, current economic conditions, industry trends, and changes in customer payment terms.

Changes in these assumptions could materially affect our allowance and results of operations.

Valuation of Inventory.

Our inventory consists of raw materials, subassemblies, and finished goods.

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

Management evaluates inventory for excess, obsolete, or slow-moving items and records write-downs when the expected future benefit is less than the carrying value.

These evaluations require judgment regarding future demand, product life cycles, and technological changes.

Valuation and Impairment of Intangible Assets .

Intangible assets include capitalized costs related to patents and trademarks, customer relationships, trade names, software, non-compete and non-solicitation agreements acquired in asset acquisitions, and indefinite-lived website domains.

Definite-lived intangible assets are amortized over their estimated useful lives.

We evaluate intangible assets for impairment when events or changes in circumstances indicate that their carrying value may not be recoverable.

Impairment assessments require significant judgment, including estimates of future cash flows, useful lives, discount rates, and assumptions regarding the strategic use of the assets.

Changes in these assumptions could result in impairment charges that materially affect our results of operations.

Business Combinations and Asset Acquisitions.

We account for business combinations in accordance with ASC Topic 805, Business Combinations.

Assets acquired and liabilities assumed in a business combination are recorded at their estimated fair value as of the acquisition date.

Determining fair values requires significant judgment and estimation, including the valuation of identifiable intangible assets such as customer relationships, trade names, software, and non-compete agreements.

During asset acquisitions, we allocate the purchase price to the identifiable assets acquired and liabilities assumed based on their relative fair values.

These valuations require management to make assumptions regarding future cash flows, useful lives, discount rates, and other factors.

Changes in these assumptions could materially affect the carrying values of acquired assets and result in impairment charges.

We account for certain warrants issued in connection with equity financings as liabilities in accordance with applicable accounting guidance.

These warrants are measured at fair value at each reporting date, with changes in fair value recognized in earnings.

The valuation of warrant liabilities requires the use of significant assumptions, including expected volatility, expected term, risk-free interest rates, and other market-based inputs.

Because these assumptions are subjective and sensitive to market conditions, changes in fair value can result in significant non-cash gains or losses that may cause volatility in our reported results of operations.

Warranty Liabilities.

We provide limited warranties on our products and establish a warranty reserve at the time product revenue is recognized.

The warranty reserve is based on estimates of future warranty claims and related repair or replacement costs.

Factors affecting warranty estimates include the number of units sold, historical warranty claim rates, and anticipated repair costs.

Due to limited historical experience, actual warranty costs may differ from our estimates.

Accrued Compensation and Contingencies.

We accrue bonus compensation when it becomes probable that a liability has been incurred and the amount can be reasonably estimated.

Bonus expense is recognized over the service period based on estimated achievement of performance targets and adjusted as necessary based on actual results.

We account for contingencies in accordance with ASC Topic 450, Contingencies.

Management evaluates legal and other contingencies to determine whether a loss is probable and reasonably estimable, which requires judgment and may change as new information becomes available.

Income Taxes.

We account for income taxes in accordance with ASC Topic 740, Income Taxes.

Significant judgment is required in determining our provision for income taxes, deferred tax assets and liabilities, unrecognized tax benefits, and any related valuation allowances.

Due to our history of operating losses, we have recorded a full valuation allowance against our deferred tax assets.

Management assesses the likelihood that deferred tax assets will be realized based on future taxable income, tax planning strategies, and other factors.

Changes in these assumptions could materially impact our effective tax rate and results of operations.

Changes in Estimates .

There were no material changes to our critical accounting policies during the year ended December 31, 2025.

However, management’s judgments and estimates related to impairment assessments, valuation of warrant liabilities, and income tax valuation allowances required increased judgment due to continued operating losses, product portfolio expansion, and market conditions.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

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-K

Item 7. Management’s Discussion and Analysis