What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-14 compared with 2025-05-15 · 299 added, 246 removed, 414 unchanged (57% of the section changed)

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should read the following discussion in conjunction with the financial statements and other financial information included elsewhere

in this Quarterly Report on Form 10-Q (this “ Report ” ) and with our audited financial statements and other information

presented in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “ Annual Report ” ).

Report may contain or incorporate by reference forward-looking statements within the meaning of Section 27A of the Securities Act of

1933, as amended (the “ Securities Act ” ), and Section 21E of the Securities Exchange Act of 1934, as amended

(the “ Exchange Act ” ).

Such forward-looking statements are based upon management ’ s assumptions,

expectations, projections, intentions and beliefs about future events.

Except for historical information, the use of predictive, future-tense

or forward-looking words such as “ expect, ” “ anticipate, ” “ intend, ” “ plan, ”

“ believe, ” “ seek, ” “ estimate, ” “ continue, ” “ may, ”

“ will, ” “ could, ” “ would, ” or the negative or plural of such words and similar

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

forward-looking statements.

Such forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors

that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the

forward-looking statements.

Factors that could cause or contribute to these differences include, but are not limited to, those discussed

below and elsewhere in this Report and in our other filings with the Securities and Exchange Commission ( “ SEC ” ),

including particularly matters set forth under Part I, Item 1A (Risk Factors) of the Annual Report.

Furthermore, such forward-looking

statements speak only as of the date of this Report.

Except as required by law, we undertake no obligation to update any forward-looking

statements to reflect events or circumstances after the date of such statements.

in this Quarterly Report on Form 10-Q (this “ Report ” ) and with our audited financial statements and other

information presented in our Annual Report on Form 10-K for the year ended December 31, 2024 (as amended, the “ Annual

This Report may contain or incorporate by reference forward-looking statements within the meaning of Section

27A of the Securities Act of 1933, as amended (the “ Securities Act ” ), and Section 21E of the Securities

Exchange Act of 1934, as amended (the “ Exchange Act ” ).

Such forward-looking statements are based upon

management ’ s assumptions, expectations, projections, intentions and beliefs about future events.

Except for historical

information, the use of predictive, future-tense or forward-looking words such as “ expect, ”

“ anticipate, ” “ intend, ” “ plan, ” “ believe, ”

“ seek, ” “ estimate, ” “ continue, ” “ may, ”

“ will, ” “ could, ” “ would, ” or the negative or plural of such words and

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

identifying forward-looking statements.

Such forward-looking statements are subject to several risks, uncertainties, assumptions and

other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or

implied by the forward-looking statements.

Factors that could cause or contribute to these differences include, but are not limited

to, those discussed below and elsewhere in this Report and in our other filings with the Securities and Exchange Commission

( “ SEC ” ), including particularly matters set forth under Part I, Item 1A (Risk Factors) of the Annual

Furthermore, such forward-looking statements speak only as of the date of this Report.

Except as required by law, we

undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such

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

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is now sold to law enforcement agencies for simulation training as well as corrections departments for the societal reentry scenarios.

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

and local law enforcement agencies in the U.S.

target market for our product and technology enabled services includes approximately 900,000 full-time sworn law enforcement officers

in over 18,000 federal, state, and local law enforcement agencies in the U.S.

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

Additionally, we are exploring

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

Our international focus is on countries with the largest

police forces.

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

expected to grow to $16.1 billion by 2027.

Additionally, we are exploring opportunities to increase our presence in other adjacent markets, such as military and private security.

Our international focus is on countries with the largest police forces.

According to 360iResearch, a market research consulting firm,

our non-lethal products are part of a global market segment expected to grow to $16.1 billion by 2027.

focus our efforts on the following products and services:

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

an individual at a range of 10-25 feet.

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

individual at a range of 10-25 feet.

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

to painful force options.

to painful use of force options.

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

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Intrensic - a Body-Worn Camera and Digital Evidence Management solutions provider.

BWC and DEM play crucial roles in capturing,

storing, and managing digital evidence, such as video and audio recordings for various purposes, including criminal investigations and

maintaining transparency in public interactions.

The Wrap Intrensic X2 camera hardware and storage and data management capability, along

with awareness of front-line operations, provides customers with a solution to meet their challenges.

Wrap Intrensic Evidence on our

cloud-based video storage platform provides an unlimited video storage platform that includes video and other evidence uploading, search,

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

BWC and DEM play crucial roles in capturing, storing,

and managing digital evidence, such as video and audio recordings for various purposes, including criminal investigations and maintaining

transparency in public interactions.

The Wrap Intrensic X2 camera hardware and storage and data management capability, along with awareness

of front-line operations, provides customers with a solution to meet their challenges.

Wrap Intrensic Evidence on our cloud-based video

storage platform provides an unlimited video storage platform that includes video and other evidence uploading, search, retrieval, redaction,

and evidence sharing while reducing the need for resources required to manage this evidence.

addition to the U.S.

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

We have established an active distributor

network representing 50 states and one dealer representing the U.S.

territory of Puerto Rico.

We have distribution agreements with 35

international distributors covering 75 countries.

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

distribution network in addition to our internal sales team.

We have distribution agreements

with 22 international distributors covering 43 countries.

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

our distribution network in addition to our internal sales team.

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

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

February 18, 2025, we 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, we acquired 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 primarily the customer contracts assigned

at the closing, for a nominal purchase price.

February 18, 2025, we entered into an Asset Purchase Agreement, dated as of February 18, 2025, pursuant to which, subject to the

terms and conditions set forth therein, we acquired substantially all the assets of W1 Global, LLC, (“W1”) used in, held

for use in or relating to the business of advisory and investigative professional services, which were primarily the customer

contracts assigned at the closing, for a nominal purchase price.

Outlook and Challenges

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As a result, we believe our brand is becoming increasingly

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

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

We believe there are market opportunities for our remote restraint

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

recognized on a global scale as a leader in Pre-Escalation and non-lethal solutions.

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

We believe there are increasing market opportunities

for our products and solutions in the law enforcement and security sectors worldwide.

These opportunities are driven by the increasing

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law enforcement agencies and in 62 countries.

Due to its safe remote restraint capabilities, some agencies

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

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

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

Due to its non-lethal, non-pain-based-compliance capabilities,

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

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

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

agencies voluntarily report usage to Wrap but many do not.

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From the information we have

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

use case is during domestic violence calls.

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

influence of alcohol or drugs.

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

common BolaWrap use case is during domestic violence calls.

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

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

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

our future revenue growth.

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

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

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

to our future revenue growth.

anticipate and believe that our portfolio of non-lethal, non-pain-based compliance products and training services has a strong and expanding

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

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

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ultimately materialize.

anticipates that our portfolio of products has a strong and expanding pipeline of market opportunities in the law enforcement, military,

corrections, and homeland security sectors both domestically and internationally.

With the increasing demand for more humane and safer

policing practices, continued need for ongoing training and transparency for police encounters, we expect a continued surge in our global

Currently, we are exploring major international business prospects while simultaneously seeking to establish relationships

with large police agencies in the U.S.

However, we acknowledge that it is challenging to predict the exact timeline for closing these

deals, or whether they will ultimately materialize.

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

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respective departments to drive successful outcomes.

As of March 31, 2024, over 1,530 agencies have received BolaWrap training with over

As of June 30, 2025, over 1,580 agencies have received BolaWrap training with over

5,520 training officers at those agencies certified as BolaWrap instructors and qualified to train the rest of their departments, representing

an 10% increase in agencies and a 10% increase in trained officers as compared to March 31, 2024.

expense of $4.5 million for the three months ended March 31, 2025 decreased by $458 thousand, when compared to $5.0 million for the

three months ended March 31, 2024, as a result of the Company’s cost containment initiatives enacted beginning during the first

half of 2024.

a 4% increase in agencies and a 3% increase in trained officers as compared to June 30, 2024.

expense of $3.3 million for the three months ended June 30, 2025 decreased by $0.9 million, when compared to $4.2 million for the three

months ended June 30, 2024, as a result of the Company’s cost containment initiatives enacted beginning during the first half of

Operating expense of $7.9 million for the six months ended June 30, 2025 decreased by $1.2 million, when compared to $9.1 million

for the six months ended June 30, 2024.

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

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

If departments follow our Use of Force Guarantee requirements,

we have offered to buy back their BolaWrap devices if their reportable use of force is not reduced by 10%.

With an increasing addressable

market, the Company offers what we believe is a unique value proposition.

Our improved pricing strategy, coupled with reduced operating

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

With an increasing addressable market, the Company offers what

we believe is a unique value proposition.

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

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

plan to increase the number of product demonstrations and training sessions, particularly in international markets.

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which we expect to lead to an overall reduction in cash burn.

of March 31, 2025, we had backlog of approximately $64 thousand which was expected to be delivered in the second quarter of 2025.

of June 30, 2025, we had backlog of approximately $60 thousand which was expected to be delivered in the third quarter of 2025.

Additionally,

as of March 31, 2025, we had deferred revenue of $350 thousand consisting of $57 thousand related to VR, $234 thousand related to Intrensic,

as of June 30, 2025, we had deferred revenue of $325 thousand consisting of $30 thousand related to VR, $226 thousand related to Intrensic,

$50 thousand related to BolaWrap extended warranties and services and $19 thousand related to training.

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for future deliveries are generally subject to modification, rescheduling or in some instances, cancellation, in the normal course of

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

operations for the foreseeable future.

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

We recorded net income of $109 thousand during the three months ended March 31, 2025, which was in-line with the net income of

$117 thousand for the three months ended March 31, 2024.

Net cash used in operations during the three months ended March 31, 2025, was

$0.7 million less than net cash used in operations during the three months ended March 31, 2024.

This decrease in net cash used in operations

during the three months ended March 31, 2024, was primarily driven by the Company’s continued cost containment efforts.

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

We recorded net loss from operations

of $2.9 million during the three months ended June 30, 2025, compared to a net loss from operations of $3.2 million for the three months

ended June 30, 2024;

primarily driven by a decrease in operating expenses..

For the six months ended June 30, 2025 and June 30, 2024,

we recorded net loss from operations of $3.8 and $7.3 million, respectively;

primarily driven by a decrease in operating expenses.

cash used in operations improved by $2.2 million, from a net cash used in operating activities of $7.2 million for the six months ended

June 30, 2024, to net cash used in operating activities $5.0 million for the six months ended June 30, 2025.

This positive change was

primarily driven by the Company’s continued cost containment efforts and operational improvements.

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

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

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

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

products in the future.

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

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

Nevertheless, we had $6.2

million in cash and cash equivalents as of March 31, 2025.

We therefore believe we have sufficient capital to fund our operations for

the next twelve months following this Report on Form 10-Q.

However, we may require additional working capital and liquidity constraints

and access to capital markets could still negatively affect our liquidity and may require changes to our plan of operations.

Company may be positively or negatively impacted by continued social unrest, protests against racial inequality, and movements like “Defund

the Police.” Such unrest may be further fueled by misleading information or negative publicity about our solutions.

our solutions are the answer to reducing use of force and driving safer outcomes for officers and the citizens they interact with each

Although the intensity of these events may have subsided, some may still indirectly or directly, influence police agency budgets

and the funding available to current and potential customers.

In addition, participants in these events may attempt to create the impression

that our solutions are contributing to the perceived problems, potentially harming our business and operations, including our revenues,

earnings, and cash flows from operations.

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

Nevertheless, we had $4.2 million

in cash and cash equivalents as of June 30, 2025 as compared to $3.6 million as of December 31, 2024..

We therefore believe we have sufficient

capital to fund our operations for the next twelve months following this Report on Form 10-Q.

However, we may require additional working

capital and liquidity constraints and access to capital markets could still negatively affect our liquidity and may require changes to

our plan of operations.

Company may be positively or negatively impacted by continued social unrest and protests against law enforcement.

Such unrest may be

further fueled by misleading information or negative publicity about our solutions.

We believe our solutions are the answer to reducing

use of force and driving safer outcomes for officers and the citizens they interact with each day.

Although the intensity of these events

may have subsided, some may still indirectly or directly, influence police agency budgets and the funding available to current and potential

In addition, participants in these events may attempt to create the impression that our solutions are contributing to the

perceived problems, potentially harming our business and operations, including our revenues, earnings, and cash flows from operations.

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

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

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

These include share-based compensation

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

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

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

These include share-based compensation and

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

liabilities and impairments.

Recognition .

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distributors.

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

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

current economic industry trends and changes in customer payment terms.

Our judgments and estimates regarding collectability of accounts

Our judgments and estimates regarding the collectability of accounts

receivable have an impact on our financial statements.

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

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

Factors affecting

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

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

Warranty expense

is recorded in cost of revenue.

We evaluate the adequacy of this reserve each reporting period.

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

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

We accrue bonus expense each quarter based

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

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

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

warranty claims.

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

Warranty expense is recorded in cost of revenue.

We evaluate the adequacy of this reserve each reporting

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

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of each subsequent quarterly period end date while the warrants are outstanding.

As of June 30, 2025, all warrants are classified

as equity-classified instruments.

The Company accounts for its business combinations under the provisions of Accounting Standards Codification (“ASC”)

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Other than the warrants and business combination described above, there were no significant changes or modification of our critical accounting

policies and estimates involving management valuation adjustments affecting our results for the period ended March 31, 2025.

policies and estimates involving management valuation adjustments affecting our results for the period ended June 30, 2025.

Our accounting

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consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the

SEC on March 31, 2025.

SEC on March 31, 2025, as amended on April 25, 2025.

and Related Information

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factors, some of which are outside of our control.

expect our operating costs will continue to stabilize or decline slightly from the first quarter of 2025 as a result of the changes

from ongoing cost containment efforts.

We may incur additional non-cash share-based compensation costs depending on future

options and restricted stock unit grants that are impacted by stock prices and other valuation factors.

Historical expenditures are

not indicative of future expenditures.

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

We may incur additional non-cash share-based compensation costs depending on future options and restricted stock unit grants that are

impacted by stock prices and other valuation factors.

Historical expenditures are not indicative of future expenditures.

of Operations

Months Ended March 31, 2025, Compared to Three Months Ended March 31, 2024 (Unaudited)

Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024 (Unaudited)

following table sets forth for the periods indicated certain items of our condensed consolidated statement of operations.

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Report on Form 10-Q.

Three Months Ended

Three Months Ended June 30,

(in thousands, except percentage change)

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Loss from operations

reported net revenue of $765 thousand for the three months ended March 31, 2025, as compared to $1.5 million for the three months ended

March 31, 2024, or a 48% decrease.

The decrease for the three months ended March 31, 2025, as compared to March 31, 2024, is primarily

reported net revenue of $0.2 million for the three months ended June 30, 2025, as compared to $1.3 million for the three months ended

June 30, 2024, or an 84% decrease.

The decrease for the three months ended June 30, 2025, as compared to June 30, 2024, is primarily

a result of lower product orders offset by the added managed services revenue from the acquisition of the W1 business.

gross profit for the three months ended March 31, 2025, was $595 thousand, or a gross margin of 78%.

gross profit for the three months ended June 30, 2025, was $0.5 million, or a gross margin of 48%.

Our gross profit for the three months

ended March 31, 2024, was $836 thousand, or a gross margin of 57%.

ended June 30, 2024, was $1.0 million, or a gross margin of 63%.

The decrease in gross profit represented a 51% decrease compared to

the three months ended March 31, 2024, as a result of lower volume of the Bola Wrap 150 product sales offset by the added high-margin

revenue from the Company’s Intrensic acquisition in August 2023 and acquisition ofW1 in February 2025.

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

However, we expect higher margins with

the production of the BolaWrap 150 compared to previous production due to design changes and improved pricing as well as our higher margin

revenue from the Intrensic product offerings.

Our margins are also subject to variations based on the sales channels and product mix

through which our products are sold.

At present, our cassettes have lower margins than BolaWrap devices.

As we scale cassette production,

we will look to reduce our costs and drive higher cassette margins.

Cassettes were a total of 10% of our overall revenue in the three

months ended March 31, 2025, and is expected to continue to grow as a recurring revenue base as more BolaWrap devices are in the field

and the usage of BolaWrap increases due to the need of officers to de-escalate earlier to prevent injuries and use of higher levels of

Additionally, we expect that gross margins will be impacted by the added managed services and software revenue contributions in

the second half of 2025.

the three months ended June 30, 2024, because of lower volume of the Bola Wrap 150 product sales offset by the added high-margin revenue

from the Company’s acquisition of W1 in February 2025.

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

At present, our cassettes

have lower margins than BolaWrap devices.

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

Cassettes were a total of 14% of product sales and 3% of our overall revenue in the three months ended June 30, 2025, and is

expected to continue to grow as a recurring revenue base as more BolaWrap devices are in the field and the usage of BolaWrap increases.

Additionally, we expect that gross margins will be impacted by growing our technology enabled services revenue contributions in the second

half of 2025.

global supply chain has experienced notable component shortages, extended lead times, cost fluctuations, and logistical constraints,

all of which have affected our product costs.

Although we have seen these supply chain obstacles ease in 2025, we acknowledge that future

supplier shortages, quality problems, and logistics delays could impact our production schedules and have a material negative impact

on our financial condition, results of operation, and cash flows.

General and Administrative Expense

general and administrative (“SG&A”) expense of $3.2 million for the three months ended June 30, 2025, was reduced by

$0.3 million when compared to $3.5 million for the three months ended June 30, 2024.

The decrease in SG&A expense was primarily the

result of the Company’s cost containment initiatives enacted beginning during the first half of 2024 which were offset by an increase

of $0.5 million in share-based compensation as well as by increased occupancy expenses related to the new the corporate office.

compensation costs allocated to SG&A totaled $0.8 million for the three months ended June 30, 2025, compared to $0.2 million for

the three months ended June 30, 2024, primarily due to options and grants issued to new employees as a result of the acquisition of

W1 Global, LLC (“W1”) in February 2025, as well as incentives provided to certain key senior level management in

and burden costs of $1.1 million for the three months ended June 30, 2025, were $0.1 million higher than the three months ended June

This increase reflects the addition of high-caliber talent and higher share-based compensation, coupled with ongoing cost containment

efforts, during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024.

and promotion costs were $109 thousand for the three months ended June 30, 2025, or a decrease of $98 thousand as compared to $207 thousand

during the three months ended June 30, 2024.

The changes in advertising costs were primarily related to reduced promotional items and

training product costs offset by increased video and testimonial costs.

and Development Expense

and development expenses totaling $162 thousand decreased by $511 thousand for the three months ended June 30, 2025, when compared to

the three months ended June 30, 2024.

We incurred a $375 thousand period-over-period decrease in compensation expense as well as a $18

thousand period-over-period increase in share-based compensation expense allocated to research and development expense because of reduction

of personnel.

Outside consulting costs decreased by $134 thousand for the three months ended June 30, 2025, when compared to the three months

ended June 30, 2024, primarily due to the Company’s cost reduction initiatives.

from operations of $2.9 million during the three months ended June 30, 2025, was an improvement of $0.3 million compared to loss from

operations of $3.2 million during the three months ended June 30, 2024, primarily reflecting the reduced revenues offset by lower operating

costs from the Company’s cost containment efforts.

Months Ended June 30, 2025, Compared to Six Months Ended June 30, 2024 (Unaudited)

following table sets forth for the periods indicated certain items of our condensed consolidated statement of operations.

The financial

information and the discussion below should be read in conjunction with the financial statements and notes contained in this Quarterly

Report on Form 10-Q.

Six Months Ended June 30,

(in thousands, except percentage change)

Product sales

Managed services

Technology enabled services

Total revenues

Cost of revenue

Operating expenses:

Selling, general and administrative

Research and development

Total operating expenses

Loss from operations

revenue totaled $1.8 million for the six months ended June 30, 2025, as compared to $3.0 million for the six months ended June 30, 2024,

or a 42% decrease.

The decrease for the six months ended June 30, 2025, as compared to June 30, 2024, is primarily a result of lower

product orders offset by the added managed services revenue from the acquisition of the W1 business.

gross profit for the six months ended June 30, 2025, was $1.1 million, or a gross margin of 61%.

Our gross profit for the six months

ended June 30, 2024, was $1.8 million, or a gross margin of 60%.

The decrease in gross profit represented a 40% decrease compared to

the six months ended June 30, 2024, because of lower volume of the Bola Wrap 150 product sales offset by the added high-margin revenue

from the Company’s acquisition of W1 in February 2025.

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

At present, our

cassettes have lower margins than BolaWrap devices.

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

cassette margins.

Cassettes were a total of 19% of our product sales and 6% of overall revenue in the six months ended June 30, 2025,

and is expected to continue to grow as a recurring revenue base as more BolaWrap devices are in the field and the usage of BolaWrap increases

due to the need of officers to de-escalate earlier to prevent injuries and use of higher levels of force.

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

our product costs.

on our product costs.

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

global supply chain has experienced notable component shortages, extended lead times, cost fluctuations, and logistical constraints,

Our global supply chain has experienced notable component shortages, extended lead times, cost fluctuations, and logistical constraints,

all of which have affected our product costs.

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General and Administrative Expense

general and administrative (“SG&A”) expense of $4.1 million for the three months ended March 31, 2025, was reduced by

$0.1 million when compared to $4.2 million for the three months ended March 31, 2024.

The decrease in SG&A expense was primarily

the result of the Company’s cost containment initiatives enacted beginning during the first half of 2024 which were offset by an

increase of $1.0 million in share-based compensation as well as by increased occupancy expenses related to the new the office space in

compensation costs allocated to SG&A totaled $1.6 million thousand for the three months ended March 31, 2025, compared to $675 thousand

for the three months ended March 31, 2024, primarily due to options and grants issued to new employees as a result of the acquisition

of W1 in February 2025, as well as incentives provided to certain key senior level management in 2025.

and burden costs of $799 thousand for the three months ended March 31, 2025, were approximately $0.6 million lower than the three months

ended March 31, 2024.

This reduction reflects the reduction in the Company’s workforce including a reduction of certain C-Level

During the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, we decreased professional

and consulting fees by $95 thousand reflecting the Company’s cost containment efforts.

We expect expenditures for SG&A expenses

in 2025 to increase from the first quarter’s run-rate as a result of the W1 acquisition.

and promotion costs were $81 thousand for the three months ended March 31, 2025, or a decrease of $182 thousand as compared to $263 thousand

during the three months ended March 31, 2024.

general and administrative (“SG&A”) expense of $7.1 million for the six months ended June 30, 2025, was reduced by $0.6

million when compared to $7.7 million for the six months ended June 30, 2024.

The decrease in SG&A expense was primarily the result

of the Company’s cost containment initiatives enacted beginning during the first half of 2024 which were offset by an increase

of $1.2 million in share-based compensation as well as by increased occupancy expenses related to the new the corporate office.

compensation costs allocated to SG&A totaled $2.4 million for the six months ended June 30, 2025, compared to $1.2 million for the

six months ended June 30, 2024, primarily due to options and grants issued to new employees as a result of the acquisition of W1 in February

2025, as well as incentives provided to certain key senior level management in 2025.

and burden costs of $1.9 million for the six months ended June 30, 2025, were $564 thousand lower than the $1.0 million for the six months

ended June 30, 2024.

This reduction reflects the reduction in the Company’s workforce including a reduction of certain executive

management positions.

During the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, reflecting the Company’s

cost containment efforts.

and promotion costs were $189 thousand for the six months ended June 30, 2025, or a decrease of $281 thousand as compared to $470 thousand

during the six months ended June 30, 2024.

The changes in advertising costs were primarily related to reduced trade show costs offset

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and Development Expense

and development expense totaling $378 thousand decreased by $377 thousand for the three months ended March 31, 2025, when compared

to the three months ended March 31, 2024.

We incurred a $309 thousand period-over-period decrease in compensation expense as well as

a $34 thousand period-over-period increase in share-based compensation expense allocated to research and development expense as a

result of reduction of personnel.

Outside consulting costs decreased by $21 thousand for the three months ended March 31, 2025, when

compared to the three months ended March 31, 2024, primarily due to the Company’s move to a more variable cost

from operations of $3.9 million during the three months ended March 31, 2025, was a decrease of $0.2 million compared to loss from operations

of $4.1 million during the three months ended March 31, 2024, primarily reflecting the reduced revenues offset by lower operating costs

from the Company’s cost containment efforts.

and development expenses totaling $732 thousand decreased by $702 thousand for the six months ended June 30, 2025, when compared to the

six months ended June 30, 2024, primarily due to a reduction in personnel.

Outside consulting costs decreased by $21 thousand for the

six months ended June 30, 2025, when compared to the six months ended June 30, 2024, primarily due to the Company’s cost reduction

from operations totaled $6.8 million during the six months ended June 30, 2025, which was a decrease of $0.5 million compared to loss

from operations of $7.3 million during the six months ended June 30, 2024, reflecting the reduced revenues offset by lower operating

costs from the Company’s cost containment efforts.

and Capital Resources

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

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

of stock options and warrants and future equity or debt financing.

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

As of March 31, 2025, we had cash of $6.2

million, negative working capital of $0.3 million including the $11.3 million of the Series A Warrants recorded in connection

with the issuance of the Series A Preferred Stock in July 2023 as well as the PIPE Warrants (as defined herein) issued in connection

with the Private Placement (as defined herein), and had sustained cumulative losses attributable to stockholders of $105.1 million.

Our working capital net of the warrants-short term as of March 31, 2025, was $3.6 million higher compared to December 31, 2024,

primarily as a result of the cash received in the Private Placement offset by operating losses of $3.9 million for the three months

ended March 31, 2025.

We believe we have sufficient capital to fund our operations for the next twelve months from the date of this

Quarterly Report on Form 10-Q.

However, liquidity constraints and access to capital markets could still negatively affect our

liquidity and may require changes to our investment strategy.

As of June 30, 2025, we had cash and cash equivalents

of $4.2 million and had sustained cumulative losses attributable to stockholders of $105.1 million.

Our working capital net of the warrants-short

term as of June 30, 2025, was $3.6 million higher compared to December 31, 2024, primarily as a result of the cash received in the Private

Placement offset by operating losses of $6.8 million for the six months ended June 30, 2025.

We believe we have sufficient capital to

fund our operations for the next twelve months from the date of this Quarterly Report on Form 10-Q.

However, liquidity constraints and

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

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

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

outbreaks pandemics or contagious diseases or fear of such outbreaks;

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

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

and extent of market acceptance of our products;

timing and extent of market acceptance of our products;

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

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

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

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

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

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

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

The 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

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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

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.

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to certain exceptions).

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

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

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

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

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

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

As consideration for entering into the Series

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

from the date of issuance.

Stockholder Approval

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payable by the Company.

On June 30, 2025, the Company entered into a warrant

amendment (the “2025 Warrant Amendment”) with certain of the PIPE Purchasers, pursuant to which, such PIPE Purchasers agreed

to amend the terms of their respective PIPE Warrants to make certain adjustments to the definition of “Black Scholes Value,”

as described in the 2025 Warrant Amendment, such that the underlying price per share as used in such calculation equals the sum of the

price per share being offered in cash in the applicable Fundamental Transaction (as defined in the PIPE Warrants), if any, plus the value

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

As consideration for entering into the

2025 Warrant Amendment, the Company and the applicable PIPE Purchasers agreed to amend the term of their respective PIPE Warrants to be

five and one-half years from the date of issuance.

Sheet Arrangements

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Flows from Operating Activities

the three months ended March 31, 2025, net cash used in operating activities was $3.1 million.

The net income of $109 thousand was decreased

by non-cash income of $4.0 million related to the change in fair value of warrants and increased by non-cash expense of $1.9 million

consisting primarily of share-based compensation expense of $1.7 million and depreciation and amortization of $155 thousand.

Other major component changes using operating cash included an increase of $404 thousand in prepaids and a $184 thousand increase in

accounts receivable as well as a decrease in both accounts payable of $115 thousand and accrued liabilities of $272 thousand.

the three months ended March 31, 2024, net cash used in operating activities was $3.7 million.

The net income of $117 thousand was decreased

the six months ended June 30, 2025, net cash used in operating activities was $5.0 million.

The net loss of $3.6 million was decreased

by non-cash income of $3.2 million related to the change in fair value of warrants and increased by non-cash expense of $8.2 million

consisting primarily of share-based compensation expense of $848 thousand.

Other major component changes using operating cash included

an increase of $584 thousand in inventories and a decrease in accounts receivable of $683 thousand.

consisting primarily of share-based compensation and depreciation and amortization of $304 thousand.

Other major component changes using

operating cash included a decrease of $156 thousand in prepaids and a $453 thousand decrease in accounts receivable as well as a decrease

in accrued liabilities of $523 thousand.

the six months ended June 30, 2024, net cash used in operating activities was $7.2 million.

The net loss of $268 thousand was decreased

by non-cash income of $6.9 million related to the change in fair value of warrants and increased by non-cash expense of $918 thousand

consisting primarily of share-based compensation expense.

Other major component changes using operating cash included a decrease of $707

thousand in inventories and a decrease in accounts receivable of $236 thousand.

Flows from Investing Activities

the three months ended March 31, 2025, we used $54 thousand of cash for the acquisition of W1 and invested $47 thousand in patents.

the three months ended March 31, 2024, we had proceeds from maturities of short-term investments of $2.5 million.

During the three

months ended March 31, 2024, we used $14 thousand cash for the purchase of property and equipment and invested $66 thousand in

patents and equipment.

the six months ended June 30, 2025, net cash used in investing activities was $152 thousands of cash for the acquisition of W1 and investment

the six months ended June 30, 2024, we had net cash provided by investing activities totaling $4.9 million from proceeds from maturities

of short-term investments of $5.0 million.

During the six months ended June 30, 2024, we used $13 thousand cash for the purchase of property

and equipment and invested $97 thousand in patents and equipment.

Flows from Financing Activities

the three months ended March 31, 2025, we received $5.7 million in net proceeds from a Private Placement.

the three months ended March 31, 2024, we received $588 thousand in proceeds from the exercise of previously issued stock options and

paid $60 thousand in cash dividends on the Company’s Series A Preferred Stock.

the six months ended June 30, 2025, net cash provided by financing activities was $5.7 million as a result of proceeds from the Private

the six months ended June 30, 2024, net cash provided by financing activities was $468 thousand because of proceeds from the exercise

of previously issued stock options of $588 thousand offset $120 thousand in cash dividends paid on the Company’s Series A Preferred

Obligations and Commitments

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

and Syzygy Licensing, LLC (“Syzygy”), we are obligated to pay to Syzygy a 4% royalty fee on future product sales up to an

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

We recorded $66 thousand

for royalties during the three months ended March 31, 2025.

The maximum payout has been reached as of June 30, 2024, and we have included

$81 thousand in our accrued liabilities.

January 2022, we extended our Tempe, Arizona facility lease for three years through July 2025 and we are committed to aggregate lease

payments on the facility lease of $126 thousand in 2024 and $75 thousand in 2025.

September 2023, we committed to a lease of office space in Coconut Grove, Florida in a multi-year term concluding in 2031 which includes

aggregate lease payments remaining totaling $3.5 million.

of March 31, 2025, we were committed to approximately $509 thousand for future component deliveries and contract services that are generally

of June 30, 2025, we were committed to approximately $509 thousand for future component deliveries and contract services that are generally

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

the three months ended March 31, 2025, and for the year ended December 31, 2024, we had experienced increased costs in labor and

materials due to inflation.

We believe throughout 2025 that low unemployment and higher salaries will create higher payroll costs

and increased operating expense in the business.

We have seen increases in costs from multiple suppliers for materials as well as

to begin in October 2025, we committed to a lease of manufacturing and office space in Southwest Virginia in a multi-year term concluding

in 2031, which includes aggregate lease payments remaining totaling $600 thousand.

the six months ended June 30, 2025, and for the year ended December 31, 2024, we experienced increased costs in labor and materials due

to inflation.

We believe throughout 2025 that low unemployment and higher salaries will create higher payroll costs and increased operating

expenses in the business.

We have seen increases in costs from multiple suppliers for materials as well as labor.

Quantitative and Qualitative Disclosures about Market Risk.

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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 2. Management’s Discussion and Analysis