What changed in this filing

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Item 1. Business

2022-03-10 compared with 2021-03-04 · 430 added, 2015 removed, 33 unchanged (99% of the section changed)

We are a global public safety technology and services company

delivering modern policing solutions to law enforcement and

security personnel.

We began sales of our first public safety

product, the BolaWrap 100 remote restraint device, in late 2018.

an alternative to more traditional means of restraint and

detainment, BolaWrap represents a breakthrough in the development

of a less-lethal tool on the low end of the applied force

As communities continue to ask for more compassionate

and safe policing practices, BolaWrap is rapidly gaining worldwide

awareness and recognition through media exposure, trade show

participation, product demonstrations and word of

Since our 2018 launch, Wrap's sales and marketing efforts have

generated over 9,000 inquiries from domestic and international law

enforcement personnel.

We have demonstrated the product to over

1,000 law enforcement agencies across the country, often with media

in attendance, resulting in hundreds of media reports including

television and print that has increased our product and brand

Successful field uses, some reported in the media, have

further increased product awareness and we believe is accelerating

adoption of BolaWrap as an effective de-escalation

To better facilitate sales enablement, Wrap promotes hands-on

demonstrations and on-site train-the-trainer courses focused on

integrating the BolaWrap into an officer's toolkit of devices and

We conduct local and regional in-person, webinar and

on-line demonstrations and use of force and de-escalation training

to support law enforcement agencies to respond to the rapidly

changing public demands for modern less-lethal policing.

charge for product demonstrations or training as it is an integral

part of our sales and marketing activities.

In December 2020, Wrap acquired NSENA, Inc.

NSENA ”) , a virtual reality-based training simulator

business targeting law enforcement and corrections.

our Wrap Reality branded virtual reality training system and plan

to incorporate BolaWrap and enhanced de-escalation and use-of-force

training in future training content.

Our training foundation

employing virtual reality training methods positions Wrap to become

a leader in de-escalation and safer policing

The immediate addressable domestic market for our products and

virtual reality training services consists of over 15,000 agencies

and 900,000 full-time sworn local, state and federal law

enforcement officers in the U.S.

and over 12 million police

officers in over 100 countries we are targeting

Our efforts are aimed at establishing a global brand around

“BolaWrap”

and “Wrap”

and building the

product and services foundation for continued business growth.

have created a strong and growing pipeline of market opportunities

for our restraint product offering and training services within the

law enforcement, military and homeland security business sectors

domestically and internationally.

Social trends demanding more

compassionate and safe policing practices are expected to continue

to drive our global business.

The Company was first established as a Delaware limited liability

company in 2016, and has accomplished a number of key objectives

since its founding, as follows:

March 2, 2016

Organized as Wrap Technologies, LLC, a Delaware limited liability

company on by our founders Elwood G.

Norris, Scot Cohen and James

December 2016

Demonstrated our first prototype BolaWrap device.

March 31, 2017

Reorganized as a corporation and renamed Wrap Technologies,

November 2017

Began demonstrations and trial field deployments of our first

production devices to a small number of U.S.

law enforcement

December 2017

Wrap became a public company by completing a self-underwritten

public offering, raising gross proceeds of approximately $3.49

million from the sale of 2,328,533 shares of our common stock, par

value $0.0001 per share (“

Common Stock ”),

at a public offering price of $1.50 per share.

July 31, 2018

patent granted on the BolaWrap deployment

Wrap demonstrated our new BolaWrap green line laser to the first

law enforcement agency.

November 2018

First international sale of BolaWrap.

December 2018

Common Stock uplisted to trade on the Nasdaq Capital Market under

symbol “WRTC”.

Commenced distributing production green line laser equipped

BolaWrap 100 devices and associated cartridges.

September 2019

Relocated corporate headquarters from Las Vegas, Nevada to a new

sales, manufacturing, training and product development facility in

Tempe, Arizona.

December 1, 2020

Changed stock symbol to “WRAP”

to align with our global

branding strategy.

December 14, 2020

Acquired NSENA, a developer and provider of a law

enforcement training platform employing immersive computer graphics

virtual reality with proprietary software, hardware and content.

have rebranded the business as Wrap Reality and believe our content

library is one of the largest targeting law enforcement currently

consisting of 47 training modules.

We are a global public safety technology and services company delivering modern policing solutions to law enforcement and security personnel.

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

In October 2021 we released a new generation product, the BolaWrap 150.

The BolaWrap 150 is electronically deployed and is more robust, smaller, lighter and simpler to deploy than the BolaWrap 100 that is being phased out.

BolaWrap 150 Remote Restraint Device

BolaWrap 150 Remote Restraint Device and Cassette

As an alternative to more traditional means of restraint and detainment, BolaWrap represents a breakthrough in the development of a less-lethal tool on the low end of the applied force continuum.

As communities continue to ask for more compassionate and safe policing practices, BolaWrap is rapidly gaining worldwide awareness and recognition through media exposure, trade show participation, product demonstrations and word of mouth. 

The immediate addressable domestic market for our solutions consists of approximately 900,000 full-time sworn law enforcement officers at over 15,300 federal, state and local law enforcement agencies in the United States.

We are also exploring other domestic markets, including military and private security.

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

The 100 largest international police agencies are estimated to have over 12.1 million law enforcement personnel.

According to 360iResearch, a market research firm, we participate in a segment of the non-lethal products global market expected to grow to $16.1 billion by 2027.

We focus our efforts on the following products, services and solutions:

BolaWrap Remote Restraint Device –

is a hand-held remote restraint device that discharges an eight-foot bola style Kevlar tether to entangle an individual at a range of 10-25 feet.

BolaWrap assists law enforcement to safely and effectively control encounters early in the use of force continuum without resorting to painful force options.

Wrap Reality –

is a law enforcement training system utilizing immersive computer graphics virtual reality with proprietary software-enabled content.

It allows up to two participants to enter a simulated training environment simultaneously, and customized weapons controllers enable trainees to engage in strategic decision making along the force continuum.

In addition to the United States law enforcement market, we have shipped our restraint products to 51 countries.

We have established an active distributor network with 12 domestic distributors representing 49 states and one dealer representing Puerto Rico.

We have distribution agreements with 47 international distributors covering 54 countries.

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

We 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 branding and market presence globally and have established significant competitive advantages in our markets.

Industry Background

The market for use-of-force related products and devices includes

law enforcement agencies, correctional facilities, military

agencies, private security guard companies and retail consumers.

believe law enforcement officials are the opinion leaders regarding

market acceptance of new public safety products.

We are focused on

the law enforcement agency segment of the market for our BolaWrap

remote restraint solution and the Wrap Reality virtual reality

A number of recent well-publicized national events, such as the

death of George Floyd, the protesting thereafter, the Capitol riots

and other publicized encounters and events throughout 2020, have

highlighted some of the challenges of modern policing and

emphasized the need for more hands-off, less-lethal engagements and

new approaches for more extensive officer training.

Police reform

and reorganization of police departments have now become a topic

with heightened community focus and public engagement.

these events will garner additional government funding and

community support for new law enforcement solutions and more

focused training.

In conversations with industry leading

organizations such as the Major City Chiefs Association (MCCA),

International Association of Chiefs of Police (IACP), and others,

police reform is a priority and area of focus in the new

Biden-Harris administration.

Currently, law enforcement agencies authorize a continuum of force

options ranging from verbal commands to lethal force.

concluded that most police officers never deploy lethal force in

the course of their careers.

Although a majority of law enforcement

officers around the world are armed with firearms, only a small

percentage will actually ever use them.

Officers, however, use

less-lethal force on a regular basis.

Traditional tactics such as

using a control hold, baton, club, or combat to control a suspect

may result not only in a risk of injury to the suspect, but also a

risk that the officer will be injured.

Other force options

including chemical spray, impact munitions and conducted electrical

weapons (“

), not only risk injury, but are often

controversial.

Each weapon available to law enforcement has

distinct advantages and disadvantages, and we believe law

enforcement agencies require a variety of different tools for

different situations.

We believe BolaWrap is a necessary tool to meet modern policing

requirements when individuals do not respond to verbal commands.

the same time the public is demanding less-lethal policing.

even more apparent in police interactions with the mentally ill.

According to a report by The State of Mental Health in America,

2018, published by The Mental Health America an estimated 40

million adults in the U.S.

The market for use-of-force related products and devices includes law enforcement agencies, correctional facilities, military agencies, private security guard companies and retail consumers.

We believe law enforcement officials are the opinion leaders regarding market acceptance of new public safety products.

We are focused on the law enforcement agency segment of the market for our BolaWrap remote restraint solution and the Wrap Reality virtual reality system.

A number of well-publicized national events, such as the death of George Floyd, the protesting thereafter, the Capitol riots and other publicized encounters and events throughout 2020 and 2021, have highlighted some of the challenges of modern policing and emphasized the need for more hands-off, less-lethal engagements and new approaches for more extensive officer training.

Police reform and reorganization of police departments have now become a topic with heightened community focus and public engagement.

We believe these events are garnering additional government funding and community support for new law enforcement solutions and more focused training.

In conversations with industry leading organizations such as the Major City Chiefs Association (" MCCA "), International Association of Chiefs of Police (" IACP "), and others, police reform is a priority and area of focus in the Biden-Harris administration.

Currently, law enforcement agencies authorize a continuum of force options ranging from verbal commands to lethal force.

Studies have concluded that most police officers never deploy lethal force in the course of their careers.

Although a majority of law enforcement officers around the world are armed with firearms, only a small percentage will actually ever use them.

Officers, however, use less-lethal force on a regular basis.

Traditional tactics such as using a control hold, baton, club, or combat to control a suspect may result not only in a risk of injury to the suspect, but also a risk that the officer will be injured.

Other force options including chemical spray, impact munitions and CEWs, not only risk injury, but are often controversial.

Each weapon available to law enforcement has distinct advantages and disadvantages, and we believe law enforcement agencies require a variety of different tools for different situations.

We believe BolaWrap is a necessary tool to meet modern policing requirements when individuals do not respond to verbal commands.

At the same time, the public is demanding less-lethal policing.

This is even more apparent in police interactions with persons in crisis and the mentally ill.

According to a report by The State of Mental Health in America, 2018, published by The Mental Health America an estimated 40 million adults in the U.S.

suffer from mental health issues.

in a 2015 report on The Role of Mental Illness in Fatal Law

Enforcement Encounters, the Treatment Advocacy Center:

Research & Public Affairs, 7.9 million individuals have severe

mental illness that affect their thinking and behavior.

Amounting to somewhat fewer than four

in every 100 adults in America, individuals with severe mental

illness generate no less than one in ten calls for police service

and occupy at least one in five prison and jail beds in the U.S.

estimated one in three individuals transported to hospital

emergency rooms in psychiatric crisis are taken there by

BolaWrap enables

officers to safely and humanely take subjects into custody without

injury to get them the help they need.

BolaWrap restraint of individuals at a distance may offer

reduced frequency of deployment of other control techniques,

including CEWs, especially in encounters with the mentally

Litigation and insurance costs involving use of force for law

enforcement agencies can be significant, with settlements in the

millions of dollars for many departments.

Reducing the frequency of

need for other use of force tools and the number of injuries and

fatalities caused by law enforcement officers may reduce the number

of suits filed against agencies for excessive use of force,

wrongful death and injury.

We believe BolaWrap may have the benefit of increasing goodwill

between public safety agencies and their communities.

relations considerations can be particularly important at a time

when almost any interaction with public safety officers can be

recorded and scrutinized by the media and the public.

The industry response to BolaWrap confirms the need to fill a gap

between verbal commands and pain inducing compliance tools.

goal is to equip every public safety officer with the BolaWrap

remote restraint solution.

participate in the global non-lethal market that, according to the

November 2020 report by Global Market Outlook, was estimated to be

$6.8 billion in 2019 and is expected to grow to $8.1 billion in

2025 even factoring the impact of COVID-19.

The following segments

are our target markets:

And, in a 2015 report on The Role of Mental Illness in Fatal Law Enforcement Encounters, the Treatment Advocacy Center:

Office of Research & Public Affairs, 7.9 million individuals have severe mental illness that affect their thinking and behavior.

Amounting to somewhat fewer than four in every 100 adults in America, individuals with severe mental illness generate no less than one in ten calls for police service and occupy at least one in five prison and jail beds in the U.S.

An estimated one in three individuals transported to hospital emergency rooms in psychiatric crisis are taken there by police.

BolaWrap enables officers to more safely and humanely take subjects into custody without injury to get them the help they need.

BolaWrap restraint of individuals at a distance may offer reduced frequency of deployment of other control techniques, including CEWs, especially in encounters with the mentally ill.

Litigation and insurance costs involving use of force for law enforcement agencies can be significant, with settlements in the millions of dollars for many departments.

Reducing the frequency of need for other use of force tools and the number of injuries and fatalities caused by law enforcement officers may reduce the number of legal cases filed against agencies for excessive use of force, wrongful death and injury.

We believe BolaWrap increases goodwill between public safety agencies and their communities.

Community relations considerations can be particularly important at a time when almost any interaction with public safety officers can be recorded and scrutinized by the media and the public.

The industry response to BolaWrap confirms the need to fill a gap between verbal commands and pain inducing compliance tools.

During 2021 dozens of agency released body or dash camera videos from actual police uses which demonstrated the utility of BolaWrap to safely detain persons often for transport for medical help.

Our goal is to equip every public safety officer with the BolaWrap remote restraint solution.

We participate in the global non-lethal market that, according to the January 2022 report by 360iResearch, was estimated to be $8.3 billion in 2020, $9 billion in 2021 and expected to grow to $16.1 billion in 2027.

The following segments are our target markets:

Domestic and International Law Enforcement

Federal, state and local law enforcement agencies in the United

States currently represent the primary target market for our

products and services.

According to the FBI’s Criminal

Justice Information Services Division in 2018 there were over

800,000 local and state full-time law enforcement officers in the

Department of Justice in October 2019 reported

that based on 2016 data, there were over 100,000 full-time federal

officers primarily providing police protection and over 15,300

general purpose law enforcement agencies in the U.S.

officers include over 37,000 customs and border patrol officers.

We believe our product line can be an

effective tool to safely assist in detention of individuals subject

to the agency’s jurisdiction.

The BolaWrap offers an

additional tool for frontline agents to de-escalate encounters

while effecting agent responsibilities.

Additionally, we have estimated an addressable international market

of over 12.1 million police officers in the 100 largest police

forces gathered from individual country statistics outside the U.S.

We delivered our first international order in 2018 and in 2019

entered into agreements with our first international distributors.

Through December 31, 2020 we have sold BolaWrap products to

36 countries.

We currently anticipate that sales

attributable to international markets will represent the majority

of our sales in the fiscal year ending December 31, 2021.

belief is based on the fact that sales of our products within the

are characterized by longer sales cycles and regulatory issues

versus international sales where purchase decisions are largely

centralized at the national level.

Federal, state and local law enforcement agencies in the United States currently represent the primary target market for our products and services.

According to the FBI’s Criminal Justice Information Services Division in 2018 there were over 800,000 local and state full-time law enforcement officers in the U.S.

In October 2019, the U.S.

Department of Justice reported that based on 2016 data, there were over 100,000 full-time federal officers primarily providing police protection, and over 15,300 general purpose law enforcement agencies in the U.S.

Federal officers include over 37,000 customs and border patrol officers.

We believe our product line can be an effective tool to safely assist in detention of individuals subject to the agency’s jurisdiction.

The BolaWrap offers an additional tool for frontline agents to de-escalate encounters while effecting agent responsibilities.

Additionally, we have estimated an addressable international market of over 12.1 million police officers in the 100 largest police forces gathered from individual country statistics outside the U.S.

We delivered our first international order in 2018 and in 2019 entered into agreements with our first international distributors.

Through December 31, 2021, we have delivered BolaWrap products to 51 countries, with international revenues during 2021 representing 60% of total revenues.

We currently anticipate that sales attributable to international markets will continue to represent significant sales in the fiscal year ending December 31, 2022.

Our belief is based on the fact that sales of our products within the U.S.

to larger agencies are characterized by longer sales cycles compared to international sales, where purchase decisions are largely centralized at the national level.

Correctional Facilities

In 2005, the United States Bureau of Justice statistics

(“Census of State and Federal Correctional Facilities,

2005,”

Department of Justice, Bureau of Justice

Statistics, published October 2008) estimated that there were

295,000 correctional officers in over 1,800 federal and state

correctional facilities in the United States, therefore

representing a large potential market for our products and

In 2005, the United States Bureau of Justice statistics (“Census of State and Federal Correctional Facilities, 2005,”

Department of Justice, Bureau of Justice Statistics, published October 2008) estimated that there were 295,000 correctional officers in over 1,800 federal and state correctional facilities in the United States, therefore representing a large potential market for our products and services.

Private Security Firms and Guard Services

According to 2019 Bureau of Labor Statistics estimates

(“Occupational Employment Statistics,”

United States

Department of Labor), there were approximately 1.1 million

privately employed security guards in the U.S.

They represent a

broad range of individuals, including those employed by

investigation and security services, hospitals, schools, local

government, and others.

We believe that some security personnel

armed with the BolaWrap could be effective to de-escalate some

encounters without eliminating other devices available today.

Providing guards with the BolaWrap may reduce the potential

liability of private security companies and personnel in such

In most countries private security personnel outnumbers police

Research produced and reported by The Guardian suggests

there were over 20 million private security workers worldwide in

2017 and that global spending on private security was anticipated

to exceed $240 billion in 2020.

Just the ten largest target

countries outside the U.S.

had approximately 17 million security

workers in 2017.

Although there are use cases in private security, correctional

facilities and in military policing, we are currently targeting our

products and services for law enforcement.

We do not currently plan

a consumer version of the device.

According to 2019 Bureau of Labor Statistics estimates (“Occupational Employment Statistics,”

United States Department of Labor), there were approximately 1.1 million privately employed security guards in the U.S.

They represent a broad range of individuals, including those employed by investigation and security services, hospitals, schools, local government, and others.

We believe that some security personnel armed with the BolaWrap could be effective to de-escalate some encounters without eliminating other devices available today.

Providing guards with the BolaWrap may reduce the potential liability of private security companies and personnel in such encounters.

In most countries private security personnel outnumbers police officers.

Research produced and reported by The Guardian suggests there were over 20 million private security workers worldwide in 2017 and that global spending on private security was anticipated to exceed $240 billion in 2020.

Just the ten largest target countries outside the U.S.

had approximately 17 million security workers in 2017.

Although there are use cases in private security, correctional facilities and in military policing, we are currently targeting our products and services for law enforcement.

We do not currently plan a consumer version of the device.

Virtual Reality Training Market

According to a 2019 report published by Allied Market Research, the

virtual training and simulation market size was valued at $204.41

billion in 2019 and is projected to grow to $601.85 billion by

2027. Law enforcement and military are important segments of

this market and the rise in awareness regarding virtual training

and simulation drives market growth.

Technology innovations now

allow virtual reality to bring real world situations into the

virtual space in a 360-degree immersion.

According to a 2019 report published by Allied Market Research, the virtual training and simulation market size was valued at $204.41 billion in 2019 and is projected to grow to $601.85 billion by 2027.

We believe virtual reality and simulation will expand in many nascent industries including law enforcement.

Although a relatively small segment today, law enforcement and military are important segments of this market and the rise in awareness regarding virtual training and simulation drives market growth.

Technology innovations now allow virtual reality to bring real world situations into the virtual space in a 360-degree immersion.

Wrap Products and Services

BolaWrap Remote Restraint

The BolaWrap 100 is our first remote restraint product.

hand-held remote restraint device that discharges an eight-foot

Kevlar tether to entangle an individual at a range of 10-25 feet.

Inspired by law enforcement professionals, the device allows law

enforcement to safely and effectively control encounters on the low

end of the applied-force continuum.

The BolaWrap 100 functions by wrapping an individual’s arms

and/or legs, impeding a subject from fleeing a scene, rapidly

approaching an officer, or inducing harm to themselves or others.

This device enables officers to safely and humanely take subjects

into custody without injury in order to get them the help they

The small, light, but rugged BolaWrap 100 is designed to provide

remote restraint while other use of force continuum options remain

The design of the device ensures a wide device-effectiveness

it will impede a subject’s movement when deployed at

the arms or legs.

A guiding laser ensures accurate placement of the

Kevlar tether, mitigating the risk of injury to subject and officer

by quickly ending an encounter.

Quick ejection and rapid

replacement of Bola cartridges allows one device to be reused in a

single encounter or in multiple encounters.

There are limited effective options for remote engagement, so when

verbal commands are ignored, law enforcement is faced with either

going “hands on”

or escalating to potentially injurious

less-lethal forces or a firearm.

The BolaWrap 100 has shown to be

effective in restraining individuals, hindering the flight ability

and reducing the ability to fight, allowing effective officer

We believe our tool is essential to meet modern policing

requirements in working with subjects who are incapable of

responding to verbal commands.

With increased public attention paid

to mental illness and implicit bias, there has also been increased

agency demand for an effective non-lethal tool that does not rely

on pain compliance.

We believe our device minimizes the need to

employ other uses of force, including hand-to-hand combat and other

less-lethal weapons.

The BolaWrap 100 does not rely on pain to gain compliance or

electricity-enabled neuromuscular incapacitation for effectiveness.

The wrapping effect is intended to impede flight while not inducing

uncontrolled falls or injury.

There is no issue of recovery time,

as is the case with CEW, impact munitions or chemical devices.

The BolaWrap 100 was our first remote restraint product, with the BolaWrap 150 (collectively with the BolaWrap 100, the " BolaWrap ") released in October 2021.

The BolaWrap 150 is electronically deployed and is more robust, smaller, lighter and simpler to deploy than the BolaWrap 100 that is being phased out.

BolaWrap is a hand-held remote restraint device that discharges an eight-foot Kevlar tether to entangle an individual at a range of 10-25 feet.

Inspired by law enforcement professionals, the device allows law enforcement to safely and effectively control encounters on the low end of the applied-force continuum.

The BolaWrap functions by wrapping an individual’s arms and/or legs, impeding a subject from fleeing a scene, rapidly approaching an officer, or inducing harm to themselves or others.

This device enables officers to safely and humanely help take subjects into custody without injury in order to get them the help they need.

The small, light, but rugged BolaWrap is designed to provide remote restraint while other use of force continuum options remain open.

The design of the device ensures a wide device-effectiveness zone;

it will impede a subject’s movement when deployed at the arms or legs.

A guiding laser ensures accurate placement of the Kevlar tether, mitigating the risk of injury to subject and officer by quickly ending an encounter.

Quick ejection and rapid replacement of BolaWrap cassettes allows one device to be reused in a single encounter or in multiple encounters.

There are limited effective options for remote engagement, so when verbal commands are ignored, law enforcement is faced with either going “hands on”

or escalating to potentially injurious less-lethal forces or a firearm.

The BolaWrap has shown to be effective in restraining individuals, hindering the flight ability and reducing the ability to fight, allowing effective officer action.

We believe our tool is essential to meet modern policing requirements in working with subjects who are incapable of responding to verbal commands.

With increased public attention paid to mental illness and implicit bias, there has also been increased agency demand for an effective non-lethal tool that does not rely on pain compliance.

We believe our device minimizes the need to employ other uses of force, including hand-to-hand combat and other less-lethal weapons.

The BolaWrap does not rely on pain to gain compliance or electricity-enabled neuromuscular incapacitation for effectiveness.

The wrapping effect is intended to impede flight while not inducing uncontrolled falls or injury.

There is no issue of recovery time, as is the case with CEW, impact munitions or chemical devices.

Other less-lethal weapons relying on “pain compliance”

have been shown to have a largely adverse effect, often causing an

incident to escalate into one causing injury to both subjects and

We spend significant resources training law enforcement on the safe

and effective use of the BolaWrap 100 in conjunction with

de-escalation and apprehension techniques.

However, like any

restraining action, injuries may result from the use of BolaWrap or

as a consequence of its use.

Our training includes primary use

cases that fall into the three broad categories routinely

encountered by law enforcement and security personnel:

remotely restrain and limit the mobility of an individual who is

experiencing a mental health crisis, narcotics-induced psychosis,

or other condition rendering them incapable of responding to law

enforcement’s verbal commands but that presents a danger to

law enforcement, the public or themselves if not

remotely restrain and limit the mobility of an individual

attempting to evade arrest or questioning, as well as individuals

ignoring verbal commands from law enforcement.

These individuals

are commonly referred to as passively resistant or non-compliant;

assist in subduing individuals actively resisting arrest by

limiting mobility, possibly making other engagement options less

risky to officers and less injurious to individuals.

Law enforcement encounters with the mentally ill or those suffering

a mental health crisis present a difficult challenge, often

generating public controversy and costly consequences.

the Treatment Advocacy Center:

Office of Research & Public

Affairs in a 2015 report on The Role of Mental Illness in Fatal Law

Enforcement Encounters, one in ten police encounters involve the

mentally ill and a minimum of one in four fatal police encounters

involve the mentally ill.

Early reports from a number of field deployments by law enforcement

agencies during 2019 and 2020, on stationary as well as moving

targets, have been encouraging and we expect additional use data in

A field deployment is generally considered

‘successful’

by law enforcement agencies if compliance

is achieved, and no additional force is required after the BolaWrap

is exposed or used.

Agencies have reported achieving compliance by

utilizing the BolaWrap in the following ways:

pointing the BolaWrap’s green line laser at the suspect in

conjunction with verbal commands

the loud sound emitted by the BolaWrap upon deployment

the impact and/or restraint of the Kevlar cord around the

used in conjunction with other less-lethal tools

We request that all agencies fill out a Use of Device Report when

the BolaWrap is used during an encounter in the field.

all field deployments are reported to us by law enforcement

agencies, as many consider the deployment of the BolaWrap to be low

level that does not constitute a reportable use of force.

deployments to date have been captured on bodycam and shared with

Others were reported by the agency or the media but

were not captured on bodycam.

As more agencies adopt the BolaWrap

onto their duty belts, we believe we will continue to see an

increase in the rate of field deployments, which we anticipate will

contribute to further adoption of the device by law enforcement

We are unable to predict the market acceptance of BolaWrap products

or the level of future sales.

We believe we can grow orders and

shipments during 2021.

We plan to extend the product line with

additional models and features in the future.

However, there can be

no assurance of the timing or quantity of orders or sales in future

have been shown to have an adverse effect, sometimes causing an incident to escalate into one causing injury to both subjects and officers.

We spend significant resources training law enforcement on the safe and effective use of the BolaWrap in conjunction with de-escalation and apprehension techniques.

However, like any restraining action, injuries may result from the use of BolaWrap or as a consequence of its use.

Our training includes primary use cases that fall into the three broad categories routinely encountered by law enforcement and security personnel:

To remotely restrain and limit the mobility of an individual who is experiencing a mental health crisis, narcotics-induced psychosis, or other crisis condition rendering them incapable of responding to law enforcement’s verbal commands but that presents a danger to law enforcement, the public or themselves if not restrained;

To remotely restrain and limit the mobility of an individual attempting to evade arrest or questioning, as well as individuals ignoring verbal commands from law enforcement.

These individuals are commonly referred to as passively resistant or non-compliant;

To assist in subduing individuals actively resisting arrest by limiting mobility, possibly making other engagement options less risky to officers and less injurious to individuals.

Law enforcement encounters with the mentally ill or those suffering a mental health crisis present a difficult challenge, often generating public controversy and costly consequences.

According to the Treatment Advocacy Center:

Office of Research & Public Affairs in a 2015 report on The Role of Mental Illness in Fatal Law Enforcement Encounters, one in ten police encounters involve the mentally ill and a minimum of one in four fatal police encounters involve the mentally ill.

Reports from dozens of field deployments by law enforcement agencies during 2020 and 2021, on stationary as well as moving targets, have been encouraging and we expect additional use data in 2022.

A field deployment is generally considered ‘successful’

by law enforcement agencies if compliance is achieved, and no additional force is required after the BolaWrap is exposed or used.

Agencies have reported achieving compliance by utilizing the BolaWrap in the following ways:

By pointing the BolaWrap’s line dot laser at the suspect in conjunction with verbal commands

Via the sound emitted by the BolaWrap upon deployment

Through the impact and/or restraint of the Kevlar cord around the suspect

When used in conjunction with other less-lethal tools

We request that all agencies fill out a Use of Device Report when the BolaWrap is used during an encounter in the field.

However, not all field deployments are reported to us by law enforcement agencies, as many consider the deployment of the BolaWrap to be low level that does not constitute a reportable use of force.

Some deployments to date have been captured on bodycam and shared with the public.

Others were reported by the agency or the media but were not captured on bodycam.

As more agencies adopt the BolaWrap onto their duty belts, we believe we will continue to see an increase in the rate of field deployments, which we anticipate will contribute to further adoption of the device by law enforcement worldwide.

We announced a new generation BolaWrap 150 device in October 2021 and discontinued production of the legacy product, the BolaWrap 100.

The BolaWrap 100 used removable cartridges, and we plan to continue to provide cartridges to customers as long as they are available;

however, we have no plans to produce new cartridges.

The BolaWrap 150 employs cassettes that are custom to the device and not interchangeable between models.

Since the October announcement of the BolaWrap 150, we have been developing a more automated supply chain in the production, quality control, and testing lines necessary to support the volume of production anticipated for the BolaWrap 150.

We continue to make product improvements based on internal testing and field experience.

We believe the improved, fully electronic BolaWrap 150 offers important benefits, including:

Modern electronic deployment

Smaller size and less weight

Reduced production costs

LED status indicator for ease of operation

Long laser battery life

LED target illumination to improve accuracy

Hardened plastic for increased durability

Enhanced water resistance for harsh environments

The BolaWrap 150 employs two micro-gas generators to individually expel each entangling projectile.

Micro-gas generators are micro explosive parts used in a variety of industrial products, including automobile airbags.

We are unable to predict the market acceptance of the BolaWrap 150 product or the level of future sales.

We believe we can grow orders and shipments during 2022.

We plan to extend the product line with additional models and features in the future.

However, there can be no assurance of the timing or quantity of orders or sales in future periods.

See “Risk Factors”

included below in this

Annual Report for additional information regarding risks and

uncertainties associated with our business.

During 2019, we partnered with an independent technology company to

scope and configure a virtual reality system and developed training

scenarios using BolaWrap.

We used the system and scenarios during

two large trade shows in October and November 2019.

2019 we installed a system in our Tempe training facility being

used for demonstrations and training.

During 2020, we outlined

situations and contracted for additional virtual reality scenarios

that we received in January 2021.

included below in this Annual Report for additional information regarding risks and uncertainties associated with our business.

During 2019, we partnered with an independent technology company to scope and configure a virtual reality system with training scenarios.

We demonstrated the virtual reality system and training scenarios during two large trade shows in October and November 2019.

In December 2020 we acquired NSENA Inc.

NSENA ”), a developer and provider

of a law enforcement training system employing immersive computer

graphics virtual reality with proprietary software-enabled content.

The NSENA system leverages

high-quality enterprise head-mounted devices (HMDs) and a high-GPU

gaming personal computer to power proprietary software.

have rebranded the system, software and business as Wrap Reality

and believe our content library is one of the largest targeting law

enforcement currently consisting of 47 training scenarios.

Reality’s scenarios were developed by and for police officers

and cover a wide array of skills and scenarios including

de-escalation, conflict resolution and all levels of

use-of-force.

Reality takes advantage of the most advanced virtual reality

hardware available.

The Wrap Reality

system allows up to two participants to enter the simulated

training environment simultaneously, and customized weapons

controllers enable trainees to engage in strategic decision making

along the force continuum.

While we are marketing and selling the current Wrap Reality system,

we plan to integrate previous scenarios into a robust platform

integrated with BolaWrap and additional de-escalation techniques

into new Wrap Reality scenarios.

We also seek to enhance the Wrap

Reality experience through software and platform

designed, tested and obtained independent certification for our

Wrap Armor labeled 20”

rifle rated police shield

and a pistol rated patrol shield.

In April 2020 we delivered our

first order of Wrap Armor shields.

We believe our strong and light

National Institute of Justice 0108.01 Type III (High Powered Rifle)

compliant tactical shield offers police agencies an affordable

defense against increasingly sophisticated threats.

currently evaluating and testing additional models and sizes,

securing sources of supply and determining the sales and marketing

resources to be allocated to market this product line.

have not yet developed our plans for

this or similar shield products.

NSENA ”), a developer and provider of a law enforcement training system employing immersive computer graphics virtual reality with proprietary software-enabled content.

The NSENA system leveraged high-quality enterprise head-mounted devices (" HMDs ") and a high-GPU gaming personal computer to power proprietary software.

We have rebranded the system, software and business as Wrap Reality Virtual Training, and believe our content library containing over 35 training scenarios is one of the largest available targeting law enforcement.

Wrap Reality’s scenarios were developed by and for police officers, and cover a wide array of skills and scenarios including de-escalation, conflict resolution, and all levels of use-of-force.

Wrap Reality Virtual Training takes advantage of the most advanced virtual reality hardware available.

The Wrap Reality system allows up to two participants to enter the simulated training environment simultaneously, and customized weapons controllers enable trainees to engage in strategic decision making along the force continuum.

In August 2021, we announced the development of a new expanded Wrap Reality Virtual Training platform powered by, and developed through, a collaboration with Amazon Web Services (" AWS ") using AWS GovCloud (US).

The new platform combines our advanced law enforcement simulator with secure cloud services to automatically track training progress and provide the ability to replay recorded training sessions.

By embedding AWS storage services, we offer a fully-integrated training and training record management solution targeting agencies of all sizes.

We believe these agencies have limited choices to meet the growing public safety training demands.

This next generation platform is in beta testing and we expect to formally release the new platform by mid-2022.

While we are marketing and selling the Wrap Reality Virtual Training system, we continue to upgrade existing scenarios and develop de-escalation techniques into new scenarios.

We also seek to enhance the Wrap Reality experience through continued software and platform innovation.

The expanded platform developed with AWS is expected to enhance the scope of our offering to law enforcement customers.

Selling, Marketing and Training

Our sales, marketing and training organizations work together

closely to drive revenue growth by enhancing market awareness of

our solutions, generating leads, building a strong sales pipeline

and cultivating customer and distributor

relationships.

Our sales, marketing and training organizations work together closely to drive revenue growth by enhancing market awareness of our solutions, generating leads, building a strong sales pipeline and cultivating customer and distributor relationships.

Law enforcement agencies represent our primary target market.

this market, we expect that the decision to purchase BolaWrap

product and accessories will normally be made by a group of people

including the agency head, his/her training staff, and use of force

and weapons experts.

The decision sometimes involves political

decision-makers, such as city council members and various

Although we expect the decision-making process for a

remote restraint device will be less complicated than that for

other less-lethal products such as CEWs, the process may take as

little as a few weeks or as long as a year or more partially due to

budgeting reasons and other distractions of agencies.

For instance,

during the summer of 2020, the U.S.

had a significant number of

protests in many major cities, which took agency time away from

proactive planning actions.

We employ demonstrations as a primary sales step with

demonstrations scheduled from the over 9,000 law enforcement leads

created by our marketing activities since 2018.

Demonstrations are

generally followed by delivery of product for test and evaluation

and training with selected agencies.

Some of these deliveries are

paid sales and some are issued as an incentive, with the goal and

expectation of larger future sales of devices and cartridges.

2019 and 2020, we demonstrated to more than 250 agencies and 690

agencies, respectively.

We and our distributors seek, when

possible, to convert demonstration and training deliveries to sales

or after a trial period to have the devices returned for use as

further demonstration or training devices.

We consider training as

an integral element of our sales and marketing approach and believe

that departments that have trained instructors knowledgeable about

our product will be more likely to purchase devices.

We provide our

product training as a service to agencies;

however, training may be

fee-based in the future.

Initial sales in 2018 and early 2019 were made by our executive and

sales employees.

In June 2019, we implemented a channel

distribution strategy in which we sell our products to existing

independent regional police equipment distributors who then sell to

local law enforcement agencies.

We are focusing our internal

sales, sales support and business development resources on building

relationships with large agencies and actively supporting

distributors.

Our sales force is currently comprised of 20

professionals.

This team includes sales and business development

personnel primarily in the field working directly with agencies,

distributors and their customers and providing sales support

including supporting demonstration and training contractors.

In addition to full-time sales, sales

support and business development personnel from time to time we

utilize part-time consultants with law enforcement or government

agency expertise to support our sales and marketing

We currently have distribution agreements with 14 domestic

distributors representing all 50 states and Puerto Rico.

nonexclusive and cancelable agreements provide certain territorial

rights to distributors but allow us to sell direct to certain

We have distribution agreements with 35 international distributors.

These agreements are generally exclusive, require minimum

performance and allow us to sell direct to customers subject to

certain compensation.

We focus significant sales and business

development efforts to support our international

distributors.

While one of our sales managers is focused on sales of Wrap Reality

virtual reality systems, we are training our demonstration,

training and other staff and our distributors on the virtual

reality training product to build awareness and grow sales.

also seeking to partner with other organizations to enhance our

virtual reality sales, marketing and technology.

We are currently

collaborating with the National Tactical Officers

Association (NTOA) to assist in creating virtual reality training

scenarios responsive to the needs of their 40,000 members from

specialties that include patrol, Tactical Emergency Medical

Support  (TEMS), crisis negotiations, canine,

corrections, sniper, protective operations, explosives, command,

tactical dispatchers, behavioral sciences and others.

Prospective customers learn about Wrap solutions through a variety

of ways, including targeted social media, paid advertising, media,

press releases, web site searches, sales calls and public

When a lead is generated through our marketing

activities and qualified, we connect them with a sales

representative and/or a distributor to discuss their needs and the

solutions in which they are interested.

We track our marketing and

sales activities to provide immediate preview into activities,

leads, quotes and pipeline opportunities.

We believe we are

developing a strong pipeline of opportunities for Wrap

marketing staff also engages with local, state and federal agencies

and personnel both directly and through professional firms that

advocate less-lethal engagements and increased education and

actively promote our brands and believe the Wrap and BolaWrap

tradenames are becoming increasingly known world-wide as the

pioneer and leader in remote restraint.

We participate in a variety of domestic and

international trade shows and conferences, both directly and with

our distributors.

We expect our marketing efforts will also

continue to benefit from significant free media

intend to increase the use of our trademarks throughout our product

distribution chain and believe growing brand awareness will assist

in expanding our business.

We believe our reputation as a pioneer

in the new category of remote restraint, strong training and

product support provide us competitive advantages.

In this market, we expect that the decision to purchase BolaWrap product and accessories will normally be made by a group of people including the agency head, his/her training staff, and use of force and weapons experts.

The decision sometimes involves political decision-makers, such as city council members and various committees.

Although we expect the decision-making process for a remote restraint device will be less complicated than for other less-lethal products such as CEWs, the process may take as little as a few weeks or as long as a year or more partially due to budgeting reasons and other distractions of agencies.

For instance, during the summer of 2020, the U.S.

had a significant number of protests in many major cities, which took agency time away from proactive planning actions.

We utilize demonstrations as a primary sales step with demonstrations scheduled from the over 12,000 law enforcement leads created by our marketing activities since 2018.

Demonstrations are generally followed by sales activities or delivery of product for test and evaluation and training with appropriate selected agencies.

Some of these deliveries are paid sales and some are issued as an incentive, with the goal and expectation of larger future sales of devices and cartridges/cassettes.

We have demonstrated our products to more than 1,000 agencies and are achieving significant brand awareness among law enforcement.

We and our distributors seek, when possible, to convert demonstration and training deliveries to sales or after a trial period to have the devices returned for use as further demonstration or training devices.

We consider training as an integral element of our sales and marketing approach and believe that departments that have trained instructors to be knowledgeable about our product will be more likely to purchase devices.

We provide our product training as a service to agencies;

however, training may be fee-based in the future.

Initial sales in 2018 and early 2019 were made by our executive and sales employees.

In June 2019, we implemented a channel distribution strategy in which we sell our products to existing independent regional police equipment distributors who then sell to local law enforcement agencies.

We are focusing our internal sales, sales support and business development resources on building relationships with large agencies and actively supporting distributors.

Our sales force is currently comprised of 19 professionals.

This team includes sales and business development personnel primarily in the field working directly with agencies, distributors and their customers and persons providing sales support including supporting demonstration and training contractors.

In addition to full-time sales, sales support and business development personnel from time to time we utilize part-time consultants with law enforcement or government agency expertise to support our sales and marketing activities.

Our 12 domestic distributors have an estimated 120 sales representatives that represent BolaWrap primarily to smaller agencies.

We currently have distribution agreements with 12 domestic distributors representing 49 states and one dealer representing Puerto Rico.

These nonexclusive and cancelable agreements provide certain territorial rights to distributors but allow us to sell direct to certain agencies under certain terms.

We have distribution agreements with 47 international distributors covering 54 countries.

These agreements are generally exclusive, require minimum performance and allow us to sell direct to customers subject to certain compensation.

We focus significant sales and business development efforts to support our international distributors.

While management is focused on sales of Wrap Reality virtual reality systems, we are training our sales, distribution, demonstration, training and other staff and our distributors on our virtual reality training product to build awareness and grow sales.

We are also seeking to partner with other organizations to enhance our virtual reality sales, marketing and technology.

In 2021 we collaborated with the National Tactical Officers Association (" NTOA ") to assist in creating virtual reality training scenarios responsive to the needs of their 40,000 members from specialties that include patrol, Tactical Emergency Medical Support (" TEMS "), crisis negotiations, canine, corrections, sniper, protective operations, explosives, command, tactical dispatchers, behavioral sciences and others.

We work with other experts in law enforcement as part of our goal of making our virtual reality scenarios compliant with industry standards of engagement.

Prospective customers learn about Wrap solutions through a variety of ways, including targeted social media, paid advertising, media, press releases, web site searches, sales calls and public relations.

We have distributed agency body and dash camera videos demonstrating effective use of BolaWrap in a variety of policing encounters.

When a lead is generated through our marketing activities and qualified, we connect them with a sales representative and/or a distributor to discuss their needs and the solutions in which they are interested.

We track our marketing and sales activities to provide immediate preview into activities, leads, quotes and pipeline opportunities.

We believe we are developing a strong pipeline of opportunities for Wrap solutions.

Our marketing staff also engages with local, state and federal agencies and personnel both directly and through professional firms that advocate less-lethal engagements and increased education and training.

We work with risk management organizations serving law enforcement to educate on the benefits of BolaWrap remote restraint to reduce incidents and costs of escalation.

In December 2021 the Arizona Municipal Risk Retention Pool (AMRRP) Board of Trustees voted funding to assist its 60 rural police agencies to procure BolaWrap devices for active-duty police officers.

We are working with other similar entities to increase awareness of the BolaWrap solution.

We actively promote our brands and believe the Wrap and BolaWrap tradenames are becoming increasingly known world-wide as the pioneer and leader in remote restraint.

We participate in a variety of domestic and international trade shows and conferences, both directly and with our distributors.

We expect our marketing efforts will also continue to benefit from significant free media coverage.

We intend to increase the use of our trademarks throughout our product distribution chain and believe growing brand awareness will assist in expanding our business.

We believe our reputation as a pioneer in the new category of remote restraint, strong training and product support provide us competitive advantages.

Demonstration, Training and Support

The Company maintains a demonstration and training department as a

part of its sales and marketing activities and does not charge for

product demonstrations or training.

Training is not a condition or

requirement of sale as most sales are made through distributors to

their end customers.

The Company conducts local and regional

in-person, webinar and on-line demonstrations and use of force and

de-escalation training to support law enforcement agencies with no

purchase requirement.

Such training may occur before or after

initial or subsequent purchase or field deployment of the

Company’s products.

The Company believes that law enforcement

trainers and officers that have seen demonstrations or have been

trained about its products are more supportive of their departments

purchase and deployment of product.

Most law enforcement and corrections agencies will not purchase new

use of force devices until a training program is in place to

certify officers in their proper use.

Generally, they also must

adapt any new tools to their use of force policies and clear use

with any relevant committees or review boards.

We have developed

and offer robust training and class materials that certify law

enforcement officers and trainers as BolaWrap Instructors in the

use and limitations of the BolaWrap 100.

Recognizing the need to provide robust training and sales support

we launched the Wrap “Train the Trainer”

October 2018.

The program is designed such that our Master BolaWrap

Instructors train local BolaWrap Instructors at local agencies who

then train line officers in accordance with an agency’s

BolaWrap Master Instructors are considered independent contractors

and are required to have law enforcement training experience and be

effective communicators.

In order to be certified as a Master

Instructor, candidates must complete a two-day Master Instructor

school at our Tempe training facility, observe a Train the Trainer

course and then be observed teaching a Train the Trainer Course.

have 52 Master Instructors, residing in 24 states that have

completed the two-day course and more than 40 have been certified

as Master Instructors allowing them to conduct Instructor

Certification Training.

In addition, we have seven Master

Instructors who have been designated Senior Master Instructors

qualified to teach and certify other Master

BolaWrap Instructors are generally sworn law enforcement officers,

typically department trainers, defensive tactic instructors or SWAT

To be certified as a BolaWrap Instructor, individuals

must attend a five-hour BolaWrap Instructor certification course,

pass a written exam and show proficiency in deploying and using the

We also assist Instructors on lessons learned and best

practices for teaching line officers in the use of BolaWrap.

nature and extent of line officer training is at each

agency’s discretion.

Instructor certification is effective

for two years after which it requires renewal.

We employ a cloud-based software system, the Wrap Learning

Management System, to schedule and organize training events,

registration and training records.

This software also hosts

training resources and materials including a 30-minute BolaWrap

Familiarization Course that distributors, purchasers and other

interested parties are highly encouraged to utilize to educate

themselves on BolaWrap use.

We have assembled a team of five experienced and well-known

trainers from different regions

across the U.S.

The Company maintains a demonstration and training department as a part of its sales and marketing activities and does not charge for product demonstrations or training.

Training is not a condition or requirement of sale as many sales are made through distributors to their end customers.

The Company conducts local and regional in-person, webinar and on-line demonstrations and use of force and de-escalation training to support law enforcement agencies with no purchase requirement.

Such training may occur before or after initial or subsequent purchase or field deployment of the Company’s products.

The Company believes that law enforcement trainers and officers that have seen demonstrations or have been trained about its products are more supportive of their departments purchase and deployment of product.

Most law enforcement and corrections agencies will not purchase new use of force devices until a training program is in place to certify officers in their proper use.

Generally, they also must adapt any new tools to their use of force policies and clear use with any relevant committees or review boards.

We have developed and offer robust training and class materials that certify law enforcement officers and trainers as BolaWrap Instructors in the use and limitations of the BolaWrap solution.

Recognizing the need to provide robust training and sales support we launched the Wrap “Train the Trainer”

program in October 2018.

The program is designed such that our Master BolaWrap Instructors train local BolaWrap Instructors at local agencies who then train line officers in accordance with an agency’s policies.

BolaWrap Master Instructors are considered independent contractors and are required to have law enforcement training experience and be effective communicators.

In order to be certified as a Master Instructor, candidates must complete a two-day Master Instructor school at our Tempe training facility, observe a Train the Trainer course and then be observed teaching a Train the Trainer Course.

We have engaged 81 Master Instructors, residing in 30 states that have completed the two-day course allowing them to conduct Instructor Certification Training.

In addition, we have nine Master Instructors who have been designated Senior Master Instructors qualified to assist with teaching and certifying other Master Instructors. Of these Senior Master Instructors, six also comprise our Training Advisory Board.

BolaWrap Instructors are generally sworn law enforcement officers, typically department trainers, defensive tactic instructors or SWAT officers.

To be certified as a BolaWrap Instructor, individuals must attend a five-hour BolaWrap Instructor certification course, pass a written exam and show proficiency in deploying and using the BolaWrap.

We also assist Instructors on lessons learned and best practices for teaching line officers in the use of BolaWrap.

The nature and extent of line officer training is at each agency’s discretion.

Instructor certification is effective for two years after which it requires renewal.

We employ a cloud-based software system, the Wrap Learning Management System, to schedule and organize training events, registration and training records.

This software also hosts a Resource Library that distributors, purchasers and other interested parties are highly encouraged to utilize to educate themselves on BolaWrap use.

We have assembled a team of five experienced and well-known trainers from different regions across the U.S.

that form the Wrap Training Academy Advisory Board.

The Wrap Training Academy Advisory Board provides guidance to

maintain a high-quality training program for Wrap

The Wrap Training Academy Advisory Board provides guidance to maintain a high-quality training program for Wrap products.

Since launching our ‘Train the Trainer’

October 2018, we now have at least one individual at over

police departments that has

received formal training and over 1,550 officers

are currently certified BolaWrap 100 instructors qualified and

certified to train line officers.

We encourage training prior to

use of the BolaWrap 100 by individual departments but the nature

and extent of training, if any, is at the discretion of each the

individual agency.

We also demonstrate and provide training on our Wrap Reality

platform and modules.

We believe our professional training and sales support team and

systems provide both a competitive advantage and a barrier to new

The nature of modern policing requires that equipment

and services be supported and that line officers have access to

training and procedures to properly perform their duties and

minimize the policing risks.

We believe we have positioned our

training and support teams to respond to agencies of all

product and training solutions continue to gain worldwide awareness

and recognition through media exposure, product demonstrations, and

word of mouth as a result of positive responses and increased

acceptance of our solutions.

We believe we have a strong global

brand, technology and product foundation, which we continue to

expand to serve new markets and customers for greater business

We believe we have strong market opportunities for our

product solutions throughout the world in the law enforcement,

defense, public safety and security sectors as a result of

increasing threats by non-compliant individuals and the demand for

less-lethal policing.

We believe our training and virtual reality

platform are positioned in rapid growth markets

Our commercialization strategy focuses on the immediate

addressable domestic market of approximately 900,000 full-time

sworn officers in over 15,300 federal,

state and local law enforcement agencies and the

o ver 12.1 million police officers in

the 100 largest police forces internationally.

Our goal is to realize the potential of our entire

suite of technology solutions targeting law enforcement and

security personnel worldwide.

we intend to continue operating with

financial discipline in order to create value for our

stockholders.

We intend to continue the pursuit of domestic

and international business opportunities with our network of

well-established distributors and grow our revenues.

develop improved and new products to our portfolio including

products for use by security and

related personnel.

We also seek business initiatives and

opportunities including acquisitions and collaborations that may be

complementary to existing product and service offerings through our

sales network.

program in October 2018, we now have at least one individual at over 1,000 U.S.

police departments that has received formal training and over 3,000 officers are currently certified BolaWrap instructors qualified and certified to train line officers.

We encourage training prior to use of the BolaWrap by individual departments but the nature and extent of training, if any, is at the discretion of each individual agency.

We also have two experienced trainers that install, demonstrate and provide training on our Wrap Reality platform and modules.

We believe our professional training and sales support team and systems provide both a competitive advantage and a barrier to new competition.

The nature of modern policing requires that equipment and services be supported and that line officers have access to training and procedures to properly perform their duties and minimize the policing risks.

We believe we have positioned our training and support teams to respond to agencies of all sizes.

Our product and training solutions continue to gain worldwide awareness and recognition through media exposure, product demonstrations, and word of mouth as a result of positive responses and increased acceptance of our solutions.

We believe we have a strong global brand, technology and product foundation, which we continue to expand to serve new markets and customers for greater business growth.

We believe we have strong market opportunities for our product solutions throughout the world in the law enforcement, defense, public safety and security sectors as a result of increasing threats by non-compliant individuals and the demand for less-lethal policing.

We believe our training and virtual reality platform are positioned in rapid growth markets worldwide.

Our commercialization strategy focuses on the immediate addressable domestic market of approximately 900,000 full-time sworn officers in over 15,300 federal, state and local law enforcement agencies, and the 12.1 million plus police officers in the 100 largest police forces internationally.

Our goal is to realize the potential of our entire suite of technology solutions targeting law enforcement and security personnel worldwide.

In 2022 we intend to continue operating with financial discipline in order to create value for our stockholders.

We intend to continue the pursuit of domestic and international business opportunities with our network of well-established distributors and grow our revenues.

We plan to develop improved and new products to our portfolio including products for use by security and related personnel.

We also seek business initiatives and opportunities including acquisitions and collaborations that may be complementary to existing product and service offerings through our sales network.

Manufacturing and Suppliers

Manufacturing

believe maintaining scalable manufacturing capabilities is

essential to the performance of our products and the growth of our

Our manufacturing and assembly involve unique processes

and materials.

We contract with third-party suppliers to produce

various parts, components and subassemblies.

We established initial

startup production in our Las Vegas facility in 2018.

2019, we completed a move and started production at our new

facility in Tempe, Arizona.

This facility now includes our

corporate administration, sales, training, engineering,

manufacturing and warehousing.

In our Tempe facility, we complete

the final assembly, test and ship our products.

We have refined our

internal processes to improve how we design, test, and qualify

We continue to implement rigorous manufacturing and

quality processes to track production and field issues.

implement design and component changes periodically to reduce our

product costs and improve product reliability and

manufacturability.

minimize inventories and maximize the efficiency of our supply

chain by having a number of components and sub-assemblies produced

by outside suppliers.

We rely on one supplier for laser assembly

with some parts sole sourced from other suppliers.

We also rely on

one supplier for certain virtual reality hardware.

We are making

efforts to source alternative suppliers to reduce such reliance.

Our ability to assemble and manufacture our products could be

adversely affected if we were to lose a sole source supplier and

were unable to find an alternative supplier.

We believe we have

developed strong relationships with our key suppliers.

suppliers should experience quality problems or part shortages, our

production schedules could be significantly delayed, or our costs

significantly increased.

December 31, 2020, we had backlog of approximately $120,000

expected to be delivered in the first quarter of 2021.

of backlog at any point in time is dependent upon order timing,

scheduled delivery dates to our customers and product lead times.

Most domestic orders are shipped shortly after order and backlog is

typically associated with larger international orders.

and customer orders for future deliveries are generally subject to

modification, rescheduling or in some instances, cancellation in

the normal course of business.

We warrant our products to be free from defects in materials and

workmanship for a period up to one year from the date of purchase.

The warranty will be generally a limited warranty, and in some

instances impose certain shipping costs on the customer.

in most cases it will be more economical and effective to replace

the defective device rather than repair.

We target the BolaWrap product as a new solution for law

enforcement and not as a replacement for other devices currently in

However, we do compete with other use of force products for

budget dollar allocations.

Law enforcement agencies may also

determine that we are an alternative to other solutions in spite of

such positioning.

Other use of force devices, including CEWs, pepper spray, batons,

and impact weapons may compete with the BolaWrap product

Many law enforcement and corrections personnel consider

such less-lethal weapons to be distinct tools, each best-suited to

a particular set of circumstances.

Consistent with this tool kit

approach, purchasing any given tool does not preclude the purchase

of one or several more.

In other cases, budgetary considerations

and limited space on officers’

belts dictate that only a

limited number of devices will be purchased and carried.

the BolaWrap’s unique remote restraint use, effectiveness,

and low possibility of injury will enable it to compete effectively

against other alternatives.

There are a number of competitors offering virtual reality

simulators for law enforcement to compete with Wrap Reality.

also compete against established video-based simulators.

other virtual reality providers and developers focused on other

applications that may in the future elect to develop and compete in

the law enforcement training space.

Our Wrap Armor ballistic shield products, in addition to competing

for law enforcement budget dollars, also competes with many other

shield manufacturers.

Many of our present and potential future competitors have, or may

have, substantially greater resources to devote to compete in the

law enforcement market and to further technological and new product

developments.

Also, these competitors or others may introduce

products with features and performance competitive to our

We believe maintaining scalable assembly capabilities is essential to the performance of our products and the growth of our business.

Our assembly processes involve unique systems and materials.

We contract with third-party suppliers to produce various parts, components and subassemblies.

We established initial startup production in a Las Vegas facility in 2018.

In October 2019, we completed a move and started production at our new facility in Tempe, Arizona.

This facility now includes our corporate administration, sales, training, engineering, manufacturing and warehousing.

In our Tempe facility, we complete the final assembly, test and ship our products.

We have refined our internal processes to improve how we design, test, and qualify products.

We continue to implement rigorous manufacturing and quality processes to track production and field issues.

We implement design and component changes periodically to reduce our product costs and improve product reliability and manufacturability.

We minimize inventories and maximize the efficiency of our supply chain by having a number of components and sub-assemblies produced by outside suppliers.

In particular, a single supplier is currently the sole manufacturer of the BolaWrap 150 battery assembly and another single supplier is the sole manufacturer of the propulsion component for BolaWrap 150 cassettes.

Other parts are sole sourced from other suppliers.

We believe we have developed strong relationships with our key suppliers.

Our ability to meet customer demand depends, in part, on our ability to obtain timely and adequate delivery of components for our products.

Our global supply chain has been subject to component shortages, increased lead times, cost fluctuations, and logistics constraints.

We expect these supply chain challenges to continue throughout 2022.

Supplier shortages, quality issues and logistic delays affect our production schedules and could in turn have a material adverse effect on our financial condition, results of operation and cash flows.

At December 31, 2021, we had backlog of approximately $268 thousand expected to be delivered in the first quarter of 2022.

The amount of backlog at any point in time is dependent upon order timing, scheduled delivery dates to our customers and product lead times.

Most orders are shipped shortly after order and backlog is typically associated with larger international orders.

Because of our history of shipping shortly after order, at this time we do not believe backlog at any period end is predictive of future order volume or revenues beyond the reported amount.

Distributor and customer orders for future deliveries are generally subject to modification, rescheduling or in some instances, cancellation in the normal course of business.

We warrant our products to be free from defects in materials and workmanship for a period up to one year from the date of purchase.

The warranty will be generally a limited warranty, and in some instances impose certain shipping costs on the customer.

Some jurisdictions require two-year or other warranty periods and we seek to comply with local or distributor requirements regarding warranties.

We expect in most cases it will be more economical and effective to replace the defective device rather than repair.

We target the BolaWrap product as a new solution for law enforcement and not as a replacement for other devices currently in use.

However, we do compete with other use of force products for budget dollar allocations.

Law enforcement agencies may also determine that we are an alternative to other solutions despite such positioning.

Other use of force devices, including conducted electrical weapons (“

CEWs ”), pepper spray, batons, and impact weapons may compete with the BolaWrap product indirectly.

Many law enforcement and corrections personnel consider such less-lethal weapons to be distinct tools, each best-suited to a particular set of circumstances.

Consistent with this tool kit approach, purchasing any given tool does not preclude the purchase of one or several more.

In other cases, budgetary considerations and limited space on officers’

belts dictate that only a limited number of devices will be purchased and carried.

We believe the BolaWrap’s unique remote restraint use, effectiveness, and low possibility of injury will enable it to compete effectively against other alternatives.

There are a number of competitors offering virtual reality simulators for law enforcement to compete with Wrap Reality.

We also compete against established video-based simulators.

There are other virtual reality providers and developers focused on other applications that may in the future elect to develop and compete in the law enforcement training space.

Many of our present and potential future competitors have, or may have, substantially greater resources to devote to compete in the law enforcement market and to further technological and new product developments.

Also, these competitors or others may introduce products with features and performance competitive to our product.

Government Regulation

The BolaWrap 100 is classified as a “firearm”

Bureau of Alcohol, Tobacco, Firearms and Explosives

ATF ”), and is subject to federal

firearms-related regulations.

We hold two Federal Firearms

Manufacturing Licenses that expire in 2022 through 2023.

regulations are enforced by surveillance and inspection.

finds a violation, it can institute a wide range of enforcement

actions, ranging from public warnings to more severe sanctions such

as fines, penalties, suspension or withdrawal of regulatory

approvals, product recalls, seizure of products, operating

restrictions or total shutdown of production, and criminal

Many states also have regulations restricting the sale and use of

certain firearms and may determine their own classification and

restrictions irrespective of ATF regulation.

In most cases, the law

enforcement and corrections market are subject to different ATF and

state regulations or exemptions than the private citizen market,

and we do not expect additional state restrictions or approvals for

sales to law enforcement.

Where different regulations exist, we

expect that the regulations affecting the private citizen market

may also apply to the private security markets, except as the

applicable regulations otherwise specifically provide.

subject to a variety of government laws and regulations that apply

to companies engaged in international operations, including, among

others, the Foreign Corrupt Practices Act, U.S.

Department of

Commerce export controls, local government regulations and

procurement policies and practices (including regulations relating

to import-export control, investments, exchange controls and

repatriation of earnings).

BolaWrap 100 is also considered a crime control product by the U.S.

Accordingly, the export of our devices is regulated

under export administration regulations.

As a result, we must

obtain export licenses from the Department of Commerce for all

shipments outside the U.S.

We do not expect the need to obtain

these licenses will cause a material delay in our foreign

Export regulations also prohibit the further shipment of

our products from foreign markets in which we hold a valid export

license to markets in which we do not hold an export license for

our products.

International destination regulations, which may

affect our device, and sale thereof, are numerous and often

We work with our international distributors, agents and

advisors who are familiar with the applicable import regulations in

each of our targeted international markets.

products are produced to comply with standard product safety

requirements for sale in the U.S.

and similar requirements for sale

in international markets.

developing additional models of restraint devices that may be

subject to different or additional international, federal and state

We expect to meet the electrical and other

regulatory requirements for any future electronic systems or

components we develop for sale throughout the world.

Intellectual Property Rights and Proprietary

We intend to vigorously protect our intellectual property assets

including issued patents, pending patents, trademarks, copyrights,

trade craft, contractual obligations and trade secrets such as

Our policy is to enter into confidentiality and

nondisclosure agreements with key employees and consultants or

third party to whom any of our proprietary information is

These agreements prohibit the disclosure of confidential

information to others, both during and subsequent to employment or

the duration of the working relationship.

These agreements may not

prevent disclosure of confidential information or provide adequate

remedies for any breach.

We rely on copyrights, trade secrets and

other proprietary rights to protect the content of our training

services including the Wrap Reality virtual reality training

software and content.

addition to such factors as innovation, technological expertise,

and experienced personnel, we believe strong product offerings that

are continually upgraded and enhanced will keep us competitive, and

we seek patent and other intellectual property protection on

important technological improvements that we make.

Prior to the filing and granting of patents, our

policy is to disclose key features to patent counsel and maintain

these features as trade secrets prior to product introduction.

Patent applications may not result in issued patents covering all

important claims and could be denied in their

We currently have ten issued U.S.

patents related to the BolaWrap

technology and nine additional U.S.

Globally, we are subject to numerous domestic, federal, state and local laws and regulations and the laws and regulations of global jurisdictions relating to matters regarding shipments, customs, import, export, safe working conditions, manufacturing practices, environmental protection and disposal of hazardous or potentially hazardous substances.

In addition, we have to ensure compliance with economic sanctions and/or restrictions on individuals, corporations or countries, and other government regulations affecting trade that may apply to our international cross border business activities.

We may incur significant costs to comply with such laws and regulations now or in the future.

The BolaWrap 100 and the BolaWrap 150 are each classified as a “firearm”

Bureau of Alcohol, Tobacco, Firearms and Explosives (“

ATF ”), and are subject to federal firearms-related regulations.

We hold two Federal Firearms Manufacturing Licenses that expire in 2022 through 2023.

The BolaWrap 150, and the related BolaWrap 150 cassette, are also regulated as exempt special explosive devices by the ATF which requires adherence to explosive manufacturing and handling regulations.

We hold one explosives manufacturing license and one explosives import license, both expiring in 2024.

ATF regulations are enforced by surveillance and inspection.

If the ATF finds a violation, it can institute a wide range of enforcement actions, ranging from public warnings to more severe sanctions such as fines, penalties, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions or total shutdown of production, and criminal prosecution.

Many states also have regulations restricting the sale and use of certain firearms and explosives and may determine their own classification and restrictions irrespective of ATF regulation.

In most cases, the law enforcement and corrections market are subject to different ATF and state regulations or exemptions than the private citizen market, and we do not expect additional state restrictions or approvals for sales to law enforcement.

Where different regulations exist, we expect that the regulations affecting the private citizen market may also apply to the private security markets, except as the applicable regulations otherwise specifically provide.

Our BolaWrap cartridges, cassettes, and lithium-ion battery packs are generally considered dangerous goods for shipment regulation.

The shipping of dangerous goods, whether via air or ground, falls under the jurisdiction of many state, federal and international agencies.

The quality of the packaging that protects a product is critical in determining whether it will arrive at its destination in a satisfactory condition.

Many of the regulations for transporting dangerous goods in the United States are determined by international rules formulated under the auspices of the United Nations. 

The International Civic Aviation Organization (" ICAO ") is the United Nations organization that develops regulations (“

Technical Instructions ”) for the safe transport of dangerous goods by air.

If shipment is by air, compliance with the rules established by the International Air Transport Association (" IATA ") is required.

The IATA is a trade association made up of airlines and air cargo couriers that publishes annual editions of the IATA Dangerous Goods Regulations.

These regulations interpret and add to the ICAO Technical Instructions to reflect industry practices.

When we ship dangerous goods, we follow strict and stringent guidelines.

We are subject to a variety of government laws and regulations that apply to companies engaged in international operations, including, among others, the Foreign Corrupt Practices Act, U.S.

Department of Commerce export controls, local government regulations and procurement policies and practices (including regulations relating to import-export control, investments, exchange controls and repatriation of earnings).

The BolaWrap 100 and the BolaWrap 150 devices are also considered a crime control product by the U.S.

Accordingly, the export of our devices is regulated under export administration regulations.

As a result, we must obtain export licenses from the Department of Commerce for all shipments outside the U.S.

We do not expect the need to obtain these licenses will cause a material delay in our foreign shipments.

Export regulations also prohibit the further shipment of our products from foreign markets in which we hold a valid export license to markets in which we do not hold an export license for our products.

We are seeking export classification of our virtual reality training product but do not currently believe export licenses will be required.

International destination regulations, which may affect our products and services, and sale thereof, are numerous and often unclear.

We work with our international distributors, agents and advisors who are familiar with the applicable import regulations in each of our targeted international markets.

Our products are produced to comply with standard product safety requirements for sale in the U.S.

and similar requirements for sale in international markets.

We expect to meet the electrical and other regulatory requirements for any electronic systems or components we sell throughout the world.

As part of our manufacturing operations, we are subject to various federal, state, local and non-U.S.

laws and regulations relating to environmental protection, including the discharge, treatment, storage, disposal and remediation of hazardous substances and wastes.

We continually assess our compliance status and management of environmental matters to ensure our operations are in substantial compliance with all applicable environmental laws and regulations.

Our Wrap Reality training software services offer agencies the option for us to store certain training records and related information.

We are committed to complying with, and helping our customers comply with, data protection laws globally.

We monitor guidance from industry and regulatory bodies, meet with our supplier partners and update our product features and contractual commitments when necessary to meet new or evolving privacy legal requirements.

We maintain a privacy policy that describes how we collect, uses and disclose information, and what choices organizations and users have.

Intellectual Property Rights and Proprietary Information

We intend to vigorously protect our intellectual property assets including issued patents, pending patents, trademarks, copyrights, trade craft, contractual obligations and trade secrets such as know-how.

Our policy is to enter into confidentiality and nondisclosure agreements with key employees and consultants or third party to whom any of our proprietary information is disclosed.

These agreements prohibit the disclosure of confidential information to others, both during and subsequent to employment or the duration of the working relationship.

These agreements may not prevent disclosure of confidential information or provide adequate remedies for any breach.

We rely on copyrights, trade secrets and other proprietary rights to protect the content of our training services including the Wrap Reality VR training software and content.

In addition to such factors such as innovation, technological expertise, and experienced personnel, we believe strong product offerings that are continually upgraded and enhanced will keep us competitive, and we seek patent and other intellectual property protection on important technological improvements that we make.

Prior to the filing and granting of patents, our policy is to disclose key features to patent counsel and maintain these features as trade secrets prior to product introduction.

Patent applications may not result in issued patents covering all important claims and could be denied in their entirety.

We currently have thirteen issued U.S.

patents related to the BolaWrap technology and fifteen additional U.S.

patents pending.

2018, we commenced filing our first foreign patent applications

targeting the European Union (38 countries) and 17 other countries,

of which two have issued to date.

We have reserved rights to file

additional foreign patents.

The failure to obtain patent protection

or the loss of patent protection on our existing and future

technologies or the circumvention of our patents by competitors

could have a material adverse effect on our ability to compete

successfully.

We have been granted trade name protection for

“BolaWrap”

In September 2018, we commenced filing our first foreign patent applications targeting the European Union (38 countries) and 17 other countries, of which six have issued to date.

During 2021 we filed additional foreign patent applications and we have reserved rights to file additional foreign patents.

The failure to obtain patent protection or the loss of patent protection on our existing and future technologies or the circumvention of our patents by competitors could have a material adverse effect on our ability to compete successfully.

We have been granted trade name protection for “BolaWrap”

and “Wrap”

in multiple countries

and expect to employ a combination of registered and common law

trade names, trademarks and service marks in our business.

on a variety of intellectual property protections for our products

and technologies, including contractual obligations, and we intend

to pursue a policy of vigorously enforcing such

The law enforcement product and services industry is characterized

by frequent litigation regarding patent and other intellectual

property rights.

Others, including academic institutions and

competitors, hold numerous patents in less-lethal and related

technologies.

Although we are not aware of any existing patents

that would materially inhibit our ability to commercialize our

technology, others may assert claims in the future.

with or without merit, may have a material adverse effect on our

financial condition, results of operations or cash

in multiple countries and expect to employ a combination of registered and common law trade names, trademarks and service marks in our business.

We rely on a variety of intellectual property protections for our products and technologies, including contractual obligations, and we intend to pursue a policy of vigorously enforcing such rights.

The law enforcement product and services industry is characterized by frequent litigation regarding patent and other intellectual property rights.

Others, including academic institutions and competitors, hold numerous patents in less-lethal and related technologies.

Although we are not aware of any existing patents that would materially inhibit our ability to commercialize our technology, others may assert claims in the future.

Such claims, with or without merit, may have a material adverse effect on our financial condition, results of operations or cash flows.

Research and Development

Our research and development initiatives are led by our internal

personnel and make use of specialized consultants when necessary.

These initiatives include basic research, mechanical engineering

design and testing.

Future development projects will focus on new

versions of the BolaWrap technology and new public safety

technologies.

fiscal years ended December 31, 2020 and 2019, we spent

approximately $ 2.8 million and

$2.2 million, respectively, on company-sponsored research and

Future levels of research and development expenditures

will vary depending on the timing of further new product

development and the availability of funds to carry on additional

research and development on currently owned technologies or in

During 2021 in addition to continued development and

enhancement of our remote restraint products we expect to incur

additional costs improving our training systems including enhancing

our Wrap Reality simulator and related content.

Our research and development initiatives are led by our internal personnel and make use of specialized consultants when necessary.

These initiatives include basic research, mechanical engineering design and testing.

Future development projects will focus on new versions of the BolaWrap technology and new public safety technologies.

For the fiscal years ended December 31, 2021 and 2020, we spent approximately $6.2 million and $2.8 million, respectively, on company-sponsored research and development.

Future levels of research and development expenditures will vary depending on the timing of further new product development and the availability of funds to carry on additional research and development on currently owned technologies or in other areas.

During 2022 in addition to continued development and enhancement of our remote restraint products we expect to incur additional costs improving our training systems including enhancing our Wrap Reality simulator and related content.

Related Party License and Royalties

We are obligated to pay royalties pursuant to an exclusive Amended

and Restated Intellectual Property 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 and James A.

Barnes, both officers and stockholders of the

Syzygy has no ongoing operations, and does not engage in

any manufacturing, production or other related

The agreement provides for the payment of royalties of 4% of

revenue from products employing the licensed device technology up

to the earlier to occur of (i) the payment by the Company of an

aggregate of $1.0 million in royalties, or (ii) September 30, 2026.

All development and patent costs have been paid by us and patent

applications and the technology related to the BolaWrap 100 have

been assigned to the Company, subject to the royalty

As a part of our acquisition of NSENA in December 2020, we agreed

to pay additional earn-out consideration equal to 10% of net

revenues (or a lesser amount equal to 50% of direct profit) from

specific identified prospects that become revenue customers before

September 30, 2021, but only on amounts collected between

consummation of the acquisition and June 30, 2022.

We are obligated to pay royalties pursuant to an exclusive Amended and Restated Intellectual Property 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 former officer and current stockholder of the Company, and James A.

Barnes, an officer and stockholder of the Company.

Syzygy has no ongoing operations, and does not engage in any manufacturing, production or other related activities.

The agreement provides for the payment of royalties of 4% of revenue from products employing the licensed device technology up to the earlier to occur of (i) the payment by the Company of an aggregate of $1.0 million in royalties, or (ii) September 30, 2026.

All development and patent costs have been paid by us and patent applications and the technology related to the BolaWrap 100 and the BolaWrap 150 have been assigned to the Company, subject to the royalty obligation.

As a part of our acquisition of NSENA in December 2020, we agreed to pay additional earn-out consideration equal to 10% of net revenues (or a lesser amount equal to 50% of direct profit) from specific identified prospects that become revenue customers before September 30, 2021, but only on amounts collected between consummation of the acquisition and June 30, 2022.

No royalties were earned or are payable under the agreement.

We do not expect to experience any significant seasonality trends.

However, seasonality trends may occur in the future.

Financial Information about Customer Concentration and Geographic

information regarding customer concentration and geographic areas

in which we operate is contained in Note 16, Major Customers and

Related Information to our consolidated financial

Financial Information about Customer Concentration and Geographic Areas

Financial information regarding customer concentration and geographic areas in which we operate is contained in Note 16, Major Customers and Related Information to our consolidated financial statements.

Human Capital

Executive Officers

current executive officers of Wrap Technologies, Inc.

ages and business experience are set forth below.

joined the Company

in March 2019 as President.

In October 2020 he was also appointed

as Interim Chief Executive Officer.

Smith co-founded TASER International (now Axon

Enterprise, Inc.) (“

TASER ”) in 1993.

He served as President of TASER

until October 2006, and as Chairman of the Board of Directors of

TASER from October 2006 until he retired to pursue entrepreneurial

activities in February 2012.

Amongst his most significant roles and

responsibilities at TASER, Mr.

Smith managed domestic and

international export sales, significantly expanding the sale and

distribution of TASER’s products, including sales to more

than 17,200 federal, state and local law enforcement agencies in

over 100 countries.

In 2012 he co-founded Achilles Technology

Solutions, LLC (“

Achilles ”), and through its wholly-owned subsidiary

ATS Armor, LLC (“

ATS Armor ”), which he co-founded in 2015, developed

products for law enforcement and military.

Smith served as the

Managing Member of Achilles from 2012 to January 2020.

Smith served as the Managing Member of ATS Armor and ATS MER

MER ”), a research and

development company acquired by Achilles in 2015 that was primarily

funded by government SBIR contracts, until March 2019 and February

2019, respectively.

ATS Armor filed a petition for Chapter 7

Bankruptcy in March 2019, and ATS MER filed a petition for Chapter

7 Bankruptcy in February 2019.

Mr. Smith holds a B.S.

in Ecology and Evolutionary Biology from the University of Arizona

degree from Northern Arizona

Cohen age 52, cofounded the

Company with Messrs.

James Barnes and Elwood Norris in March 2016,

and currently serves as its Executive Chair since July 2017.

to that, he served as a Manager until the Company’s

incorporation in March 2017 at which time he was appointed to serve

as the Company’s Corporate Secretary until January 2018.

Cohen has over 20 years of experience in institutional asset

management, wealth management, and capital markets.

currently manages several operating partnerships that actively

invest in the energy sector in addition to maintaining an active

investment portfolio in various public companies, early-stage

private companies, hedge funds and alternative assets including

Some of these include serving as Principal of the

Iroquois Capital Opportunity Fund, a closed end private equity fund

he founded in 2010 which focuses on investments in North American

oil and gas assets;

as the Manager of V3 Capital, LLC, an investor

in public and private companies that he also founded in 2015;

was the co-founder of Iroquois Capital Investment Group, LLC.

Cohen currently sits on the board of directors of Charlie’s

Holding, Inc., and serves as Executive Chair of the Board of Petro

River Oil Corp.

since 2012. Mr.

Cohen earned his Bachelor of

Science degree from Ohio University.

Barnes age 66, cofounded the

Company with Messrs.

Elwood Norris and Cohen in March 2016, and

currently serves as Chief Financial Officer, Secretary and

He served as Manager until the Company’s

incorporation in March 2017 when he was appointed President and

Chief Financial Officer.

He served as a member of the

Company’s Board of Directors from March 2017 to November

In January 2018 he was appointed to the additional positions

of Secretary and Treasurer and resigned as President.

He has served

as the President of Sunrise Capital, Inc., a private venture

capital and financial and regulatory consulting firm, since 1984.

He was Chief Financial Officer of Parametric Sound Corporation (now

Turtle Beach Corporation) from 2010 to February 2015, and from

February 2015 to February 2017 served as Vice President

Administration at Turtle Beach Corporation.

Since 1999, he has been

Manager of Syzygy Licensing LLC, a private technology invention and

licensing company he owns with Mr.

The current executive officers of Wrap Technologies, Inc.

and their ages and business experience are set forth below.

LW Varner, Jr., age 71, joined the Company as Interim Chief Executive Officer in January 2022.

Varner will serve as Interim Chief Executive Officer under the terms of a Consulting Agreement dated January 24, 2022, by and between the Company and LWV Consulting, LLC.

Varner has significant experience as a corporate executive and director in transition and turnaround situations.

From June 2020 through November 2021, Mr.

Varner was the Chief Executive Officer and a director of Select Interior Concepts, a publicly traded company focused on the building product space.

Prior to that, from July 2012 to May 2018, he was Chief Executive Officer of United Subcontractors, led a transformation of the business through organic growth and strategic transactions that resulted in USI achieving double digit EBITDA margins and an eventual sale, creating significant value for shareholders.

From 2004 to 2012, Mr.

Varner served as the President and Chief Executive Officer of Aquilex Corporation, a leading provider of specialty services to the energy sector.

Under his leadership, the company grew revenues by fivefold and achieved record earnings.

Prior to joining in 2004, Mr.

Varner served as President for several global businesses in various industries orchestrating their growth in new markets through expansion of service and product offerings.

He is a graduate of The Citadel in Charleston, South Carolina, and has served on various philanthropic, industry and community boards.

He has also served as a director of Bartlett Holdings, Aquilex Inc., USI and The Identity Group, and currently serves on the Board of Directors of Acousti Engineering, a portfolio company of Ardian, a global private equity firm.

Glenn Hickman, age 34, was appointed as the Company’s Chief Operating Officer (“

COO ”) on July 1, 2021.

Prior to his appointment, since March 2021, Mr.

Hickman served as a consultant to the Company.

From 2014 to 2019, Mr.

Hickman served as Vice President of Research and Development for Axon Enterprises (formerly TASER International).

At Axon, Hickman led the launch of six hardware products, all connected to an ecosystem of cloud software and mobile apps.

He created engineering and supply chain processes and grew the engineering team from 35 to 70.

Hickman was responsible for establishing Axon’s first manufacturing line in Shenzhen, China, and an optics engineering team in Finland.

Hickman graduated with distinction from Stanford University, receiving his Bachelor and Master of Science in Mechanical Engineering, and his MBA with honors from Northwestern University’s Kellogg School of Management with a double major in Strategy and Marketing.

Barnes age 67, cofounded the Company with Messrs.

Elwood Norris and Scot Cohen in March 2016, and currently serves as Chief Financial Officer, Secretary and Treasurer.

He served as Manager until the Company’s incorporation in March 2017 when he was appointed President and Chief Financial Officer.

He served as a member of the Company’s Board of Directors from March 2017 to November 2018.

In January 2018 he was appointed to the additional positions of Secretary and Treasurer and resigned as President.

He has served as the President of Sunrise Capital, Inc., a private venture capital and financial and regulatory consulting firm, since 1984.

He was Chief Financial Officer of Parametric Sound Corporation (now Turtle Beach Corporation) from 2010 to February 2015, and from February 2015 to February 2017 served as Vice President Administration at Turtle Beach Corporation.

Since 1999, he has been Manager of Syzygy Licensing LLC, a private technology invention and licensing company he owns with Mr.

Elwood Norris.

He previously

practiced as a certified public accountant and management

consultant with Ernst & Ernst, Touche Ross & Co., and as a

principal in J.

He previously practiced as a certified public accountant and management consultant with Ernst & Ernst, Touche Ross & Co., and as a principal in J.

McDonald & Co.

Ltd., Phoenix, Arizona.

graduated from the University of Nebraska with a Bachelor of Arts

Degree in Business Administration in 1976 and is a certified public

accountant (status:

Norris age 82, cofounded the

Company with Mr.

Barnes and Mr.

Cohen in March 2016 and currently

serves as the Company’s Chief Technology Officer.

as a director on the Company’s Board of Directors from March

2017 to January 2018.

He was previously a director and President of

Parametric Sound Corporation (now Turtle Beach Corporation) from

2010 to February 2015, and from February 2015 to September 2016 he

served as Chief Scientist, a non-executive position, at Turtle

He was a director of LRAD Corporation (now Genasys Inc.)

from August 1980 to June 2010.

He served as Chairman of LRAD

Corporation’s Board of Directors, an executive position, in

which he served in a technical advisory role and acted as a product

spokesman from September 2000 to April 2009.

He is an inventor, and

has authored more than 80 U.S.

patents, primarily in the fields of

electrical and acoustical engineering, and has been a frequent

speaker on innovation to corporations and government organizations.

He is the inventor of our BolaWrap technology.

Elwood Norris is

a majority owner of Syzygy but has no employment or management

relationship with Syzygy.

officers serve at the discretion of the board of

We employ 52 full-time employees with 50 in the United States and

two located in the United Kingdom.

In addition to our four

executive officers, we had 24 persons engaged in sales, marketing,

sales support and training, 12 in production, eight in research and

development and four in administration.

In addition, we

engage consultants from time to time to provide additional sales, marketing, training

and research and development services, and anticipate engaging

consultants going forward to supplement our full- and part-time

dedicated to preserving operational excellence and remaining an

employer of choice.

We provide and maintain a work environment that

is designed to attract, develop and retain top talent through

offering our employees an engaging work experience that contributes

to their career development.

We recognize that our success is based

on the collective talents and dedication of those we employ, and we

are highly invested in their success. 

He graduated from the University of Nebraska with a Bachelor of Arts Degree in Business Administration in 1976 and is a certified public accountant (status:

Pending his planned retirement, Mr.

Barnes will continue to serve as Chief Financial Officer, Treasurer and Secretary of the Company until the earlier of his retirement or the naming of his replacement by the Company.

In this regard, the Board of Directors has commenced a formal search to identify a highly qualified candidate to serve in the capacity of Chief Financial Officer.

Executive officers serve at the discretion of the board of directors.

We employ 68 full-time employees with 47 in the United States and three located in the United Kingdom.

In addition to our three executive officers, we had 19 persons engaged in sales, marketing, sales support and training, 21 in production, 15 in research and development and 10 in administration.

In addition, we engage consultants from time to time to provide additional sales, marketing, training and research and development services, and anticipate engaging consultants going forward to supplement our full- and part-time personnel.

We are dedicated to preserving operational excellence and remaining an employer of choice.

We provide and maintain a work environment that is designed to attract, develop and retain top talent through offering our employees an engaging work experience that contributes to their career development.

We recognize that our success is based on the collective talents and dedication of those we employ, and we are highly invested in their success. 

Available Information

As a public company, we are required to file our annual reports on

Form 10-K, quarterly reports on Form 10-Q, current reports on Form

8-K, proxy statements on Schedule 14A and other information

(including any amendments) with the Securities and Exchange

Commission (the “

As a public company, we are required to file our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements on Schedule 14A and other information (including any amendments) with the Securities and Exchange Commission (the “

SEC ”).

The SEC maintains an Internet site that

contains reports, proxy and information statements, and other

information regarding issuers that file electronically with the

You can find our SEC filings at the SEC’s website

at www.sec.gov .

The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

You can find our SEC filings at the SEC’s website at www.sec.gov .

Our Internet address is www.wrap.com .

Information contained on our website is not part of this Annual

Our SEC filings (including any amendments) are also made

available free of charge on www.wrap.com ,

as soon as reasonably practicable after we electronically file such

material with, or furnish it to, the SEC.

RI SK FACTORS

An investment in our Company involves a high degree of risk.

addition to the other information included in this Annual Report,

you should carefully consider the following risk factors in

evaluating an investment in our Company.

You should consider these

matters in conjunction with the other information included or

incorporated by reference in this Annual Report.

If any of the following risks actually

occurs, our business, reputation, financial condition, results of

operations, revenue, and future prospects could be negatively

In that event, the market price of our Common Stock could

decline, and you could lose part or all of your

Risk Factors Relating to Our Business and Industry

We have a history of operating losses, expect additional losses and

may not achieve or sustain profitability.

We have a history of operating losses and expect to incur

additional losses until we achieve sufficient revenue and resulting

margins to offset our operating costs. Our net loss for the

years ended December 31, 2020 and 2019 was $12,580,209 and

$8,325,488, respectively.

Our ability to achieve future

profitability is dependent on a variety of factors, many of which

are outside of our control.

Failure to achieve profitability or

sustain profitability, if achieved, may require us to raise

additional financing, which could have a material negative impact

on the market value of our Common Stock.

Global economic conditions or business interruptions related to the

COVID-19 pandemic or other events may negatively impact our

financial conditions and results of operations.

monitoring the impact of the COVID-19 pandemic, which has caused

significant uncertainty and disruption to global financial markets

and supply chains, beginning in early calendar year 2020.

significance of the operational and financial impact of the

COVID-19 pandemic will depend on how long and widespread the

uncertainty and disruption continue.

The extent to which the

COVID-19 pandemic impacts our financial conditions and results of

operations will depend on future developments, which are highly

uncertain and cannot be predicted, including new information which

may emerge concerning the severity of the outbreak and the actions

being taken to contain and treat it.

Uncertainty surrounds the

duration and broader impact of the COVID-19 pandemic and therefore,

the effects it will have on our financial results and operations.

If economic or market conditions in key global markets deteriorate,

we may experience material adverse effects on our business,

financial condition and results from operations.

deriving from the domestic and international response to the

COVID-19 pandemic that may negatively impact sales and gross margin

in the future include but are not limited to:

limitations on the

ability of our suppliers to meet delivery requirements and

limitations on the ability of employees to perform

their work due to illness caused by the pandemic or local, state or

federal orders requiring employees to remain at home;

on the ability of carriers to deliver products to customers;

limitations on the ability of our customers to conduct their

business and purchase our products and services;

and limitations on

the ability of our customers to pay us on a timely

Substantially all of our employees are located in the U.S.

addition to our employees, we rely on (i) distributors, agents and

third-party logistics providers in connection with product sales

and distribution and (ii) raw material and component suppliers in

the U.S., Canada, Europe and China.

If we, or any of these

third-party partners encounter any disruptions to our or their

respective operations or facilities, or if we or any of these

third-party partners were to shut down for any reason, including by

pandemic, fire, natural disaster, such as a hurricane, tornado or

severe storm, power outage, systems failure, labor dispute, or

other unforeseen disruption, then we or they may be prevented or

delayed from effectively operating our or their business,

respectively. 

We may need additional capital to execute our business plan, and

raising additional capital, if possible, by issuing additional

equity securities may cause dilution to existing stockholders.

addition, raising additional capital by issuing additional debt

instruments may restrict our operations.

Although we believe we have adequate financial resources to fund

our operations and capital needs for at least the next twelve

months, and that we may be able to generate funds from product

sales during that time, existing working capital may not be

sufficient to achieve profitable operations due to product

introduction costs, operating losses and other factors.

factors affecting the availability of internally generated funds

of product sales and services to meet planned

government spending

levels impacting sales of our products;

capital requirements to support business growth;

ability to integrate acquisitions;

ability to control spending;

ability to collect accounts receivable;

of our products and services in planned markets.

In the event we are required to raise additional capital through

the issuance of equity or convertible debt securities, the

percentage ownership of our stockholders could be diluted

significantly, and such newly issued securities may have rights,

preferences or privileges senior to those of our existing

stockholders.

In addition, the issuance of any equity securities

could be at a discount to the market price.

If we incur debt financing, the payment of principal and interest

on such indebtedness may limit funds available for our business

activities, and we could be subject to covenants that restrict our

ability to operate our business and make distributions to our

stockholders. These restrictive covenants may include

limitations on additional borrowing and specific restrictions on

the use of our assets, as well as prohibitions on our ability to

create liens, pay dividends, redeem stock or make investments.

There is no assurance that any equity or debt financing transaction

will be available on acceptable terms, if at all.

We expect to be dependent on sales of our BolaWrap product for the

foreseeable future, and if this product is not widely accepted, our

growth prospects will be diminished.

expect to depend on sales of the BolaWrap product and related

cartridges for the foreseeable future.

A lack of demand for this

product, or its failure to achieve broader market acceptance, would

significantly harm our growth prospects, operating results and

financial condition.

To execute our

business plan successfully, we will need to execute on the

following objectives, either on our own or with strategic

collaborators:

our commercialization of the BolaWrap product, and develop

additional future products and accessories for

commercialization;

required regulatory approvals for our products in global market

and, as required, enforce our intellectual property portfolio for

the BolaWrap product and other future products;

sales, distribution and marketing capabilities, and/or enter into

strategic partnering arrangements to access such capabilities,

market acceptance for the BolaWrap 100 and/or other future

We are materially dependent on the acceptance of our product by the

law enforcement market.

If law enforcement agencies do not purchase

our product, our revenue will be adversely affected and we may not

be able to expand into other markets, or otherwise continue as a

going concern.

substantial number of law enforcement agencies may not purchase our

remote restraint product.

In addition, if our product is not widely

accepted by the law enforcement market, we may not be able to

expand sales of our product into other markets.

Law enforcement

agencies may be influenced by claims or perceptions that our

product is not effective or may be used in an abusive manner.

of our product to these agencies may be delayed or limited by such

claims or perceptions.

We may incur significant and unpredictable warranty costs as our

products are introduced and produced.

warrant our products to be free from defects in materials and

workmanship for a period of up to one year from the date of

We may incur substantial and unpredictable warranty costs

from post-production product or component failures.

Future warranty

costs could further adversely affect our financial position,

results of operations and business prospects.

We could incur charges for excess or obsolete inventory and incur

production costs for improvements or model changes.

we strive to effectively manage our inventory, rapidly changing

technology, and uneven customer demand may result in short product

cycles and the value of our inventory may be adversely affected by

changes in technology that affect our ability to sell the products

in our inventory.

If we do not effectively forecast and manage our

inventory, we may need to write off inventory as excess or

obsolete, which in turn can adversely affect cost of sales and

gross profit.

experienced, and may in the future experience, improvement and

model changes and unusual production costs associated with

implementing production for our products.

We currently have no

reserve for slow moving or obsolete inventory but may incur future

charges for obsolete or excess inventory.

Our international operations could be harmed by factors including

political instability, natural disasters, fluctuations in currency

exchange rates, and changes in regulations that govern

international transactions.

We sell our products worldwide and have exported to multiple

We expect exports to continue to be a significant part

of our future business.

The risks inherent in international trade

may reduce our international sales or impede growth and harm our

business and the businesses of our customers and our suppliers.

These risks include, among other things:

Changes in tariff regulations;

Political instability, war, terrorism and other political

Foreign currency exchange rate fluctuations;

Establishing and maintaining relationships with local distributors,

agents and dealers;

Lengthy shipping times and accounts receivable payment

Import and export control and licensing requirements;

Compliance with a variety of U.S.

laws, including the Foreign

Corrupt Practices Act, by us or key subcontractors;

Compliance with a variety of foreign laws and regulations,

including unexpected changes in taxation and regulatory

requirements;

Greater difficulty in safeguarding intellectual property abroad

than in the U.S.;

Difficulty in staffing and managing geographically diverse

These and other risks may preclude or curtail international sales

or increase the relative price of our products compared to those

manufactured in other countries, reducing the demand for our

Failure to comply with U.S.

and international

governmental laws and regulations applicable to international

business, such as the Foreign Corrupt Practices Act or U.S.

control regulations, could have an adverse impact on our business

with the U.S.

and international governments.

We anticipate that a majority of our revenue in the short-term will

be generated from international sales, which may adversely affect

our ability to timely collect accounts receivable.

During the year ended December 31, 2020, we generated approximately

64% of our revenue from international sales, 56% of which was

uncollected at the end of the fiscal year.

Due principally to the

longer sales cycle and regulatory issues associated with domestic

sales versus international sales, we currently anticipate that a

substantial portion of our sales in the year ended December 31,

2021 will be generated from international

In the event we are unable to timely

collect account receivables associated with international sales, or

collection of such international sales are delayed, our financial

condition could be adversely and materially

If we are unable to manage our projected growth, our growth

prospects may be limited, and our future profitability may be

adversely affected.

We intend to continue to expand our sales, marketing and training

programs and our manufacturing capability.

Rapid expansion may

strain our managerial, financial and other resources.

unable to manage our growth, our business, operating results and

financial condition could be adversely affected.

procedures, controls and management resources also may not be

adequate to support our future operations.

We will need to

continually improve our operational, financial and other internal

systems to manage our growth effectively, and any failure to do so

may lead to inefficiencies and redundancies, and result in reduced

growth prospects and profitability.

We may face personal injury and other liability claims that harm

our reputation and adversely affect our sales and financial

Our product is intended to be used in confrontations that could

result in injury to those involved, whether or not involving our

Our product may cause or be associated with such injuries.

A person injured in a confrontation or otherwise in connection with

the use of our product may bring legal action against us to recover

damages on the basis of theories including personal injury,

wrongful death, negligent design, dangerous product or inadequate

We may also be subject to lawsuits involving allegations

of misuse of our product.

If successful, personal injury, misuse

and other claims could have a material adverse effect on our

operating results and financial condition.

Although we carry

product liability insurance, significant litigation could also

result in a diversion of management’s attention and

resources, negative publicity and an award of monetary damages in

excess of our insurance coverage.

Our future success is dependent on our ability to expand sales

through distributors, and our inability to grow our sales force or

maintain and add distributors would negatively affect our

Our distribution strategy is to pursue sales through multiple

channels with an emphasis on independent distributors, domestically

and internationally.

Our inability to recruit and retain sales

personnel and maintain and add police equipment distributors who

can successfully sell our products could adversely affect our

If we do not competitively price our products, meet the

requirements of any future distributors or end-users, provide

adequate marketing support, or comply with the terms of any

distribution arrangements, such distributors may fail to

aggressively market our product or may terminate their

relationships with us.

These developments would likely have a

material adverse effect on our sales.

Our reliance on the sales of

our products by distributors also makes it more difficult to

predict our revenue, cash flow and operating results.

We expect to expend significant resources to generate sales due to

our lengthy sales cycle, and such efforts may not result in sales

law enforcement agencies consider a wide range of issues before

committing to purchase a product, including product benefits,

training costs, the cost to use our product in addition to, or in

place of, other use of force products, product reliability and

budget constraints.

The length of our sales cycle may range from

30 days to a year or more.

We may incur substantial selling

costs and expend significant effort in connection with the

evaluation of our product by potential customers before they place

an order, if they place an order at all.

If these potential

customers do not purchase our product, we will have expended

significant resources without corresponding revenue.

Most of our intended end-users are subject to budgetary and

political constraints that may delay or prevent sales.

our and our distributors intended end-user customers are government

These agencies often do not set their own budgets and

therefore have little control over the amount of money they can

In addition, these agencies experience political pressure

that may dictate the manner in which they spend money.

even if an agency wants to acquire our product, it may be unable to

purchase our product due to budgetary or political constraints.

Some government agency orders may also be canceled or substantially

delayed due to budgetary, political or other scheduling delays,

which frequently occur in connection with the acquisition of

products by such agencies.

Our dependence on third-party suppliers for key components of our

product could delay shipment of our products and reduce our

depend on certain domestic and foreign suppliers for the delivery

of components used in the assembly of our product.

Our reliance on

third-party suppliers creates risks related to our potential

inability to obtain an adequate supply of components or

sub-assemblies and reduced control over pricing and timing of

delivery of components and subassemblies.

Specifically, we will

depend on suppliers of sub-assemblies, machined parts, injection

molded plastic parts, and other miscellaneous custom parts for our

We do not have any long-term supply agreements with any

Any interruption of supply for any material components

of our products could significantly delay the shipment of our

products and have a material adverse effect on our revenue,

profitability and financial condition.

We may not be able to successfully integrate acquisitions in the

future, and we may not be able to realize, revenue enhancements or

other synergies from such acquisitions.

December 14, 2020, we acquired substantially all of the virtual

reality system assets and business of NSENA.

Our ability to successfully

implement our business plan and achieve targeted financial results

and other benefits including, among other things, greater market

presence and development, and enhancements to our product portfolio

and customer base, is dependent on our ability to successfully

identify, consummate and integrate acquisitions, including

NSENA as well as other

businesses we may acquire in the future.

We may not realize the

intended benefits of the NSENA

acquisition or the acquisition of other businesses in the future as

rapidly as, or to the extent, anticipated by our management.

can be no assurance that we will be able to successfully integrate

the NSENA business or any other acquired businesses, products or

technologies without substantial expenses, delays or other

operational or financial problems.

Acquisitions, including our

acquisition of NSENA, involve a number of risks, some or all which

could have a material adverse effect on our acquired businesses,

products or technologies.

Furthermore, there can be no assurance

that the NSENA business or any other acquired business, product, or

technology will be profitable or achieve anticipated revenues and

Our failure to manage our acquisition and integration

strategy successfully could have a material adverse effect on our

business, results of operations and financial condition.

process of integrating an acquired business involves risks,

including but not limited to:

management related to changes in the size and possible locations of

our businesses and employees;

management's attention from the management of daily

Difficulties in the

assimilation of different corporate cultures, employees and

business practices;

Retaining the

loyalty and business of the employees or customers of acquired

Retaining employees

that may be vital to the integration of acquired businesses or to

the future prospects of the combined businesses;

Difficulties and

unanticipated expenses related to the integration of departments,

information technology systems, including accounting systems,

technologies, books and records, and procedures, and maintaining

uniform standards, such as internal accounting controls,

procedures, and policies;

Costs and expenses

associated with any undisclosed or potential liabilities,

The use of more

cash or other financial resources on integration and implementation

activities than we expect.

to successfully integrate NSENA or any other acquired business in

the future may result in reduced levels of revenue, earnings, or

operating efficiency than might have been achieved if we had not

acquired such businesses.

addition, the acquisition of NSENA and any future businesses could

result in additional debt and related interest expense, contingent

liabilities, and amortization expenses related to intangible

assets, as well as the issuance of our Common Stock, which could

have a material adverse effect on our financial condition,

operating results, and cash flow.

Government regulation of our products may adversely affect

Our device is classified as a firearm regulated by the U.S.

of Alcohol, Tobacco, Firearms and Explosives (“ATF”)

involving substantial regulatory compliance.

ATF regulations are

enforced by surveillance and inspection.

If ATF finds a violation,

it can institute a wide range of enforcement actions, ranging from

public warnings to more severe sanctions such as fines, penalties,

suspension or withdrawal of regulatory approvals, product recalls,

seizure of products, operating restrictions or total shutdown of

production, and criminal prosecution.

Any such actions could have a

material adverse impact on our operations.

Our device may face state restrictions, especially regarding sales

to security agencies.

Our product sales may be significantly

affected by federal, state and local regulation.

Failure to comply

with regulations could also result in the imposition of fines,

penalties and other actions that could adversely impact our

financial position, cash flows and operating results.

Our product is also controlled by the U.S.

Department of Commerce

DOC ”) for exports directly from the United

Consequently, we need to obtain export licenses from the

DOC for the export of our products from the United States.

Compliance with or changes in U.S.

export regulations could

significantly and adversely affect any future international

Certain foreign jurisdictions may restrict the importation or sale

of our products, limiting our international sales

opportunities.

Our products, including the BolaWrap 100, have limited issued

patents or other intellectual property protection.

If we are unable

to protect our intellectual property, we may lose a competitive

advantage or incur substantial litigation costs to protect our

future success depends in part upon our proprietary technology.

currently own ten issued U.S.

patents related to the BolaWrap 100

and have nine U.S.

patents pending.

We have filed foreign patent

applications in the European Union (up to 38 countries) and 17

other countries, and reserved our rights to file additional foreign

Our protective measures taken thus far, including our

issued patents, pending patents, issued and pending trademarks and

trade secret laws, may prove inadequate to protect our proprietary

There can be no assurance we will be granted any patent

rights from pending patents.

The scope of any possible patent

rights may not prevent others from developing and selling competing

The validity and breadth of claims covered in any

possible patents involve complex legal and factual questions, and

the resolution of such claims may be highly uncertain, lengthy, and

In addition, any patents, if granted, may be held

invalid upon challenge, or others may claim rights in or ownership

of our patents.

Our competitive position will be seriously damaged if our products

are found to infringe on the intellectual property rights of

Other companies and our competitors may currently own or obtain

patents or other proprietary rights that might prevent, limit or

interfere with our ability to make, use or sell our products.

intellectual property infringement claims made against us, with or

without merit, could be costly and time-consuming to defend and

divert our management’s attention from our business.

event of a successful claim of infringement against us and our

failure or inability to license the infringed technology, our

business and operating results could be adversely affected.

litigation or claims, whether or not valid, could result in

substantial costs and diversion of our resources.

An adverse result

from intellectual property litigation could force us to do one or

more of the following:

Cease selling, incorporating or using products or services that

incorporate the challenged intellectual property;

Obtain a license from the holder of the infringed intellectual

property right, which license may not be available on reasonable

terms, if at all;

Redesign products or services that incorporate the disputed

If we are forced to take any of the foregoing actions, we could

face substantial costs and shipment delays and our business could

be materially harmed.

Although we carry general liability

insurance, our insurance may not cover potential claims of this

type or be adequate to indemnify us for all liability that may be

In addition, it is possible that our distributors and customers may

seek indemnity from us in the event that our products are found or

alleged to infringe the intellectual property rights of others.

such claim for indemnity could result in substantial expense to us

that could harm our operating results.

Competition in the law enforcement market could reduce our sales,

make our products obsolete or inferior and prevent us from

achieving profitability.

enforcement market is highly competitive.

We face competition from

numerous larger, better capitalized, more experienced and more

widely known companies that make restraint devices, less-lethal

weapons and other law enforcement products.

One or more of our

competitors may have developed or may succeed in developing

technologies and products that are more effective than any of ours,

rendering our technology and products obsolete or noncompetitive.

Increased competition could result in reduced sales, greater

pricing pressure, lower gross margins, and prevent us from

achieving profitability.

Foreign currency fluctuations may reduce our competitiveness and

sales in international markets.

relative change in currency values creates fluctuations in product

pricing for future potential international customers.

These changes

in international end-user costs may result in lost orders and

reduce the competitiveness of our products in certain international

These changes may also negatively affect the financial

condition of some international customers and reduce or eliminate

their future orders of our products.

Our business is dependent on the continued services of our

executive team and key employees.

business and operations are substantially dependent upon the

experience and continued service of our executive team including

our President and Interim Chief Executive Officer, Thomas Smith.

do not maintain “key person”

life insurance on Mr.

Smith or any of our other executive officers and have no employment

agreements or post-employment agreements to have access to

important institutional knowledge should any executive officer

resign or be dismissed.

The loss of one or several key employees

could have a material adverse effect upon our business, financial

condition, results of operations and cash flows.

also dependent on our ability to retain and motivate high quality

personnel, especially sales and skilled engineering personnel.

Competition for such personnel is intense, and we may not be able

to attract, assimilate or retain other highly qualified managerial,

sales and technical personnel in the future.

The inability to

attract and retain the necessary managerial, sales and technical

personnel could cause our business, operating results or financial

condition to suffer.

Our current Chief Executive Officer serves in an interim capacity.

Our business may be adversely affected if we are unable to

effectively handle any transition in the position of Chief

Executive Officer or other executive positions.

Our President Thomas Smith was appointed as interim Chief Executive

Officer in October 2020.

Executive leadership transitions can be

inherently difficult to manage and may cause significant and costly

disruption to our business.

The loss of services of Mr.

other members of senior management, or the inability to attract

qualified permanent replacements, could have a material adverse

effect on our business, financial condition, results of operations

and cash flows.

Risk Factors Relating to Our Financial Statements and Operating

We cannot predict our future operating results.

Our quarterly and

annual results will likely be subject to fluctuations caused by

many factors, any of which could result in our failure to achieve

our expectations.

We currently expect that the BolaWrap product will be the primary

source of our revenue in the foreseeable future.

We expect our

revenue to vary significantly due to a number of factors.

these factors are beyond our control.

Any one or more of these

factors, including those listed below, could cause us to fail to

achieve our revenue expectations.

These factors include, among

ability to develop and supply product to customers;

acceptance of, and changes in demand for, our

or losses of significant customers, distributors or strategic

relationships;

Unpredictable

volume and timing of customer orders;

availability, pricing and timeliness of delivery of components for

our products;

in the availability of manufacturing capacity or manufacturing

yields and related manufacturing costs;

of new technological advances, product announcements or

introductions by us and by our competitors;

Unpredictable

warranty costs associated with our products;

cycles and order delays by customers or production delays by us or

our suppliers;

changes affecting the marketability of our products;

challenges of obtaining supplies and components and shipping

products resulting from the pandemic;

economic conditions that could affect the timing of customer orders

and capital spending and result in order cancellations or

rescheduling;

political conditions in this country and in various other parts of

the world that could affect spending for the products that we

intend to offer.

Some or all of these factors could adversely affect demand for our

products and, therefore, adversely affect our future operating

As a result of these and other factors, we believe that

period-to-period comparisons of our operating results may not be

meaningful in the near term, and accordingly you should not rely

upon our performance in a particular period as indicative of our

performance in any future period.

Our expense may vary from period to period, which could affect

quarterly results and our stock price.

If we incur additional expense in a quarter in which we do not

experience increased revenue, our results of operations will be

adversely affected, and we may incur larger losses than anticipated

for that quarter.

Factors that could cause our expense to fluctuate

from period to period include:

timing and extent of our research and development

and costs of maintaining or protecting our intellectual

and sales efforts to promote our products and technologies;

timing of personnel and consultant hiring.

our operating expenses are relatively fixed in the short term.

may be unable to rapidly adjust spending to compensate for any

unexpected sales shortfalls, which could harm our quarterly

operating results and our stock price.

We do not have the ability

to predict future operating results with any

Our disclosure controls and procedures may not prevent or detect

all acts of fraud.

disclosure controls and procedures are designed to reasonably

assure that information required to be disclosed in reports filed

or submitted under the Securities Exchange Act is accumulated and

communicated to management and is recorded, processed, summarized

and reported within the time periods specified in the SEC’s

rules and forms.

Our management expects that our disclosure

controls and procedures and internal controls and procedures, no

matter how well conceived and operated, can provide only

reasonable, not absolute, assurance that the objectives of the

control system are met.

Because of the inherent limitations in all

control systems, they cannot provide absolute assurance that all

control issues and instances of fraud, if any, within our company

have been prevented or detected.

These inherent limitations include

the realities that judgments in decision-making can be faulty, and

that breakdowns can occur because of a simple error or mistake.

Additionally, controls can be circumvented by the individual acts

of some persons, by collusion of two or more people, or by an

unauthorized override of the controls.

The design of any system of

controls also is based in part upon certain assumptions about the

likelihood of future events, and we cannot assure that any design

will succeed in achieving its stated goals under all potential

future conditions.

Accordingly, because of the inherent limitations

in a cost-effective control system, misstatements due to error or

fraud may occur and not be detected.

Failure to maintain an effective system of internal control over

financial reporting could harm stockholder and business confidence

in our financial reporting, our ability to obtain financing and

other aspects of our business.

an effective system of internal control over financial reporting is

necessary for us to provide reliable financial reports.

of the Sarbanes-Oxley Act of 2002 and the related rules and

regulations promulgated by the SEC require us to include in our

Form 10-K a report by management regarding the effectiveness of our

internal control over financial reporting.

The report includes,

among other things, an assessment of the effectiveness of our

internal control over financial reporting as of the end of the

respective fiscal year, including a statement as to whether or not

our internal control over financial reporting is effective.

assessment must include disclosure of any material weaknesses in

our internal control over financial reporting identified by

While our management has concluded that our internal

control over financial reporting was effective as of December 31,

2020, it is possible that material weaknesses will be identified in

In addition, components of our internal control over

financial reporting may require improvement from time to time.

management is unable to assert that our internal control over

financial reporting is effective in any future period, investors

may lose confidence in the accuracy and completeness of our

financial reports, which could have an adverse effect on the

Company’s stock price.

Risk Factors Relating to Our Common Stock

Our stock price is volatile and may continue to be volatile or may

decline regardless of our operating performance, resulting in

substantial losses for investors.

The market price of our Common Stock has fluctuated significant to

date and in the future may fluctuate significantly in response to

numerous factors, many of which are beyond our control, including

the factors listed below and other factors described in this

“Risk Factors”

or anticipated fluctuations in our operating

results; 

of securities analysts to initiate or maintain coverage of our

Company, changes in financial estimates by any securities analysts

who follow our Company, or our failure to meet these estimates or

the expectations of investors; 

changes by any securities analysts who follow our

Company; 

in the availability of federal funding to support local law

enforcement efforts, or local budgets;

Announcements

by us of significant technical innovations, acquisitions, strategic

partnerships, joint ventures or capital commitments;

in operating performance and stock market valuations of other

security product companies generally;

and volume fluctuations in the overall stock market, including as a

result of trends in the economy as a whole;

Announcements of

merger or acquisition transactions;

in our board of directors or management;

of large blocks of our Common Stock, including sales by our

executive officers, directors and significant

stockholders;

threatened or filed against us;

sales, hedging and other derivative transactions involving our

capital stock;

economic conditions in the United States and abroad;

events or factors, including those resulting from war, incidents of

terrorism or responses to these events.

In addition, stock markets have experienced extreme price and

volume fluctuations that have affected and continue to affect the

market prices of equity securities of many security and technology

Stock prices of many security and technology companies

have fluctuated in a manner unrelated or disproportionate to the

operating performance of those companies.

We are and, in the future, may be subject to securities litigation,

which may be expensive and could divert management

Our share price is volatile, and in the past companies that have

experienced volatility in the market price of their stock have been

subject to securities class action litigation.

For instance, in

September 2020 a putative class action lawsuit and in November 2020

a shareholder derivative lawsuit were filed against us and certain

of our directors and officers.

Lawsuits of this nature divert financial and management resources

that would otherwise be used to benefit our operations.

deny the material allegations in the lawsuits and intend to defend

ourselves vigorously, defending the lawsuits may result in

substantial costs.

Any lawsuit to which we or our directors or

officers are a party, with or without merit, may result in an

unfavorable judgment.

We also may decide to settle lawsuits on

unfavorable terms.

Any such negative outcome could result in

payments of substantial damages or fines, damage to our reputation

or adverse changes to our offerings or business practices.

these results could adversely affect our business.

In addition, we may be the target of securities-related litigation

in the future.

Such litigation may divert our management’s

attention and resources, result in substantial costs, and have an

adverse effect on our business, results of operations and financial

We maintain director and officer insurance that we

regard as reasonably adequate to protect us from potential claims;

however, we cannot assure you that it will.

Further, if we are

subject to future litigation, the costs of insurance may increase,

and the availability of coverage may decrease.

As a result, we may

not be able to maintain our current levels of insurance at a

reasonable cost, or at all, which might make it more difficult to

attract qualified candidates to serve as executive officers or

directors of the Company.

Sales of a substantial number of shares of our Common Stock may

adversely affect the market price of our Common Stock.

Sales or distributions of a substantial number of shares of our

Common Stock in the public market, or the perception that such

sales could occur, could adversely affect the market price of our

Common Stock.

Many of the outstanding shares of our Common Stock,

other than the shares held by executive officers and directors, are

eligible for immediate resale in the public market.

selling of our Common Stock could adversely affect the market price

of our Common Stock.

Our Common Stock could be delisted from the Nasdaq Stock

Nasdaq’s

continued listing standards for our Common Stock require, among

other things, that (i) we maintain a closing bid price for our

Common Stock of at least $1.00, and (ii) we maintain:

stockholders’

equity of $2.5 million;

(B) market value of

listed securities of $35 million;

or (C) net income from continuing

operations of $500,000 in the most recently completed fiscal year

or in two of the last three most recently completed fiscal years.

Any failures to satisfy any continued listing requirements could

lead to the receipt of a deficiency notice from Nasdaq and

ultimately to a delisting from trading of our Common Stock.

Common Stock were delisted from Nasdaq, among other things, this

could result in a number of negative implications, including

reduced liquidity in our Common Stock as a result of the loss of

market efficiencies associated with Nasdaq and the loss of federal

preemption of state securities laws as well as the potential loss

of confidence by suppliers, customers and employees, institutional

investor interest, fewer business development opportunities,

greater difficulty in obtaining financing and possible breaches of

certain contractual obligations.

Our officers and directors are among our largest stockholders and

may have certain personal interests that may affect the

Management owned approximately 41% of our Common Stock

at December 31, 2020.

As a result, our management, acting

individually or as a group, has the potential ability to exert

influence on the outcome of issues requiring approval by our

stockholders.

This concentration of ownership may have effects such

as delaying or preventing a change in control of the Company that

may be favored by other stockholders or preventing transactions in

which stockholders might otherwise recover a premium for their

shares over current market prices.

We may issue additional shares of Common Stock in the future.

issuance of additional shares of Common Stock may reduce the value

of your Common Stock.

issue additional shares of Common Stock without further action by

our stockholders.

Moreover, the economic and voting interests of

each stockholder will be diluted as a result of any such issuances.

Although the number of shares of Common Stock that stockholders

presently own will not decrease, such shares will represent a

smaller percentage of the total shares that will be outstanding

after the issuance of additional shares. The issuance of

additional shares of Common Stock may cause the market price of our

Common Stock to decline.

Sales of shares of Common Stock issuable upon the exercise of any

future options or warrants may lower the price of our Common

At December 31, 2020, we had warrants, options and restricted stock

units outstanding on 7.6 million shares of our Common Stock.

issuance of shares of Common Stock issuable upon the exercise of

options or warrants or issuance from restricted stock units could

cause substantial dilution to existing holders of our Common Stock,

and the sale of those shares in the market could cause the market

price of our Common Stock to decline.

The potential dilution from

the issuance of these shares could negatively affect the terms on

which we are able to obtain equity financing.

We may issue preferred stock in the future, and the terms of the

preferred stock may reduce the value of your Common

authorized to issue up to 5 million shares of preferred stock in

one or more series.

Our Board of Directors may determine the terms

of future preferred stock offerings without further action by our

stockholders.

If we issue preferred stock, it could affect your

rights or reduce the value of your Common Stock.

In particular,

specific rights granted to future holders of preferred stock could

be used to restrict our ability to merge with or sell our assets to

a third party.

Preferred stock terms may include voting rights,

preferences as to dividends and liquidation, conversion and

redemption rights and sinking fund provisions.

We incur substantial costs as a result of being a public

As a public company, we incur significant levels of legal,

accounting, insurance, exchange listing fees and other expenses

that we did not incur as a private company.

We are subject to the

reporting requirements of the Securities Exchange Act of 1934, as

amended (the “

Act ”), the Sarbanes-Oxley

Act of 2002 (the “

Sarbanes-Oxley

Act ”), the Dodd-Frank

Act, the listing requirements of the Nasdaq Capital Market and

other applicable securities rules and regulations.

Compliance with

these rules and regulations increases our legal and financial

compliance costs, makes some activities more difficult,

time-consuming or costly and increases demand on our systems and

resources as compared to when we operated as a private company.

Exchange Act requires, among other things, that we file annual,

quarterly and current reports with respect to our business and

operating results.

The Sarbanes-Oxley Act requires, among other

things, that we maintain effective disclosure controls and

procedures and internal control over financial reporting.

to maintain and, if required, improve our disclosure controls and

procedures and internal control over financial reporting to meet

this standard, significant resources and management oversight may

As a result, management’s attention may be

diverted from other business concerns, which could adversely affect

our business and operating results.

We may need to hire more

corporate employees in the future or engage outside consultants to

comply with these requirements, which would increase our costs and

In addition, changing laws, regulations and standards relating to

corporate governance and public disclosure are creating uncertainty

for public companies, increasing legal and financial compliance

costs and making some activities more time-consuming.

regulations and standards are subject to varying interpretations,

in many cases due to their lack of specificity, and, as a result,

their application in practice may evolve over time as new guidance

is provided by regulatory and governing bodies.

This could result

in continuing uncertainty regarding compliance matters and higher

costs necessitated by ongoing revisions to disclosure and

governance practices.

We intend to invest resources to comply with

evolving laws, regulations and standards, and this investment may

result in increased general and administrative expenses and a

diversion of management’s time and attention from

revenue-generating activities to compliance activities.

efforts to comply with new laws, regulations and standards differ

from the activities intended by regulatory or governing bodies due

to ambiguities related to their application and practice,

regulatory authorities may initiate legal proceedings against us

and our business may be adversely affected. 

As a result of disclosure of information in this report and in the

filings that we are required to make as a public company, our

business, operating results and financial condition have become

more visible, which has resulted in, and may in the future result

in threatened or actual litigation, including by competitors and

other third parties.

If any such claims are successful, our

business, operating results and financial condition could be

adversely affected, and even if the claims do not result in

litigation or are resolved in our favor, these claims, and the time

and resources necessary to resolve them, could divert the resources

of our management and adversely affect our business, operating

results and financial condition.

The payment of dividends will be at the discretion of our Board of

never declared dividends on our Common Stock, and currently do not

anticipate that we will do so in the foreseeable future.

declaration and amount of future dividends, if any, will be

determined by our Board of Directors and will depend on our

financial condition, earnings, capital requirements, financial

covenants, regulatory constraints, industry practice and other

factors our Board of Directors deems relevant.

U NRESOLVED STAFF

Information contained on our website is not part of this Annual Report.

Our SEC filings (including any amendments) are also made available free of charge on www.wrap.com , as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

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

What changed 10-K

Item 1. Business