What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-10-15 · 133 added, 112 removed, 440 unchanged (36% of the section changed)

3 unchanged sentences

(in thousands, except par value and share amounts)

June 30, 2024

September 30,

Current assets:

25 unchanged sentences

par value $ 0.0001 per share;

0 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

0 shares issued and outstanding at September 30, 2024 and December 31, 2023

Common stock - 150,000,000 authorized;

par value $ 0.0001 per share;

45,793,112 and 43,855,503 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

45,869,390 and 43,855,503 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

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

8,207 and 9,898 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

8,207 and 9,898 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

6 unchanged sentences

(in thousands, except share and per share amounts)

Three Months ended June 30,

Six Months ended June 30,

Three Months ended

September 30,

Nine Months ended

September 30,

Product sales

11 unchanged sentences

Total other income (expense), net

Net income (loss)

C onvertible preferred stock dividends

Net loss attributable to common stockholders

Net loss per basic and diluted common share

Net income (loss) attributable to common stockholders

Net income (loss) per basic and diluted common share

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

Comprehensive loss:

Comprehensive loss

Comprehensive income (loss):

Net income (loss)

Comprehensive income (loss)

See accompanying notes to unaudited condensed consolidated interim financial statements.

2 unchanged sentences

(in thousands, except share amounts)

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

Preferred Stock

4 unchanged sentences

Income (Loss)

Balance at April 1, 2024

Balance at July 1, 2024

Share-based compensation expense

1 unchanged sentence

Common shares issued upon vesting of restricted stock units

Common shares issued upon convertible preferred stock exercising conversion rights

Net loss for the period

Balance at June 30, 2024

Six Months Ended June 30, 2024

Net income for the period

Balance at September 30, 2024

Nine Months Ended September 30, 2024

Balance at January 1, 2024

5 unchanged sentences

Net income for the period

Balance at June 30, 2024

Three Months Ended June 30, 2023

Balance at September 30, 2024

See accompanying notes to unaudited condensed consolidated interim financial statements.

Three Months Ended September 30, 2023

Preferred Stock

3 unchanged sentences

Income (Loss)

Balance at April 1, 2023

Common shares issued upon exercise of stock options

Balance at July 1, 2023

Share-based compensation expense

Dividends on convertible preferred stock

Convertible preferred stock issued, net of offering costs

Common shares issued upon vesting of restricted stock units

Issuance of common stock for acquisition

Net loss for the period

Balance at June 30, 2023

Six Months Ended June 30, 2023

Balance at September 30, 2023

Nine Months Ended September 30, 2023

Balance at January 1, 2023

1 unchanged sentence

Share-based compensation expense

Common shares issued upon convertible preferred stock exercising conversion rights

Dividends on convertible preferred stock

Convertible preferred stock issued, net of offering costs

Common shares issued upon vesting of restricted stock units

Issuance of common stock for acquisition

Settlement – US Treasury bills

Net loss for the period

Balance at June 30, 2023

Balance at September 30, 2023

See accompanying notes to unaudited condensed consolidated interim financial statements.

Wrap Technologies, Inc.

1 unchanged sentence

(in thousands)

Six Months ended June 30,

Nine Months ended September 30,

Cash Flows From Operating Activities:

Net income (loss)

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

15 unchanged sentences

Deferred Revenue

Changes in other non-current assets

Changes in other non-current assets and goodwill

Net cash used in operating activities

5 unchanged sentences

Purchase of intangible assets

Proceeds from long-term deposits

Net cash paid for acquisition of Intrensic

Proceeds (cash outlay for) long-term deposits

Net cash provided by investing activities

1 unchanged sentence

Proceeds from exercise of stock options

Proceeds from issuance of warrants and convertible preferred stock, net of offering costs

Dividends settled in Cash

5 unchanged sentences

Change in unrealized gain on short-term investments

Issuance of common stock for acquisition

Net assets acquired from acquisition

Convertible preferred stock issued, net of offering costs

Warrant liabilities

Dividends on convertible preferred stock

Dividends settled with common stock

See accompanying notes to unaudited condensed consolidated interim financial statements.

Wrap Technologies, Inc.

42 unchanged sentences

The Company accounts for warrants as liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“ FASB ”) Accounting Standards Codification (“ ASC ”) 480, Distinguishing Liabilities from Equity (“ ASC 480 ”) and ASC 815, Derivatives and Hedging (“ ASC 815 ”).

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares of common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

28 unchanged sentences

Royalties are also charged to cost of products sold.

Loss per Share

Basic loss per share (EPS) is computed by dividing net loss, less any dividends, accretion or decretion, redemption or induced conversion, if any, on our Series A Preferred Stock, by the weighted average number of shares outstanding during the reported period.

Net Income (Loss) per Share

Basic net income (loss) per share (EPS) is computed by dividing net income (loss), less any dividends, accretion or decretion, redemption or induced conversion, if any, on our Series A Preferred Stock, by the weighted average number of shares outstanding during the reported period.

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

1 unchanged sentence

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

Stock options and restricted stock units exercisable or issuable for a total of 4,903,951 and 4,117,586 shares of Common Stock were outstanding as of June 30, 2024 and 2023, respectively.

Stock options and restricted stock units exercisable or issuable for a total of 4,979,745 and 2,668,750 shares of Common Stock were outstanding as of September 30, 2024 and 2023, respectively.

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

2 unchanged sentences

These reclassifications had no effect on the reported results of operations.

An adjustment has been made to the Consolidated Balance Sheet and Consolidated Statements of Cash Flows for fiscal year ended December 31, 2023, to reclassify the Convertible Preferred Stock at par value.

An adjustment has been made to the Consolidated Balance Sheet and Consolidated Statements of Cash Flows for the fiscal year ended December 31, 2023, as well as the Consolidated Statements of Stockholder’s Equity for the three and nine months ended September 30, 2023, to reclassify the Series A Convertible Preferred Stock at par value.

Recently Issued Accounting Guidance

28 unchanged sentences

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

The table below details the activity in our contract liabilities during the six months ended June 30, 2024.

The table below details the activity in the Company's contract liabilities during the nine months ended September 30, 2024.

Balance at January 1, 2024

1 unchanged sentence

Transfer to revenue

Balance at June 30, 2024

Balance at September 30, 2024

Current portion

Long-term portion

As of June 30, 2024, the Company’s deferred revenue of $ 585 consisted of $ 122 related to VR, $ 358 related to Intrensic, and $ 105 related to BolaWrap extended warranties and services.

As of September 30, 2024, the Company’s deferred revenue of $ 673 consisted of $ 97 related to VR, $ 463 related to Intrensic, $ 98 related to BolaWrap extended warranties and services and $ 15 related to training.

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

12 unchanged sentences

Treasury bill securities and Certificate of Deposits are classified as Level 1 because they are valued using quoted market prices.

The following table shows the Company’s short-term investments by significant investment category as of June 30, 2024 and December 31, 2023.

As of June 30, 2024

The following table shows the Company’s short-term investments by significant investment category as of September 30, 2024, and December 31, 2023.

As of September 30, 2024

Money Market Funds

6 unchanged sentences

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

During the six months ended June 30, 2024 as well as the six months ended June 30, 2023, no gain (loss) was recorded to comprehensive loss, respectively.

During the nine months ended September 30, 2024, as well as the nine months ended September 30, 2023, no gain (loss) was recorded to comprehensive loss.

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

The subsequent measurement of the warrant liabilities as of June 30, 2024, is classified as Level 3 due to the use of an observable market quote in a non-active market and the management’s assumption of the expected stock price volatility.

The subsequent measurement of the warrant liabilities as of September 30, 2024, is classified as Level 3 due to the use of an observable market quote in a non-active market and the management’s assumption of the expected stock price volatility.

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

Fair value at inception for December 31, 2023 or the beginning of the period for June 30, 2024

September 30,

Fair value at inception for December 31, 2023, or the beginning of the period for September 30, 2024

Change in fair value of warrant liabilities

2 unchanged sentences

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

September 30,

Expected stock price volatility

8 unchanged sentences

Inventories consisted of the following:

September 30,

Finished goods

4 unchanged sentences

Property and equipment consisted of the following:

September 30,

Production and lab equipment

3 unchanged sentences

Property and equipment, net

Depreciation expense was $ 114 and $ 230 for the three and six months ended June 30, 2024, respectively, and $ 118 and $ 236 for the three and six months ended June 30, 2023, respectively.

Depreciation expense was $ 82 and $ 312 for the three and nine months ended September 30, 2024, respectively, and $ 122 and $ 358 for the three and nine months ended September 30, 2023, respectively.

INTANGIBLE ASSETS AND GOODWILL

1 unchanged sentence

Intangible assets, net consisted of the following:

September 30,

Amortizable intangible assets:

5 unchanged sentences

Total intangible assets, net

Amortization expense was $ 113 and $ 220 for the three and six months ended June 30, 2024, respectively, and $ 85 and $ 167 for the three and six months ended June 30, 2023, respectively.

As of June 30, 2024, future amortization expense is as follows:

Amortization expense was $ 114 and $ 334 for the three and nine months ended September 30, 2024, respectively, and $ 150 and $ 317 for the three and nine months ended September 30, 2023, respectively.

As of September 30, 2024, future amortization expense is as follows:

2024 (3 months)

Total estimated amortization expense

There has been no change to the value of goodwill from December 31, 2023 through the period ended June 30, 2024.

During the three month period ended September 30, 2024, the Company recorded an increase of $ 29 to the goodwill associated with costs related to the August 2023 acquisition of Intrensic.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

2 unchanged sentences

Barnes, a former officer and stockholder of the Company (see Note 13).

Accounts payable includes $ 81 and $ 14 due to Syzygy as of June 30, 2024 and December 31, 2023, respectively.

Accounts payable includes $ 81 and $ 14 due to Syzygy as of September 30, 2024, and December 31, 2023, respectively.

Accrued liabilities consist of the following:

September 30,

Patent and legal costs

3 unchanged sentences

Changes in our estimated product warranty costs were as follows:

Six Months Ended

Nine Months Ended

September 30,

Balance, beginning of period

8 unchanged sentences

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

The guidance in FASB ASC Topic 842, Leases defines a lease as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.

The guidance in FASB ASC Topic 842, Leases defines a lease as a contract, or part of a contract, which conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration.

Operating lease right of use (“ ROU ”) assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date.

8 unchanged sentences

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

Amortization expense was $ 72 and $ 143 for the three and six months ended June 30, 2024, respectively, and $ 27 and $ 53 for the three and six months ended June 30, 2023, respectively

Operating lease expense for capitalized operating leases included in operating activities was $ 166 and $ 415 for the three months and six months ended June 30, 2024 , and $ 26 and $ 76 for the three and six months ended June 30, 2023, respectively.

Operating lease obligations recorded on the balance sheet at June 30, 2024 are:

Amortization expense was $ 74 and $ 217 for the three and nine months ended September 30, 2024, respectively, and $ 28 and $ 84 for the three and nine months ended September 30, 2023, respectively.

Operating lease expense for capitalized operating leases included in operating activities was $ 154 and $ 463 for the three and nine months ended September 30, 2024, respectively, and $ 30 and $ 90 for the three and nine months ended September 30, 2023, respectively.

Operating lease obligations recorded on the balance sheet at September 30, 2024 are:

Operating lease liability- short term

1 unchanged sentence

Total Operating Lease Liability

Future lease payments included in the measurement of lease liabilities on the balance sheet at June 30, 2024 for future periods are as follows:

Future lease payments included in the measurement of lease liabilities on the balance sheet at September 30, 2024 for future periods are as follows:

2024 (3 months)

4 unchanged sentences

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 $ 14 and $ 24 variable lease expenses for the three and six months ended June 30, 2024, respectively, and $ 6 and $ 25 for the three and six months ended June 30, 2023, respectively.

The Company had $ 4 and $ 15 short-term lease expense for the three and six months ended June 30, 2024, respectively, and $ 13 and $ 27 for the three and six months ended June 30, 2023, respectively.

The Company had $ 23 and $ 41 variable lease expenses for the three and nine months ended September 30, 2024, respectively, and $ 15 and $ 38 variable lease expenses for the three and nine months ended September 30, 2023, respectively.

The Company had $ 1 and $ 16 short-term lease expenses for the three and nine months ended September 30, 2024, respectively, and $ 40 and $ 68 short-term lease expenses for the three and nine months ended September 30, 2023, respectively.

The Company does not have any finance leases.

STOCKHOLDERS' EQUITY

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

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

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 ”), as filed with the Secretary of State of the State of Delaware on July 3, 2023.

4 unchanged sentences

If the Company elects to pay any dividends in shares of Common Stock, the Conversion Price used to calculate the number of shares issuable will be equal to the lower of (i) the then-applicable Conversion Price and (ii) 85% of the arithmetic average of the three (3) lowest closing prices of the 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.

The Series A Preferred Stock cannot be converted to Common Stock if the holder, other than Scot Cohen, V4 Global LLC or their transferees, and its affiliates would beneficially own more than 4.99 %, or 9.99 % at the election of the holder, of the outstanding Common Stock.

Other than Scot Cohen, V4 Global LLC or their transferees, a holder of Series A Preferred Stock cannot convert shares of its Series A Preferred Stock into shares of Common Stock if the holder and its affiliates would beneficially own more than 4.99 %, or 9.99 % at the election of the holder, of the outstanding Common Stock after giving effect to the conversion.

However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99% upon notice to us, provided that any increase in this limitation will not be effective until 61 days after such notice from the holder to us and such increase or decrease will apply only to the holder providing such notice.

Except as required by law (including without limitation, the Delaware General Corporation Law (the “DGCL”)), the holders of the Series A Preferred Stock are entitled to vote with holders of the Common Stock on as 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.

To the extent that under the DGCL the vote of the holders of shares of Series A Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of a majority of the outstanding shares of Series A Preferred Stock, voting together in the aggregate and not in separate series unless required under the DGCL, represented at a duly held meeting at which a quorum is presented or by written consent of such majority (except as otherwise may be required under the DGCL) shall constitute the approval of such action by both the class or the series, as applicable.

Except as required by law (including without limitation, the Delaware General Corporation Law (the “ DGCL ”)), the holders of the Series A Preferred Stock are entitled to vote with holders of the Common Stock on as 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 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.

To the extent that under the DGCL the vote of the holders of shares of Series A Preferred Stock, voting separately as a class or series, as applicable, is required to authorize a given action of the Company, the affirmative vote or consent of a majority of the outstanding shares of Series A Preferred Stock, voting together in the aggregate and not in separate series unless required under the DGCL, represented at a duly held meeting at which a quorum is present or by written consent of such majority (except as otherwise may be required under the DGCL) shall constitute the approval of such action by both the class or the series, as applicable.

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

1 unchanged sentence

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

Pursuant to the Series A Amendment, the Required Holders agreed that (A) the unpaid and accrued dividends on the Series A Preferred Stock due July 1, 2024 (the “July Delinquent Dividend Amount”), shall be payable, at the option of the Company, in (i) cash and/or (ii) shares of Common Stock, at a price per share of Common Stock equal to the lower of (x) $ 1.00 and (y) the Dividend Conversion Price (as defined in the Certificate of Designations), using July 1, 2024, as the applicable date of determination in accordance with the Certificate of Designations; (B) the dividends due on October 1, 2024 (the “October Dividend Amount” and, together with the July Delinquent Dividend Amount, the “Delinquent Dividend Amounts”), shall be payable in shares of Common Stock based on a per share price of Common Stock equal to 80% of the arithmetic average of the three (3) lowest closing sale prices of the Common Stock during the month of September 2024; and (C) such Delinquent Dividend Amounts and any Dividend Balance Shares (as defined in the Certificate of Designations), with respect thereto, if applicable, shall be delivered on October 1, 2024.

Pursuant to the Series A Amendment, the Required Holders agreed that (A) the unpaid and accrued dividends on the Series A Preferred Stock due July 1, 2024 (the “ July Delinquent Dividend Amount ”), shall be payable, at the option of the Company, in (i) cash and/or (ii) shares of Common Stock, at a price per share of Common Stock equal to the lower of (x) $ 1.00 and (y) the Dividend Conversion Price (as defined in the Certificate of Designations), using July 1, 2024, as the applicable date of determination in accordance with the Certificate of Designations; (B) the dividends due on October 1, 2024 (the “ October Dividend Amount ” and, together with the July Delinquent Dividend Amount, the “ Delinquent Dividend Amounts ”), shall be payable in shares of Common Stock based on a per share price of Common Stock equal to 80% of the arithmetic average of the three (3) lowest closing sale prices of the Common Stock during the month of September 2024; and (C) such Delinquent Dividend Amounts and any Dividend Balance Shares (as defined in the Certificate of Designations), with respect thereto, if applicable, shall be delivered on October 1, 2024 and the Pre-Dividend Shares (as defined in the Certificate of Designations) with respect to each of the July Delinquent Dividend Amount and the October Dividend Amount, if applicable, shall be delivered to the Series A Investors on or prior to the twenty-first (21st) trading day prior to October 1, 2024.

The Company and the Required Holders further agreed pursuant to the Series A Amendment to amend (i) the Certificate of Designations, as described below, by filing a Certificate of Amendment to the Certificate of Designations (the “ Certificate of Amendment ”) and (ii) the Series A Purchase Agreement to amend the definition of “Excluded Securities.”

The 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, which was subsequently further amended by the October 2024 Certificate of Amendment (as defined below), 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.

The Certificate of Amendment amended 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, which was subsequently further amended by the October 2024 Certificate of Amendment (as defined below), (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, and (C) amend the definition of “Excluded Securities” to exclude Dividend Shares (as defined in the Certificate of Designations) and shares of Common Stock issued in connection with the payments of dividends.

The Certificate of Amendment was filed with the Secretary of State of the State of Delaware on August 23, 2024.

On October 14, 2024, the Company entered into an Amendment Agreement (the “October 2024 Series A Amendment”) with the Required Holders (as defined in the Certificate of Designations).

Pursuant to the October 2024 Series A Amendment, the Required Holders agreed to amend the Certificate of Designations (the “October 2024 Certificate of Amendment”).

Pursuant to the October 2024 Certificate of Amendment, (i) the Series A Preferred Stock will be entitled to voting rights as described therein, (ii) certain holders of the Preferred Stock will not be subject to certain beneficial ownership limitations as described in the Certificate of Designations, and (iii) 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.

On October 14, 2024, the Company entered into an Amendment Agreement (the “ October 2024 Series A Amendment ”) with the Required Holders.

Pursuant to the October 2024 Series A Amendment, the Required Holders agreed to further amend the Certificate of Designations (the “ October 2024 Certificate of Amendment ”).

Pursuant to the October 2024 Certificate of Amendment, (i) the Series A Preferred Stock is now entitled to voting rights as described therein, (ii) certain holders of the Series A Preferred Stock are no longer subject to certain beneficial ownership limitations as described in the Certificate of Designations, and (iii) stockholder approval is no longer 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 on October 14, 2024.

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

During the three months ended December 31, 2023, 102 shares of the Series A Preferred Stock were converted into 76,440 shares of Common Stock and during the six months ended June 30, 2024 an additional 1,691 shares of Series A Preferred Stock were converted into 1,391,183 shares of Common Stock.

As of June 30, 2024, the Company has authorized and declared $ 700 in dividends during the year of which $ 500 was accrued in accounts payable as of June 30, 2024.

See Note 16, “Subsequent Events,” for additional information.

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

During the three months ended December 31, 2023, 102 shares of the Series A Preferred Stock were converted into 76,440 shares of Common Stock and during the nine months ended September 30, 2024, an additional 1,691 shares of Series A Preferred Stock were converted into 1,391,183 shares of Common Stock.

As of September 30, 2024, the Company has authorized and declared $ 1,017 in dividends during the year of which $ 818 was accrued in accounts payable as of September 30, 2024.

SHARE-BASED COMPENSATION

1 unchanged sentence

In May 2019 , the stockholders ratified an increase in the Plan authorizing an additional 2,100,000 shares of Common Stock;

in June 2020 ratified an additional 1,900,000 shares of Common Stock;

in June 2021 ratified an additional 1,500,000 shares of Common Stock;

and in June 2022 ratified an additional 1,500,000 shares of Common Stock;

in June 2020, the stockholders ratified an additional 1,900,000 shares of Common Stock;

in June 2021, the stockholders ratified an additional 1,500,000 shares of Common Stock;

and in June 2022, the stockholders ratified an additional 1,500,000 shares of Common Stock;

for a total of 9,000,000 shares subject to the Plan.

As of June 30, 2024, there were 849,534 shares of Common Stock remaining available for grant under the Plan.

As of September 30, 2024, there were 275,422 shares of Common Stock remaining available for grant under the Plan.

Stock Options

The following table summarizes stock option activity for the six months ended June 30, 2024:

The following table summarizes stock option activity for the nine months ended September 30, 2024:

Weighted Average

1 unchanged sentence

Forfeited, cancelled, expired

Outstanding June 30, 2024

Exercisable June 30, 2024

As of June 30, 2024, there were 2,510,893 service-based stock options outstanding, and 1,290,166 performance-based stock options outstanding which were granted in October 2023 to the Company's current Chief Executive Officer subject to future market capitalization targets.

Outstanding September 30, 2024

Exercisable September 30, 2024

As of September 30, 2024, there were 2,701,463 service-based stock options outstanding, and 1,290,166 performance-based stock options outstanding, which were granted in October 2023 to the Company's current Chief Executive Officer subject to future market capitalization targets.

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

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

For the Six Months

Ended June 30,

For the Nine Months

Ended September 30,

Expected stock price volatility

12 unchanged sentences

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 ($ 33 ) and $ 434 for the three and six months ended June 30, 2024, respectively, and $ 255 and $ 567 for the three and six months ended June 30, 2023, respectively.

Stock option expense was $ 341 and $ 776 for the three and nine months ended September 30, 2024, respectively, and $( 169 ) and $ 399 for the three and nine months ended September 30, 2023, 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 six months ended June 30, 2024:

The following table summarizes RSU activity for the nine months ended September 30, 2024:

Service-Based

2 unchanged sentences

Forfeited and cancelled

Unvested at June 30, 2024

Unvested at September 30, 2024

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

1 unchanged sentence

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

RSU expense was $ 275 and $ 484 for the three and six months ended June 30, 2024, respectively, and $ 966 and $ 1,282 for the three and six months ended June 30, 2023, respectively.

RSU expense was $ 555 and $ 1,038 for the three and nine months ended September 30, 2024, respectively, and $( 33 ) and $ 1,249 for the three and nine months ended September 30, 2023, respectively.

Share-Based Compensation Expense

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Selling, general and administrative

1 unchanged sentence

Total share-based expense

As of June 30, 2024, total estimated compensation cost of stock options granted and outstanding but not yet vested was $ 2,772 which is expected to be recognized over the weighted average period of 2.33 years.

As of June 30, 2024, total estimated compensation cost of RSUs granted and outstanding but not yet vested was $ 2,206 , which is expected to be recognized over the weighted average period of 5.19 years.

As of September 30, 2024, total estimated compensation cost of stock options granted and outstanding but not yet vested was $ 2,657 which is expected to be recognized over the weighted average period of 2.50 years.

As of September 30, 2024, total estimated compensation cost of RSUs granted and outstanding but not yet vested was $ 1,773 , which is expected to be recognized over the weighted average period of 3.26 years.

DEFINED CONTRIBUTION PLAN

3 unchanged sentences

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

The Company’s contributions for each of the six months ended June 30, 2024 and 2023 was $ 0 .

The Company’s contributions for each of the nine months ended September 30, 2024, and 2023 was $ 0 .

COMMITMENTS AND CONTINGENCIES

Related Party Technology License Agreement

The Company is obligated to pay royalties and development and patent costs pursuant to the License Agreement dated as of September 30, 2016, with Syzygy, a company owned and controlled by stockholder/consultant Mr.

Elwood Norris and stockholder/consultant Mr.

James Barnes.

The Company is obligated to pay royalties and development and patent costs pursuant to the License Agreement.

The agreement provides for royalty payments of 4 % of revenue from products employing the licensed ensnarement device technology up to an aggregate of $ 1,000 in royalties or until September 30, 2026 , whichever occurs earlier.

The Company recorded $ 20 and $ 66 for the three and six months ended June 30, 2024, respectively, and $ 40 and $ 64 for the three and six months ended June 30, 2023, respectively related to such royalties.

The maximum payout has been satisfied as of June 30, 2024.

The Company recorded $ 0 and $ 66 for the three and nine months ended September 30, 2024, respectively, and $ 122 and $ 185 for the three and nine months ended September 30, 2023, respectively, related to such royalties.

The maximum payout was satisfied as of June 30, 2024.

Purchase Commitments

As of June 30, 2024, the Company was committed for approximately $ 941 for future component deliveries that are generally subject to modification or rescheduling in the normal course of business.

As of September 30, 2024, the Company was committed for approximately $ 975 for future component deliveries that are generally subject to modification or rescheduling in the normal course of business.

Indemnifications and Guarantees

9 unchanged sentences

These provisions are reviewed and adjusted to include the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel, and other information and events pertaining to a particular matter.

As of June 30, 2024, the Company had no provision for liability under existing litigation.

As of September 30, 2024, the Company had no provision for liability under existing litigation.

RELATED PARTY TRANSACTIONS

4 unchanged sentences

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

For the six months ended June 30, 2024, Mr.

For the nine months ended September 30, 2024, Mr.

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

1 unchanged sentence

Commencing in October 2017, the Company began reimbursing Mr.

Elwood Norris, a former officer, current 5% stockholder and consultant of the Company, $ 1.5 per month on a month-to-month basis for laboratory facility costs which was terminated in January 2024 and $ 7.5 per month on a month-to month basis for invention consulting services, which was terminated in February 2024 for an aggregate of $ 15 and $ 23 during each of the three months ended June 30, 2024 and 2023, respectively.

The Company is obligated to pay royalties and development and patent costs pursuant to the License Agreement dated September 30, 2016, with Syzygy, a company owned and controlled by a 5% stockholder of the Company, Mr.

Elwood Norris, and a former officer of the Company, Mr.

James Barnes.

Elwood Norris, a former officer, current 5% or greater stockholder and consultant of the Company, $ 1.5 per month, on a month-to-month basis, for laboratory facility costs which was terminated in January 2024 and $ 7.5 per month, on a month-to month basis, for invention consulting services, which was terminated in February 2024 for an aggregate of $ 17 and $ 80 during each of the nine months ended September 30, 2024 and 2023, respectively.

The Company is obligated to pay royalties and development and patent costs pursuant to the License Agreement.

During the three months ended June 30, 2024 and 2023, the Company incurred royalties to Syzygy of $ 46 and $ 24 , respectively.

During the three months ended September 30, 2024, and 2023, the Company incurred royalties to Syzygy of $ 0 and $ 61 , respectively.

The maximum payout was satisfied as of June 30, 2024.

See Notes 1, 7 and 13 for additional information on related party transactions and obligations.

MAJOR CUSTOMERS AND RELATED INFORMATION

For the three months ended June 30, 2024, revenue from one distributor accounted for approximately 39 % of revenue with no other single customer accounting for more than 10% of total revenue.

For the three months ended June 30, 2023, revenue from two distributors accounted for approximately 21 % and 20 % of revenues, respectively, with no other single customer accounting for more than 10% of total revenue.

For the six months ended June 30, 2024, revenue from two distributors accounted for approximately 33 % and 20 % of revenue, respectively, with no other single customer accounting for more than 10% of total revenue.

For the six months ended June 30, 2023, revenue from three distributors accounted for approximately 15 %, 14 % and 13 % of revenue, respectively, with no other single customer accounting for more than 10% of total revenue.

At June 30, 2024, accounts receivable from one distributor accounted for 39 % of net accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

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

For the three months ended September 30, 2023, revenue from two distributors accounted for approximately 62 % and 12 % of revenues, respectively, with no other single customer accounting for more than 10% of total revenue.

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

For the nine months ended September 30, 2023, revenue from one distributor accounted for approximately 41 % of revenue, with no other single customer accounting for more than 10% of total revenue.

At September 30, 2024, accounts receivable from one distributor accounted for 11 % of net accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

At December 31, 2023, accounts receivable from one distributor accounted for 67 % of net accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

2 unchanged sentences

For the Three Months

For the Six Months

Ended June 30,

For the Nine Months

Ended September 30,

Europe, Middle East and Africa

1 unchanged sentence

SUBSEQUENT EVENTS

On August 19, 2024, the Company entered into the Series A Amendment with the Required Holders.

Pursuant to the Series A Amendment, the Required Holders agreed that (A) 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, using July 1, 2024, as the applicable date of determination in accordance with the Certificate of Designations; (B) the October Dividend Amount, 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, with respect thereto, if applicable, shall be delivered on October 1, 2024.

The Company and the Required Holders further agreed pursuant to the Series A Amendment to amend (i) the Certificate of Designations, as described below, by filing the Certificate of Amendment and (ii) the Series A Purchase Agreement to amend the definition of “Excluded Securities.”

The 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.

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

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

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

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

On October 14, 2024, the Company entered into the October 2024 Series A Amendment with the Required Holders, 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 the October 2024 Certificate of Amendment.

The October 2024 Certificate of Amendment amended the Certificate of Designations to, among other things, provide that, except as required by applicable law, the holders of the Series A Preferred Stock are 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 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 provided that (i) certain holders of the Series A Preferred Stock are no longer subject to certain beneficial ownership limitations as described in the Certificate of Designations, and (ii) stockholder approval is no longer 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.

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