What changed in this filing

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Item 1. Financial Statements

2025-05-15 compared with 2024-11-14 · 654 added, 380 removed, 193 unchanged (84% of the section changed)

Financial Statements

Wrap Technologies, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value and share amounts)

September 30,

Technologies, Inc.

Consolidated Balance Sheets

thousands, except par value and share amounts)

March 31, 2025

Current assets:

Cash and cash equivalents

Short-term investments

Accounts receivable and contract assets, net

22 unchanged sentences

par value $ 0.0001 per share;

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

0 shares issued and outstanding at March 31, 2025, and December 31, 2024, respectively

Common stock - 150,000,000 authorized;

par value $ 0.0001 per share;

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

50,494,701 and 47,101,631 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

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

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

8,207 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

Preferred Stock

Additional paid-in capital

2 unchanged sentences

Total liabilities and stockholders’ equity

See accompanying notes to unaudited condensed consolidated interim financial statements.

Wrap Technologies, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

Three Months ended

September 30,

Nine Months ended

September 30,

accompanying notes to unaudited condensed consolidated interim financial statements.

Technologies, Inc.

Consolidated Statements of Operations and Comprehensive Loss

thousands, except share and per share amounts)

Three Months ended March 31,

Product sales

Managed services

Other revenue

7 unchanged sentences

Other income (expense):

Interest I ncome

Interest income

Change in fair value of warranty liabilities

Total other income (expense), net

Net income (loss)

C onvertible preferred stock dividends

Net income (loss) attributable to common stockholders

Net income (loss) per basic and diluted common share

Convertible preferred stock dividends

Net loss attributable to common stockholders

Net loss per basic and diluted common share

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

Comprehensive income (loss):

Net income (loss)

Comprehensive income (loss)

See accompanying notes to unaudited condensed consolidated interim financial statements.

Wrap Technologies, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share amounts)

Three Months Ended September 30, 2024

Comprehensive loss:

Comprehensive loss

accompanying notes to unaudited condensed consolidated interim financial statements.

Technologies, Inc.

Consolidated Statements of Stockholders’ Equity

thousands, except share amounts)

Months Ended March 31, 2025

Preferred Stock

Additional Paid-In

Accumulated Other

Comprehensive

Stockholders’

Income (Loss)

Balance at July 1, 2024

Share-based compensation expense

Dividends on convertible preferred stock

Common shares issued upon vesting of restricted stock units

Net income for the period

Balance at September 30, 2024

Nine Months Ended September 30, 2024

Balance at January 1, 2025

Common shares issued upon exercise of stock options

$ ( 105,081 )

Share-based compensation expense

Dividends on convertible preferred stock

Common shares issued upon convertible preferred stock exercising conversion rights

Common shares issued upon vesting of restricted stock units

Common Stock issued upon vesting of restricted stock units

Common Stock issued with Private Placement

Net income for the period

Balance at September 30, 2024

See accompanying notes to unaudited condensed consolidated interim financial statements.

Three Months Ended September 30, 2023

Preferred Stock

Accumulated Other

Comprehensive

Stockholders'

Income (Loss)

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 September 30, 2023

Nine Months Ended September 30, 2023

Balance at March 31, 2025

$ ( 105,136 )

Balance at January 1, 2024

Common shares issued upon exercise of stock options

Common Stock issued upon exercise of stock options

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

Settlement – US Treasury bills

Net loss for the period

Balance at September 30, 2023

See accompanying notes to unaudited condensed consolidated interim financial statements.

Wrap Technologies, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

Nine Months ended September 30,

Common Stock issued upon convertible preferred stock exercising conversion rights

Common Stock issued upon vesting of restricted stock units

Net income for the period

Balance at March 31, 2024

accompanying notes to unaudited condensed consolidated interim financial statements.

Technologies, Inc.

Consolidated Statements of Cash Flows

Three Months ended March 31,

Cash Flows From Operating Activities:

Net income (loss)

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

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

Depreciation and amortization

14 unchanged sentences

Deferred Revenue

Changes in other non-current assets and goodwill

Changes in other non-current assets

Net cash used in operating activities

Cash Flows From Investing Activities:

Purchase of short-term investments

Proceeds from maturities of short-term investments

1 unchanged sentence

Investment in patents and trademarks

Purchase of intangible assets

Net cash paid for acquisition of Intrensic

Proceeds (cash outlay for) long-term deposits

Net cash provided by investing activities

Net cash paid for acquisition of W1, LLC

Net cash (used in) provided by investing activities

Cash Flows From Financing Activities:

Proceeds from exercise of stock options

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

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

Dividends settled in Cash

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

1 unchanged sentence

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

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.

Notes to Condensed Consolidated Interim Financial Statements

(in thousands, except per share and share amounts)

accompanying notes to unaudited condensed consolidated interim financial statements.

Technologies, Inc.

to Condensed Consolidated Interim Financial Statements

thousands, except per share and share amounts)

ORGANIZATION, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT DEVELOPMENTS

Organization and Business Description

Wrap Technologies, Inc., a Delaware corporation (the “ Company ”, “ we ”, “ us ”, and “ our ”), is a publicly traded company with its common stock, par value $ 0.0001 per share (“ Common Stock ”), listed on the Nasdaq Capital Market (“ Nasdaq ”) under the trading symbol “WRAP”.

The Company is a developer and supplier of public safety products and training services for law enforcement and security personnel.

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

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

Basis of Presentation

The Company’s unaudited interim condensed consolidated financial statements included herein have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X and the rules and regulations of the Securities and Exchange Commission (“ SEC ”).

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

and Business Description

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

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

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

and training services for law enforcement and security personnel.

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

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

East and Asia.

of Presentation

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

the instructions to Form 10-Q and Article 8 of Regulation S-X and the rules and regulations of the Securities and Exchange

Commission (“ SEC ”).

Certain information and footnote disclosures normally included in financial statements

prepared in accordance with U.S.

generally accepted accounting principles (“ U.S.

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

In management’s opinion, the accompanying financial statements reflect adjustments necessary to present fairly the financial position, results of operations, and cash flows for those periods indicated, and contain adequate disclosure to make the information presented not misleading.

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

The condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “ Annual Report ”), as filed with the SEC on August 28, 2024.

The accompanying condensed consolidated balance sheet as of December 31, 2023 has been derived from the audited consolidated balance sheet as of December 31, 2023, contained in the Annual Report.

GAAP ”) have been condensed or

omitted pursuant to such rules and regulations.

In management’s opinion, the accompanying financial statements reflect

adjustments necessary to present fairly the financial position, results of operations, and cash flows for those periods indicated,

and contain adequate disclosure to make the information presented not misleading.

Adjustments included herein are of a normal,

recurring nature unless otherwise disclosed in the footnotes.

The condensed consolidated financial statements and notes thereto

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

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

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

The accompanying condensed consolidated balance sheet as of December

31, 2024 has been derived from the audited consolidated balance sheet as of December 31, 2024, contained in the Annual Report.

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

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

Principles of Consolidation

The Company has two wholly owned subsidiaries, Wrap Reality, Inc., an Arizona corporation, formed in December 2020 that sells a virtual reality (“ VR ”) training system primarily targeting law enforcement agencies and Intrensic, LLC (“ Intrensic ”), which the Company acquired in August 2023, which specializes in Body Worn Camera and Digital Evidence Management solutions.

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

Segment and Related Information

The Company operates as a single segment.

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

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

of Consolidation

Company has two wholly owned subsidiaries, Wrap Reality, Inc., an Arizona corporation, formed in December 2020 that sells a virtual reality

(“ VR ”) training system primarily targeting law enforcement agencies and Intrensic, LLC (“Intrensic”),

which the Company acquired in August 2023, which specializes in Body Worn Camera and Digital Evidence Management solutions.

The consolidated

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

and Related Information

Company operates as a single segment.

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

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

Refer to Note 15.

Major Customers and Related Information for further discussion.

Goodwill represents the difference, if any, between the aggregate consideration paid for an acquisition and the fair values of the underlying net assets and liabilities assumed from an acquired business.

Major Customers

and Related Information for further discussion.

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

net assets and liabilities assumed from an acquired business.

Goodwill is not amortized, but instead is tested for impairment.

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

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

Definite-lived Intangible Assets

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

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

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

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

7 years for customer relationships;

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

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

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

Definite-lived

Intangible Assets

Definite-lived

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

Definite-lived

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

Definite-lived intangible

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

The Company amortizes these acquired

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

between 3 and 7 years for

customer relationships;

and 8 years for trademarks and trade names.

Use of Estimates

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

GAAP requires management to make estimates and assumptions (e.g., stock-based compensation valuation, allowance for doubtful accounts, valuation of inventory and intangible assets, warranty reserve, accrued expense, valuation of warrants, and recognition and measurement of contingencies) that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and affect the reported amounts of revenue and expense during the reporting period.

preparation of financial statements in conformity with U.S.

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

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

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

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

and expense during the reporting period.

Actual results could materially differ from those estimates.

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

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

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

For issued warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.

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

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

This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s condensed consolidated statement of operations.

Series A Preferred Stock

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 480 and ASC 815 to determine if those instruments or embedded components of those instruments qualify as derivatives and are subject to bifurcation accounting.

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

Company accounts for warrants as liability-classified instruments based on an assessment of the warrant’s specific terms and applicable

authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).

assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability

pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether

the warrants are indexed to the Company’s own shares of Common Stock and whether the warrant holders could potentially require

“net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent

quarterly period end date while the warrants are outstanding.

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

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

The Company accounts for the warrants issued in accordance

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

as liabilities.

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

value at each reporting period.

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

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

A Preferred Stock

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

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

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

to the economic characteristics and risks of the host contract.

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

Additionally, the convertible instruments do not have any redemption features that would preclude permanent equity classification in accordance with the guidance contained in ASC 480-10-S99.

The Company issued the Series A Warrants (as defined herein), which are classified as liabilities and measured at fair value on a recurring basis, and Series A Preferred Stock (as defined herein) in one transaction.

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

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

Revenue Recognition

The Company adopted ASC Topic 606, Revenue from Contracts with Customers on January 1, 2018.

The Company enters into contracts that include various combinations of products, accessories, software and services, each of which are generally distinct and are accounted for as separate performance obligations.

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

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

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

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

The issuance proceeds

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

Under this method, the Company first allocated the issuance proceeds to the Series

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

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

Revenue is recognized

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

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

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

distinct and are accounted for as separate performance obligations.

Product sales include BolaWrap products and accessories.

services revenue represents the consulting services provided to customers as a result of the Company’s acquisition of W1, LLC (“W1”)

in February 2025.

Other revenue includes VR revenues, service, training and shipping revenues.

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

The Company generally has an unconditional right to consideration when customers are invoiced, and a receivable is recorded.

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

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

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

The Company may receive consideration, per terms of a contract, from customers prior to transferring goods to the customer.

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

The Company generally has an unconditional right

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

A contract asset is recognized when revenue is recognized

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

The Company recognizes

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

These costs are ascribed to or allocated

to the underlying performance obligations in the contract.

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

prior to transferring goods to the customer.

The Company records customer deposits as a contract liability.

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

Additionally, the Company

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

In such instances, a deferred revenue liability is recorded.

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

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

The Company recognizes these contract liabilities as revenue

after all revenue recognition criteria are met.

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

the related product.

Royalties are also charged to cost of products sold.

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.

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

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 4,979,745 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.

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation.

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 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

In November 2023, the Financial Accounting Standards Board (FASB) issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires an enhanced disclosure of significant segment expenses on an annual and interim basis.

This guidance will be effective for the annual periods beginning the year ended December 31, 2024, and for interim periods beginning January 1, 2025.

Early adoption is permitted.

Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating segment disclosures related to its annual report for fiscal year 2024.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (ASU 2023-09), which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction.

It also includes certain other amendments to improve the effectiveness of income tax disclosures.

This guidance will be effective for the annual periods beginning the year ended December 31, 2025.

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.

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

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

Such add-back would also include any

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

or induced conversion, if any.

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 7,595,515

shares and 5,476,219

shares of Common Stock were outstanding as of March 31, 2025 and 2024, respectively.

These securities are not included in the

computation of diluted net loss per common share for the periods presented as their inclusion would be antidilutive due to losses

incurred by the Company.

Reclassification

of Prior Year Presentation

prior year amounts have been reclassified for consistency with the current year presentation.

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 the quarterly period ending March 31, 2024 and the fiscal year ended December 31, 2024, to reclassify the Series A Preferred

Stock at par value.

Issued Accounting Guidance Not Yet Effective

November 4, 2024, the FASB issued ASU 2024-03,2 (“ASU 2024-03”) which requires disaggregated disclosure of income statement

expenses for public business entities (“PBEs”).

ASU 2024-03 does not change the expense captions an entity presents on the

face of the income statement;

rather, it requires disaggregation of certain expense captions into specified categories in disclosures

within the footnotes to the financial statements.

ASU 2024-03 adds ASC 220-40 to require a footnote disclosure about specific expenses

by requiring PBEs to disaggregate, in a tabular presentation, each relevant expense caption on the face of the income statement that

includes any of the following natural expenses:

(1) purchases of inventory, (2) employee compensation, (3) depreciation, (4) intangible

asset amortization, and (5) depreciation, depletion, and amortization (DD&A) recognized as part of oil- and gas-producing activities

or other types of depletion expenses.

The tabular disclosure would also include certain other expenses, when applicable.

does not change or remove existing expense disclosure requirements;

however, it may affect where that information appears in the footnotes

to the financial statements.

ASU 2024-03 is effective for all PBEs for fiscal years beginning after December 15, 2026, and interim periods

within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

Upon adoption, the guidance can be applied prospectively or retrospectively.

The Company is currently evaluating income tax disclosures related to its annual report for fiscal year 2025.

The Company has not yet adopted this ASU during the

year ended December 31, 2024.

The Company is currently evaluating the impacts of ASU 2024-03 on its financial statements.

REVENUE AND PRODUCT COSTS

Revenue consists of product revenue and other revenue.

consists of product revenue and other revenue.

Product sales include BolaWrap products and accessories.

Other revenue includes VR revenue, service, training and shipping revenue.

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

The Company generally has an unconditional right to consideration when customers are invoiced, and a receivable is recorded.

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

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

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

The Company may receive consideration, per terms of a contract, from customers prior to transferring goods to the customer.

Other revenue includes VR revenue,

service, training and shipping revenue.

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

The Company generally has an unconditional right

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

A contract asset is recognized when revenue is recognized

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

The Company recognizes

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

These costs are ascribed to or allocated

to the underlying performance obligations in the contract.

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

prior to transferring goods to the customer.

The Company records customer deposits as a contract liability.

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

Additionally, the Company

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

In such instances, a deferred revenue liability is recorded.

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

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

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 three months

ended March 31, 2025.

OF CONTRACT LIABILITIES

Balance at January 1, 2025

1 unchanged sentence

Transfer to revenue

Balance at September 30, 2024

Balance at March 31, 2025

Current portion

Long-term portion

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.

of March 31, 2025, the Company’s deferred revenue of $ 350 consisted of $ 57 related to VR, $ 234 related to Intrensic, $ 54 related

to BolaWrap extended warranties and services and $ 5 related to training.

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

the related product.

Royalties are also charged to the cost of products sold.

FINANCIAL INSTRUMENTS

Assets and liabilities recorded at fair value on a recurring basis in the Condensed Consolidated Balance Sheets and assets and liabilities measured at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values.

The accounting guidance for fair value provides a framework for measuring fair value and requires certain disclosures about how fair value is determined.

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

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

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

The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

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

Level 2 —Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities;

Level 3 —Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

The Company’s short-term investments consisting of U.S.

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 September 30, 2024, and December 31, 2023.

As of September 30, 2024

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

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

used to measure their fair values.

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

certain disclosures about how fair value is determined.

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

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

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

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

Observable inputs reflect market data obtained from

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

The three-level hierarchy for

the inputs to valuation techniques is briefly summarized as follows:

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

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

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

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

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

by little or no market data.

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

OF SHORT TERM INVESTMENTS

As of March 31, 2025

Money Market Funds

Certificate of Deposits

Total Financial Assets

1 unchanged sentence

Money Market Funds

Certificate of Deposits

Total Financial Assets

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 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 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:

September 30,

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

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 three months ended March 31, 2025, as well as the three months ended March 31, 2024, no gain (loss)

was recorded to comprehensive loss.

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

The subsequent measurement of the warrant liabilities as of March

31, 2025, is classified as Level 3 due to the use of an observable market quote in a non-active market and the management’s assumption

of the expected stock price volatility.

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

of the period of warrant liabilities:

OF FAIR OF WARRANT LIABILITIES

March 31, 2025

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

Warrants issued with Private Placement

Change in fair value of warrant liabilities

Fair value as of period end

The Company uses the modified Black-Scholes option pricing model to determine the fair value of warrant liabilities.

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

September 30,

Company uses the modified Black-Scholes option pricing model to determine the fair value of warrant liabilities.

The following table

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

OF BLACK SCHOLES OPTION PRICING MODEL OF WARRANT LIABILITIES

March 31, 2025

Expected stock price volatility

1 unchanged sentence

Dividends yield

Expected life of warrants (years)

Exercise price

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

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

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

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

Weighted average expected life of warrants (years)

Weighted average exercise price

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

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

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

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

the FIFO cost method.

Inventories consisted of the following:

September 30,

March 31, 2025

December 31, 2024

Finished goods

3 unchanged sentences

PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:

September 30,

and equipment consisted of the following:

OF PROPERTY AND EQUIPMENT

March 31, 2025

December 31, 2024

Production and lab equipment

1 unchanged sentence

Furniture, fixtures and improvements

Property and equipment, gross

Accumulated depreciation

Property and equipment, net

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

Intangible Assets, net

Intangible assets, net consisted of the following:

September 30,

expense was $ 40 and $ 116 for the three months ended March 31, 2025 and 2024, respectively.

INTANGIBLE ASSETS

assets, net consisted of the following:

SCHEDULE OF FINITE-LIVED INTANGIBLE ASSETS

March 31, 2025

Amortizable intangible assets:

1 unchanged sentence

Customer Relationships

Amortizable intangible assets, gross

Accumulated amortization

2 unchanged sentences

Total intangible assets, net

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:

expense was $ 115 and $ 107 for the three months ended March 31, 2025 and 2024, respectively.

of March 31, 2025, future amortization expense is as follows:

SCHEDULE OF FINITE-LIVED INTANGIBLE ASSETS, FUTURE AMORTIZATION EXPENSE

2025 (9 months)

Total estimated amortization expense

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

We are obligated to pay royalties pursuant to an exclusive Amended and Restated Intellectual Property License Agreement (the “ License Agreement ”), dated as of September 30, 2016, with Syzygy Licensing, LLC (“ Syzygy ”), a private technology invention, consulting and licensing company owned and controlled by Elwood G.

Norris, a founder and former officer and current 5% or greater stockholder of the Company, and James A.

are obligated to pay royalties pursuant to an exclusive Amended and Restated Intellectual Property License Agreement (the “License

Agreement”), dated as of September 30, 2016, with Syzygy Licensing, LLC (“Syzygy”), a private technology invention,

consulting and licensing company owned and controlled by Elwood G.

Norris, a founder and former officer and current 5% or greater stockholder

of the Company, and James A.

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

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,

Accounts payable includes $ 81 due

to Syzygy as of March 31, 2025, and December 31, 2024.

liabilities consist of the following:

SCHEDULE OF ACCRUED LIABILITIES

March 31, 2025

Patent and legal costs

1 unchanged sentence

Warranty costs

Contract settlement

Accrued purchases

Taxes and other

Changes in our estimated product warranty costs were as follows:

Nine Months Ended

September 30,

in our estimated product warranty costs were as follows:

SCHEDULE OF PRODUCT WARRANTY LIABILITY

Months Ended March 31,

Balance, beginning of period

2 unchanged sentences

Balance, end of period

On June 29, 2023, the Company entered into a Securities Purchase Agreement (the “ Series A Purchase Agreement ”) with certain directors of the Company and certain accredited and institutional investors (collectively, the “ Series A Investors ”), pursuant to which it agreed to sell to the Series A Investors in a registered direct offering (the “ Series A Offering ”) (i) an aggregate of 10,000 shares of the Company’s newly-designated Series A Convertible Preferred Stock, with par value $ 0.0001 per share and a stated value of $ 1,000 per share (the “ Series A Preferred Stock ”), initially convertible into up to 6,896,553 shares of Common Stock, at an initial conversion price of $ 1.45 per share (the “ Conversion Price ”), and (ii) warrants to acquire up to an aggregate of 6,896,553 shares of Common Stock (the “ Series A Warrants ”).

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

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

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

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

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

(i) an aggregate

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

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

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

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

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

and will expire 5 years following the date of issuance.

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

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

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

exercise price (subject to certain exceptions).

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

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

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, 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.

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

Due to a lack of financing history or ability, the Company uses an estimate of low-grade debt rate published by the Federal Reserve Bank as its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments.

The ROU asset includes any lease payments made and excludes lease incentives and initial direct costs incurred.

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

The aggregate gross proceeds

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

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

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

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

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

The purchase price for

one Common Share and accompanying PIPE Warrant was $ 1.80 .

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

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

Company determines if an arrangement is a lease at inception.

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

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

a period of time in exchange for consideration.

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

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

The Company’s leases do not

provide an implicit rate.

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

by the Federal Reserve Bank as its incremental borrowing rate based on the information available at the commencement date in determining

the present value of future payments.

The ROU asset includes any lease payments made and excludes lease incentives and initial direct

costs incurred.

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

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

Upon execution of the amendment, which was deemed a lease modification, the Company reassessed the lease liability using the discount rate determined at the modification date and recorded an additional ROU asset for the same amount.

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

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

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

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:

Upon execution of the amendment,

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

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

The Company’s lease contains renewal provisions and escalating rental

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

The renewal provisions of

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

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

expense was $ 74 and $ 71 for the three months ended March 31, 2025, and 2024, respectively.

lease expense for capitalized operating leases included in operating activities was $156 and $249 for the three months ended March 31,

2025, and 2024, respectively.

lease obligations recorded on the balance sheet at March 31, 2025 are:

SCHEDULE OF OPERATING LEASE OBLIGATIONS

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 September 30, 2024 for future periods are as follows:

lease payments included in the measurement of lease liabilities on the balance sheet at March 31, 2025 for future periods are as follows:

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

2025 (9 months)

1 unchanged sentence

Less imputed interest

The weighted average remaining lease term is 6.23 years, and the weighted average discount rate is 14.52 %.

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

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

The Company had $ 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.

weighted average remaining lease term is 5.89 years, and the weighted average discount rate is 14.80 % .

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

These expenses are treated

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

The Company had $ 23

and $ 9 variable lease expenses for the three months ended March 31, 2025 and 2024, respectively.

Company had $ 0 and $ 11 short-term lease expense for the three months ended March 31, 2025 and 2024, respectively.

The Company does not

have any finance leases.

STOCKHOLDERS’ EQUITY

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.

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 per share.

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

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

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

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

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 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.

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 Securities Exchange Act of 1934, as amended, 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 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.

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 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 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.

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.

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.

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

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

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

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

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

Stock (the “Certificate of Designations”).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(as defined in the Certificate of Designations).

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

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

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

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

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

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

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

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

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

and (C) such Delinquent Dividend Amounts and any

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

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

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

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

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

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

provided that such issuance

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

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

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

the Certificate of Designations.

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

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

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

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

described in the Certificate of Designations are satisfied.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

in the Certificate of Designations.

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

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

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

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

The October 2024 Certificate of Amendment

was filed with the Secretary of State of the State of Delaware, effective as of October 14, 2024.The holders of the Series A Preferred

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

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

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

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

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

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

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

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

The November 2024 Certificate of Amendment

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

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

The Certificate of Amendment became

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

the time of issuance, $ 2,036

of the net proceeds less transaction cost of the Series A Purchase Agreement was allocated to the 10,000

shares of Series A Preferred Stock initially issued.

As of December 31, 2024, a total of 1,793

shares of Series A Preferred Stock were converted into approximately 1,468,000

shares of Common Stock.

There were no additional conversions in the three months end March 31, 2025.

As of March 31, 2025, the

Company has authorized, declared and paid $ 164

in dividends in the form of shares of the Company’s Common Stock during the three months ended March 31, 2025.

For the three

months ended March 31, 2024, authorized and declared dividends totaling $ 189 ,

of which $ 60

was paid in cash, $ 129

was paid in shares of the Company’s Common Stock.

SHARE-BASED COMPENSATION

On March 31, 2017 , the Company adopted, and the stockholders approved, the 2017 Stock Incentive Plan (the “ Plan ”) authorizing 2,000,000 shares of Common Stock for issuance as awards to employees, directors or consultants.

In May 2019 , the stockholders ratified an increase in the Plan authorizing an additional 2,100,000 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 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 nine months ended September 30, 2024:

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

2017 Equity Incentive

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

Under the 2017

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

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

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

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

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

The 2017 Plan

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

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

The 2017 Plan was

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

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

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

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

of March 31, 2025, there were 4,848,259 shares of Common Stock remaining available for grant under the 2017 Plan.

following table summarizes stock option activity for the three months ended March 31, 2025:

SCHEDULE OF STOCK OPTION ACTIVITY

Weighted Average

1 unchanged sentence

Forfeited, cancelled, expired

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.

Outstanding March 31, 2025

Exercisable March 31, 2025

of March 31, 2025, there were 4,806,045 service-based stock options outstanding, and 1,290,166 performance-based stock options outstanding

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

capitalization targets.

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

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

For the Nine Months

Ended September 30,

SCHEDULE OF STOCK OPTION ACTIVITY, FAIR VALUE OF ASSUMPTIONS

For the Three Months

Ended March 31,

Expected stock price volatility

3 unchanged sentences

Weighted-average fair value of options granted

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

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

The Company’s calculation of estimated volatility is based on historical stock prices of these peer entities over a period equal to the expected life of the awards.

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

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

life of awards.

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

stock prices were publicly available.

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

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

The Company uses the historical volatility of peer entities

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

The Company records forfeitures as they are incurred.

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

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

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

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

Stock option expense was $ 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

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

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

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

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

Treasury bonds whose maturity period is

appropriate for the term of the options.

The dividend yield of zero 0

is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends.

calculates the expected life of the options using the Simplified Method for the employee stock options as the Company does not have

sufficient historical exercise data.

option expense was $ 387 and $ 484 for the three months ended March 31, 2025 and 2024, respectively.

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

RSUs are settled in shares of the Company’s Common

Stock as the RSUs vest.

The following table summarizes RSU activity for the three months ended March 31, 2025:

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

Service-Based

2 unchanged sentences

Forfeited and cancelled

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.

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

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

RSU expense was $ 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

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

Unvested at March 31, 2025

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

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

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

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

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

expense was $ 1,278 and $ 191 for the three months ended March 31, 2025 and 2024, respectively.

Compensation Expense

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

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

Months Ended March 31,

Selling, general and administrative

1 unchanged sentence

Total share-based expense

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.

of March 31, 2025, total estimated compensation cost of stock options granted and outstanding but not yet vested was $ 5,304 which is

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

of March 31, 2025, total estimated compensation cost of RSUs granted and outstanding but not yet vested was $ 1,540 , which is expected

to be recognized over the weighted average period of 2.73 years.

DEFINED CONTRIBUTION PLAN

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

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

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

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

the Internal Revenue Code.

This plan was formed on January 1, 2022.

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

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

Eligible employees may contribute a percentage of their salary subject

to certain limitations.

The Company’s contributions for each of the three months ended March 31, 2025 and 2024 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.

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 $ 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.

Party Technology License Agreement

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 and consultant to the Company, Mr.

Elwood Norris, and Mr.

James Barnes, a

stockholder of the Company and consultant to the Company.

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 $ 0 and $ 46 for the three months ended March 31, 2025 and 2024, respectively, related to such royalties.

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

Purchase Commitments

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

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

of March 31, 2025, the Company was committed for approximately $ 509 for future component deliveries that are generally subject to modification

or rescheduling in the normal course of business.

Indemnifications

and Guarantees

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

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

The Company is unable to estimate with any reasonable accuracy the liability that may be incurred pursuant to any such indemnification obligations now or in the future.

Because of the uncertainty surrounding these circumstances, the Company’s current or future indemnification obligations could range from immaterial to having a material adverse impact on its financial position and its ability to continue in the ordinary course of business.

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

obligations now or in the future.

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

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

the ordinary course of business.

The Company has no liabilities recorded for such indemnities.

Regulatory Agencies

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

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

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

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

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

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

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

The Company records a provision for a liability

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

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

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

As of March 31, 2025, the Company had no provision for liability

under existing litigation.

RELATED PARTY TRANSACTIONS

Series A Preferred Stock

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

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

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

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

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

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

Consulting Services

Commencing in October 2017, the Company began reimbursing Mr.

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 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.

A Preferred Stock

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

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

Cohen has voting and dispositive control with respect to the securities

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

Pursuant to the Series A Purchase Agreement, the Company issued

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

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

For the three months ended March 31, 2025, Mr.

Cohen earned dividends

totaling $ 60 on his Series A Preferred Stock.

in October 2017, the Company began reimbursing Mr.

Elwood Norris, a former officer, current 5% or more 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 $ 0 and $ 15

during each of the three months ended March 31, 2025 and 2024, respectively.

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.

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.

During the three months ended March

31, 2025 and 2024, the Company incurred royalties to Syzygy of $ 0 and $ 46 respectively.

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

V4 Global, LLC

(“V4”), an entity controlled by Mr.

Cohen, the Company’s Chief Executive Officer;

Continuum Ventures, LLC

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

Savbo Investments LLC (“Savbo”), an entity controlled by Marc Savas, a member of the Company’s Board, pursuant to

which, the Company issued and sold in a private placement an aggregate of 3,216,666 shares

of common stock and PIPE Warrants with an exercise price of $ 1.80 per

share, to purchase up to 3,216,666

shares of Common Stock (the “Private Placement”).

Pursuant to the Private Placement, the Company sold to (i) V4 1,100,000

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

shares of Common Stock, for aggregate gross proceeds of $ 1,980 ,

(ii) Continuum an aggregate of 275,000

shares of Common stock and PIPE Warrants to purchase up to an aggregate of 275,000

shares of Common Stock for aggregate gross proceeds of $ 495

and (iii) Savbo an aggregate of 50,000

shares of Common stock and PIPE Warrants to purchase up to an aggregate of 50,000

shares of Common Stock for aggregate gross proceeds of $ 90 .

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

MAJOR CUSTOMERS AND RELATED INFORMATION

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.

The following table summarizes revenue by geographic region.

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

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

For the three months ended March 31, 2024, revenue from

one distributor accounted for approximately 68 % of revenues, with no other single customer accounting for more than 10 % of total revenue.

March 31, 2025, accounts receivable from two

customers accounted for 15 %

and 15 % of net accounts receivable with no other single customer accounting for more than 10 %

of the accounts receivable balance.

At December 31, 2024, accounts receivable from one

distributor accounted for 68 %

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

of the accounts receivable balance.

following table summarizes revenue by geographic region.

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

SCHEDULE OF DISAGGREGATION OF REVENUE

For the Three Months

For the Nine Months

Ended September 30,

Ended March 31,

Europe, Middle East and Africa

Total revenues

W1 ACQUISITION

February 18, 2025, the Company and W1, 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 used in, held for use in or relating to the business of advisory and investigative professional services which were

specific identified customer contracts.

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

as intangible assets included in Customer Relationships (See

Note 6 “Intangible Assets” above).

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

included as part of the W1 asset acquisition.

SUBSEQUENT EVENTS

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.

Company has reviewed activities through May 15, 2025, and determined that there are no subsequent events that require disclosure in accordance

with ASC 855-10-25-1.

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