What changed in this filing

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Item 1. Financial Statements

2026-08-11 compared with 2026-05-13 · 154 added, 76 removed, 412 unchanged (36% of the section changed)

3 unchanged sentences

(in thousands, except par value and share amounts)

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Current assets:

17 unchanged sentences

Total current liabilities 1,641 1,817

Non-current liabilities:

Deferred revenue — long term 7 14

Operating lease liability — long term 345 2,097

Total long-term liabilities 380 2,111

Total non-current liabilities 352 2,111

Total liabilities 1,993 3,928

3 unchanged sentences

par value $ 0.0001 per share;

11,707 and 12,707 shares issued and outstanding at March 31, 2026, and December 31, 2025, respectively.

11,707 and 12,707 shares issued and outstanding at June 30, 2026, and December 31, 2025, respectively.

Common stock - 200,000,000 authorized;

par value $ 0.0001 per share;

55,506,692 and 51,733,217 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively 5 5

55,857,933 and 51,733,217 shares issued and outstanding at June 30, 2026 and December 31, 2025, respectively 5 5

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

8,107 and 8,207 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively - -

Series B convertible preferred stock - 4,500 authorized, par value $ 0.0001 per share, 3,600 and 4,500 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively - -

8,107 and 8,207 shares issued and outstanding at June 30, 2026 and December 31, 2025, respectively - -

Series B convertible preferred stock - 4,500 authorized, par value $ 0.0001 per share, 3,600 and 4,500 shares issued and outstanding at June 30, 2026 and December 31, 2025, respectively - -

Additional paid-in-capital 136,868 127,804

6 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2026 2025 2026 2025

Product sales $ 1,747 $ 50 $ 2,630 $ 359

12 unchanged sentences

Gain on lease termination - - 227 -

Other ( 8 ) ( 2 ) ( 7 ) ( 2 )

Total other income (expense), net ( 6 ) ( 871 ) 223 3,159

Net (loss) income $ ( 4,540 ) $ 109

Net loss $ ( 2,257 ) $ ( 3,727 ) $ ( 6,797 ) $ ( 3,618 )

Convertible preferred stock dividends ( 162 ) ( 164 ) ( 411 ) ( 328 )

2 unchanged sentences

Weighted average common shares — basic and diluted 55,731,095 50,609,509 54,871,126 49,439,838

Comprehensive (loss) income:

Net (loss) income ( 4,540 ) 109

Comprehensive (loss) income:

Comprehensive loss:

Net loss ( 2,257 ) ( 3,727 ) ( 6,797 ) ( 3,618 )

Comprehensive loss:

( 2,257 ) ( 3,727 ) ( 6,797 ) ( 3,618 )

3 unchanged sentences

(in thousands, except share amounts)

Common Stock Preferred Stock Additional

Common Stock Preferred Stock Additional Total

Series A Convertible Series B Convertible Paid-in Accumulated Stockholders'

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Balance at March 31, 2026 55,506,692 $ 5 8,107 $ - 3,600 $ - $ 135,537 $ ( 121,108 ) $ 14,434

Share-based compensation expense - - - - - - 1,019 - 1,019

Common stock issued for professional services 96,775 - - - - - 150 - 150

Dividends on convertible preferred stock 162,836 - - - - - 162 ( 162 ) -

Common Stock issued upon vesting of restricted stock units 91,630 - - - - - - - -

Net loss - - - - - - - ( 2,257 ) ( 2,257 )

Balance at June 30, 2026 55,857,933 $ 5 8,107 $ - 3,600 $ - $ 136,868 $ ( 123,527 ) $ 13,346

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

2 unchanged sentences

(in thousands, except share amounts)

Common Stock Preferred Stock Additional

Common Stock Preferred Stock Additional Total

Series A Convertible Series B Convertible Paid-in Accumulated Stockholders'

7 unchanged sentences

Balance at March 31, 2025 50,494,701 $ 5 8,207 $ - - $ - $ 107,698 $ ( 105,136 ) $ 2,567

Share-based compensation expense - - - - - - 770 - 770

Dividends on convertible preferred stock 139,431 - - - - - 164 ( 164 ) -

Common Stock issued upon vesting of restricted stock units 94,403 - - - - - - - -

Reclassification of warrant liability due to warrant amendment - - - - - - 12,151 - 12,151

Net loss - - - - - - - ( 3,727 ) ( 3,727 )

Balance at June 30, 2025 50,728,535 $ 5 8,207 $ - - $ - $ 120,783 $ ( 109,027 ) $ 11,761

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

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows From Operating Activities:

Net (loss) income $ ( 4,540 ) $ 109

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Net loss $ ( 6,797 ) $ ( 3,618 )

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

Depreciation and amortization 111 304

Share-based compensation 3,403 2,435

Common stock issued for professional services 150 -

Warranty provision 31 2

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Non-cash lease expense 75 ( 199 )

(Reversal) / Provision for credit losses ( 1 ) 37

Provision for credit losses 76 60

Inventory obsolescence reserve 73 187

14 unchanged sentences

Investment in patents, trademarks and other intangibles ( 97 ) ( 145 )

Net cash paid for acquisition - ( 54 )

Net cash used in investing activities ( 108 ) ( 153 )

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Supplemental Disclosure of Non-Cash Investing and Financing Activities:

Reclassification of warrant liabilities to additional paid in capital $ - $ 12,159

Dividends declared on convertible preferred stock $ ( 411 ) $ ( 328 )

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Organization and Business Description

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

The Company's product and service portfolio also includes Wrap Reality, a virtual reality training simulator, WrapTactics™, a subscription-based digital training platform, WrapVision™, a body-worn camera and digital evidence management solution, and technology-enabled services including managed services and policy support.

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

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

The Company’s principal product is the BolaWrap® 150, a handheld remote restraint device sold together with recurring consumable cassettes and related accessories.

The Company also offers technology-enabled services, including Wrap Reality, a virtual reality training simulator, WrapTactics™, a subscription-based digital training platform, WrapVision™, a body-worn camera and digital evidence management solution, and managed services and policy support.

As described under Recent Developments, the Company is developing WrapShield™, an integrated detection, orchestration, and response architecture for public safety and security applications, together with additional non-lethal response products that remain in development.

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

Basis of Presentation

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Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “ Annual Report ”), as filed with the SEC on March 26, 2026.

The accompanying unaudited condensed consolidated balance sheet as of March 31, 2026 has been derived from the audited consolidated balance sheet as of December 31, 2025, contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.

The accompanying unaudited condensed consolidated balance sheet as of June 30, 2026 has been derived from the audited consolidated balance sheet as of December 31, 2025, contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2025.

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

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The Company's revenues consist of product sales (BolaWrap devices, cassettes, and accessories) and technology-enabled services (software subscriptions, body-worn cameras, managed services, policy support, training, and shipping).

As of March 31, 2026, all outstanding warrants (Series A Warrants, PIPE Warrants, Series B Warrants, and February 2026 Warrants each defined herein) are classified within permanent equity (additional paid-in capital) following amendments executed on June 30, 2025 that enabled equity classification under ASC 815-40 as discussed further in Note 8.

These warrants are not subject to subsequent fair value remeasurement and no warrant liability is recorded as of March 31, 2026 or December 31, 2025.

As of June 30, 2026, all outstanding warrants (Series A Warrants, PIPE Warrants, Series B Warrants, and February 2026 Common Warrants each defined herein) are classified within permanent equity (additional paid-in capital) following amendments executed on June 30, 2025 that enabled equity classification under ASC 815-40 as discussed further in Note 8.

These warrants are not subject to subsequent fair value remeasurement and no warrant liability is recorded as of June 30, 2026 or December 31, 2025.

Loss per Share

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

Stock options and restricted stock units exercisable or issuable for a total of 11,369,761 shares and 7,595,515 sh ares of Common Stock were outstanding as of March 31, 2026 and 2025, respectively.

Stock options and restricted stock units exercisable or issuable for a total of 11,077,429 shares and 7,856,142 sh ares of Common Stock were outstanding as of June 30, 2026 and 2025, respectively.

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

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Technology-enabled services include software subscriptions, body-worn cameras, managed services, policy and training support, and shipping revenue.

The table below details the activity in our contract liabilities during the three months ended March 31, 2026.

The table below details the activity in our contract liabilities during the six months ended June 30, 2026.

SCHEDULE OF CONTRACT LIABILITIES

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Transfer to revenue ( 29 ) ( 446 )

Balance at March 31, 2026 $ 51 $ 460

Balance at June 30, 2026 $ 98 $ 385

Current portion $ 98 $ 378

Long-term portion $ - $ 7

As of March 31, 2026, the Company’s deferred revenue of $ 460 consisted of $ 9 related to BolaWrap extended warranties and services, $ 27 related to WRAP Ready, $ 379 related to Intrensic extended warranties and services, $ 21 related to VR, $ 14 related to training and $ 10 related to WrapTactics.

As of June 30, 2026, the Company’s deferred revenue of $ 385 consisted of $ 8 related to BolaWrap extended warranties and services, $ 27 related to WRAP Ready, $ 323 related to Intrensic extended warranties and services, $ 15 related to VR, $ 4 related to training and $ 8 related to Wrap Tactics.

FINANCIAL INSTRUMENTS

15 unchanged sentences

no market data.

The following table shows the Company’s short-term investments by significant investment category as of March 31, 2026, and December 31, 2025.

As of March 31, 2026

The following table shows the Company’s short-term investments by significant investment category as of June 30, 2026, and December 31, 2025.

As of June 30, 2026

Cost Unrealized

9 unchanged sentences

Total financial assets $ 639 $ - $ - $ 639

As of March 31, 2026 and December 31, 2025, the Company has no warrant liabilities.

As of June 30, 2026 and December 31, 2025, the Company has no warrant liabilities.

All outstanding warrants are classified within permanent equity following amendments completed on June 30, 2025.

4 unchanged sentences

SCHEDULE OF INVENTORY

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Finished goods $ 3,174 $ 3,509

2 unchanged sentences

Inventories, net $ 4,308 $ 4,971

Inventory reserve expense was $ 0 and $ 18 for the three months ended March 31, 2026 and 2025, respectively.

Inventory reserve expense was $ 73 and $ 73 for the three and six months ended June 30, 2026, respectively, and $ 169 and $ 187 for the three and six months ended June 30, 2025, respectively.

PROPERTY AND EQUIPMENT, NET

1 unchanged sentence

SCHEDULE OF PROPERTY AND EQUIPMENT

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Production and lab equipment $ 391 $ 391

5 unchanged sentences

Property and equipment, net $ 89 $ 123

Depreciation expense was $ 23 and $ 40 for the three months ended March 31, 2026 and 2025, respectively.

Depreciation expense was $ 22 and $ 45 for the three and six months ended June 30, 2026, respectively, and $ 27 and $ 67 for the three and six months ended June 30, 2025, respectively.

INTANGIBLE ASSETS

1 unchanged sentence

Intangible assets, net consisted of the following:

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Amortizable intangible assets:

7 unchanged sentences

Total intangible assets, net $ 1,603 $ 1,572

Amortization expense was $ 33 and $ 115 for the three months ended March 31, 2026 and 2025 respectively.

As of March 31, 2026, future amortization expense is as follows:

Amortization expense was $ 33 and $ 66 for the three and six months ended June 30, 2026, respectively, and $ 123 and $ 238 for the three and six months ended June 30, 2025, respectively.

As of June 30, 2026, future amortization expense is as follows:

2026 (6 months) $ 62

4 unchanged sentences

Accrued liabilities consist of the following:

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Patent and legal costs $ 115 $ 111

6 unchanged sentences

Changes in our estimated product warranty costs were as follows:

Three Months Ended March 31,

Six Months Ended June 30,

Balance, beginning of period $ 30 $ 83

3 unchanged sentences

SCHEDULE OF PRODUCT WARRANTY LIABILITY

All outstanding warrants are classified within permanent equity as of March 31, 2026 and December 31, 2025.

All outstanding warrants are classified within permanent equity as of June 30, 2026 and December 31, 2025.

The following summarizes the Company's outstanding warrants:

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lease incentives and initial direct costs incurred.

Amortization expense was $ 54 and $ 74 for the three months ended March 31, 2026 and 2025 respectively.

Operating lease expense for capitalized operating leases included in operating activities was $ 112 and $ 156 for the three months ended March 31, 2026 and 2025, respectively.

Operating lease obligations recorded on the balance sheet at March 31, 2026 are:

March 31, 2026

Amortization expense was $ 21 and $ 75 for the three and six months ended June 30, 2026, respectively, and $ 84 and $ 151 for the three and six months ended June 30, 2025, respectively.

Operating lease expense for capitalized operating leases included in operating activities was $ 29 and $ 141 for the three and six months ended June 30, 2026, respectively, and $ 156 and $ 313 for the three and six months ended June 30, 2025, respectively.

Operating lease obligations recorded on the balance sheet at June 30, 2026 are:

June 30, 2026

Operating lease liability — short term $ 91

2 unchanged sentences

SCHEDULE OF OPERATING LEASE OBLIGATIONS

Future lease payments included in the measurement of lease liabilities on the balance sheet at March 31, 2026 for future periods are as follows:

Future lease payments included in the measurement of lease liabilities on the balance sheet at June 30, 2026 for future periods are as follows:

2026 (6 months) $ 60

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

The Company had $ 0 and $ 23 variable lease expenses for the three months ended March 31, 2026 and 2025, respectively.

The Company had no short-term lease expenses for the three months ended March 31, 2026 and 2025 respectively.

The Company had $ 0 and $ 17 variable lease expense for the three month ended June 30, 2026 and 2025, respectively, and $ 0 and $ 31 for the six months ended June 30, 2026 and 2025, respectively.

The Company had no short-term lease expenses for the three and six months ended June 30, 2026 and 2025 respectively.

The Company does not have any finance leases.

6 unchanged sentences

The Company's authorized capital consists of 200,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, par value $ 0.0001 per share, of which 10,000 shares are designated as Series A Convertible Preferred Stock and 4,500 shares are designated as Series B Convertible Preferred Stock.

During the three months ended June 30, 2026, the Company issued 96,775 shares of Common Stock to a vendor in settlement of a $ 150 invoice for investor relations services rendered.

The shares were issued in full satisfaction of the amount owed, with no cash paid and no future service or vesting condition attached.

The Company recorded the $ 150 expense within selling, general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive loss, based on the fair value of the shares issued of $ 1.55 per share on the issuance date.

Series A Preferred Stock

On July 3, 2023, the Company designated and issued 10,000 shares of Series A Preferred Stock (stated value $ 1,000 per share) convertible into shares of Common Stock at an initial conversion price of $ 1.45 per share.

As of March 31, 2026 and December 31, 2025, there were 8,107 and 8,207 shares outstanding, respectively.

As of June 30, 2026 and December 31, 2025, there were 8,107 and 8,207 shares outstanding, respectively.

Holders are entitled to dividends of 8 % per annum, payable in cash or shares of Common Stock at the Company's election.

For the three months ended March 31, 2026 and 2025, the Company paid dividends of $ 249 and $ 164 , respectively, in shares of Common Stock.

For the six months ended June 30, 2026 and 2025, the Company paid dividends of $ 411 and $ 328 , respectively, in shares of Common Stock.

Series B Preferred Stock

On August 18, 2025, the Company issued 4,500 shares of Series B Preferred Stock (stated value $ 1,000 per share) convertible up to 3,000,000 shares of Common Stock at an initial conversion price of $ 1.50 per share.

As of March 31, 2026 and December 31, 2025, there were 3,600 and 4,500 shares outstanding, respectively.

As of June 30, 2026 and December 31, 2025, there were 3,600 and 4,500 shares outstanding, respectively.

Holders are entitled to dividends when and as declared by the Board, payable in cash or shares of the Company's securities.

No dividends were declared or paid during the three months ended March 31, 2026.

No dividends were declared or paid during the six months ended June 30, 2026.

The Company maintains the Wrap Technologies, Inc.

2017 Equity Incentive Plan (the "2017 Plan"), which was most recently amended on December 12, 2025 to authorize up to 20,500,000 shares of Common Stock for issuance as equity awards under the 2017 Plan.

As of March 31, 2026, there were 4,033,073 shares of Common Stock remaining available for grant under the 2017 Plan.

As of June 30, 2026, there were 4,223,775 shares of Common Stock remaining available for grant under the 2017 Plan.

Stock Options

The following table summarizes stock option activity for the three months ended March 31, 2026:

The following table summarizes stock option activity for the six months ended June 30, 2026:

Weighted Average

5 unchanged sentences

Forfeited, cancelled, expired ( 1,219,917 ) 2.38 - -

Outstanding March 31, 2026 10,347,034 2.10 8.75 402

Exercisable March 31, 2026 3,072,524 2.31 7.79 141

As of March 31, 2026 there were 8,981,868 service-based stock options outstanding, and 1,365,166 performance-based stock options outstanding.

Outstanding June 30, 2026 10,048,117 2.04 8.72 6

Exercisable June 30, 2026 2,994,159 $ 2.16 8.02 $ -

As of June 30, 2026 there were 8,682,951 service-based stock options outstanding, and 1,365,166 performance-based stock options outstanding.

For the performance-based options, 1,290,166 were granted in October 2023 to the Company's current Chief Executive Officer, subject to vesting based on future market capitalization targets, and 75,000 were granted to a consultant, subject to vesting upon the Company's execution of a specified customer contract.

2 unchanged sentences

SCHEDULE OF STOCK OPTION ACTIVITY, FAIR VALUE OF ASSUMPTIONS

Three Months Ended March 31,

Six Months Ended June 30,

Expected stock price volatility 76 % 76 %

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

Stock option expense was $ 2,033 and $ 387 for the three months ended March 31, 2026 and 2025, respectively.

Stock option expense was $ 843 and $ 477 for the three months ended June 30, 2026 and 2025, respectively, and $ 2,876 and $ 864 for the six months ended June 30, 2026 and 2025, respectively.

Restricted Stock Units

1 unchanged sentence

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

The following table summarizes RSU activity for the three months ended March 31, 2026:

The following table summarizes RSU activity for the six months ended June 30, 2026:

Weighted Average

6 unchanged sentences

Forfeited and cancelled - - -

Unvested at March 31, 2026 1,022,727 $ 2.25 3.69

Unvested at June 30, 2026 1,029,312 $ 2.23 3.57

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

2 unchanged sentences

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

RSU expense was $ 351 and $ 1,278 for the three months ended March 31, 2026 and 2025, respectively.

RSU expense was $ 176 and $ 293 for the three months ended June 30, 2026 and 2025, respectively, and $ 527 and $ 1,571 for the six months ended June 30, 2026 and 2025.

Share-Based Compensation Expense

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2026 2025 2026 2025

Selling, general and administrative $ 1,019 $ 755 $ 3,403 $ 2,358

2 unchanged sentences

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

As of March 31, 2026, total estimated compensation cost of stock options granted and outstanding but not yet vested was $ 8,707 which is expected to be recognized over the weighted average period of 2.94 years.

As of March 31, 2026, total estimated compensation cost of RSUs granted and outstanding but not yet vested was $ 1,004 , which is expected to be recognized over the weighted average period of 1.88 years.

As of June 30, 2026, total estimated compensation cost of stock options granted and outstanding but not yet vested was $ 7,620 which is expected to be recognized over the weighted average period of 2.67 years.

As of June 30, 2026, total estimated compensation cost of RSUs granted and outstanding but not yet vested was $ 867 , which is expected to be recognized over the weighted average period of 1.67 years.

DEFINED CONTRIBUTION PLAN

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

The Company’s matching contributions were $ 13 and $ 0 for the three months ended March 31, 2026 and 2025, respectively.

The Company’s matching contributions were $ 24 and $ 23 for the six months ended June 30, 2026 and 2025, respectively.

COMMITMENTS AND CONTINGENCIES

Purchase Commitments

As of March 31, 2026, the Company was committed for approximately $ 541 for future component deliveries that are generally subject to modification or rescheduling in the normal course of business.

As of June 30, 2026, the Company was committed for approximately $ 536 for future component deliveries that are generally subject to modification or rescheduling in the normal course of business.

Indemnifications and Guarantees

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

As of March 31, 2026, the Company had no provision for liability under existing litigation.

As of June 30, 2026, the Company had no provision for liability under existing litigation.

RELATED PARTY TRANSACTIONS

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Scot Cohen, the Company's Executive Chairman and Chief Executive Officer, holds directly and through V4 Global LLC ("V4"), an entity he controls, shares of Series A Preferred Stock and related warrants.

For the three months ended March 31, 2026, Mr.

For the six months ended June 30, 2026, Mr.

Cohen earned dividends totaling $ 151 o n his Series A Preferred Stock.

14 unchanged sentences

2026 Common Warrants for gross proceeds of $ 500 .

Strategic Investment in Frenel Imaging Ltd.

As described in Note 17, in July 2026 the Company made a strategic investment in Frenel Imaging Ltd.

Scot Cohen, the Company's Executive Chairman and Chief Executive Officer, participated as an investor in the same Frenel financing, investing $ 100 and receiving 3,746 Series A Preferred Shares of Frenel on the same terms as the other investors in the financing.

In addition, Mr.

Cohen had previously invested $ 75 in a simple agreement for future equity of Frenel, which converted into 3,512 Series A Preferred Shares of Frenel in connection with the financing.

Following these transactions, Mr.

Cohen held an aggregate of 7,258 Series A Preferred Shares of Frenel

License Agreement

The Company is party to a royalty license with Syzygy, a company owned by Elwood G.

Norris, a 5 % or greater stockholder, and James A.

Norris and James A.

Barnes, a stockholder.

Norris was a 5 % or greater stockholder of the Company up and until July 9, 2026, upon which date he sold all of his shares of Common Stock and ceased being a stockholder of the Company.

No payments were made during the three and six months ended June 30, 2026.

SEGMENT INFORMATION

The Company operates as a single operating and reportable segment in accordance with ASC 280, Segment Reporting.

The Company's Chief Operating Decision Maker ("CODM") is Scot Cohen, the Company's Executive Chairman and Chief Executive Officer.

The CODM reviews financial information on a consolidated basis for purposes of evaluating financial performance and allocating resources, with the primary measure of segment performance being consolidated loss from operations.

Resource allocation decisions are based on consolidated operating results, cash flows, liquidity, and overall strategic priorities rather than discrete financial information at a product line, geography, or functional level.

While the Company monitors certain operating metrics, including revenue by product line, such information is used for operational oversight and forecasting and is not used by the CODM to assess segment performance or allocate resources among components of the business.

Accordingly, the Company has determined that it operates as one operating and one reportable segment.

The following table presents the significant expense categories and amounts for the three and six months ended June 30, 2026 and 2025.

Three Months Ended June 30, Six Months Ended June 30,

2026 2025 2026 2025

Total revenues $ 2,052 $ 1,012 $ 3,163 $ 1,778

Significant segment expenses:

Cost of revenues 507 525 927 695

Research and development 152 162 257 594

Salaries and burden 861 1,143 1,819 2,205

Share-based compensation 1,019 770 3,403 2,435

Consulting and professional fees 863 519 1,987 1,262

Depreciation and amortization 55 149 111 304

Other selling, general and administrative expenses (1) 846 600 1,679 1,060

Total significant segment expenses 4,303 3,868 10,183 8,555

Other segment items (2) - - - -

Segment loss from operations $ ( 2,251 ) $ ( 2,856 ) $ ( 7,020 ) $ ( 6,777 )

(1) Other selling, general and administrative expenses represents the aggregate of CODM-reviewed expense categories not considered individually significant, consisting of travel and entertainment, advertising and promotion, training, occupancy and office, public company costs, and other general and administrative costs.

(2) Other segment items consist of items not regularly reviewed by the Company's chief operating decision maker as part of the significant expense categories above and not individually significant.

No such items were identified for the periods presented;

other segment items reconcile to zero.

The measure of segment profit or loss reviewed by the CODM is consolidated loss from operations, which is the same measure presented in the Company's condensed consolidated statements of operations.

The CODM does not review segment assets, as such information is not used in allocating resources or assessing performance.

Refer to Note 16, Major Customers and Related Information, for entity-wide disclosures regarding revenue by geography and customer concentration.

MAJOR CUSTOMERS AND RELATED INFORMATION

For the three months ended March 31, 2026, revenue from one customer accounted for approximatel y 40 % of revenue, with no other single customer accounting for more than 10% of total revenue.

For the three months ended March 31, 2025, revenue from three customers accounted for approximately 13 %, 13 % and 11 % of revenue, respectively.

At March 31, 2026, accounts receivable from three distributors accounted for 29 %, 24 %, and 14 % of net accounts receivable and contract assets with no other single customer accounting for more than 10% of the accounts receivable and contract assets balance.

For the three months ended June 30, 2026, revenue from one distributor accounted for approximately 74 % of revenue with no other single customer accounting for more than 10% of total revenue.

For the three months ended June 30, 2025, revenue from three customers accounted for approximately 32 %, 23 % and 10 % of revenue, respectively, with no other single customer accounting for more than 10% of total revenue.

For the six months ended June 30, 2026, revenue from one distributor accounted for approximately 62 % of revenue, with no other single customer accounting for more than 10% of total revenue.

For the six months ended June 30, 2025, revenue from one customer accounted for approximately 16 % of revenue, with no other single customer accounting for more than 10% of total revenue.

At June 30, 2026, accounts receivable from one distributor accounted for 76 % of net accounts receivable with no other single customer accounting for more than 10% of the accounts receivable balance.

At December 31, 2025, accounts receivable from two distributors accounted for 71 % and 10 %, respectively of net accounts receivable and contract assets, with no other single customer accounting for more than 10% of the accounts receivable and contract assets balance.

1 unchanged sentence

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2026 2025 2026 2025

Americas $ 509 $ 846 $ 1,154 $ 1,592

Europe, Middle East and Africa 1,533 166 1,999 186

Asia Pacific 10 - 10 -

Total revenues $ 2,052 $ 1,012 $ 3,163 $ 1,778

SCHEDULE OF DISAGGREGATION OF REVENUE

SUBSEQUENT EVENTS

The Company has reviewed activities through May 13, 2026, the date on which this Quarterly Report on Form 10-Q was filed with the Securities and Exchange Commission, and has determined there are no subsequent events requiring disclosure in accordance with ASC 855-10-25-1.

The Company has evaluated subsequent events through August 11, 2026, the date on which this Quarterly Report on Form 10-Q was filed with the Securities and Exchange Commission.

Other than as described below, the Company determined there are no subsequent events requiring disclosure in accordance with ASC 855.

In July 2026, the Company made a strategic investment in Frenel, an advanced-sensing company.

Pursuant to the agreement, the Company purchased in a private placement 74,918 Series A Preferred Shares of Frenel at a purchase price of $ 26.6959 per share, for an aggregate purchase price of $ 2,000 , of which $ 300 had been paid previously under an advance investment and interim limited license agreement in March 2026.

The Series A Preferred Shares are convertible into ordinary shares of Frenel at the holder's option.

Under the purchase agreement, the Company has the right, but not the obligation, to invest up to an additional $ 2,500 in Series A-2 Preferred Shares of Frenel at any time within 24 months following the initial closing, based on a pre-money valuation of $ 18,500 on a fully diluted basis.

The Company is evaluating the appropriate accounting for its investment in Frenel, which represents an equity interest in a privately held company, and expects to complete that assessment during the third quarter of 2026.

Additionally, the Company and Frenel entered into an exclusive distribution and license agreement under which Frenel granted the Company an exclusive license to market, sell, distribute, and integrate Frenel's proprietary polarimetric thermal imaging software within the United States, and to NATO agencies and member-state customers through U.S.

Department of Defense Foreign Military Financing and Foreign Military Sales channels.

The license is exclusive for an initial period of four years , subject to the Company's satisfaction of specified minimum annual commitment milestones, and converts to a non-exclusive license if those milestones are not met following applicable cure periods.

The Company has agreed to pay Frenel a base price for products supplied plus a revenue share of 10 % of net funds invoiced to end customers.

The Company intends to use the licensed technology as part of the detection layer of its WrapShield platform.

The arrangement is in an early stage, and the timing and amount of any resulting revenue are uncertain.

In July 2026, ATF Ruling 2026-2 became effective, classifying the BolaWrap 150 as an instrument of restraint and determining that it is not a "firearm" under the Gun Control Act or an "any other weapon" under the National Firearms Act.

The ruling supersedes prior ATF classifications of the BolaWrap 150 and addresses that product only.

The ruling did not affect the Company's financial position or results of operations for the periods presented.

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

What changed 10-Q

Item 1. Financial Statements