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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June~~September 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 001-38750

Wrap Technologies, Inc.

(Exact name of registrant as specified in its charter)

Delaware

98-0551945

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

3480 Main Hwy, Suite 202

Miami, Florida 33133

(Address of principal executive offices) (Zip Code)

(800) 583-2652

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001 per share		WRAP		Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~August~~November 1311, 2025, a total of 5051,~~820~~549,~~698~~ 094 shares of the Registrant’s common stock, par value $0.0001 per share (“Common Stock”), were issued and outstanding.

WRAP TECHNOLOGIES, INC.

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements:	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	45
	Notes to Condensed Consolidated Interim Financial Statements	56
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1822
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3238
Item 4.	Controls and Procedures	3238
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	3339
Item 1A.	Risk Factors	3339
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3341
Item 3.	Defaults Upon Senior Securities	3341
Item 4.	Mine Safety Disclosures	3341
Item 5.	Other Information	3341
Item 6.	Exhibits	3442
SIGNATURES		3543

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Wrap Technologies, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value and share amounts)

(unaudited)

	June 30, 2025			December 31, 2024
ASSETS
Current assets:
Cash and cash equivalents	$	4,177		$	3,610
Accounts receivable and contract assets, net		906			513
Inventories, net		5,904			6,170
Prepaid expense and other current assets		334			178
Total current assets		11,321			10,471
Property and equipment, net		87			146
Operating lease right-of-use asset, net		1,814			1,964
Intangible assets, net		2,262			2,354
Other long-term assets		128			186
Total assets	$	15,612		$	15,121
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	583		$	609
Accrued liabilities		872			1,403
Customer deposits		27			27
Deferred revenue - short term		302			466
Operating lease liability - short term		218			567
Warrants		-			10,131
Total current liabilities		2,002			13,203
Deferred revenue – long-term		23			39
Operating lease liability – long-term		1,826			1,629
Total long-term liabilities		1,849			1,668
Total liabilities	$	3,851		$	14,871
Commitments and contingencies (Note 13)		-			-
Stockholders’ equity:
Preferred stock - 5,000,000 authorized; par value $0.0001 per share; 0 shares issued and outstanding at June 30, 2025, and December 31, 2024	$	-		$	-
Common stock - 150,000,000 authorized; par value $0.0001 per share; 50,728,535 and 47,101,631 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively		5			5
Convertible Preferred Stock - 10,000 authorized, par value $0.0001 per share; 8,207 shares issued and outstanding at June 30, 2025 and December 31, 2024		-			-
Preferred Stock		-			-
Additional paid-in capital		120,783			105,326
Accumulated deficit		(109,027	)		(105,081	)
Total stockholders’ equity		11,761			250
Total liabilities and stockholders’ equity	$	15,612		$	15,121

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

Wrap Technologies, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)

	2025			2024			2025			2024
	Three Months ended June 30,						Six Months ended June 30,
	2025			2024			2025			2024
Revenues:
Product sales	$	197		$	1,251		$	550			2,578
Managed services		764			-			1,000			-
Technology enabled services		51			322			228			471
Total revenues		1,012			1,573			1,778			3,049
Cost of revenues		525			589			695			1,229
Gross profit		487			984			1,083			1,820
Operating expenses:
Selling, general and administrative		3,181			3,475			7,266			7,695
Research and development		162			679			594			1,434
Total operating expenses		3,343			4,154			7,860			9,129
Loss from operations		(2,856	)		(3,170	)		(6,777	)		(7,309	)
Other income (expense):
Interest income		2			55			3			133
Change in fair value of warranty liabilities		(871	)		2,738			3,158			6,917
Other		(2	)		(8	)		(2	)		(9	)
Total other income (expense), net		(871	)		2,785			3,159			7,041
Net loss		(3,727	)		(385	)	$	(3,618	)	$	(268	)
Less: Convertible preferred stock dividends		(164	)		(511	)		(328	)		(700	)
Net loss attributable to common stockholders	$	(3,891	)	$	(896	)	$	(3,946	)	$	(968	)
Net loss per basic and diluted common share	$	(0.07	)	$	(0.02	)	$	(0.07	)	$	(0.02	)
Weighted average common shares used to compute net loss per basic and diluted common share		50,609,509			45,324,917			49,439,838			44,470,183
Comprehensive loss:
Net loss	$	(3,727	)	$	(385	)	$	(3,618	)	$	(268	)
Comprehensive loss	$	(3,727	)	$	(385	)	$	(3,618	)	$	(268	)

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

~~Wrap Technologies,~~PART ~~Inc~~I. FINANCIAL INFORMATION

~~Condensed Consolidated~~Item ~~Statements~~1. ofFinancial ~~Stockholders’ Equity~~Statements

~~(in thousands~~Wrap Technologies, ~~except share amounts)~~Inc.

~~(unaudited)~~Condensed Consolidated Balance Sheets

~~Three Months~~(in ~~Ended~~thousands, ~~June~~except ~~30,~~par ~~2025~~value and share amounts)

	Shares		Amount		Shares		Amount		Capital		Deficit			Equity
	Common Stock				Convertible Preferred Stock				Additional Paid-In		Accumulated			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity
Balance at April 1, 2025		50,494,701	$	5		8,207	$	-	$	107,698	$	(105,136	)	$	2,567
Share-based compensation expense		-		-		-		-		770		-			770
Dividends on convertible preferred stock		139,431		-		-		-		164		(164	)		-
Common Stock issued upon vesting of restricted stock units		94,403		-		-		-		-		-			-
Common Stock issued with Private Placement		-		-		-		-		-		-			-
Reclassification of warrant liability due to warrant amendment		-		-		-		-		12,151		-			12,151
Net loss for the period		-		-		-		-		-		(3,727	)		(3,727	)
Balance at June 30, 2025		50,728,535	$	5		8,207	$	-	$	120,783	$	(109,027	)	$	11,761
Six months Ended June 30, 2025
Balance at January 1, 2025		47,101,631	$	5		8,207	$	-	$	105,326	$	(105,081	)	$	250
Share-based compensation expense		-		-		-		-		2,435		-			2,435
Dividends on convertible preferred stock		252,636		-		-		-		328		(328	)		-
Common Stock issued upon vesting of restricted stock units		157,602		-		-		-		-		-			-
Common Stock issued with Private Placement		3,216,666		-		-		-		543		-			543
Reclassification of warrant liability due to warrant amendment		-		-		-		-		12,151		-			12,151
Net loss for the period		-		-		-		-		-		(3,618	)		(3,618	)
Balance at June 30, 2025		50,728,535	$	5		8,207	$	-	$	120,783	$	(109,027	)	$	11,761

(unaudited)

Three months Ended June 30, 2024

		September 30, 2025			December 31, 2024

ASSETS
Current Assets:
Cash and cash equivalents	$	5,965		$	3,610
Accounts receivable, net		1,822			513
Inventories, net		5,461			6,170
Prepaids and deposits		334			178
Total Current Assets		13,582			10,471
Property and equipment, net		138			146
Operating lease right of use assets, net		2,242			1,964
Intangible assets, net		2,147			2,354
Other assets, net		128			186
Total Assets	$	18,237		$	15,121

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable		596			609
Accrued liabilities		563			1,403
Customer deposits		61			27
Deferred revenue - short term		382			466
Operating lease liability - short term		305			567
Warrants- short term		-			10,131
Total Current Liabilities		1,907			13,203

Deferred revenue - long term		18			39
Operating lease liability - long term		2,186			1,629
Total long-term liabilities	$	2,204		$	1,668
Total Liabilities	$	4,111		$	14,871

Commitments and Contingencies

Stockholders' Equity
Preferred stock - 5,000,000 authorized; par value $0.0001 per share; 12,707 shares issued and outstanding at September 30, 2025, and December 31, 2024		-			-
Common stock - 150,000,000 authorized; par value $0.0001 per share; 51,497,710 and 47,101,631 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively	$	5		$	5
Series A convertible preferred stocks - 10,000 authorized, par value $0.0001 per share; 8,207 shares issued and outstanding at September 30, 2025 and December 31, 2024		-			-
Series B convertible preferred stocks - 4,500 authorized, par value $0.0001 per share, 4,500 and 0 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively		-			-
Additional paid-in capital		126,085			105,326
Accumulated deficit		(111,964	)		(105,081	)
Total Stockholders' Equity		14,126			250
Total Liabilities and Stockholders' Equity	$	18,237		$	15,121

	Common Stock				Convertible Preferred Stock					Additional Paid-In		Accumulated			Total Stockholders’
	Shares		Amount		Shares			Amount		Capital		Deficit			Equity
Balance at April 1, 2024		44,373,107	$	4		9,798		$	-	$	102,539	$	(98,060	)	$	4,483
Share-based compensation expense		-		-		-			-		243		-			243
Dividends on convertible preferred stock		-		-		-			-		11		(511	)		(500	)
Common Stock issued upon convertible preferred stock exercising conversion rights		1,316,699		-		(1,591	)		-		-		-			-
Common Stock issued upon vesting of restricted stock units		103,306		-		-			-		-		-			-
Net loss for the period		-		-		-			-		-		(385	)		(385	)
Balance at June 30, 2024		45,793,112	$	4		8,207		$	-	$	102,793	$	(98,956	)	$	3,841
Six months Ended June 30, 2024
Balance at January 1, 2024		43,855,503	$	4		9,898		$	-	$	101,147	$	(97,988	)	$	3,163
Balance		43,855,503	$	4		9,898		$	-	$	101,147	$	(97,988	)	$	3,163
Common Stock issued upon exercise of stock options		232,081		-		-			-		588		-			588
Share-based compensation expense		-		-		-			-		918		-			918
Dividends on convertible preferred stock		128,233		-		-			-		140		(700	)		(560	)
Common Stock issued upon convertible preferred stock exercising conversion rights		1,391,183		-		(1,691	)		-		-		-			-
Common Stock issued upon vesting of restricted stock units		186,112		-		-			-		-		-			-
Net loss for the period		-		-		-			-		-		(268	)		(268	)
Balance at June 30, 2024		45,793,112	$	4		8,207		$	-	$	102,793	$	(98,956	)	$	3,841
Balance		45,793,112	$	4		8,207		$	-	$	102,793	$	(98,956	)	$	3,841

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

~~The accompanying notes are an integral part of these financial statements.~~1

3Wrap Technologies, Inc.

~~Wrap Technologies,~~Condensed ~~Inc.~~Consolidated Statements of Operations and Comprehensive Loss

~~Condensed Consolidated~~(in ~~Statements~~thousands, ofexcept ~~Cash~~share ~~Flows~~and per share amounts)

(~~in thousands~~unaudited)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
		2025			2024			2025			2024
Revenues:
Product sales		1,743		$	434			2,293		$	3,012
Managed services		242			-			1,241			-
Technology enabled services		37			159			265			630
Total revenues, gross		2,022			593			3,799			3,642
Sales returns and allowances		(531	)		-			(531	)		-
Total revenues, net		1,491			593			3,268			3,642
Cost of revenues		608			358			1,303			1,587
Gross profit		883			235			1,965			2,055

Operating Expenses:
Selling, general and administrative		3,477			3,334			10,887			11,029
Research and development		167			527			619			1,960
Total operating expenses		3,644			3,861			11,506			12,989
Loss from operations		(2,761	)		(3,626	)		(9,541	)		(10,934	)

Other income / (expense):
Interest income		2			21			6			154
Change in fair value of warranty liabilities		-			5,600			3,158			12,517
Other		(14	)		(5	)		(14	)		(15	)
Total other income / (expense), net		(12	)		5,616			3,150			12,656
Net (loss) income	$	(2,773	)	$	1,990		$	(6,391	)	$	1,722

Less: convertible preferred stock dividends		(164	)		(317	)		(492	)		(1,017	)
Net (loss) income attributable to common stockholders	$	(2,937	)	$	1,673		$	(6,883	)	$	705

Net (loss) income per basic and diluted share of Common Stock	$	(0.06	)	$	0.04		$	(0.14	)	$	0.02
Weighted average common shares used to compute net loss per basic and diluted shares of Common Stock		51,096,292			45,861,208			49,998,057			45,067,793

Comprehensive (loss) income:
Net (loss) income	$	(2,773	)	$	1,990		$	(6,391	)	$	1,722
Comprehensive (loss) income	$	(2,773	)	$	1,990		$	(6,391	)	$	1,722

	2025			2024
	Six Months ended June 30,
	2025			2024
Cash Flows From Operating Activities:
Net loss	$	(3,618	)	$	(268	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		304			451
Share-based compensation		2,435			918
Warranty provision		2			17
Change in fair value of warrant liabilities		(3,158	)		(6,917	)
Non-cash lease expense		(199	)		143
Provision for doubtful accounts		34			-
Write-off accounts receivables		26			-
Inventory obsolescence reserve		187			12
Changes in assets and liabilities:
Accounts receivable		(453	)		(236	)
Inventories		79			(707	)
Prepaid expenses and other current assets		(156	)		261
Accounts payable		(34	)		25
Operating lease liability		197			(29	)
Customer deposits		-			(1,002	)
Accrued liabilities and other		(523	)		39
Warranty settlement		(10	)		(34	)
Deferred revenue		(180	)		41
Changes in other non-current assets		58			37
Net cash used in operating activities		(5,009	)		(7,249	)
Cash Flows From Investing Activities:
Proceeds from maturities of short-term investments		-			5,000
Capital expenditures for property and equipment		(8	)		(13	)
Investment in patents and trademarks		(145	)		(97	)
Net cash (used in) provided by investing activities		(153	)		4,890
Cash Flows From Financing Activities:
Proceeds from exercise of stock options		-			588
Proceeds from issuance of warrants and common stock, net of offering costs		5,729			-
Dividends settled in Cash		-			(120	)
Net cash provided by financing activities		5,729			468
Net increase (decrease) in cash and cash equivalents		567			(1,891	)
Cash and cash equivalents, beginning of period		3,610			3,955
Cash and cash equivalents, end of period	$	4,177		$	2,064
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Reclassification of warrant liabilities to additional paid in capital	$	12,159			-
Change in unrealized gain on short-term investments		-		$	94
Dividends on convertible preferred stock	$	(328	)	$	700
Dividends settled with common stock	$	328		$	140

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

~~The accompanying notes are an integral part of these financial statements.~~2

4Wrap Technologies, Inc.

~~Wrap Technologies,~~Condensed ~~Inc.~~Consolidated Statements of Stockholders’ Equity

~~Notes to~~(in ~~Condensed~~thousands, ~~Consolidated~~except ~~Interim~~share ~~Financial Statements~~amounts)

(~~in thousands, except per share and share amounts~~unaudited)

(unaudited)


Three Months Ended September 30, 2025
					Series A Convertible				Series B Convertible						Additional					Total
	Common Stock				Preferred Stock				Preferred Stock						Paid-in		Accumulated			Stockholders’
		Shares		Amount		Shares		Amount		Shares		Amount			Capital		Deficit			Equity
Balance at July 1, 2025		50,728,535	$	5		8,207	$	-		-	$	-	$	$	120,783	$	(109,027	)	$	11,761
Share-based compensation expense		-		-		-		-		-		-			638		-			638
Dividends on convertible preferred stock		153,409		-		-		-		-		-			164		(164	)		-
Common Stock issued upon vesting of restricted stock units		615,766		-		-		-		-		-			-		-			-
Series B Convertible Preferred Stock issuance		-		-		-		-		4,500		-			4,500		-			4,500
Reclassification of warrant liability due to warrant amendment		-		-		-		-		-		-			-		-			-
Net loss for the period		-		-		-		-		-		-			-		(2,773	)		(2,773	)
Balance at September 30, 2025		51,497,710		5		8,207	$	-		4,500	$	-		$	126,085	$	(111,964	)	$	14,126

Nine months Ended September 30, 2025

Balance at January 1, 2025		47,101,631	$	5		8,207	$	-		-	$	-		$	105,326	$	(105,081	)	$	250
Share-based compensation expense		-		-		-		-		-		-			3,073		-			3,073
Dividends on convertible preferred stock		406,045		-		-		-		-		-			492		(492	)		-
Common Stock issued upon vesting of restricted stock units		773,368		-		-		-		-		-			-		-			-
Series B Convertible Preferred Stock issuance		-		-		-		-		4,500		-			4,500		-			4,500
Common Stock issued with Private Placement		3,216,666		-		-		-		-		-			543		-			543
Reclassification of warrant liability due to warrant amendment		-		-		-		-		-		-			12,151		-			12,151
Net loss for the period		-		-		-		-		-		-			-		(6,391	)		(6,391	)
Balance at September 30, 2025		51,497,710	$	5		8,207	$	-		4,500	$	-		$	126,085	$	(111,964	)	$	14,126

~~1. ORGANIZATION,~~The ~~SUMMARY~~accompanying OFnotes ~~SIGNIFICANT~~are ~~ACCOUNTING~~an ~~POLICIES~~integral ~~AND~~part ~~RECENT~~of ~~DEVELOPMENTS~~these financial statements.

~~Organization and Business Description~~3

Wrap Technologies, Inc., a Delaware corporation (the “Company”, “we”, “us”, and “our”), is a publicly traded company with its common stock, par value $0.0001 per share (“Common Stock”), listed on the Nasdaq Capital Market (“Nasdaq”) under the trading symbol “WRAP.” The Company is a developer and supplier of public safety products and training services for law enforcement and security personnel. The Company’s primary product is the BolaWrap® remote restraint device. The principal markets for the Company’s proprietary products and services are in North and South America, Europe, Middle East and Asia.

~~Basis~~ Condensed Consolidated Statements of ~~Presentation~~Stockholders’ Equity

The Company’s unaudited interim condensed consolidated financial statements included herein have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X and the rules and regulations of the Securities and Exchange Commission (~~“SEC”). Certain information and footnote disclosures normally included~~ in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. In management’s opinionthousands, ~~the~~except ~~accompanying~~share financial statements reflect adjustments necessary to present fairly the financial position, results of operations, and cash flows for those periods indicated, and contain adequate disclosure to make the information presented not misleading. Adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the footnotes. The condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2024, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “Annual Report”amounts), as filed with the SEC on March 31, 2025 and as amended on April 25, 2025. The accompanying condensed consolidated balance sheet as of June 30, 2025 has been derived from the audited consolidated balance sheet as of December 31, 2024, contained in the Annual Report. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.

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

Principles of Consolidation


Three Months Ended September 30, 2024
					Series A Convertible					Series B Convertible					Additional						Total
	Common Stock				Preferred Stock					Preferred Stock					Paid-in			Accumulated			Stockholders’
		Shares		Amount		Shares			Amount		Shares		Amount		Capital			Deficit			Equity

Balance at July 1, 2024		45,793,112	$	4		8,207		$	-		-	$	-	$	102,793		$	(98,956	)	$	3,841
Share-based compensation expense		-		-		-			-		-		-		896			-			896
Dividends on convertible preferred stock		-		-		-			-		-		-		(4	)		(317	)		(321	)
Common Stock issued upon convertible preferred stock exercising conversion rights		-		-		-			-		-		-		-			-			-
Common Stock issued upon vesting of restricted stock units		76,278		-		-			-		-		-		-			-			-
Net income for the period		-		-		-			-		-		-		-			1,990			1,990
Balance at September 30, 2024		45,869,390	$	4		8,207		$	-		-	$	-	$	103,685		$	(97,283	)	$	6,406
													-
Nine months Ended September 30, 2024

Balance at January 1, 2024		43,855,503	$	4		9,898		$	-		-	$	-	$	101,147		$	(97,988	)	$	3,163
Common Stock issued upon exercise of stock options		232,081		-		-			-		-		-		588			-			588
Share-based compensation expense		-		-		-			-		-		-		1,814			-			1,814
Dividends on convertible preferred stock		128,233		-		-			-		-		-		136			(1,017	)		(881	)
Common Stock issued upon convertible preferred stock exercising conversion rights		1,391,183		-		(1,691	)		-		-		-		-			-			-
Common Stock issued upon vesting of restricted stock units		262,390		-		-			-		-		-		-			-			-
Net income for the period		-		-		-			-		-		-		-			1,722			1,722
Balance at September 30, 2024		45,869,390	$	4		8,207		$	-		-	$	-	$	103,685		$	(97,283	)	$	6,406

The ~~Company~~ ~~has~~accompanying ~~three wholly~~notes ~~owned~~are ~~subsidiaries,~~an ~~Wrap~~integral ~~Reality,~~part Inc., that sells a virtual reality (“VR”) training system primarily targeting law enforcement agencies and Intrensic, LLC (“Intrensic”), specializing in Body Worn Camera and Digital Evidence Management solutions. The condensed consolidated financial statements include the accounts of these ~~subsidiaries after~~financial ~~elimination of intercompany transactions and accounts~~statements.

~~Segment and Related Information~~4

~~The Company~~Wrap ~~operates as a single segment. The Company’s chief operating decision maker is Scot Cohen~~Technologies, ~~the Company’s Executive Chairman and Chief Executive Officer, who manages operations for purposes of allocating resources~~Inc. ~~Refer to Note 15. Major Customers and Related Information for further discussion.~~

~~Goodwill~~Condensed Consolidated Statements of Cash Flows

~~Goodwill represents~~(in the difference, if any, between the aggregate consideration paid for an acquisition and the fair values of the underlying net assets and liabilities assumed from an acquired business. Goodwill is not amortized but instead is tested for impairment. The Company tests goodwill for impairment on an annual basis during the fourth quarter, or more frequently if conditions indicate that such impairment could exist. The Company evaluates qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying value and whether it is necessary to perform goodwill impairment process.thousands)

~~Definite-lived Intangible Assets~~(unaudited)

Definite-lived intangible assets represent certain trade names, patents, licenses, software, acquired technology and customer relationships. Definite-lived intangible assets are recorded at cost less any accumulated amortization and accumulated impairment losses, if any. Definite-lived intangible assets acquired through the business combination are measured at fair value at the acquisition date. The Company amortizes these acquired definite-lived intangibles assets with a finite life on a straight-line basis, over 6 years for technology; between 3 and 7 years for customer relationships; and 8 years for trademarks and trade names.


	Nine Months ended September 30,
		2025			2024
Cash Flows From Operating Activities:
Net (loss) income	$	(6,391	)	$	1,722
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		455			646
Loss on disposition of assets		9			-
Share-based compensation		3,073			1,814
Warranty provision		42			(37	)
Change in fair value of warrant liabilities		(3,158	)		(12,517	)
Non-cash lease expense		(278	)		217
Provision for doubtful accounts		35			(89	)
Inventory obsolescence reserve		(397	)		12

Changes in assets and liabilities:
Accounts receivable		(1,344	)		2,337
Inventories		1,106			(529	)
Prepaid expenses and other current assets		(156	)		666
Accounts payable		(13	)		168
Operating lease liability		295			(99	)
Customer deposits		34			(956	)
Accrued liabilities and other		(876	)		(370	)
Warranty settlement		(13	)		(42	)
Deferred revenue		(105	)		130
Changes in other non-current assets		58			8
Net cash used in operating activities		(7,624	)		(6,919	)

Cash Flows From Investing Activities:
Proceeds from maturities of short-term investments		-			7,500
Capital expenditures for property and equipment		(93	)		(13	)
Investment in patents and trademarks		(156	)		(124	)
Net cash (used in) provided by investing activities		(249	)		7,363

Cash Flows From Financing Activities:
Proceeds from exercise of stock options		-			588
Proceeds from issuance of Series B convertible preferred stock		4,500			-
Proceeds from issuance of warrants and common stock, net of offering costs		5,728			-
Dividends settled in cash		-			(120	)
Net cash provided by financing activities		10,228			468

Net increase in cash and cash equivalents		2,355			912
Cash and cash equivalents, beginning of period		3,610			3,955
Cash and cash equivalents, end of period	$	5,965		$	4,867

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Reclassification of warrant liabilities to additional paid in capital	$	12,151		$	94
Dividends on convertible preferred stock	$	(492	)	$	(1,017	)
Dividends settled with common stock	$	492		$	140

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

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions (e.g., stock-based compensation valuation, allowance for doubtful accounts, valuation of inventory and intangible assets, warranty reserve, accrued expense, valuation of warrants, and recognition and measurement of contingencies) that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and affect the reported amounts of revenue and expense during the reporting period. Actual results could materially differ from those estimates.5

5Wrap Technologies, Inc.

~~Warrants~~Notes to Condensed Consolidated Interim Financial Statements

The Company accounts for warrants as liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares of Common Stock and whether the warrant holders could potentially require “net cash settlement” in ~~a circumstance outside of the Company’s control~~thousands, ~~among~~except ~~other~~per ~~conditions~~share ~~for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance~~ and asshare ~~of each subsequent quarterly period end date while the warrants are outstanding.~~amounts)

For issued warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. The Company accounts for the warrants issued in accordance with the guidance contained in ASC 815-40-15-7C, under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the warrants as liabilities at their fair value and adjusts the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s condensed consolidated statement of operations.(unaudited)

On June 30, 2025, the Company entered into the Series A Warrant Amendment (as defined herein) and the 2025 Warrant Amendment (as defined herein). As a result, the Series A Warrants (as defined here) and the PIPE Warrants (as defined herein), each satisfy the requirements outlined in ASC 815-10-15-74(a)(1~~) and in ASC 815-10-15-74(a)(2)~~. ~~Under ASC 815-40-35-10~~ORGANIZATION, ~~the~~SUMMARY ~~amended~~OF ~~instruments~~SIGNIFICANT ~~qualify~~ACCOUNTING ~~for equity-classification~~POLICIES onAND aRECENT ~~prospective basis. The effective date of the relating reclassification from warrant liabilities to additional paid-in capital was June, 30, 2025. See Footnote 8: Warrants for additional detail.~~DEVELOPMENTS

~~Series A~~Organization ~~Preferred~~and ~~Stock~~Business Description

~~The Company~~Wrap ~~evaluates~~Technologies, ~~and~~Inc., ~~accounts~~a ~~for~~Delaware ~~conversion~~corporation ~~options~~(the ~~embedded~~“Company”, in“we”, ~~its~~“us”, ~~convertible~~and ~~instruments~~“our”), inis ~~accordance~~a ~~with~~publicly ~~ASC~~traded ~~480~~company ~~and~~with ~~ASC~~its ~~815 to~~common ~~determine~~stock, ifpar ~~those~~value ~~instruments~~$0.0001 orper ~~embedded~~share ~~components~~(“Common ofStock”), ~~those~~listed ~~instruments~~on ~~qualify~~the asNasdaq ~~derivatives~~Capital ~~and~~Market ~~are~~(“Nasdaq”) ~~subject~~under tothe ~~bifurcation~~trading ~~accounting~~symbol “WRAP. ” The Company ~~determines~~is ~~that~~a ~~the~~developer ~~economic characteristics~~ and ~~risks~~supplier of ~~the~~public ~~embedded~~safety ~~derivative~~products ~~instrument are clearly~~ and ~~closely~~training ~~related to~~services ~~the~~for ~~economic~~law ~~characteristics~~enforcement and ~~risks~~security ~~of the host contract~~personnel. The ~~convertible~~Company’s ~~instruments~~primary ~~are~~product ~~accounted~~is ~~for~~the asBolaWrap® aremote ~~single~~restraint ~~hybrid instrument~~device. ~~Additionally,~~ ~~the~~The ~~convertible~~principal ~~instruments~~markets dofor ~~not~~the ~~have~~Company’s ~~any~~proprietary ~~redemption~~products ~~features~~and ~~that~~services ~~would~~are ~~preclude~~in ~~permanent~~North ~~equity~~and ~~classification~~South ~~in accordance~~America, ~~with~~Europe, ~~the~~Middle ~~guidance~~East ~~contained~~and ~~in ASC 480-10-S99~~Asia.

~~The Company~~Basis issued the Series A Warrants (as defined herein), which are classified as liabilities and measured at fair value on a recurring basis, and the Series A Convertible Preferred Stock (the “Series A Preferred Stock”) in one transaction. The issuance proceeds were allocated by using the with-and-without method. Under this method, the Company first allocated the issuance proceeds to the Series A Warrants based on their initial fair value measurement and then allocated the remaining proceeds to the Series A Preferred Stock. On June 30, 2025, the Company and Holders of the Series A Warrants (as defined herein) amended the Series A Warrants, which allowed the Company to account for the Series A Warrants as equity under ASC 480 and a reclassification was recorded from warrant liability to additional paid-in-capital.Presentation

~~Revenue~~The Company’s unaudited interim condensed consolidated financial statements included herein have been prepared in accordance with the instructions to ~~Recognition~~ Form 10-Q and Article 8 of Regulation S-X and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. In management’s opinion, the accompanying financial statements reflect adjustments necessary to present fairly the financial position, results of operations, and cash flows for those periods indicated, and contain adequate disclosure to make the information presented not misleading. Adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the footnotes. The condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2024, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “Annual Report”), as filed with the SEC on March 31, 2025 and as amended on April 25, 2025. The accompanying unaudited condensed consolidated balance sheet as of September 30, 2025 has been derived from the audited consolidated balance sheet as of December 31, 2024, contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.

~~The Company~~Where ~~recognizes~~necessary, ~~revenue under ASC Topic 606 - Revenue from Contracts with Customers (“ASC 606”). Revenue is recognized when control of~~ the ~~promised~~prior ~~goods or performance obligations for services is transferred to the Company~~year’s ~~customers,~~information inhas anbeen ~~amount that~~reclassified ~~reflects the consideration the Company expects~~ to beconform ~~entitled~~ to ~~in exchange for~~ the ~~goods~~current oryear’s ~~services~~presentation.

~~The Company~~Principles ~~enters into contracts that include various combinations~~ of products, accessories, software and services, each of which are generally distinct and are accounted for as separate performance obligations. Product sales include BolaWrap products and accessories. Managed services revenue represents the consulting services provided to customers of W1 Global, LLC (“W1”). Other revenue includes VR revenues, service, training and shipping revenues.Consolidation

The ~~timing~~ ~~of revenue recognition may differ from the timing of invoicing to customers. The~~ Company ~~generally~~ has anthree ~~unconditional~~wholly ~~right to~~owned ~~consideration~~subsidiaries, ~~when~~Wrap ~~customers are invoiced~~Reality, ~~and a receivable is recorded~~Inc. ~~A contract asset is recognized when revenue is recognized prior to invoicing~~, orthat sells a ~~contract~~virtual ~~liability~~reality (~~deferred revenue~~“VR”) ~~when~~training ~~revenue~~system ~~will~~primarily betargeting ~~recognized~~law ~~after~~enforcement ~~invoicing.~~agencies, ~~The~~Intrensic, ~~Company~~LLC ~~recognizes an~~(“Intrensic”), ~~asset~~specializing ~~if there are incremental costs of obtaining a contract with a customer such as commissions. These costs are ascribed to or allocated to the underlying performance obligations~~ in ~~the~~Body ~~contract.~~Worn ~~The~~Camera ~~Company~~and ~~may~~Digital ~~receive~~Evidence ~~consideration,~~Management ~~per~~solutions ~~terms~~and ofWrap ~~a contract~~Federal, ~~from customers prior to transferring goods to the customer~~LLC. The ~~Company~~condensed ~~records~~consolidated ~~customer~~financial ~~deposits~~statements asinclude ~~a contract liability. Additionally,~~ the ~~Company may~~accounts ~~receive payments, most typically for service and warranty contracts, at the onset~~ of ~~the contract and before the services have been completed. In such instances, a deferred revenue liability is recorded. The Company recognizes~~ these ~~contract~~subsidiaries ~~liabilities as revenue~~ after ~~all~~elimination ~~revenue~~of ~~recognition~~intercompany ~~criteria~~transactions ~~are~~and ~~met~~accounts.

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

~~Loss per~~The ~~Share~~Company operates as a single segment. The Company’s chief operating decision maker is Scot Cohen, the Company’s Executive Chairman and Chief Executive Officer, who manages operations for purposes of allocating resources. Refer to Note 15. Major Customers and Related Information for further discussion.

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

~~In computing~~Goodwill ~~diluted~~represents ~~EPS, we adjust~~ the ~~numerator used in the basic EPS computation~~difference, ~~subject~~if ~~to anti-dilution requirements~~any, tobetween ~~add back~~ the ~~dividends~~aggregate ~~(declared~~consideration orpaid ~~cumulative~~for ~~undeclared)~~an ~~applicable~~acquisition toand the ~~Series~~fair Avalues ~~Preferred~~of ~~Stock.~~the ~~Such~~underlying ~~add-back~~net ~~would also include any adjustments~~assets to and ~~equity~~liabilities inassumed ~~the~~from ~~period~~an toacquired ~~accrete~~business. ~~the~~Goodwill ~~Series~~is Anot ~~Preferred~~amortized ~~Stock~~but toinstead ~~its~~is ~~redemption~~tested ~~price,~~for orimpairment. ~~recorded~~The ~~upon~~Company atests ~~redemption~~goodwill orfor ~~induced~~impairment ~~conversion, if~~on ~~any.~~an Weannual ~~adjust~~basis ~~the~~during ~~denominator used in~~ the ~~basic~~fourth ~~EPS computation~~quarter, ~~subject~~or tomore ~~anti-dilution~~frequently ~~requirements,~~if toconditions ~~include~~indicate ~~the dilution from~~that ~~potential~~ such ~~shares~~impairment ~~resulting~~could ~~from the issuance of the Series A Preferred Stock, restricted stock units, and stock options~~exist. ~~Stock~~The ~~options and~~Company ~~restricted~~evaluates ~~stock~~qualitative ~~units~~factors ~~exercisable~~to ordetermine ~~issuable~~if ~~for~~it ais ~~total~~more oflikely ~~2,413,595~~than ~~shares and 4,903,951 shares of Common Stock were outstanding as of June 30, 2025 and 2024, respectively. These securities are~~ not ~~included~~that in the ~~computation~~fair value of ~~diluted~~a ~~net~~reporting ~~loss~~unit ~~per~~is ~~common~~less ~~share for~~than ~~the~~its ~~periods~~carrying ~~presented~~value asand ~~their~~whether ~~inclusion~~it ~~would~~is benecessary ~~antidilutive due~~ to ~~losses~~perform ~~incurred~~goodwill ~~by the Company~~impairment process.

~~Recently Issued~~Definite-lived ~~Accounting~~Intangible ~~Guidance Not Yet Effective~~Assets

~~In November~~Definite-lived ~~2024,~~intangible ~~the~~assets ~~FASB~~represent ~~issued~~certain ~~ASU~~trade ~~No.~~names, ~~2024-03~~patents, ~~Income~~licenses, ~~Statement—Reporting~~software, ~~Comprehensive~~acquired ~~Income—Expense~~technology ~~Disaggregation Disclosures~~and ~~(Subtopic~~customer ~~220~~relationships. Definite-~~40):~~lived ~~Disaggregation~~intangible ofassets ~~Income~~are ~~Statement~~recorded ~~Expenses~~at ~~(“ASU~~cost ~~2024-03”),~~less ~~which~~any ~~requires~~accumulated ~~disaggregation of~~amortization ~~certain costs~~ and ~~expenses,~~accumulated ~~including~~impairment ~~employee compensation~~losses, ~~and~~if ~~requires~~any. ~~other~~Definite-lived ~~improvements~~intangible toassets ~~disclosures.~~acquired ~~The~~through ~~amendments~~the inbusiness ~~this update~~combination are ~~effective~~measured ~~for~~at ~~annual~~fair ~~periods~~value ~~beginning~~at ~~after~~the ~~December~~acquisition ~~15,~~date. ~~2026~~The ~~and~~Company ~~interim~~amortizes ~~reporting~~these ~~periods~~acquired ~~beginning~~definite-lived ~~after~~intangibles ~~December~~assets ~~15, 2027.~~with ~~The~~a ~~update~~finite ~~may~~life ~~be applied~~ on a ~~prospective~~straight-line orbasis, ~~retrospective~~over ~~basis.~~6 ~~The~~years ~~Company~~for istechnology; ~~evaluating~~between ~~the~~3 ~~impact~~and of7 ~~ASU~~years ~~2024-03~~for oncustomer ~~the~~relationships; ~~Company’s~~and ~~notes~~8 ~~to the~~years ~~consolidated~~for ~~financial~~trademarks ~~statements~~and trade names.

~~2. REVENUE~~Use ~~AND~~of ~~PRODUCT COSTS~~Estimates

~~Revenue consists~~The preparation of ~~product~~financial ~~revenue,~~statements ~~technology~~in ~~enabled~~conformity ~~services,~~with U.S. GAAP requires management to make estimates and ~~managed~~assumptions ~~services~~(e.g., ~~Product~~stock-based compensation ~~sales~~valuation, ~~include~~allowance ~~BolaWrap~~for ~~products~~doubtful accounts, valuation of inventory and ~~accessories. Technology~~intangible ~~enables~~assets, ~~services~~warranty ~~includes~~reserve, VRaccrued ~~revenue~~expense, ~~service~~valuation of warrants, ~~training~~and recognition and ~~shipping~~measurement ~~revenue.~~of ~~Managed~~contingencies) ~~services~~that ~~revenue~~affect ~~includes~~the ~~consulting~~reported amounts of ~~services~~ assets ~~delivered~~and toliabilities, ~~third~~and ~~parties~~disclosure of contingent assets and ~~billed~~liabilities onat anthe ~~agreed~~date ~~hourly~~of ~~fee~~the ~~basis~~financial ~~when~~statements ~~enforceable~~and ~~right~~affect tothe ~~payment~~reported ~~exists~~amounts of revenue and expense during the reporting period. Actual results could materially differ from those estimates.

The timing of revenue recognition may differ from the timing of invoicing to customers. The Company generally has an unconditional right to consideration when customers are invoiced, and a receivable is recorded. A contract asset is recognized when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized subsequent to invoicing. The Company recognizes an asset if there are incremental costs of obtaining a contract with a customer such as commissions. These costs are ascribed to or allocated to the underlying performance obligations in the contract. The Company may receive consideration, per terms of a contract, from customers prior to transferring goods to the customer. The Company records customer deposits as a contract liability. Additionally, the Company may receive payments, most typically for service and warranty contracts, at the onset of the contract and before the services have been completed. In such instances, a deferred revenue liability is recorded. The Company recognizes these contract liabilities as revenue after all revenue recognition criteria are met. Estimated costs for the Company’s standard warranty, generally one-year, are charged to cost of products sold when revenue is recorded for the related product. Royalties are also charged to the cost of products sold.Warrants

The Company accounts for warrants as liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative ~~table~~ guidance ~~below~~in ~~details~~Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants ~~activity~~are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares of Common Stock and whether the warrant holders could potentially require “net cash settlement” in ~~our~~a ~~contract~~circumstance ~~liabilities~~outside ~~during~~of the ~~six~~Company’s ~~months~~control, ~~ended~~among ~~June~~other 30conditions for equity classification. This assessment, ~~2025~~which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

~~SCHEDULE~~For OFissued ~~CONTRACT~~warrants ~~LIABILITIES~~that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. The Company accounts for the warrants issued in accordance with the guidance contained in ASC 815-40-15-7C, under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the warrants as liabilities at their fair value and adjusts the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s condensed consolidated statement of operations.

	Customer		Deferred
	Deposits		Revenue
Balance at January 1, 2025	$	27	$	505
Additions, net		-		205
Transfer to revenue		-		(385	)
Balance at June 30, 2025	$	27	$	325
Current portion	$	27	$	302
Long-term portion	$	-	$	23

On June 30, 2025, the Company entered into the Series A Warrant Amendment (as defined herein) and the 2025 Warrant Amendment (as defined herein). As a result, the Series A Warrants (as defined herein) and the PIPE Warrants (as defined herein), each satisfy the requirements outlined in ASC 815-10-15-74(a)(1) and in ASC 815-10-15-74(a)(2). Under ASC 815-40-35-10, the amended instruments qualify for equity-classification on a prospective basis. The effective date of the relating reclassification from warrant liabilities to additional paid-in capital was June, 30, 2025. See Footnote 8: Warrants for additional detail.

~~As of~~Series ~~June~~A ~~30,~~Preferred ~~2025, the Company’s deferred revenue of $325 consisted of Technology Enabled Services.~~Stock

3The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 480 and ASC 815 to determine if those instruments or embedded components of those instruments qualify as derivatives and are subject to bifurcation accounting. The Company determines that the economic characteristics and risks of the embedded derivative instrument are clearly and ~~FINANCIAL~~ closely ~~INSTRUMENTS~~related to the economic characteristics and risks of the host contract. The convertible instruments are accounted for as a single hybrid instrument. Additionally, the convertible instruments do not have any redemption features that would preclude permanent equity classification in accordance with the guidance contained in ASC 480-10-S99.

Assets and liabilities recorded at fair value on a recurring basis in the Condensed Consolidated Balance Sheets and assets and liabilities measured at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provides a framework for measuring fair value and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:7

~~Level 1-Inputs~~The Company issued the Series A Warrants (as defined herein), which are ~~unadjusted~~classified as liabilities and measured at fair value on a recurring basis, ~~quoted~~and ~~prices~~the Company's Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”) in ~~active~~one ~~markets~~transaction. ~~for~~The ~~identical~~proceeds ~~assets~~from orthe ~~liabilities~~issuances atwere allocated by using the with-and-without method. Under this method, the Company first allocated the proceeds to the Series A Warrants based on their initial fair value measurement ~~date;~~and then allocated the remaining proceeds to the Series A Preferred Stock. On June 30, 2025, the Company and holders of the Series A Warrants amended the Series A Warrants, which allowed the Company to account for the Series A Warrants as equity under ASC 480 and a reclassification was recorded from warrant liability to additional paid-in-capital.

7Revenue Recognition

~~Level 2-Inputs~~The ~~are~~Company ~~observable,~~recognizes ~~unadjusted~~revenue ~~quoted~~under ~~prices~~ASC inTopic ~~active~~606 ~~markets~~- ~~for~~Revenue ~~similar~~from ~~assets~~Contracts orwith ~~liabilities,~~Customers ~~unadjusted~~(“ASC ~~quoted~~606”). ~~prices~~Revenue ~~for~~is recognized when control of the ~~identical~~ promised goods or ~~similar~~performance ~~assets~~obligations orfor ~~liabilities~~services inis ~~markets~~transferred ~~that~~to ~~are~~the ~~not~~Company’s ~~active~~customers, orin ~~other~~an ~~inputs~~amount that ~~are~~reflects ~~observable~~the orconsideration ~~can~~the beCompany ~~corroborated by~~expects ~~observable~~to ~~market~~be ~~data~~entitled ~~for~~to ~~substantially~~in ~~the~~exchange ~~full~~for ~~term of~~ the ~~related~~goods ~~assets~~ or ~~liabilities; and~~services.

~~Level 3-Unobservable~~The ~~inputs~~Company enters into contracts that ~~are~~include ~~significant~~various tocombinations ~~the~~of ~~measurement~~products, accessories, software and services, each of which are generally distinct and are accounted for as separate performance obligations. Product sales include BolaWrap products and accessories. Managed services revenue represents the ~~fair~~consulting ~~value~~services provided to customers of ~~the~~W1 ~~assets~~Global, orLLC ~~liabilities~~(“W1”). ~~that~~Other ~~are~~revenue ~~supported~~includes byVR ~~little~~ revenues, orservice, notraining ~~market~~and ~~data~~shipping revenues.

The ~~following~~ ~~table~~timing ~~shows~~of revenue recognition may differ from the timing of invoicing to customers. The Company’s ~~short-term~~generally ~~investments~~has byan ~~significant~~unconditional ~~investment~~right ~~category~~to consideration when customers are invoiced, and a receivable is recorded. A contract asset is recognized when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized after invoicing. The Company recognizes an asset if there are incremental costs of obtaining a contract with a customer such as commissions. These costs are ascribed to or allocated to the underlying performance obligations in the contract. The Company may receive consideration, per the terms of ~~June~~a 30contract, ~~2025~~from customers prior to transferring goods to the customer. The Company records customer deposits as a contract liability. Additionally, the Company may receive payments, most typically for service and ~~December~~warranty contracts, at 31 the onset of the contract and before the services have been completed. In such instances, ~~2024~~a deferred revenue liability is recorded. The Company recognizes these contract liabilities as revenue after all revenue recognition criteria are met.

~~SCHEDULE~~Estimated OFcosts ~~SHORT~~for ~~TERM~~the ~~INVESTMENTS~~Company’s standard warranty, generally one-year, are charged to cost of products sold when revenue is recorded for the related product. Royalties are also charged to the cost of products sold.

	As of June 30, 2025
	Adjusted		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Level 1:
Money Market Funds	$	3,134	$	-	$	-	$	3,134
Total Financial Assets	$	3,134	$	-	$	-	$	3,134

Loss per Share

	As of December 31, 2024
	Adjusted		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Level 1:
Money Market Funds	$	2,945		-		-	$	2,945
Total Financial Assets	$	2,945	$	-	$	-	$	2,945

~~Unrealized gains~~In computing diluted EPS, the Company adjusts the numerator used in the basic EPS computation, subject to anti-dilution requirements, to add back the dividends (declared or ~~losses~~cumulative ~~resulting~~undeclared) ~~from~~applicable ~~our~~to ~~short~~the Series A Preferred Stock. Such add-~~term~~back ~~investments~~would ~~are~~also ~~recorded~~include any adjustments to equity in ~~accumulated~~the ~~other~~period ~~comprehensive~~to ~~gain~~accrete the Series A Preferred Stock to its redemption price, or ~~loss~~recorded asupon ~~they~~a ~~are~~redemption ~~classified as~~or ~~available~~induced ~~for~~conversion, ~~sale~~if any. ~~During~~The Company adjusts the ~~six~~denominator ~~months~~used ~~ended~~in ~~June~~the 30basic EPS computation, ~~2025~~subject to anti-dilution requirements, asto ~~well~~include asthe dilution from potential shares resulting from the ~~six~~issuance ~~months~~of ~~ended~~the ~~June~~Series A Preferred Stock, restricted stock units, and stock options. Stock options and restricted stock units exercisable or issuable for a total of 7,089,678 shares and 4,979,745 shares of Common Stock were outstanding as of September 30, 2025 and 2024, norespectively. ~~gain~~These (securities are not included in the computation of diluted net loss) ~~was~~per ~~recorded~~ share of Common Stock for the periods presented as their inclusion would be antidilutive due to ~~comprehensive~~losses ~~loss~~incurred by the Company.

~~The warrant~~Recently ~~liabilities~~Issued ~~are~~Accounting ~~measured~~Guidance atNot ~~fair~~Yet value on a recurring basis. The subsequent measurement of the warrant liabilities as of June 30, 2025, is classified as Level 3 due to the use of an observable market quote in a non-active market and the management’s assumption of the expected stock price volatility.Effective

~~The following~~In ~~table~~November ~~presents~~2024, the ~~fair~~FASB ~~value~~issued inASU ~~the~~No. ~~beginning~~2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of ~~the~~Income ~~period~~Statement Expenses (“ASU 2024-03”), ~~the~~which ~~changes~~requires disaggregation of certain costs and expenses, including employee compensation, and requires other improvements to disclosures. The amendments in ~~the~~this ~~fair~~update are ~~value~~effective for annual periods beginning after December 15, 2026 and ~~the~~interim ~~fair~~reporting ~~value~~periods atbeginning after December 15, 2027. The update may be applied on a prospective or retrospective basis. The Company is evaluating the ~~end~~ impact of ASU 2024-03 on the ~~period~~Company’s ofnotes ~~warrant~~to ~~liabilities:~~the consolidated financial statements.

~~SCHEDULE OF FAIR OF WARRANT LIABILITIES~~8

Level 3:	June 30, 2025			December 31, 2024
Fair value at inception for December 31, 2024 or the beginning of the period for June 30, 2025	$	(10,131	)	$	(19,703	)
Warrants issued with Private Placement		(5,186	)		-
Change in fair value of warrant liabilities		3,158			9,572
Reclassification of warrant liabilities to equity		12,159			-
Fair value as of period end	$	-		$	(10,131	)

2. REVENUE AND PRODUCT COSTS

~~The Company~~Revenue ~~used~~consists aof ~~Monte~~product ~~Carlo~~revenue, ~~simulation~~technology toenabled ~~estimate~~services, ~~the~~and ~~fair~~managed ~~value~~services. ofProduct ~~warrant~~sales ~~liabilities~~include asBolaWrap ofproducts ~~June~~and ~~30, 2025, being the date the~~accessories. ~~Company~~ Technology ~~entered~~enabled ~~into~~services ~~the~~includes ~~Series~~VR Arevenue, ~~Warrant~~service, ~~Amendment~~training and ~~the~~shipping ~~2025 Warrant Amendment~~revenue. ~~The~~Managed ~~valuation~~services ~~was~~revenue ~~performed~~includes ~~based~~consulting onservices ~~the~~delivered ~~amended terms~~to ofthird ~~the~~parties ~~Series A Warrants~~ and ~~PIPE~~billed ~~Warrants.~~on ~~The~~an ~~following~~agreed ~~table~~hourly ~~summarizes~~fee ~~the~~basis ~~assumptions~~when ~~used~~enforceable right to ~~compute the fair value of the~~payment ~~Company’s warrants:~~ exists.

8The timing of revenue recognition may differ from the timing of invoicing to customers. The Company generally has an unconditional right to consideration when customers are invoiced, and a receivable is recorded. A contract asset is recognized when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized subsequent to invoicing. The Company recognizes an asset if there are incremental costs of obtaining a contract with a customer such as commissions. These costs are ascribed to or allocated to the underlying performance obligations in the contract. The Company may receive consideration, per the terms of a contract, from customers prior to transferring goods to the customer. The Company records customer deposits as a contract liability. Additionally, the Company may receive payments, most typically for service and warranty contracts, at the onset of the contract and before the services have been completed. In such instances, a deferred revenue liability is recorded. The Company recognizes these contract liabilities as revenue after all revenue recognition criteria are met. Estimated costs for the Company’s standard warranty, generally one-year, are charged to cost of products sold when revenue is recorded for the related product. Royalties are also charged to the cost of products sold.

~~SCHEDULE~~The OFtable ~~BLACK~~below ~~SCHOLES~~details ~~OPTION~~the ~~PRICING~~activity ~~MODEL~~in OFour ~~WARRANT~~contract ~~LIABILITIES~~liabilities during the nine months ended September 30, 2025.

~~MONTE CARLO~~SCHEDULE ~~SIMULATION~~OF ~~MODEL~~CONTRACT ~~– PIPE WARRANTS~~LIABILITIES

		As of June 30, 2025
		Customer				Deferred
Expected stock price volatility			86	%
		Deposits				Revenue
Risk-free interest rate			3.73	%
Balance at January 1, 2025	$	27			$	505
Dividends yield			0	%
Additions, net		34				491
Term (years)			4.50
Transfer to revenue		-				(596	)
Strike Price		$	1.45
Balance at September 30, 2025	$	61			$	400
Stock Price		$	1.56
Current portion	$	61			$	382
Fair Value Per Warrant Share		$	1.235
Long-term portion	$	-			$	18

~~MONTE CARLO~~As ~~SIMULATION~~of ~~MODEL~~September –30, 2025, ~~WARRANTS~~the Company’s deferred revenue of $400 consisted of $15 related to BolaWrap extended warranties and services, $20 related to WRAP Ready, $289 related to Intrensic extended warranties and services, $39 related to VR, and $37 related to training.

	As of June 30, 2025
Expected stock price volatility		89	%
Risk-free interest rate		3.77	%
Dividends yield		0	%
Term (years)		5.15
Strike Price	$	1.80
Stock Price	$	1.56
Fair Value Per Warrant Share	$	1.132

3. FINANCIAL INSTRUMENTS

~~The Company~~Assets ~~used~~and liabilities recorded at fair value on a recurring basis in the ~~modified~~Condensed ~~Black~~Consolidated Balance Sheets and assets and liabilities measured at fair value on a non-~~Scholes~~recurring ~~option~~basis ~~pricing~~or ~~model~~disclosed toat ~~determine~~fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value ofprovides ~~warrant~~a ~~liabilities~~framework for measuring fair value and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received upon the sale of ~~December~~an ~~31,~~asset ~~2024.~~or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The ~~following~~accounting ~~table~~guidance ~~summarizes~~also establishes a three-level valuation hierarchy that prioritizes the ~~assumptions~~inputs to valuation techniques used to ~~compute~~measure ~~the~~ fair value ofbased upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the ~~Company’s~~reporting ~~warrants~~entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

	As of December 31, 2024
Expected stock price volatility		88	%
Risk-free interest rate		4.25	%
Dividends yield		0	%
Weighted average expected life of warrants (years)		3.50
Weighted average exercise price	$	1.45

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

~~Our other~~Level ~~financial~~2-Inputs ~~instruments~~are ~~also~~observable, ~~include~~unadjusted ~~accounts~~quoted ~~receivable,~~prices ~~accounts~~in ~~payable,~~active ~~accrued~~markets ~~liabilities~~for ~~and~~similar ~~customer~~assets ~~deposits.~~or ~~Due~~liabilities, tounadjusted ~~the~~quoted prices for ~~short-term~~ identical ~~nature~~or ofsimilar ~~these~~assets ~~instruments~~or liabilities in markets that are not active, ~~their~~or ~~fair~~other ~~values~~inputs ~~approximate~~that ~~their~~are ~~carrying~~observable ~~values~~or oncan be corroborated by observable market data for substantially the ~~balance~~full ~~sheet.~~term of the related assets or liabilities; and

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

Inventory is recorded at the lower of cost or net realizable value. The cost of substantially all the Company’s inventory is determined by the FIFO cost method. Inventories consisted of the following:9

~~SCHEDULE~~The OFfollowing ~~INVENTORY~~table shows the Company’s short-term investments by significant investment category as of September 30, 2025, and December 31, 2024.

	June 30, 2025			December 31, 2024
	As of September 30, 2025
Finished goods	$	4,337		$	4,387
		Adjusted			Unrealized			Unrealized		Market
Raw materials		2,234			2,263
		Cost			Gains			Losses		Value
Reserve for Obsolescence		(667	)		(480	)
Level 1:
Inventories - net	$	5,904		$	6,170
Money Market Funds	$	637		$	-		$	-	$	637
Total Financial Assets	$	637		$	-		$	-	$	637

Inventory reserve expense was $169 and $187 for the three and six months ended June 30, 2025, respectively, and $12 and $12 for the three and six months ended June 30, 2024, respectively.


	As of December 31, 2024
		Adjusted		Unrealized		Unrealized		Market
		Cost		Gains		Losses		Value
Level 1:
Money Market Funds	$	631	$	-	$	-	$	631
Total Financial Assets	$	631	$	-	$	-	$	631

5.Unrealized gains or losses resulting from our short-term investments are recorded in accumulated other comprehensive gain or loss as they are classified ~~PROPERTY~~ as ~~AND~~available ~~EQUIPMENT~~for sale. During the nine months ended September 30, ~~NET~~2025, as well as the nine months ended September 30, 2024, no gain (loss) was recorded to comprehensive loss.

~~Property~~The warrant liabilities are measured at fair value on a recurring basis. The subsequent measurement of the warrant liabilities as of September 30, 2025, is classified as Level 3 due to the use of an observable market quote in a non-active market and ~~equipment~~the ~~consisted~~management’s assumption of the ~~following:~~expected stock price volatility.

~~SCHEDULE~~The OFfollowing ~~PROPERTY~~table ~~AND~~presents ~~EQUIPMENT~~the fair value in the beginning of the period, the changes in the fair value, and the fair value at the end of the period of the warrant liabilities:

	June 30, 2025			December 31, 2024
Production and lab equipment	$	432		$	432
Tooling		570			570
Computer equipment		237			229
Furniture, fixtures and improvements		120			120
Property and equipment, gross	$	1,359		$	1,351
Accumulated depreciation		(1,272	)		(1,205	)
Property and equipment, net	$	87		$	146

SCHEDULE OF FAIR OF WARRANT LIABILITIES

Depreciation expense was $27 and $67 for the three and six months ended June 30, 2025, respectively, and $114 and $230 for the three and six months ended June 30, 2024, respectively.


Level 3:		September 30, 2025			December 31, 2024
Fair value at inceptions for December 31, 2024 or the beginning of the period for September 30, 2025	$	(10,131	)	$	(19,703	)
Warrants issued with Private Placement		(5,178	)		-
Change in fair value of warrant liabilities		3,158			9,572
Reclassification of warrant liabilities to equity		12,151			-
Fair value as of period end	$	-		$	(10,131	)

9The Company used a Monte Carlo simulation to estimate the fair value of warrant liabilities as of June 30, 2025, being the date the Company entered into the Series A Warrant Amendment and the 2025 Warrant Amendment. Under ASC 815-40-35-10, the amended instruments qualify for equity-classification on a prospective basis. The effective date of the relating reclassification from warrant liabilities to additional paid-in capital was June, 30, 2025 (the "Reclassification Date"). The valuation was performed based on the amended terms of the Series A Warrants and PIPE Warrants. The following table summarizes the assumptions used to compute the fair value of the Company’s warrants:

~~6. INTANGIBLE~~MONTE ~~ASSETS~~CARLO SIMULATION MODEL – PIPE WARRANTS

Intangible Assets, net

		As of
		June 30, 2025
		Reclassification Date
Expected stock price volatility		86	%
Risk-free interest rate		3.73	%
Dividends yield		0	%
Terms (years)		4.5
Strike Price	$	1.45
Stock Price	$	1.56
Fair Value Per Warrant Share	$	1.235

~~Intangible assets, net consisted of the following:~~10

~~SCHEDULE~~MONTE OFCARLO ~~FINITE-LIVED~~SIMULATION ~~INTANGIBLE~~MODEL ~~ASSETS~~– 2025 WARRANTS

		June 30, 2025			December 31, 2024
		As of
Amortizable intangible assets:
		June 30, 2025
Patents		$	1,073		$	1,013
		Reclassification Date
Trademarks			294			264
Expected stock price volatility		89	%
Purchased software and technology			1,752			1,752
Risk-free interest rate		3.77	%
Customer Relationships			215			160
Dividends yield		0	%
Amortizable intangible assets, gross		$	3,334		$	3,189
Terms (years)		5.15
Accumulated amortization			(1,493	)		(1,256	)
Strike Price	$	1.8
Total amortizable		$	1,841		$	1,933
Stock Price	$	1.56
Indefinite life assets (non-amortizable)			421			421
Fair Value Per Warrant Share	$	1.132
Total intangible assets, net		$	2,262		$	2,354

~~Amortization expense~~The ~~was~~Company ~~$123~~used ~~and~~the ~~$238~~modified ~~for~~Black-Scholes option pricing model to determine the ~~three~~fair ~~and~~value ~~six~~of ~~months~~warrant ~~ended~~liabilities ~~June~~as ~~30,~~of ~~2025,~~December ~~respectively~~31, ~~and~~2024. ~~$113~~The following ~~and~~table ~~$220~~summarizes ~~for~~ the ~~three~~assumptions ~~and~~used ~~six~~to ~~months ended~~compute ~~June~~the ~~30,~~fair ~~2024,~~value ~~respectively.~~of the Company’s warrants:

As of June 30, 2025, future amortization expense is as follows:

		As of
		December 31, 2024
Expected stock price volatility		88	%
Risk-free interest rate		4.25	%
Dividends yield		0	%
Weighted average expected life of warrants (years)		3.5
Weighted average exercise price	$	1.45

~~SCHEDULE~~Our OFother ~~FINITE~~financial instruments also include accounts receivable, accounts payable, accrued liabilities and customer deposits. Due to the short-~~LIVED~~term nature ~~INTANGIBLE~~of ~~ASSETS~~these instruments, ~~FUTURE~~their ~~AMORTIZATION~~fair ~~EXPENSE~~values approximate their carrying values on the balance sheet.

2025 (6 months)	$	234
2026		368
2027		226
2028		217
2029		176
Thereafter		620
Total	$	1,841

4. INVENTORIES

7Inventory is recorded at the lower of cost or net realizable value. ~~ACCOUNTS~~ ~~PAYABLE~~The ~~AND~~cost ~~ACCRUED~~of ~~LIABILITIES~~substantially all the Company’s inventory is determined by the FIFO cost method. Inventories consisted of the following:

~~Accrued liabilities~~ SCHEDULE ~~consist~~OF ~~of the following:~~INVENTORY

SCHEDULE OF ACCRUED LIABILITIES


		September 30, 2025			December 31, 2024
Finished goods	$	3,746		$	4,387
Raw materials		1,798			2,263
Reserve for Obsolescence		(83	)		(480	)
Inventories - net	$	5,461		$	6,170

	June 30, 2025		December 31, 2024
Patent and legal costs	$	60	$	60
Accrued compensation		213		121
Warranty costs		75		83
Royalty		81		81
Contract settlement		-		300
Accrued purchases		24		584
Accrued lease payable		166		-
Taxes and other		253		174
Total	$	872	$	1,403

Inventory reserve expense was $83 and $270 for the three and nine months ended September 30, 2025, respectively, and $0 and $12 for the three and nine months ended September 30, 2024, respectively.

~~Changes in our estimated product warranty costs were as follows:~~11

~~SCHEDULE~~5. OFPROPERTY ~~PRODUCT~~AND ~~WARRANTY~~EQUIPMENT, ~~LIABILITY~~NET

	Six Months Ended June 30,
	2025			2024
Balance, beginning of period	$	83		$	72
Warranty settlements		(10	)		(34	)
Warranty provision		2			17
Balance, end of period	$	75		$	55

Property and equipment consisted of the following:

10SCHEDULE OF PROPERTY AND EQUIPMENT

8. WARRANTS


		September 30, 2025			December 31, 2024

Production and lab equipment	$	391		$	432
Tooling		570			570
Computer equipment		175			229
Furniture, fixtures and improvements		78			120
	$	1,214		$	1,351
Accumulated depreciation		(1,076	)		(1,205	)
Property and equipment, net	$	138		$	146

~~On June~~Depreciation ~~29,~~expense ~~2023,~~was ~~the~~$25 and ~~Company~~$92 for ~~entered into a Securities Purchase Agreement (~~the ~~“Series~~three ~~A Purchase Agreement”) with certain directors of the Company~~ and ~~certain~~nine ~~accredited~~months ~~and~~ended ~~institutional~~September ~~investors (collectively~~30, ~~the “Series A Investors”)~~2025, ~~pursuant to which it agreed to sell to the Series A Investors in a registered direct offering (the “Series A Offering”): (i) an aggregate of 10~~respectively,~~000~~ ~~shares~~and ~~of the Company’s newly-designated Series A Convertible Preferred Stock, with par value~~ $~~0.0001 per share~~ 82 and ~~a stated value of~~ $~~1,000~~312 for ~~per share (~~the ~~“Series~~three Aand ~~Preferred~~nine ~~Stock”),~~months ~~initially~~ended ~~convertible~~September ~~into up to 6~~30,~~896,553~~ ~~shares of Common Stock~~2024, ~~at an initial conversion price of $1~~respectively.~~45 per share (the “Conversion Price”), and (ii) warrants to acquire up to an aggregate of 6,896,553 shares of Common Stock (the “Series A Warrants”).~~

~~Each Series A Warrant has an exercise price of $1~~6.45 ~~per~~INTANGIBLE share, became exercisable after the date that was six months from the date of issuance and will expire 5 years following the date of issuance. The exercise price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable exercise price (subject to certain exceptions). The closing of the Series A Offering occurred on July 3, 2023. The aggregate gross proceeds from the Series A Offering were $10,000, of which $7,717 was allocated to the Series A Warrants.ASSETS

~~On February~~Intangible 24Assets, 2025, the Company entered into a securities purchase agreement (the “PIPE Purchase Agreement”) with certain accredited investors (collectively, the “PIPE Purchasers”) for the issuance and sale in a private placement (the “Private Placement”) of an aggregate of 3,216,666 shares (the “Common Shares”) of Common Stock and accompanying warrants (“PIPE Warrants”) to purchase up to 3,216,666 shares of Common Stock, with an exercise price of $1.80 per share. The purchase price for one Common Share and accompanying PIPE Warrant was $1.80. The gross proceeds to the Company were $5,790 before estimated offering expenses payable by the Company, of which $5,185 was allocated to the PIPE Warrants.net

~~On June~~Intangible 30assets, ~~2025,~~net ~~the~~consisted Company entered into a warrant amendment (the “Series A Warrant Amendment”) with the Required Holders (as defined in the Series A Purchase Agreement), pursuant to which, the Required Holders agreed to amend the terms of the Series A Warrants to make certain adjustments to the definition of “Black Scholes Value” in each of the Series A Warrants, as described in the Series A Warrant Amendment, such that the underlying price per share as used in such calculation equals the sum of the price per share being offered in cash in the applicable Fundamental Transaction (as defined in the Series A Warrants), if any, plus the value of the non-cash consideration being offered in the applicable Fundamental Transaction, if any. As consideration for entering into the Series A Warrant Amendment, the Company and the Required Holders agreed to amend the term of the Series A Warrants to be six and one-half years from the date of issuance.following:

Additionally, on June 30, 2025, the Company entered into a warrant amendment (the “2025 Warrant Amendment”) with certain of the PIPE Purchasers, pursuant to which, such PIPE Purchasers agreed to amend the terms of their respective PIPE Warrants to make certain adjustments to the definition of “Black Scholes Value,” as described in the 2025 Warrant Amendment, such that the underlying price per share as used in such calculation equals the sum of the price per share being offered in cash in the applicable Fundamental Transaction (as defined in the PIPE Warrants), if any, plus the value of the non-cash consideration being offered in the applicable Fundamental Transaction, if any. As consideration for entering into the 2025 Warrant Amendment, the Company and the applicable PIPE Purchasers agreed to amend the term of their respective 2025 Warrants to be five and one-half years from the date of issuance.


		September 30, 2025			December 31, 2024
Amortizable intangible assets:
Patents	$	1,093		$	1,013
Trademarks		339			264
Purchased software and technology		1,752			1,752
Customer Relationships		160			160
	$	3,344		$	3,189
Accumulated amortization		(1,618	)		(1,256	)
Total amortizable	$	1,726		$	1,933
Indefinite life assets (non-amortizable)		421			421
Total intangible assets, net	$	2,147		$	2,354

~~Under ASC~~Amortization ~~815-40-35-10,~~expense ~~upon~~was ~~effective~~$125 ~~amendment~~and on$362 ~~June~~for ~~30,~~the ~~2025,~~three ~~each~~and ofnine ~~the~~months ~~Series~~ended ASeptember ~~Warrants~~30, 2025, respectively, and ~~PIPE~~$114 ~~Warrants~~and ~~qualify~~$334 for ~~equity-classification.~~ ~~Immediately~~the ~~before~~three ~~the~~and ~~equity~~nine ~~reclassification,~~months ~~such~~ended ~~warrants~~September ~~were~~30, ~~each~~2024, ~~revalued~~respectively. The atCompany ~~fair~~recognized ~~value~~impairment ~~with~~charges ~~the resulting~~for ~~gain~~Customer orRelationships ~~loss~~of ~~being~~$54 ~~recorded~~and in$54 for the ~~Statement~~three ofand ~~Operations.~~nine ~~After~~months ~~fair~~ended ~~value~~September ~~remeasurement~~30, ~~the~~2025, ~~reclassification~~respectively, ~~from warrant~~related ~~liabilities~~ to ~~additional~~the ~~paid-in~~managed ~~capital~~services ~~was completed~~realignment. ~~See~~No ~~Footnote~~impairment 3:charges ~~Financial~~were ~~Instruments~~recognized ~~for~~in ~~details of~~ the ~~fair~~three ~~value measurement~~ and ~~impact~~nine onmonths ~~the~~ended ~~Statement~~September of30, ~~Operations~~2024.

~~9. LEASES~~As of September 30, 2025, future amortization expense is as follows:

The Company determines if an arrangement is a lease at inception. The guidance in FASB ASC Topic 842, Leases defines a lease as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. Operating lease right of use (“ROU”) assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. The Company’s leases do not provide an implicit rate. Due to a lack of financing history or ability, the Company uses an estimate of low-grade debt rate published by the Federal Reserve Bank as its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The ROU asset includes any lease payments made and excludes lease incentives and initial direct costs incurred.


2025 (3 months)		111
2026		370
2027		218
2028		218
2029		187
Thereafter		622
Total		1,726

For leases beginning on or after January 1, 2019, lease components are accounted for separately from non-lease components for all asset classes. On January 21, 2023, the Company’s lease was amended to extend the expiration date to July 31, 2025. Upon execution of the amendment, which was deemed a lease modification, the Company reassessed the lease liability using the discount rate determined at the modification date and recorded an additional ROU asset for the same amount. The Company’s lease contains renewal provisions and escalating rental clauses and generally requires the Company to pay utilities, insurance, taxes and other operating expenses. The renewal provisions of the existing lease agreement were not included in the determination of the operating lease liabilities and the ROU assets. The Company also reassessed the lease classification and concluded that the lease continues to be an operating lease.12

~~Amortization expense was $84 and $151 for the three and six months ended June 30, 2025, respectively, and $72 and $143 for the three and six months ended June 30, 2024, respectively~~7. ~~Operating~~ACCOUNTS ~~lease~~PAYABLE ~~expense for capitalized operating leases included in~~AND ~~operating~~ ACCRUED ~~activities was $156 and $313 for the three and six months ended June 30, 2025, respectively, and $166 and $415 for the three months and six months ended June 30, 2024.~~LIABILITIES

~~Operating lease~~Accrued ~~obligations~~liabilities ~~recorded~~consist onof the ~~balance sheet at June 30, 2025 are~~following:

SCHEDULE OF ~~OPERATING~~ACCRUED ~~LEASE OBLIGATIONS~~LIABILITIES

Operating lease liability- short term		$	218
		September 30, 2025			December 31, 2024
Operating lease liability - long term			1,826
Patent and legal costs	$	133		$	60
Total Operating Lease Liability		$	2,044
Accrued compensation		138			121
Warranty costs		112			83
Royalty		79			81
Contract settlement		31			300
Accrued purchases		7			584
Taxes and other		63			174
Total	$	563		$	1,403

~~Future lease~~Changes ~~payments included~~ in ~~the~~our ~~measurement~~estimated ofproduct ~~lease~~warranty ~~liabilities~~costs onwere ~~the balance sheet at June 30, 2025 for future periods are~~ as follows:

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


	Nine Months Ended September 30,
		2025			2024
Balance, beginning of period	$	83		$	72
Warranty settlements		(13	)		(74	)
Warranty provision		42			37
Balance, end of period	$	112		$	35

2025 (6 months)	$	258
2026		507
2027		522
2028		538
2029		554
Thereafter		717
Total future minimum lease payments	$	3,096
Less imputed interest		(1,052	)
Total	$	2,044

SCHEDULE OF PRODUCT WARRANTY LIABILITY

~~The weighted average remaining lease term is 5~~8.73 ~~years, and the weighted average discount rate is 15.00%.~~WARRANTS

~~Certain leases~~On ~~contain~~June ~~provisions~~29, ~~for~~2023, ~~payment~~the Company entered into a Securities Purchase Agreement (the “Series A Purchase Agreement”) with certain directors of ~~real~~the ~~estate~~Company ~~taxes,~~and ~~insurance~~certain accredited and ~~maintenance~~institutional ~~costs~~investors by(collectively, the ~~Company.~~“Series ~~These~~A ~~expenses~~Investors”), ~~are treated~~pursuant asto ~~variable~~which ~~lease~~it ~~payments~~agreed ~~and~~to ~~recognized~~sell into the ~~period~~Series A Investors in ~~which~~a registered direct offering (the ~~obligation~~“Series ~~for~~A ~~those~~Offering”): ~~payments~~(i) ~~was~~an ~~incurred.~~aggregate ~~The~~of 10,000 shares of the Company ~~had~~’s newly-designated Series A Convertible Preferred Stock, with par value $17 0.0001 per share and ~~$31 variable~~a ~~lease~~stated ~~expenses~~value ~~for~~of ~~the~~$1,000 ~~three~~per ~~and~~share ~~six~~(the ~~months~~“Series ~~ended~~A ~~June~~Preferred 30Stock”), ~~2025~~initially convertible into up to 6,896,553 ~~respectively~~shares of Common Stock, ~~and~~at ~~$14 and~~an initial conversion price of $~~24 for~~1.45 per share (the ~~three~~“Conversion Price”), and ~~six~~(ii) ~~months~~warrants ~~ended~~to ~~June~~acquire ~~30,~~up ~~2024~~to an aggregate of 6,896,553 ~~respectively~~shares of Common Stock (the “Series A Warrants”).

~~The Company~~Each ~~had~~Series ~~$0 and~~A Warrant has an exercise price of $01.45 ~~short-term~~per ~~lease~~share, ~~expense~~became ~~for~~exercisable after the ~~three~~date ~~and~~that was six months ~~ended~~from ~~June~~the ~~30,~~date ~~2025~~of issuance and will expire 5 years following the date of issuance. The exercise price is subject to customary adjustments for stock dividends, ~~respectively~~stock splits, reclassifications and $4the like, and ~~$15~~subject ~~for~~ to price-based adjustment, on a “full ratchet” basis, in the ~~three~~event ~~and~~of ~~six~~any ~~months~~issuances ~~ended~~of ~~June~~Common 30Stock, ~~2024~~or securities convertible, ~~respectively~~exercisable or exchangeable for Common Stock, at a price below the then-applicable exercise price (subject to certain exceptions). The ~~Company~~closing ~~does~~of ~~not~~the ~~have~~Series ~~any~~A ~~finance~~Offering ~~leases~~occurred on July 3, 2023. The aggregate gross proceeds from the Series A Offering were $10,000, of which $7,717 was allocated to the Series A Warrants.

11On February 24, 2025, the Company entered into a securities purchase agreement (the “PIPE Purchase Agreement”) with certain accredited investors (collectively, the “PIPE Purchasers”) for the issuance and sale in a private placement (the “Private Placement”) of an aggregate of 3,216,666 shares (the “Common Shares”) of Common Stock and accompanying warrants (“PIPE Warrants”) to purchase up to 3,216,666 shares of Common Stock, with an exercise price of $1.80 per share. The purchase price for one Common Share and accompanying PIPE Warrant was $1.80. The gross proceeds to the Company were $5,790 before estimated offering expenses payable by the Company, of which $5,185 was allocated to the PIPE Warrants.

~~10. STOCKHOLDERS’ EQUITY~~13

~~The~~ On June 30, 2025, the Company’s ~~authorized~~entered ~~capital~~into ~~consists~~a ofwarrant ~~150~~amendment (the “Series A Warrant Amendment”) with the Required Holders (as defined in the Series A Purchase Agreement),~~000~~ pursuant to which,~~000~~ ~~shares~~the Required Holders agreed to amend the terms of ~~Common~~the ~~Stock~~Series ~~and~~A ~~5,000,000~~Warrants ~~shares~~to make certain adjustments to the definition of ~~preferred~~“Black ~~stock~~Scholes Value” in each of the Series A Warrants, ~~par~~as ~~value $0.0001~~described in the Series A Warrant Amendment, such that the underlying price per share as used in such calculation equals the sum of the price per share being offered in cash in the applicable Fundamental Transaction (~~“Preferred~~as ~~Stock”~~defined in the Series A Warrants), if any, plus the value of ~~which~~the 10non-cash consideration being offered in the applicable Fundamental Transaction,~~000~~ ~~are~~if ~~designated~~any. asAs consideration for entering into the Series A ~~Preferred~~Warrant ~~Stock~~Amendment, the Company and the Required Holders agreed to amend the term of the Series A Warrants to be six and one-half years from the date of issuance.

~~On July~~Additionally, 3on June 30, ~~2023~~2025, the Company ~~filed~~entered ~~the~~into ~~Certificate of Designations of the Series~~ a ~~Preferred~~warrant ~~Stock~~amendment (the “~~Certificate~~2025 ofWarrant ~~Designations~~Amendment”) with ~~the~~certain ~~Secretary~~ of ~~State of~~ the ~~State~~PIPE ~~of Delaware~~Purchasers, ~~designating~~pursuant 10to which,~~000~~ ~~shares~~such ofPIPE ~~its~~Purchasers ~~Preferred~~agreed ~~Stock~~to asamend ~~Series~~the ~~A Convertible Preferred Stock. The~~ terms of ~~the~~their ~~Series~~respective APIPE ~~Preferred~~Warrants ~~Stock~~to ~~are~~make ascertain ~~set~~adjustments ~~forth~~to in the ~~form~~definition of ~~Certificate~~“Black ofScholes ~~Designations~~Value,” ofas described in the ~~Series~~2025 AWarrant ~~Preferred Stock~~Amendment, (such that the ~~“Certificate~~underlying ofprice ~~Designations”).~~per ~~The~~share ~~Series~~as Aused ~~Preferred~~in ~~Stock~~such iscalculation ~~convertible~~equals ~~into~~the ~~shares~~sum of ~~Common~~the ~~Stock~~price ~~(the~~per ~~“Conversion Shares”)~~share atbeing ~~the~~offered ~~election~~in ofcash in the ~~holder~~applicable atFundamental ~~any~~Transaction ~~time~~(as atdefined anin ~~initial~~the ~~conversion~~PIPE ~~price~~Warrants), ofif ~~$1.45~~any, (plus the ~~“Conversion~~value ~~Price”). The~~of ~~Conversion~~the ~~Price~~non-cash isconsideration ~~subject~~being tooffered ~~customary~~in ~~adjustments~~the ~~for~~applicable ~~stock~~Fundamental ~~dividends~~Transaction, ~~stock~~if ~~splits,~~any. ~~reclassifications~~As ~~and~~consideration ~~the~~for ~~like,~~entering ~~and~~into ~~subject to~~the ~~price-based~~2025 ~~adjustment~~Warrant inAmendment, the ~~event~~Company ofand ~~any~~the ~~issuances~~applicable ofPIPE ~~Common~~Purchasers ~~Stock,~~agreed orto ~~securities~~amend ~~convertible,~~the ~~exercisable~~term orof ~~exchangeable~~their ~~for~~respective ~~common stock,~~2025 atWarrants ato ~~price~~be ~~below~~five ~~the~~and ~~then~~one-~~applicable~~half ~~Conversion~~years ~~Price~~from ~~(subject~~the todate ~~certain~~of ~~exceptions)~~issuance.

~~The holders~~Under ofASC ~~the~~815-40-35-10, ~~Series~~upon Aeffective ~~Preferred~~amendment ~~Stock~~on ~~are~~June ~~entitled to dividends of 8% per annum~~30, ~~compounded monthly~~2025, ~~which~~each ~~are payable in cash or shares~~ of ~~Common Stock, or a combination thereof, at~~ the ~~Company’s~~Series ~~option~~A inWarrants ~~accordance~~and ~~with~~PIPE ~~the~~Warrants ~~terms~~qualify offor ~~the Certificate of Designations~~equity-classification. ~~Upon~~ Immediately ~~the~~before ~~occurrence and during~~ the ~~continuance~~equity ~~of a Triggering Event (as defined in the Certificate of Designations)~~reclassification, ~~the~~such ~~Series~~warrants Awere ~~Preferred Stock~~each ~~will~~revalued ~~accrue dividends~~ at ~~the~~fair ~~rate~~value ofwith ~~20% per annum. If~~ the ~~Company~~resulting ~~elects~~gain toor ~~pay~~loss ~~any~~being ~~dividends~~recorded in ~~shares of Common Stock,~~ the ~~Conversion Price~~Statement ~~used to calculate the number~~ of ~~shares~~Operations. ~~issuable~~After ~~will~~fair bevalue ~~equal~~remeasurement, to the ~~lower~~reclassification offrom ~~(i) the then applicable Conversion Price and (ii)~~warrant ~~85%~~ liabilities ofto ~~the~~additional ~~arithmetic~~paid-in ~~average~~capital ofwas ~~the~~completed. ~~three~~See (Footnote 3): ~~lowest~~Financial ~~closing~~Instruments prices of the Company’s Common Stock during the twenty (20) consecutive trading day period ending on the trading day immediately preceding the dividend payment date, provided that such price shall not be lower than the lower of (x) $0.2828 (subject to adjustment for ~~stock~~details ~~splits, stock dividends, stock combinations, recapitalizations or other similar events ) and (y) 20%~~ of the ~~“Minimum~~fair ~~Price”~~value ~~(as~~measurement ~~defined~~and inimpact ~~Nasdaq Stock Market Rule 5635)~~ on the ~~date~~Statement of the Stockholder Approval (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) or, in any case, such lower amount as permitted, from time to time, by the Nasdaq Stock MarketOperations.

On August 1918, ~~2024~~2025, the Company entered into ana ~~Amendment~~securities ~~Agreement~~purchase agreement (the “~~August~~Series ~~2024~~B ~~Amendment~~Purchase Agreement”) with ~~the~~certain ~~Required~~accredited ~~Holders~~ investors (ascollectively, ~~defined in~~ the ~~Certificate~~“Series ~~of Designations~~B Purchasers”). ~~Pursuant~~for to the ~~August~~issuance ~~2024~~and ~~Amendment,~~sale ~~the~~in ~~Required~~a ~~Holders~~private ~~agreed~~placement ~~that~~ (A) the ~~unpaid and accrued dividends on the~~ “Series AB Private ~~Preferred~~Placement”) ~~Stock~~of ~~due~~an ~~July~~aggregate 1,of ~~2024~~ (~~the “July Delinquent Dividend Amount”~~i), ~~shall be payable~~4,500 atshares ~~the option~~ of the Company,’s newly-designated inSeries ~~(i)~~B ~~cash~~Convertible ~~and/or~~Preferred ~~(ii) shares of Common~~ Stock, atwith a ~~price~~par ~~per~~value ~~share~~ of ~~Common Stock equal to~~ ~~the lower of (x)~~ $10.000001 ~~and~~per ~~(y)~~share ~~the~~and ~~Dividend~~a ~~Conversion~~stated ~~Price~~value ~~(as defined in the Certificate~~ of ~~Designations)~~$1,000 ~~using~~per ~~July 1~~share, ~~2024,~~initially asconvertible ~~the~~into ~~applicable~~up ~~date~~to of3,000,000 ~~determination~~shares ~~in accordance with the Certificate~~ of ~~Designations;~~Common ~~(B)~~Stock, ~~the~~at ~~dividends~~an ~~due~~initial onconversion ~~October~~price of $1,.50 ~~2024~~per share (the “~~October~~Series ~~Dividend~~B ~~Amount~~Preferred Stock”), and, ~~together~~(ii) ~~with~~accompanying warrants ~~the July Delinquent Dividend Amount, the~~ (“~~Delinquent~~Series ~~Dividend~~B ~~Amounts~~Warrants”)~~, shall~~ beto ~~payable~~purchase inup to 3,000,000 shares of Common Stock, ~~based~~with onan ainitial ~~per~~exercise ~~share~~ price of ~~Common~~$1.50 ~~Stock~~per ~~equal~~share. toThe ~~80%~~Series ofB Warrants and the ~~arithmetic~~shares ~~average~~ of ~~the~~Series ~~three (3)~~B ~~lowest~~Preferred ~~closing~~Stock ~~sale~~will ~~prices~~be ofexercisable ~~the~~or ~~Common~~convertible, respectively, ~~Stock~~into ~~during~~shares ~~the~~of ~~month~~Common ofStock ~~September~~(“Series ~~2024;~~B ~~and~~Conversion (CShares”) beginning ~~such~~on ~~Delinquent~~the ~~Dividend~~effective ~~Amounts~~date ~~and~~of ~~any Dividend~~stockholder ~~Balance~~approval ~~Shares~~of (asi) ~~defined~~under inNasdaq Stock ~~the~~Market ~~Certificate~~Rule ~~of Designations~~5635(d), ~~with~~the ~~respect~~issuance ~~thereto,~~of ifshares ~~applicable,~~of ~~shall~~Common beStock ~~delivered~~in onexcess ~~October~~of ~~1, 2024~~19.99% ~~The~~of ~~Company and~~ the ~~Required~~Company’s ~~Holders~~issued ~~further~~and ~~agreed~~outstanding ~~pursuant~~shares toof ~~the~~Common ~~August~~Stock ~~2024~~at ~~Amendment~~prices below ~~to amend (i)~~ the ~~Certificate~~“Minimum ofPrice” ~~Designations,~~ (as ~~described~~defined ~~below,~~in byRule ~~filing~~5635 ~~a Certificate~~ of ~~Amendment to~~ the ~~Certificate~~Rules of ~~Designations (~~the ~~“August~~Nasdaq Stock ~~2024~~Market) ~~Certificate~~on ofthe ~~Amendment”) and~~date ~~(ii)~~of the Series AB Purchase Agreement pursuant to ~~amend~~ the terms ~~definition~~ of ~~“Excluded~~the ~~Securities.”~~Series ~~The~~B ~~August~~Preferred ~~2024~~Stock ~~Certificate~~and ~~of Amendment amends~~ the ~~Certificate~~Series ofB ~~Designations to~~Warrants, ~~among~~and ~~other things,~~ (Aii) ~~allow~~an increase ~~for~~in the ~~payment~~authorized shares of ~~dividends~~the inCompany (the ~~form~~“Series ofB ~~Common~~Stockholder ~~Stock~~Approval”). toAs ~~a holder~~ of the ~~Series~~date Aof ~~Preferred~~this ~~Stock~~Quarterly ~~who~~Report ~~serves~~on asForm ~~a director~~10-Q, ~~officer or employee of~~ the Company~~; provided that such issuance~~ ishas ~~approved~~not byobtained the ~~Company’s~~Series ~~stockholders~~B ~~prior~~Stockholder toApproval. ~~such issuance~~However, ~~and~~the ~~(B)~~Company ~~amend~~plans to ~~certain~~hold ~~conditions required for (i)~~ a ~~mandatory conversion~~special meeting of ~~the~~its ~~Series~~stockholders Aon ~~Preferred~~December ~~Stock~~12, ~~(as described below)~~2025, ~~and (ii) the Company’s right~~ to ~~redeem~~, ~~all~~among other ~~or a portion~~things, ofobtain the Series AB ~~Preferred~~Stockholder ~~Stock~~Approval. ~~outstanding~~The ~~pursuant~~Series toB anWarrants will ~~optional~~expire ~~redemption~~five ~~(as~~years ~~described~~from ~~below),~~the ineffective ~~each~~date ~~case,~~of ~~pursuant to~~ the ~~terms~~Series ~~of the~~B ~~Certificate of Designations~~Stockholder Approval.

Pursuant to the August 2024 Certificate of Amendment, the Company may require holders to convert their shares of Series A Preferred Stock into shares of Common Stock if the closing price of the Company’s Common Stock exceeds $89.00 per share (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) for 20 consecutive trading days and the daily dollar trading volume of the Common Stock exceeds $2,000,000 per day during the same period, provided that certain equity conditions described in the Certificate of Designations are satisfied.LEASES

~~Pursuant to~~The ~~the~~Company ~~August~~determines ~~2024~~if ~~Certificate~~an ofarrangement ~~Amendment,~~is a lease at ~~any~~inception. ~~time~~The ~~beginning~~guidance 18in ~~months~~FASB ~~from~~ASC ~~the~~Topic ~~date~~842, ofLeases ~~the~~defines ~~issuance~~a lease as a contract, ~~provided~~or ~~that~~part ~~the~~of ~~Company~~a ~~has~~ contract, ~~filed~~that ~~all~~conveys ~~reports~~the ~~required~~right to becontrol ~~filed~~the byuse itof ~~pursuant~~identified toproperty, ~~the~~plant, ~~Exchange~~or ~~Act~~equipment on(an aidentified ~~timely~~asset) ~~basis~~ for a ~~continuous~~ period of ~~one~~time ~~year~~in ~~and provided~~exchange ~~further~~for ~~that~~consideration. ~~certain~~Operating ~~equity~~lease ~~conditions~~right ~~described in the Certificate~~ of ~~Designations~~use ~~are~~(“ROU”) ~~satisfied,~~assets ~~the~~and ~~Company~~lease ~~has~~liabilities ~~the~~are ~~right~~recognized to based ~~redeem~~on inthe ~~cash~~present ~~all~~value orof ~~some~~future ofminimum ~~the~~lease ~~shares~~payments ofover the ~~Series~~lease Aterm ~~Preferred Stock outstanding~~ at ~~such~~commencement ~~time~~date. atThe aCompany’s ~~redemption~~leases ~~price~~do ~~equal~~not toprovide ~~the product~~an ofimplicit ~~(x)~~rate. ~~125%~~Due ~~multiplied~~to bya ~~(y)~~lack ~~the sum~~ of ~~(A)~~financing ~~the~~history ~~stated~~or ~~value~~ability, of the ~~Series~~Company Auses ~~Preferred~~an ~~Stock~~estimate ~~plus~~of ~~(B)~~low-grade ~~all declared and unpaid~~debt ~~Dividends~~ rate onpublished ~~such~~by ~~Preferred~~the ~~Stock~~Federal ~~and~~Reserve ~~any~~Bank ~~other~~as ~~unpaid~~its ~~amounts~~incremental ~~then~~borrowing ~~due~~rate ~~and~~based ~~payable~~on ~~hereunder~~the ~~with~~information ~~respect~~available toat ~~such~~the ~~Series~~commencement Adate ~~Preferred Stock,~~in ~~plus~~determining ~~(C)~~ the ~~make-whole~~present ~~amount,~~value ~~plus~~of ~~(D)~~future ~~any~~payments. ~~accrued~~The ~~and~~ROU ~~unpaid~~asset ~~late~~includes ~~charges~~any ~~with~~lease ~~respect~~payments tomade ~~such stated value~~ and ~~amounts payable~~excludes ~~pursuant~~ lease toincentives ~~clause~~and ~~(B)~~initial asdirect ofcosts ~~such date of determination~~incurred.

1214

~~On October~~For ~~14,~~leases ~~2024,~~beginning ~~the~~on ~~Company~~or ~~entered~~after ~~into~~January an1, ~~Amendment~~2019, ~~Agreement~~lease ~~with~~components ~~the~~are ~~Required~~accounted ~~Holders~~for ~~(as~~separately ~~defined~~from innon-lease ~~the~~components ~~Certificate~~for ofall ~~Designations),~~asset classes. On ~~pursuant~~ January to21, ~~which~~2023, the ~~Required Holders agreed to amend the Certificate of Designations of the~~ Company’s ~~Series~~lease Awas ~~Preferred~~amended ~~Stock, as described below, by filing a Certificate of Amendment~~ to ~~the~~extend ~~Certificate of Designations (~~the ~~“October~~expiration ~~2024~~date ~~Certificate~~to ofJuly ~~Amendment”)~~31, 2025. ~~The~~ ~~October~~Upon ~~2024~~execution ~~Certificate~~ of ~~Amendment amends~~ the ~~Certificate of Designations to~~amendment, ~~among~~which ~~other~~was ~~things,~~deemed ~~provide~~a ~~that,~~lease ~~except as required by applicable law~~modification, the ~~holders~~Company ofreassessed the ~~Series~~lease Aliability ~~Preferred~~using ~~Stock will be entitled to vote with holders of~~ the ~~Common~~discount ~~Stock~~rate ondetermined ~~an as converted~~at ~~basis, with~~ the ~~number~~modification ofdate ~~votes~~and torecorded ~~which~~an ~~each~~additional ~~holder~~ROU ofasset ~~Series~~for Athe ~~Preferred~~same ~~Stock is entitled to be calculated assuming a conversion price of $1~~amount.~~414~~ ~~per~~The ~~share,~~Company’s ~~which~~lease ~~was~~contains ~~the~~renewal ~~Minimum~~provisions ~~Price~~and ~~(as~~escalating ~~defined~~rental inclauses ~~Rule 5635 of the Rule of the Nasdaq Stock Market) applicable immediately before the execution~~ and ~~delivery~~generally ofrequires the ~~Series~~Company Ato ~~Purchase~~pay ~~Agreement~~utilities, ~~subject~~insurance, totaxes ~~certain~~and ~~beneficial~~other ~~ownership limitations as set forth~~operating ~~in the Certificate of Designations~~ expenses. The ~~October~~renewal ~~2024~~provisions ~~Certificate~~ of ~~Amendment further provides that (i) certain holders of~~ the ~~Series A~~existing ~~Preferred~~lease ~~Stock~~agreement ~~will~~were not beincluded ~~subject to certain beneficial ownership limitations as described~~ in the ~~Certificate~~determination of ~~Designations, and (ii) stockholder approval will not be required in connection with~~ the ~~payment~~operating oflease ~~dividends~~liabilities inand the ~~form~~ROU ~~of Common Stock to a holder of the Series A Preferred Stock who serves as a director, officer or employee of the Company~~assets. The ~~October~~Company ~~2024~~also ~~Certificate~~reassessed ~~of Amendment was filed with~~ the ~~Secretary~~lease ofclassification ~~State~~and ofconcluded ~~the~~that ~~State of Delaware, effective as of October 14, 2024. The holders of~~ the ~~Series~~lease ~~A Preferred~~continues ~~Stock have no voting rights, other than with respect~~ to ~~certain~~be ~~matters~~an ~~affecting~~operating ~~the rights of the Series A Preferred Stock~~lease.

~~On November~~Amortization ~~25,~~expense ~~2024,~~was ~~the Company entered into an Amendment~~ $76 and ~~Agreement~~$204 for ~~with~~ the ~~Series~~three Aand ~~Investors~~nine ~~(the~~months ~~“November~~ended ~~2024~~September ~~Amendment Agreement”)~~30, ~~pursuant to which~~2025, ~~(i) the Series A Investors agreed to amend the Certificate of Designations~~respectively, asand ~~described~~$74 and ~~below, by~~$217 for ~~filing a Certificate of Amendment to~~ the ~~Certificate~~three ofand ~~Designations~~nine ~~with~~months ~~the~~ended ~~Secretary~~September of30, ~~State (the “November~~ 2024 ~~Certificate of Amendment”)~~, ~~and~~respectively. ~~(ii)~~Operating ~~the~~lease ~~Series~~expense Afor ~~Investors~~capitalized ~~and~~operating ~~the~~leases ~~Company~~included ~~agreed~~in ~~that~~operating ~~all~~activities ~~payment~~was ~~amounts~~$154 ~~that have accrued~~ and ~~are~~$463 for ~~unpaid as of November 25, 2024, pursuant to~~ the ~~Certificate~~three ~~of Designations~~ and ~~the~~nine ~~August~~months ~~2024~~ended ~~Amendment~~September ~~will~~30, ~~be satisfied by delivery of shares of Common Stock on or prior to November 25~~2025, ~~2024~~respectively, ~~with~~and ~~each~~$154 and ~~Series~~$463 for ~~A Investor entitled to receive~~ the ~~number~~three ofmonths ~~shares~~and ofnine ~~Common~~months ~~Stock specified~~ended ~~below~~September ~~such~~30, ~~Series A Investor’s name on its respective signature page thereto. The November~~ 2024 ~~Certificate of Amendment amends the Certificate of Designations to provide that upon the occurrence of a Triggering Event (as defined in the Certificate of Designations)~~, ~~the~~ ~~Series A Preferred Stock will accrue dividends compounded monthly at the rate of 20% per annum~~respectively. ~~The Certificate of Amendment became effective with the Secretary of State on December 6, 2024.~~

~~At the~~Operating ~~time~~lease ofobligations ~~issuance,~~recorded ~~$2,036~~on of the ~~net~~balance ~~proceeds~~sheet ~~less~~at ~~transaction~~September cost of the Series A Purchase Agreement was allocated to the 10,000 shares of Series A Preferred Stock initially issued. As of December 31, 2024, a total of 1,793 shares of Series A Preferred Stock were converted into approximately 1,468,000 shares of Common Stock. There were no additional conversions in the six months end June 30, 2025~~. As~~ of June 30, 2025, the Company has authorized, declared and paid $328 in dividends in the form of shares of the Company’s Common Stock during the six months ended June 30, 2025. For the six months ended June 30, 2024, authorized and declared dividends totaling $189, of which $60 was paid in cash, $129 was paid in shares of the Company’s Common Stock.are:

~~11. SHARE-BASED~~ SCHEDULE ~~COMPENSATION~~OF OPERATING LEASE OBLIGATIONS

On March 28, 2017, the Company adopted, and the Company’s stockholders approved, the Wrap Technologies, Inc. 2017 Equity Incentive Plan (the “2017 Plan”), which was adopted by the Board on November 12, 2024, subject to stockholder approval. Under the 2017 Plan as originally adopted, the Company initially reserved 2,000,000 shares of Common Stock for issuance as awards under the 2017 Plan. The 2017 Plan was amended by the First Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 4,100,000 shares, which was adopted by the Board on March 16, 2019, and by stockholders on May 23, 2019. The 2017 Plan was also amended by the Second Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 6,000,000 shares which was adopted by the Board on April 8, 2020, and by stockholders on June 5, 2020. The 2017 Plan was also amended by the Third Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 7,500,000 shares which was adopted by the Board on April 23, 2021, and by stockholders on June 22, 2021. The 2017 Plan was also amended by the Fourth Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 9,000,000 shares which was adopted by the Board on April 22, 2022, and by our stockholders on June 23, 2022.The 2017 Plan was amended by the Fifth Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 16,500,000 shares which was adopted by the Board on November 12, 2024, and by our stockholders on December 23, 2024.


Operating lease liability - short term	$	305
Operating lease liability - long term		2,186
Total Operating Lease Liability	$	2,491

13Future lease payments included in the measurement of lease liabilities on the balance sheet at September 30, 2025 for future periods are as follows:

As of June 30, 2025, there were 4,004,187 shares of Common Stock remaining available for grant under the 2017 Plan.




2025 (3 months)	$	155
2026		627
2027		642
2028		658
2029		674
Thereafter		813
Total future minimum lease payments	$	3,569
Less imputed interest		(1,078	)
Total	$	2,491

~~Stock Options~~The weighted average remaining lease term is 5.37 years, and the weighted average discount rate is 13.50%.

Certain leases contain provisions for payment of real estate taxes, insurance and maintenance costs by the Company. These expenses are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. The ~~following~~ ~~table~~Company ~~summarizes~~had ~~stock~~$2 and ~~option~~$33 variable ~~activity~~lease expenses for the ~~six~~three and nine months ended ~~June~~September 30, 2025:, respectively, and $23 and $41 variable lease expenses for the three and nine months ended September 30, 2024, respectively.

The Company had no ~~SCHEDULE~~short-term OFlease ~~STOCK~~expenses ~~OPTION~~for ~~ACTIVITY~~the three and nine months ended September 30, 2025, respectively, and had $1 and $16 in short-term lease expenses for the three and nine months ended September 30, 2024, respectively. The Company does not have any finance leases.

				Weighted Average
	Options on Common Shares			Exercise Price		Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding January 1, 2025		3,944,284		$	2.12		8.30	$	1,486
Granted		3,453,927			1.88		-		-
Exercised		-			-		-		-
Forfeited, cancelled, expired		(536,500	)		2.86		-		-
Outstanding June 30, 2025		6,861,711		$	1.94		8.90	$	541
Exercisable June 30, 2025		1,419,164		$	2.58		7.48	$	142

~~As of~~10. ~~June 30, 2025, there were 5,571,545 service-based stock options outstanding, and 1,290,166 performance-based stock options outstanding which were granted in October 2023 to the Company~~STOCKHOLDERS’s ~~current Chief Executive Officer, subject to vesting based on future market capitalization targets.~~EQUITY

The Company’s ~~uses~~authorized ~~the~~capital ~~Black-Scholes~~consists ~~option~~of ~~pricing~~150,000,000 ~~model~~shares toof ~~determine~~Common ~~the~~Stock ~~fair~~and ~~value~~5,000,000 shares of ~~the~~preferred ~~service-based~~stock, ~~options~~par ~~that~~value ~~have been granted~~$0. ~~The~~0001 ~~following~~per ~~table~~share ~~summarizes~~(“Preferred ~~the~~Stock”), ~~assumptions~~of ~~used~~which to10,000 and ~~compute~~4,500 ~~the~~are ~~fair~~designated ~~value~~as ofSeries ~~options~~A ~~granted~~and toSeries ~~employees~~B ~~and~~Preferred ~~non-employees:~~Stock, respectively.

~~SCHEDULE~~Series OFA ~~STOCK~~Preferred ~~OPTION ACTIVITY, FAIR VALUE OF ASSUMPTIONS~~Stock

	For the Six Months Ended June 30,
	2025			2024
Expected stock price volatility		76	%		76	%
Risk-free interest rate		4.06	%		3.97	%
Expected dividend yield		0	%		0	%
Expected life of options		6.00			6.00
Weighted-average fair value of options granted	$	1.05		$	2.90

On July 3, 2023, the Company filed the Certificate of Designations of the Series A Preferred Stock (the “Certificate of Designations”) with the Secretary of State of the State of Delaware, designating 10,000 shares of its Preferred Stock as Series A Convertible Preferred Stock. The terms of the Series A Preferred Stock are as set forth in the form of Certificate of Designations of the Series A Preferred Stock (the “Certificate of Designations”). The Series A Preferred Stock is convertible into shares of Common Stock (the “Conversion Shares”) at the election of the holder at any time at an initial conversion price of $1.45 (the “Conversion Price”). The Conversion Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for common stock, at a price below the then-applicable Conversion Price (subject to certain exceptions).

~~Estimated volatility~~The isholders aof ~~measure~~the Series A Preferred Stock are entitled to dividends of ~~the~~8% ~~amount~~per byannum, compounded monthly, which are payable in cash or shares of Common Stock, or a combination thereof, at the Company’s ~~stock~~option ~~price~~in isaccordance ~~expected~~with tothe ~~fluctuate~~terms ~~each~~of ~~year~~the Certificate of Designations. Upon the occurrence and during the ~~expected life~~continuance of ~~awards~~a Triggering Event (as defined in the Certificate of Designations), the Series A Preferred Stock will accrue dividends at the rate of 20% per annum. ~~The~~If the Company’s ~~estimated~~elects ~~volatility~~to ~~was~~pay ~~based~~any ondividends anin ~~average~~shares of Common Stock, the ~~historical~~Conversion ~~volatility~~Price ofused ~~peer~~to ~~entities~~calculate ~~whose stock~~the ~~prices~~number ~~were~~of ~~publicly~~shares ~~available.~~issuable ~~The~~will ~~Company’s~~be ~~calculation~~equal to the lower of ~~estimated~~(i) ~~volatility~~the isthen ~~based~~applicable onConversion Price and (ii) 85% of the ~~historical~~arithmetic ~~stock~~average of the three (3) lowest closing prices of ~~these~~the ~~peer~~Company’s ~~entities~~Common ~~over~~Stock aduring the twenty (20) consecutive trading day period ~~equal~~ending toon the ~~expected~~trading ~~life~~day ofimmediately preceding the ~~awards.~~dividend ~~The~~payment ~~Company~~date, ~~uses~~provided ~~the~~that ~~historical~~such ~~volatility~~price shall not be lower than the lower of ~~peer~~(x) ~~entities due~~$0.2828 (subject to ~~the~~adjustment ~~lack~~for stock splits, stock dividends, stock combinations, recapitalizations or other similar events ) and (y) 20% of ~~sufficient~~the ~~historical~~“Minimum ~~data~~Price” (as defined in Nasdaq Stock Market Rule 5635) on the date of ~~its~~the Stockholder Approval (subject to adjustment for stock ~~price.~~splits, ~~The~~stock ~~Company~~dividends, ~~records~~stock ~~forfeitures~~combinations, recapitalizations or other similar events) or, in any case, such lower amount as ~~they~~permitted, ~~are~~from ~~incurred~~time to time, by the Nasdaq Stock Market.

~~The risk-free~~On ~~interest~~August ~~rate~~19, ~~assumption~~2024, isthe ~~based~~Company ~~upon~~entered ~~observed~~into ~~interest~~an ~~rates~~Amendment onAgreement ~~zero~~(the ~~coupon~~“August U2024 Amendment”) with the Required Holders (as defined in the Certificate of Designations).S. ~~Treasury~~Pursuant ~~bonds~~to ~~whose~~the ~~maturity~~August ~~period~~2024 ~~is appropriate~~Amendment, ~~for~~the Required Holders agreed that (A) the ~~term~~unpaid and accrued dividends on the Series A Preferred Stock due July 1, 2024 (the “July Delinquent Dividend Amount”), shall be payable, at the option of the ~~options~~Company, in (i) cash and/or (ii) shares of Common Stock, at a price per share of Common Stock equal to the lower of (x) $1.00 ~~The~~and ~~dividend~~(y) ~~yield~~the Dividend Conversion Price (as defined in the Certificate of ~~zero~~Designations), 0using isJuly 1, 2024, as the applicable date of determination in accordance with the Certificate of Designations; (B) the dividends due on October 1, 2024 (the “October Dividend Amount” and, together with the July Delinquent Dividend Amount, the “Delinquent Dividend Amounts”), shall be payable in shares of Common Stock based on a per share price of Common Stock equal to 80% of the ~~fact~~arithmetic ~~that~~average of the ~~Company~~three ~~has~~(3) ~~never~~lowest ~~paid~~closing ~~cash~~sale ~~dividends~~ prices of the Common Stock during the month of September 2024; and ~~has~~(C) nosuch ~~present~~Delinquent ~~intention~~Dividend Amounts and any Dividend Balance Shares (as defined in the Certificate of ~~paying~~Designations), ~~cash~~with ~~dividends~~respect thereto, if applicable, shall be delivered on October 1, 2024. The Company ~~calculates~~and the ~~expected~~Required ~~life~~Holders further agreed pursuant to the August 2024 Amendment to amend (i) the Certificate of Designations, as described below, by filing a Certificate of Amendment to the ~~options~~Certificate ~~using~~of Designations (the ~~Simplified~~“August ~~Method~~ 2024 Certificate of Amendment”) and (ii) the Series A Purchase Agreement to amend the definition of “Excluded Securities.” The August 2024 Certificate of Amendment amends the Certificate of Designations to, among other things, (A) allow for the payment of dividends in the form of Common Stock to a holder of the Series A Preferred Stock who serves as a director, officer or employee ~~stock~~of ~~options~~the Company; provided that such issuance is approved by the Company’s stockholders prior to such issuance, and (B) amend certain conditions required for (i) a mandatory conversion of the Series A Preferred Stock (as described below), and (ii) the Company’s ~~does~~right ~~not~~to ~~have~~redeem, ~~sufficient~~all ~~historical~~or ~~exercise~~a ~~data~~portion, of the Series A Preferred Stock outstanding pursuant to an optional redemption (as described below), in each case, pursuant to the terms of the Certificate of Designations.

Stock option expense was $477 and ($33) for the three months ended June 30, 2025 and 2024, respectively. Stock option expense was $864 and $434 for the six months ended June 30, 2025 and 2024, respectively.16

14Pursuant to the August 2024 Certificate of Amendment, the Company may require holders to convert their shares of Series A Preferred Stock into shares of Common Stock if the closing price of the Company’s Common Stock exceeds $8.00 per share (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) for 20 consecutive trading days and the daily dollar trading volume of the Common Stock exceeds $2,000,000 per day during the same period, provided that certain equity conditions described in the Certificate of Designations are satisfied.

~~Restricted~~ Pursuant to the August 2024 Certificate of Amendment, at any time beginning 18 months from the date of the issuance, provided that the Company has filed all reports required to be filed by it pursuant to the Exchange Act on a timely basis for a continuous period of one year and provided further that certain equity conditions described in the Certificate of Designations are satisfied, the Company has the right to redeem in cash all or some of the shares of the Series A Preferred Stock ~~Units~~outstanding at such time at a redemption price equal to the product of (x) 125% multiplied by (y) the sum of (A) the stated value of the Series A Preferred Stock plus (B) all declared and unpaid Dividends on such Preferred Stock and any other unpaid amounts then due and payable hereunder with respect to such Series A Preferred Stock, plus (C) the make-whole amount, plus (D) any accrued and unpaid late charges with respect to such stated value and amounts payable pursuant to clause (B) as of such date of determination.

~~The Plan~~On ~~provides~~October ~~for~~14, 2024, the ~~grant~~Company entered into an Amendment Agreement with the Required Holders (as defined in the Certificate of ~~restricted~~Designations), ~~stock~~pursuant ~~units~~to which, the Required Holders agreed to amend the Certificate of Designations of the Company’s Series A Preferred Stock, as described below, by filing a Certificate of Amendment to the Certificate of Designations (the “~~RSUs~~October 2024 Certificate of Amendment”). ~~RSUs~~The ~~are~~October ~~settled~~2024 inCertificate ~~shares~~of Amendment amends the Certificate of Designations to, among other things, provide that, except as required by applicable law, the ~~Company’s~~holders of the Series A Preferred Stock will be entitled to vote with holders of the Common Stock on an as converted basis, with the ~~RSUs~~number ~~vest~~of votes to which each holder of Series A Preferred Stock is entitled to be calculated assuming a conversion price of $1.414 per share, which was the Minimum Price (as defined in Rule 5635 of the Rule of the Nasdaq Stock Market) applicable immediately before the execution and delivery of the Series A Purchase Agreement, subject to certain beneficial ownership limitations as set forth in the Certificate of Designations. The ~~following~~October ~~table~~2024 ~~summarizes~~Certificate ~~RSU~~of ~~activity~~Amendment ~~for~~further provides that (i) certain holders of the ~~six~~Series ~~months~~A ~~ended~~Preferred ~~June~~Stock 30will not be subject to certain beneficial ownership limitations as described in the Certificate of Designations, ~~2025:~~and (ii) stockholder approval will not be required in connection with the payment of dividends in the form of Common Stock to a holder of the Series A Preferred Stock who serves as a director, officer or employee of the Company. The October 2024 Certificate of Amendment was filed with the Secretary of State of the State of Delaware, effective as of October 14, 2024. The holders of the Series A Preferred Stock have no voting rights, other than with respect to certain matters affecting the rights of the Series A Preferred Stock.

~~SCHEDULE~~On OFNovember ~~RESTRICTED~~25, ~~STOCK~~2024, ~~UNITS~~the ~~ACTIVITY~~Company entered into an Amendment and Agreement with the Series A Investors (the “November 2024 Amendment Agreement”), pursuant to which, (i) the Series A Investors agreed to amend the Certificate of Designations, as described below, by filing a Certificate of Amendment to the Certificate of Designations with the Secretary of State (the “November 2024 Certificate of Amendment”), and (ii) the Series A Investors and the Company agreed that all payment amounts that have accrued and are unpaid as of November 25, 2024, pursuant to the Certificate of Designations and the August 2024 Amendment will be satisfied by delivery of shares of Common Stock on or prior to November 25, 2024, with each Series A Investor entitled to receive the number of shares of Common Stock specified below such Series A Investor’s name on its respective signature page thereto. The November 2024 Certificate of Amendment amends the Certificate of Designations to provide that upon the occurrence of a Triggering Event (as defined in the Certificate of Designations), the Series A Preferred Stock will accrue dividends compounded monthly at the rate of 20% per annum. The Certificate of Amendment became effective with the Secretary of State on December 6, 2024.

	Service-Based RSU’s			Weighted Average Grant Date Fair Value		Weighted Average Vesting Period (Years)
Unvested at January 1, 2025		988,102		$	2.25		3.67
Granted - service based		663,931			1.97		-
Vested		(657,602	)		1.97		-
Forfeited and cancelled		-			-		-
Unvested at June 30, 2025		994,431		$	2.25		2.56

At the time of issuance, $2,036 of the net proceeds less transaction cost of the Series A Purchase Agreement was allocated to the 10,000 shares of Series A Preferred Stock initially issued. As of December 31, 2024, a total of 1,793 shares of Series A Preferred Stock were converted into approximately 1,468,000 shares of Common Stock. There were no additional conversions in the nine months ended September 30, 2025. As of September 30, 2025, the Company has authorized, declared and paid $492 in dividends in the form of shares of the Company’s Common Stock during the nine months ended September 30, 2025. For the nine months ended September 30, 2024, authorized and declared dividends totaling $1,017, of which $60 was paid in cash, $129 was paid in shares of the Company’s Common Stock.

The Company used the Monte Carlo Simulation Model to value at the grant date the aggregate of 632,911 market condition performance RSUs granted in January 2024 to the Company’s Chief Executive Officer. The assumptions used in the Monte Carlo Simulation were stock price on the date of grant equal to $3.40, a contract term of 10 years, expected volatility of 78% and risk-free interest rate of 4.10%. Vesting is based on sustained market capitalization of $1 billion, and the derived service period is 4.3 years.17

~~RSU expense~~Series ~~was~~B ~~$293~~Preferred ~~and $275 for the three months ended June 30, 2025 and 2024, respectively. RSU expense was $1,571 and $484 for the six months ended June 30, 2025 and 2024, respectively~~Stock

~~Share~~On August 18, 2025, the Company entered into the Series B Purchase Agreement with the Series B Purchasers for the issuance and sale in a private placement of an aggregate of (i) 4,500 shares of the Company’s Series B Preferred Stock initially convertible into up to 3,000,000 shares of Common Stock, at an initial conversion price of $1.50 per share, and (ii) accompanying Series B Warrants to purchase up to 3,000,000 shares of Common Stock, with an initial exercise price of $1.50 per share. The Series B Warrants and the shares of Series B Preferred Stock will be exercisable or convertible, respectively, into shares of Common Stock beginning on the effective date of stockholder approval of (i) under Nasdaq Stock Market Rule 5635(d), the issuance of shares of Common Stock in excess of 19.99% of the Company’s issued and outstanding shares of Common Stock at prices below the “Minimum Price” (as defined in Rule 5635 of the Rules of the Nasdaq Stock Market) on the date of the Series B Purchase Agreement pursuant to the terms of the Series B Preferred Stock and the Series B Warrants, and (ii) an increase in the authorized shares of the Company. As of the date of this Quarterly Report on Form 10-~~Based Compensation~~Q, ~~Expense~~the Company has not obtained the Series B Stockholder Approval. However, the Company plans to hold a special meeting of its stockholders on December 12, 2025, to, among other things, obtain the Series B Stockholder Approval. The Series B Warrants will expire five years from the effective date of the Series B Stockholder Approval.

~~The~~ On August 20, 2025, the Company ~~recorded~~filed ~~share-based~~the ~~compensation~~Series ~~for~~B ~~options~~Certificate ~~and~~of ~~RSUs~~Designations, thereby creating the Series B Preferred Stock. The Series B Certificate of Designations became effective with the Secretary of State of the State of Delaware upon filing. The terms of the Series B Convertible Preferred Stock are as set forth in ~~its~~the ~~statements~~Series B Certificate of ~~operations~~Designations. The Series B Preferred Stock are convertible into the Series B Conversion Shares at the election of the holders of the Series B Preferred Stock at any time at an initial conversion price of $1.50 per share. The conversion price is subject to customary adjustments for stock dividends, stock splits, reclassifications, stock combinations and the ~~relevant~~like ~~periods~~(subject asto ~~follows:~~certain exceptions).

~~SCHEDULE~~ Holders OFof ~~SHARE-BASED~~the ~~COMPENSATION~~Series ~~FOR~~B ~~OPTIONS~~Preferred ~~AND~~Stock ~~RESTRICTED~~shall ~~STOCK~~be ~~UNITS~~entitled to receive dividends when and as declared by the Board, from time to time, in its sole discretion, which dividends will be paid by the Company out of funds legally available therefor, payable, subject to the conditions and other terms of the Series B Certificate of Designations, in cash, in securities of the Company or using assets as determined by the Board on the stated value of such Series B Preferred Stock.

	2025		2024		2025		2024
	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Selling, general and administrative	$	755	$	208	$	2,358	$	856
Research and development		15		34		77		62
Total share-based expense	$	770	$	242	$	2,435	$	918

Except as otherwise provided in the Series B Certificate of Designations or as otherwise required by law, the Series B Preferred Stock has no voting rights. However, as long as any shares of Series B Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of Series B Preferred Stock of a majority of the then outstanding shares of the Series B Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the of the Series B Preferred Stock or alter or amend the Series B Certificate of Designations, (b) amend its certificate of incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series B Preferred Stock, (c) increase the number of authorized shares of the Series B Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.

As ofThere ~~June~~is ~~30,~~no ~~2025,~~established ~~total~~public ~~estimated~~trading ~~compensation~~market ~~cost~~for ofthe ~~stock~~Series ~~options~~B ~~granted~~Preferred Stock and ~~outstanding~~the ~~but~~Company does not ~~yet~~intend ~~vested~~to ~~was~~list ~~$5,591~~the ~~which~~Series isB ~~expected to~~Preferred beStock ~~recognized~~on ~~over~~any ~~the~~national ~~weighted~~securities ~~average~~exchange ~~period~~or ofnationally ~~3.03~~recognized ~~years~~trading system.

~~As of June 30, 2025, total estimated compensation cost of RSUs granted and outstanding but not yet vested was $1,368, which is expected to be recognized over the weighted average period of 2~~11.56 ~~years.~~SHARE-BASED COMPENSATION

On March 28, 2017, the Company adopted, and the Company’s stockholders approved, the Wrap Technologies, Inc. 2017 Equity Incentive Plan (the “2017 Plan”), which was adopted by the Board on November 12, 2024, subject to stockholder approval. ~~DEFINED~~ ~~CONTRIBUTION~~Under ~~PLAN~~the 2017 Plan as originally adopted, the Company initially reserved 2,000,000 shares of Common Stock for issuance as awards under the 2017 Plan. The 2017 Plan was amended by the First Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 4,100,000 shares, which was adopted by the Board on March 16, 2019, and by stockholders on May 23, 2019. The 2017 Plan was also amended by the Second Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 6,000,000 shares which was adopted by the Board on April 8, 2020, and by stockholders on June 5, 2020. The 2017 Plan was also amended by the Third Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 7,500,000 shares which was adopted by the Board on April 23, 2021, and by stockholders on June 22, 2021. The 2017 Plan was also amended by the Fourth Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 9,000,000 shares which was adopted by the Board on April 22, 2022, and by our stockholders on June 23, 2022.The 2017 Plan was amended by the Fifth Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 16,500,000 shares which was adopted by the Board on November 12, 2024, and by our stockholders on December 23, 2024.

The Company has a defined contribution savings plan for all eligible U.S. employees established under the provisions of Section 401(k) of the Internal Revenue Code. This plan was formed on January 1, 2022. Eligible employees may contribute a percentage of their salary subject to certain limitations. The Company’s contributions for each of the six months ended June 30, 2025 and 2024 was $23 and $0, respectively.18

15As of September 30, 2025, there were 4,654,885 shares of Common Stock remaining available for grant under the 2017 Plan.

~~13. COMMITMENTS~~Stock ~~AND CONTINGENCIES~~Options

~~Purchase Commitments~~The following table summarizes stock option activity for the nine months ended September 30, 2025:

~~As of~~ SCHEDULE ~~June~~OF ~~30,~~STOCK ~~2025,~~OPTION ~~the Company was committed for approximately $508 for future component deliveries that are generally subject to modification or rescheduling in the normal course of business.~~ACTIVITY

Indemnifications and Guarantees

			Weighted Average
	Options on				Remaining		Aggregate
	Common			Exercise	Contractual		Intrinsic
	Shares			Price	Term		Value
Outstanding January 1, 2025	3,944,284		$	2.12	8.30	$	1,486
Granted	4,113,927			1.82	-		-
Exercised	-			-	-		-
Forfeited, cancelled, expired	(2,024,762	)		5.21	-		-
Outstanding September 30, 2025	6,033,449		$	1.91	8.38	$	3,541
Exercisable September 30, 2025	1,625,078		$	2.43	6.56	$	856

~~Our officers~~As ~~and~~of ~~directors~~September ~~are~~30, ~~indemnified~~2025, asthere towere ~~personal~~4,743,283 service-based ~~liability~~stock asoptions ~~provided~~outstanding, ~~by Delaware law~~ and ~~the~~1,290,166 ~~Company’s~~performance-based ~~articles~~stock ofoptions ~~incorporation and~~outstanding ~~bylaws.~~which ~~The~~were ~~Company~~granted ~~may also undertake indemnification obligations~~ in ~~the~~October ~~ordinary~~2023 ~~course of business related~~ to ~~its operations. The Company is unable to estimate with any reasonable accuracy~~ the ~~liability that may be incurred pursuant to any such indemnification obligations now or in the future. Because of the uncertainty surrounding these circumstances, the~~ Company’s current orChief ~~future~~Executive ~~indemnification obligations~~Officer, ~~could~~subject ~~range from immaterial~~ to ~~having~~vesting abased ~~material adverse impact~~ on ~~its~~future ~~financial~~market ~~position~~capitalization ~~and its ability to continue in the ordinary course of business~~targets. ~~The Company has no liabilities recorded for such indemnities.~~

~~Regulatory Agencies~~The Company uses the Black-Scholes option pricing model to determine the fair value of the service-based options that have been granted. The following table summarizes the assumptions used to compute the fair value of options granted to employees and non-employees:

~~The Company~~ SCHEDULE isOF ~~subject~~STOCK toOPTION ~~oversight~~ACTIVITY, ~~from~~FAIR ~~regulatory~~VALUE ~~agencies~~OF ~~regarding firearms that arise in the ordinary course of its business.~~ASSUMPTIONS

Litigation


	For the Nine Months Ended September 30,
		2025			2024
Expected stock price volatility		76	%		76	%
Risk-free interest rate		3.87	%		3.79	%
Expected dividend yield		0	%		0	%
Expected life of options		6			6
Weighted-average fair value of options granted	$	1.28		$	1.48

~~The~~ Estimated volatility is a measure of the amount by which the Company’s stock price is ~~subject~~expected to ~~litigation~~fluctuate ~~and~~each ~~other~~year ~~claims~~during in the ~~ordinary~~expected ~~course~~life of ~~business~~awards. The Company’s ~~records~~estimated avolatility ~~provision~~was ~~for~~based aon ~~liability relating~~an toaverage ~~legal~~of ~~matters~~the ~~when~~historical itvolatility isof ~~both~~peer ~~probable~~entities ~~that~~whose astock ~~liability~~prices ~~has~~were ~~been~~publicly ~~incurred~~available. ~~and~~The ~~the~~Company’s ~~amount~~calculation of estimated volatility is based on the ~~loss~~historical ~~can~~stock beprices ~~reasonably~~of ~~estimated.~~these ~~These~~ peer ~~provisions~~entities ~~are~~over ~~reviewed~~a ~~and~~period ~~adjusted~~equal to ~~include~~ the ~~impacts~~expected life of ~~negotiations,~~the ~~estimated~~awards. ~~settlements,~~The ~~legal~~Company ~~rulings,~~uses ~~advice~~the ofhistorical ~~legal counsel,~~volatility ~~and~~of ~~other~~peer ~~information~~entities ~~and~~due ~~events~~to ~~pertaining~~the tolack aof ~~particular~~sufficient ~~matter.~~historical Asdata of ~~June~~its ~~30,~~stock ~~2025,~~price. ~~the~~The Company ~~had~~records noforfeitures ~~provision~~as ~~for~~they ~~liability under~~are ~~existing litigation~~incurred.

~~Facility lease~~The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the options. The dividend yield of zero 0 is based on the fact that the Company has never paid cash dividends and has no present intention of paying cash dividends. The Company calculates the expected life of the options using the Simplified Method for the employee stock options as the Company does not have sufficient historical exercise data.

~~The Company~~Stock ~~entered~~option ~~into~~expense awas ~~facility~~$295 ~~lease~~and ~~agreement~~ $341 for ~~its~~the ~~new~~three ~~production~~months ~~facility~~ended ~~based~~September ~~in Norton~~30, ~~Virginia.~~2025 ~~The initial~~and ~~term~~2024, ofrespectively. ~~the~~Stock ~~agreement~~option isexpense ~~for~~was ~~five years and commences on October~~ $1,158 ~~2025.~~and ~~The total~~$776 ~~cash~~for ~~payments~~the tonine ~~the~~months ~~lessor~~ended ~~during~~September ~~the~~30, ~~term~~2025 ~~are~~and ~~$600~~2024, respectively.

~~14. RELATED PARTY TRANSACTIONS~~19

~~Series A~~Restricted ~~Preferred~~ Stock Units

~~On June~~The ~~29,~~Plan ~~2023,~~provides ~~the~~for ~~Company entered into~~ the ~~Series~~grant Aof ~~Purchase~~restricted ~~Agreement~~stock ~~with~~units ~~certain investors, including Scot Cohen, the Company’s Chief Executive Officer, and V4 Global LLC~~ (“V4RSUs”). ~~Mr.~~RSUs ~~Cohen~~are ~~has~~settled ~~voting~~in ~~and~~shares ~~dispositive control with respect to the securities and is deemed to be the beneficial owner~~ of the ~~securities~~Company’s ~~held~~Common byStock ~~V4.~~as ~~Pursuant to~~ the ~~Series~~RSUs ~~A Purchase Agreement, the Company issued Mr~~vest. ~~Cohen~~The ~~and~~following V4table ansummarizes ~~aggregate~~RSU ofactivity ~~3,000 shares of Series A Preferred Stock and Series A Warrants to purchase up to an aggregate of 2,068,966 shares of Common Stock~~ for ~~aggregate gross proceeds of $3,000. For~~ the ~~six~~nine months ended ~~June~~September 30, 2025~~, Mr. Cohen earned dividends totaling $60 on his Series A Preferred Stock.~~:

~~PIPE Financing~~ SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

On February 24, 2025, the Company entered into the PIPE Purchase Agreement with certain accredited including: V4 Global, LLC (“V4”), an entity controlled by Mr. Cohen, the Company’s Chief Executive Officer; Continuum Ventures, LLC (“Continuum”), an entity controlled by Jared Novick, the Company’s President and Chief Operating Officer; and Savbo Investments LLC (“Savbo”), an entity controlled by Marc Savas, a member of the Company’s Board, pursuant to which, the Company issued and sold in a private placement an aggregate of 3,216,666 shares of Common Stock and PIPE Warrants with an exercise price of $1.80 per share, to purchase up to 3,216,666 shares of Common Stock (the “Private Placement”). Pursuant to the Private Placement, the Company sold to (i) V4 1,100,000 shares of Common Stock and PIPE Warrants to purchase up to an aggregate of 1,100,000 shares of Common Stock, for aggregate gross proceeds of $1,980, (ii) Continuum an aggregate of 275,000 shares of Common stock and PIPE Warrants to purchase up to an aggregate of 275,000 shares of Common Stock for aggregate gross proceeds of $495 and (iii) Savbo an aggregate of 50,000 shares of Common stock and PIPE Warrants to purchase up to an aggregate of 50,000 shares of Common Stock for aggregate gross proceeds of $90.


				Weighted	Weighted
	Service-Based			Average Grant	Average Vesting
	RSU's			Date Fair Value	Period (Years)
Unvested at January 1, 2025	988,102		$	2.25	3.67
Granted-service based	841,495			1.86	-
Vested	(773,368	)		1.91	-
Forfeited and cancelled	-			-	-
Unvested at September 30, 2025	1,056,229		$	2.19	2.31

16The Company used the Monte Carlo Simulation Model to value at the grant date the aggregate of 632,911 market condition performance RSUs granted in January 2024 to the Company’s Chief Executive Officer. The assumptions used in the Monte Carlo Simulation were stock price on the date of grant equal to $3.40, a contract term of 10 years, expected volatility of 78% and risk-free interest rate of 4.10%. Vesting is based on sustained market capitalization of $1 billion, and the derived service period is 4.3 years.

15RSU expense was $343 and $555 for the three months ended September 30, 2025 and 2024, respectively. ~~MAJOR~~ ~~CUSTOMERS~~RSU ~~AND~~expense ~~RELATED~~was ~~INFORMATION~~$1,915 and $1,038 for the nine months ended September 30, 2025 and 2024, respectively.

~~For the~~Share-Based ~~three~~Compensation months ended June 30, 2025, revenue from three customers accounted for approximately 32%, 23% and 10% of revenue, respectively, with no other single customer accounting for more than 10% of total revenue. For the three months ended June 30, 2024, revenue from one distributor accounted for approximately 39% of revenue, with no other single customer accounting for more than 10% of total revenue.Expense

~~For~~The ~~the~~Company ~~three~~recorded ~~months ended~~share-based ~~June~~compensation ~~30,~~for ~~2025,~~options ~~revenue~~and ~~from~~RSUs ~~one customer~~in ~~accounted~~its ~~for~~statements ~~approximately 16%~~ of ~~revenue,~~operations ~~with no other single customer accounting~~ for ~~more than 10% of total revenue. For~~ the ~~six~~relevant ~~months~~periods ~~ended~~as ~~June 30, 2024, revenue from two distributors accounted for approximately 33% and 20% of revenue, respectively, with no other single customer accounting for more than 10% of total revenue.~~follows:

~~At June~~ SCHEDULE ~~30,~~OF ~~2025,~~SHARE-BASED ~~accounts~~COMPENSATION ~~receivable~~FOR ~~from~~OPTIONS ~~four~~AND ~~customers accounted~~RESTRICTED ~~for~~STOCK 15%, 13%, 11%, 10%, respectively, of net accounts receivable with no other single customer accounting for more than 10% of the accounts receivable balance. At December 31, 2024, accounts receivable from two distributors accounted for 11% and 10%, respectively, of net accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.UNITS

The following table summarizes revenue by geographic region. Revenue is attributed to countries based on customer’s delivery location:


	Three months ended September 30,				Nine months ended September 30,
		2025		2024		2025		2024
Selling, general, and administrative	$	632	$	878	$	3,004	$	1,735
Research and development		6		18		69		79
Total share-based expense	$	638	$	896	$	3,073	$	1,814

As of September 30, 2025, total estimated compensation cost of stock options granted and outstanding but not yet vested was $3,974 ~~SCHEDULE~~which OFis ~~DISAGGREGATION~~expected OFto ~~REVENUE~~be recognized over the weighted average period of 3.01 years.

	2025		2024		2025		2024
	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2025		2024		2025		2024
Americas	$	846	$	1,536	$	1,592	$	2,999
Europe, Middle East and Africa		166		37		186		43
Asia Pacific		-		-		-		7
Total revenues	$	1,012	$	1,573	$	1,778	$	3,049

As of September 30, 2025, total estimated compensation cost of RSUs granted and outstanding but not yet vested was $1,282, which is expected to be recognized over the weighted average period of 2.31 years.

1612. W1 ~~ACQUISITION~~DEFINED CONTRIBUTION PLAN

~~On February~~The ~~18, 2025, the~~ Company ~~and~~has ~~W1,~~a ~~entered~~defined ~~into~~contribution ansavings ~~Asset~~plan ~~Purchase~~for ~~Agreement,~~all ~~dated~~eligible asU.S. ofemployees ~~February~~established ~~18,~~under ~~2025 pursuant which, subject to~~ the ~~terms~~provisions ~~and~~of ~~conditions~~Section ~~set~~401(k) ~~forth~~of ~~therein,~~ the ~~Company~~Internal ~~agreed~~Revenue toCode. ~~acquire~~This ~~substantially all~~plan ~~the~~was ~~assets~~formed ofon W1January ~~used in~~1, ~~held~~2022. ~~for~~Eligible ~~use~~employees inmay orcontribute ~~relating~~a topercentage ~~the business~~ of ~~advisory~~their ~~and~~salary ~~investigative~~subject ~~professional services which related~~ to ~~specific~~certain ~~identified customer contracts~~limitations. The Company’s ~~recorded~~contributions ~~the~~for ~~transaction~~each asof anthe ~~Asset~~nine ~~Acquisition~~months inended ~~accordance~~September ~~with~~30, ~~ASC~~2025 ~~805~~ and ~~recorded~~ ~~$54~~2024 aswas ~~intangible~~$23 ~~assets~~and ~~included~~$0, ~~in Customer Relationships (See Note 6 “Intangible Assets” above)~~respectively. ~~The Company has preliminarily assigned a three-year life to such Customer Relationships.~~

~~17. SUBSEQUENT EVENTS~~20

~~The Company~~13. ~~has~~COMMITMENTS ~~reviewed~~AND ~~activities through August 14, 2025, and determined that there are no subsequent events that require disclosure in accordance with ASC 855-10-25-1.~~CONTINGENCIES

17Purchase Commitments

~~Item 2.~~As ~~Management’s~~of ~~Discussion~~September ~~and~~30, ~~Analysis~~2025, ofthe ~~Financial~~Company ~~Condition~~was ~~and~~committed ~~Results~~for approximately $391 for future component deliveries that are generally subject to modification or rescheduling in the normal course of ~~Operations~~business.

~~You should~~Indemnifications ~~read the following discussion in conjunction with the financial statements~~ and other financial information included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) and with our audited financial statements and other information presented in our Annual Report on Form 10-K for the year ended December 31, 2024 (as amended, the “Annual Report”). This Report may contain or incorporate by reference forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements are based upon management’s assumptions, expectations, projections, intentions and beliefs about future events. Except for historical information, the use of predictive, future-tense or forward-looking words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “continue,” “may,” “will,” “could,” “would,” or the negative or plural of such words and similar expressions or variations of such words are intended to identify forward-looking statements but are not the only means of identifying forward-looking statements. Such forward-looking statements are subject to several risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Report and in our other filings with the Securities and Exchange Commission (“SEC”), including particularly matters set forth under Part I, Item 1A (Risk Factors) of the Annual Report. Furthermore, such forward-looking statements speak only as of the date of this Report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.Guarantees

~~Overview~~Our officers and directors are indemnified as to personal liability as provided by Delaware law and the Company’s certificate of incorporation and bylaws. The Company may also undertake indemnification obligations in the ordinary course of business related to its operations. The Company is unable to estimate with any reasonable accuracy the liability that may be incurred pursuant to any such indemnification obligations now or in the future. Because of the uncertainty surrounding these circumstances, the Company’s current or future indemnification obligations could range from immaterial to having a material adverse impact on its financial position and its ability to continue in the ordinary course of business. The Company has no liabilities recorded for such indemnities.

~~We are~~Regulatory a global public safety technology and services company that delivers safe and effective policing solutions to law enforcement and security personnel worldwide. We are leading the movement for safer outcomes by equipping law enforcement with safer, non-painful compliance tools, and immersive training fit for modern society. We began sales of our first public safety product, the BolaWrap 100 remote restraint device, in late 2018. In the first quarter of 2022, we delivered 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 has since been phased out. In late 2020 we added a new solution to our public safety technologies, our virtual reality (“VR”) training platform, Wrap Reality, and in August 2023 we acquired Intrensic, LLC, a Delaware limited liability company (“Intrensic”), which added a Body-Worn Camera (“BWC”) and Digital Evidence Management (“DEM”) solution to our portfolio of policing solutions. Wrap Reality is now sold to law enforcement agencies for simulation training as well as corrections departments for the societal reentry scenarios.Agencies

~~Our target~~The ~~market~~Company ~~for~~is ~~our~~subject ~~product~~to ~~and~~oversight ~~technology~~from ~~enabled~~regulatory ~~services includes approximately 900,000 full-time sworn law enforcement officers in over 18,000 federal, state, and local law enforcement~~ agencies inregarding ~~the~~firearms ~~U.S.~~that ~~and~~arise ~~over 12 million police officers~~ in more than 100 countries. Additionally, we are exploring opportunities to increase our presence in other adjacent markets, such as military and private security. Our international focus is on countries with the ~~largest~~ordinary ~~police~~course ~~forces. According to 360iResearch, a market research consulting firm, our non-lethal products are part~~ of aits ~~global market segment expected to grow to $16~~business.~~1 billion by 2027.~~

~~We focus our efforts on the following products and services:~~Litigation

~~BolaWrap Remote~~The ~~Restraint~~Company ~~Device~~is -subject ato ~~hand-held~~litigation ~~remote~~and ~~restraint~~other ~~device~~claims ~~that~~in ~~discharges~~the ordinary course of business. The Company records a ~~seven~~provision ~~and~~for ~~half-foot~~a ~~Kevlar~~liability ~~tether~~relating to legal ~~entangle~~matters ~~an individual~~when atit is both probable that a ~~range~~liability has been incurred and the amount of ~~10-25~~the ~~feet~~loss can be reasonably estimated. ~~BolaWrap~~These ~~assists~~provisions ~~law~~are ~~enforcement~~reviewed and adjusted to ~~safely~~include ~~and~~the ~~effectively~~impacts ~~control~~of ~~encounters~~negotiations, ~~early~~estimated ~~without~~settlements, ~~resorting~~legal rulings, advice of legal counsel, and other information and events pertaining to ~~painful~~a ~~use~~particular matter. As of ~~force~~September ~~options~~30, 2025, the Company had no provision for liability under existing litigation.

~~Wrap Reality~~Facility - a law enforcement 3D training system employing immersive computer graphics VR 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. Wrap Reality has 45 scenarios for law enforcement and corrections and 15 scenarios for societal reentry. Wrap Reality is one of the most robust 3D Virtual Reality solutions on the market for law enforcement and societal reentry today.lease

~~Wrap Intrensic~~The -Company aentered ~~Body-Worn~~into ~~Camera~~a ~~and~~facility ~~Digital~~lease ~~Evidence~~agreement ~~Management~~for ~~solutions~~its ~~provider.~~new ~~BWC~~production ~~and~~facility ~~DEM~~based ~~play crucial roles~~ in ~~capturing~~Norton, ~~storing, and~~Virginia. ~~managing~~The ~~digital~~initial ~~evidence,~~term ~~such~~of asthe ~~video~~agreement ~~and~~is ~~audio recordings~~ for ~~various~~five ~~purposes,~~years ~~including~~and ~~criminal~~commenced ~~investigations~~on ~~and~~October ~~maintaining transparency~~1, in2025 ~~public~~(the ~~interactions~~"Term"). The ~~Wrap~~Company was ~~Intrensic~~granted X2early ~~camera~~occupancy ~~hardware and storage and data management capability, along with awareness~~ of ~~front-line~~the ~~operations,~~facility ~~provides~~for ~~customers~~use ~~with~~beginning ~~a solution to meet their challenges. Wrap Intrensic Evidence~~ on ~~our~~August ~~cloud-based video storage platform provides an unlimited video storage platform that includes video and other evidence uploading~~18, ~~search,~~2025. ~~retrieval,~~The ~~redaction, and~~total ~~evidence~~cash ~~sharing~~payments ~~while~~to ~~reducing~~ the ~~need~~lessor ~~for~~during ~~resources~~the ~~required~~Term toare ~~manage this evidence~~$600.

1814. RELATED PARTY TRANSACTIONS

~~In addition~~Series toA ~~the~~Preferred U.S. law enforcement market, we have shipped our restraint products to 62 countries. We have distribution agreements with 22 international distributors covering 43 countries. We focus significant sales, training and business development efforts to support our distribution network in addition to our internal sales team.Stock

~~We focus~~On ~~significant~~June ~~resources~~29, on2023, ~~research~~the Company entered into the Series A Purchase Agreement with certain investors, including Scot Cohen, the Company’s Chief Executive Officer, and ~~development~~V4 ~~innovations~~Global LLC (“V4”). Mr. Cohen has voting and ~~continue~~dispositive tocontrol ~~enhance~~with ~~our~~respect ~~products~~to the securities and ~~plan~~is deemed to ~~introduce~~be ~~new~~the ~~products~~beneficial owner of the securities held by V4. We ~~believe~~Pursuant weto ~~have~~the ~~established~~Series aA ~~strong~~Purchase ~~brand~~Agreement, the Company issued Mr. Cohen and ~~market~~V4 ~~presence~~an ~~globally~~aggregate of 3,000 shares of Series A Preferred Stock and ~~have~~Series ~~established~~A ~~significant~~Warrants ~~competitive~~to ~~advantages~~purchase ~~in our~~up ~~markets~~to an aggregate of 2,068,966 shares of Common Stock for aggregate gross proceeds of $3,000. For the nine months ended September 30, 2025, Mr. Cohen earned dividends totaling $120 on his Series A Preferred Stock.

~~Acquisition of W1~~21

~~On February~~PIPE 18, 2025, we entered into an Asset Purchase Agreement, dated as of February 18, 2025, pursuant to which, subject to the terms and conditions set forth therein, we acquired substantially all the assets of W1 Global, LLC, (“W1”) used in, held for use in or relating to the business of advisory and investigative professional services, which were primarily the customer contracts assigned at the closing, for a nominal purchase price.Financing

~~Business Outlook~~On February 24, 2025, the Company entered into the PIPE Purchase Agreement with certain accredited including: V4 Global, LLC (“V4”), an entity controlled by Mr. Cohen, the Company’s Chief Executive Officer; Continuum Ventures, LLC (“Continuum”), an entity controlled by Jared Novick, the Company’s President and ~~Challenges~~Chief Operating Officer; and Savbo Investments LLC (“Savbo”), an entity controlled by Marc Savas, a member of the Company’s Board, pursuant to which, the Company issued and sold in a private placement an aggregate of 3,216,666 shares of Common Stock and PIPE Warrants with an exercise price of $1.80 per share, to purchase up to 3,216,666 shares of Common Stock (the “Private Placement”). Pursuant to the PIPE Private Placement, the Company sold to (i) V4 1,100,000 shares of Common Stock and PIPE Warrants to purchase up to an aggregate of 1,100,000 shares of Common Stock, for aggregate gross proceeds of $1,980, (ii) Continuum an aggregate of 275,000 shares of Common stock and PIPE Warrants to purchase up to an aggregate of 275,000 shares of Common Stock for aggregate gross proceeds of $495 and (iii) Savbo an aggregate of 50,000 shares of Common stock and PIPE Warrants to purchase up to an aggregate of 50,000 shares of Common Stock for aggregate gross proceeds of $90.

~~We believe~~On ~~our~~August 18, 2025, the Company’s ~~products~~entered ~~and~~into ~~solutions~~the ~~are~~Series ~~gaining~~B ~~global~~Purchase ~~recognition~~Agreement with the Series B Purchasers, including V4, pursuant to which, the Company issued and ~~awareness~~sold ~~through~~in ~~various~~a ~~channels~~private ~~such~~placement asan ~~social media~~aggregate of (i) 4,500 ~~trade~~shares ~~shows~~of the Company’s Series B Preferred Stock initially convertible into up to 3,000,000 ~~and~~shares ~~media~~of ~~exposure~~Common Stock, ~~among~~at ~~others~~an initial conversion price of $1.50 Inper ~~part~~share, ~~this~~and ~~recognition~~(ii) ~~and~~accompanying ~~awareness~~Series ~~can~~B beWarrants ~~attributed~~to purchase up to ~~positive~~3,000,000 ~~feedback from~~shares ~~law~~of ~~enforcement~~Common ~~agencies~~Stock, ~~and~~with ~~the~~an ~~successful~~initial ~~deployment~~exercise price of ~~our~~$1.50 ~~products~~per share. AsPursuant ato ~~result,~~the weSeries ~~believe~~B ~~our~~Private ~~brand~~Placement, isthe ~~becoming~~Company ~~increasingly recognized~~sold onto aV4 ~~global~~1,000 ~~scale~~shares asof aSeries ~~leader~~B inPreferred ~~Pre-Escalation~~Stock and ~~non-lethal~~666,667 ~~solutions~~Series B Warrants for aggregate gross proceeds of $100.

~~In addition, we are focused on sales, marketing, public and investor relations efforts~~15. WeMAJOR ~~believe~~CUSTOMERS ~~there~~AND ~~are~~RELATED ~~increasing market opportunities for our products and solutions in the law enforcement and security sectors worldwide. These opportunities are driven by the increasing demand for less-lethal policing.~~INFORMATION

In For the ~~law~~three ~~enforcement~~months ~~sector,~~ended ~~our~~September ~~BolaWrap~~30, ~~product has been successfully deployed in the field~~2025, asrevenue ~~reported~~from byone ~~many~~customer ~~agencies.~~accounted ~~BolaWrap is~~for ~~now~~approximately in93% ~~use~~of ~~by over 900 U.S. law enforcement agencies and in 62 countries. Due to its non-lethal~~revenue, ~~non-pain-based-compliance~~with ~~capabilities, some~~no ~~agencies~~other dosingle ~~not~~customer ~~deem~~accounting ~~its~~for ~~usage~~more athan ~~categorical~~10% ~~reportable use~~ of ~~force~~total ~~and~~revenue. ~~rather~~For ~~place~~the itthree ~~underneath~~months ~~early~~ended ~~use~~September of30, ~~force such as handcuffs. In our strategic roadmap~~2024, werevenue ~~clarified~~from ~~that~~one ~~law~~distributor ~~enforcement~~accounted ~~agencies~~for ~~deploy~~approximately ~~BolaWrap~~20% ~~when~~with ~~verbal~~no ~~commands~~other ~~breakdown~~single ~~but~~customer ~~long~~accounting ~~before~~for ~~there is~~more ~~justifiable~~than ~~escalation~~10% toof ~~pepper~~total ~~spray, pepper ball, batons, bean bags, tasers or Conducted Electrical Weapons (CEW’s) or firearms~~revenue.

~~Some agencies~~For ~~voluntarily~~the ~~report~~nine ~~usage~~months toended ~~Wrap~~September ~~but~~30, ~~many~~2025, dorevenue ~~not.~~from Inthree ~~the~~distributors accounted ~~usage~~for ~~reports~~approximately we42%, ~~have been provided~~11%, ~~officers~~and ~~have reported successful outcomes in 85~~10% of ~~the~~revenue, ~~use~~respectively, ~~cases.~~with ~~This~~no ~~percentage~~other issingle ~~higher~~customer ~~than~~accounting ~~what~~for ismore ~~often~~than ~~seen~~10% ~~with~~of ~~less~~total ~~lethal tools~~revenue. ~~From~~For the ~~information~~nine wemonths ~~have been~~ended ~~provided~~September 30, ~~the~~2024, ~~most~~revenue ~~common~~from ~~BolaWrap~~two ~~use~~distributors ~~case~~accounted is for ~~individuals~~approximately ~~with~~28% orand ~~experiencing~~17% ~~behavioral~~of ~~health~~revenue, ~~issues~~respectively, ~~and~~with ~~the~~no ~~second~~other ~~most common~~single ~~BolaWrap~~customer ~~use~~accounting ~~case~~for ismore ~~during~~than ~~domestic~~10% ~~violence~~of ~~calls~~total revenue.

~~There are~~At ~~many~~September ~~reasons~~30, ~~why~~2025, weaccounts ~~may~~receivable ~~not~~from ~~receive~~one ~~reports~~customer onaccounted ~~all~~for ~~the~~76%, of ~~use~~net ofaccounts ~~the~~receivable ~~BolaWrap,~~with ~~including,~~no ~~when~~other ~~uses~~single ofcustomer ~~BolaWrap~~accounting ~~are~~for ~~considered~~more ~~evidence in~~than ~~ongoing~~10% ~~criminal~~of ~~cases,~~the ~~are~~accounts ~~controlled~~receivable bybalance. ~~local~~At ~~policy~~December or31, ~~regulation~~2024, oraccounts ~~require~~receivable ~~officer~~from ~~and~~two ~~union~~distributors ~~permission~~accounted tofor be11% ~~shared~~and ~~with~~10%, ~~us. However~~respectively, ~~some agencies have shared bodycam footage~~ of ~~successful~~net ~~field~~accounts ~~deployments~~receivable with ~~us,~~no ~~which~~other wesingle ~~may~~customer ~~use~~accounting infor ~~our~~more ~~training~~than ~~and~~10% ~~education efforts.~~of ~~We believe that as~~ the ~~reports~~accounts ofreceivable ~~BolaWrap’s effectiveness in Pre-Escalation continue to increase, it will contribute to our future revenue growth~~balance.

~~We anticipate~~The ~~and~~following ~~believe~~table ~~that~~summarizes ~~our~~revenue ~~portfolio~~by ofgeographic non-lethal, non-pain-based compliance products and training services has a strong and expanding pipeline of market opportunities in the law enforcement, military, corrections, and homeland security sectors both domestically and internationallyregion. ~~With~~ ~~the~~Revenue increasing demand for more humane and safer policing practices, we expect a continued surge in our global business. Currently, we are exploring major international business prospects while simultaneously seeking to establish relationships with large police agencies in the U.S. However, we acknowledge that it is ~~challenging~~attributed to ~~predict~~countries ~~the~~based ~~exact~~on ~~timeline~~customer’s ~~for~~delivery ~~closing these deals, or whether they will ultimately materialize.~~location:

19SCHEDULE OF DISAGGREGATION OF REVENUE

As part of our efforts to expand our sales and distribution operations, we provide a comprehensive training program for law enforcement officers and trainers in using the BolaWrap. This training equips them with knowledge about the appropriate use and limitations of BolaWrap in tandem with modern policing techniques for de-escalation of encounters. We now focus on also teaching when and why BolaWrap should be used, including the specific area of success, such as after verbal commands break down and before the law enforcement officer is ready to escalate to less lethal pain compliance tools. We believe that law enforcement trainers and officers who have been trained to use our products, or have witnessed demonstrations, are more inclined to support the acquisition and deployment of our products by their respective departments to drive successful outcomes. As of June 30, 2025, over 1,580 agencies have received BolaWrap training with over 5,520 training officers at those agencies certified as BolaWrap instructors and qualified to train the rest of their departments, representing a 4% increase in agencies and a 3% increase in trained officers as compared to June 30, 2024.


	For the Three Months					For the Nine Months
	Ended September 30,					Ended September 30,
		2025			2024		2025		2024
Americas	$	(70	)	$	585	$	1,522	$	3,583
Europe, Middle East and Africa		1,540			7		1,725		51
Asia Pacific		21			1		21		8
Total revenues	$	1,491		$	593	$	3,268	$	3,642

Operating expense of $3.3 million for the three months ended June 30, 2025 decreased by $0.9 million, when compared to $4.2 million for the three months ended June 30, 2024, as a result of the Company’s cost containment initiatives enacted beginning during the first half of 2024. Operating expense of $7.9 million for the six months ended June 30, 2025 decreased by $1.2 million, when compared to $9.1 million for the six months ended June 30, 2024. 22

Although geopolitical tensions and macroeconomic challenges have affected our quarterly results in the past and may in the future, we believe our Company is uniquely positioned to provide lifesaving technologies and training that enable law enforcement officers worldwide to conduct safe and effective encounters while reducing the use of force16. ~~With~~W1 an increasing addressable market, the Company offers what we believe is a unique value proposition. Our improved pricing strategy, coupled with reduced operating expenses and our growing sales outlook, is expected to help reduce losses and improve cash flow in the future.ACQUISITION

~~We plan~~On toFebruary ~~increase~~18, 2025, the ~~number~~Company ofand ~~product~~W1, ~~demonstrations~~entered ~~and~~into ~~training~~an ~~sessions~~Asset Purchase Agreement, ~~particularly~~dated inas ~~international~~of ~~markets.~~February ~~Our~~18, ~~new~~2025 ~~focus~~pursuant on to which, subject to the ~~when~~terms and ~~why~~conditions ~~BolaWrap~~set isforth ~~used~~therein, ~~has~~the ~~shown~~Company ~~improved~~agreed ~~results.~~to ~~This~~acquire issubstantially aall ~~departure~~the ~~from~~assets ~~the~~of ~~hardware~~W1 ~~product~~used ~~only~~in, ~~approach~~held offor ~~the~~use ~~past. Our~~in ~~sales~~or ofrelating to the ~~BolaWrap~~business ~~150~~of advisory and ~~Wrap~~investigative ~~Reality~~professional ~~are~~services ~~expected~~which related to ~~continue~~specific toidentified ~~rise,~~customer ~~aided~~contracts. byThe ~~our~~Company ~~ongoing~~recorded ~~cost~~the ~~savings~~transaction ~~and~~as ~~cost~~an ~~control~~Asset ~~measures, which~~Acquisition wein ~~expect~~accordance towith ~~lead~~ASC to805 anand ~~overall~~recorded ~~reduction~~$54 as intangible assets included in ~~cash~~Customer ~~burn~~Relationships (See Note 6 “Intangible Assets” above). The Company has preliminarily assigned a three-year life to such Customer Relationships.

~~As of~~The ~~June~~Company ~~30,~~acquired ~~2025,~~W1 weGlobal ~~had~~to ~~backlog~~integrate oftechnology ~~approximately~~enablement ~~$60~~into ~~thousand~~its ~~which~~core ~~was~~offerings ~~expected~~and toexpand beinto ~~delivered~~managed intechnology ~~the~~services ~~third~~supporting ~~quarter~~the ofBolaWrap ~~2025~~go-to-market strategy. ~~Additionally, as~~Following ofa ~~June~~third-quarter 30evaluation, ~~2025,~~the wecompany ~~had~~determined ~~deferred~~that ~~revenue~~W1’s ofinvestigative ~~$325~~services ~~thousand~~were ~~consisting~~not ofessential ~~$30~~to ~~thousand~~Wrap’s ~~related~~domestic toor VRinternational expansion; however, ~~$226~~customers ~~thousand~~strongly valued managed services related to ~~Intrensic, $50~~policy ~~thousand~~and ~~related~~training. toAs ~~BolaWrap~~a ~~extended~~result, ~~warranties~~Wrap ~~and~~will ~~services~~continue ~~and~~focusing ~~$19~~on ~~thousand~~managed ~~related~~services toin ~~training.~~policy ~~Distributor~~governance and ~~customer~~training ~~orders for~~to ~~future~~advance ~~deliveries~~the ~~are~~next ~~generally~~era ~~subject~~of tonon-lethal ~~modification~~technology development, ~~rescheduling~~delivering oran inintegrated ~~some~~response ~~instances~~package that combines technology with the support, ~~cancellation~~policy alignment, inand governance needed for adoption at the ~~normal~~state ~~course~~and ~~of business~~federal levels.

~~We believe that we have adequate financial resources to sustain our operations for the twelve months~~17. WeSUBSEQUENT recorded net loss from operations of $2.9 million during the three months ended June 30, 2025, compared to a net loss from operations of $3.2 million for the three months ended June 30, 2024; primarily driven by a decrease in operating expenses.. For the six months ended June 30, 2025 and June 30, 2024, we recorded net loss from operations of $3.8 and $7.3 million, respectively; primarily driven by a decrease in operating expenses. Net cash used in operations improved by $2.2 million, from a net cash used in operating activities of $7.2 million for the six months ended June 30, 2024, to net cash used in operating activities $5.0 million for the six months ended June 30, 2025. This positive change was primarily driven by the Company’s continued cost containment efforts and operational improvements.EVENTS

~~We expect~~Mutual ~~that~~Separation wewith ~~will~~Jerry ~~continue~~Ratigan ~~to innovate new applications for our public safety technology, open new geographies, develop new products~~ and ~~technologies~~Appointment toof ~~meet~~Scot ~~diverse customer requirements and identify and develop new markets for our products.~~Cohen

20 On October 21, 2025, the Company and Jerry Ratigan, who served as the Company’s Chief Financial Officer, Principal Accounting Officer and Principal Financial Officer, mutually agreed to the separation of Mr. Ratigan from such roles, effective as of October 24, 2025.

~~Supply~~ ~~chain~~The ~~disruptions~~terms ~~could~~of ~~also~~Mr. ~~affect~~Ratigan’s ~~our~~separation ~~operations~~from ~~and~~the ~~could~~Company ~~negatively~~have ~~impact~~been ~~our~~memorialized ~~ability~~pursuant to ~~source~~a ~~materials,~~General ~~manufacture~~Release and ~~distribute products~~Severance inAgreement, dated as of October 21, 2025, which was executed by the ~~future~~Company and Mr. ~~Moreover~~Ratigan on October 24, ~~financial~~2025 ~~markets~~(the ~~continue~~“Separation Agreement”). Pursuant to ~~experience~~the ~~significant~~Separation ~~volatility~~Agreement, ~~which~~Mr. ~~could~~Ratigan ~~potentially~~is ~~affect~~entitled ~~our ability~~ to ~~enter~~receive ora ~~modify~~severance ~~favorable~~payment ~~terms~~in ~~and~~an ~~conditions~~amount ~~regarding~~equal ~~equity~~to ~~and~~$50,000, ~~debt~~representing ~~financing~~three ~~activities~~months of Mr. ~~Nevertheless~~Ratigan’s base salary, weless ~~had~~all ~~$4.2~~lawful ~~million in~~and ~~cash~~authorized withholdings and ~~cash~~deductions, ~~equivalents~~payable asin ofa ~~June~~lump ~~30,~~sum ~~2025~~on the Company’s first regular pay date following the Effective Date (as ~~compared~~defined toin $3the Separation Agreement).6 ~~million~~In asexchange offor ~~December~~the ~~31,~~consideration ~~2024~~provided to Mr.. WeRatigan ~~therefore~~in ~~believe~~the weSeparation ~~have~~Agreement, ~~sufficient capital~~Mr. Ratigan agreed to ~~fund~~waive ~~our~~and ~~operations~~release ~~for~~any ~~the~~claims ~~next~~in ~~twelve~~connection ~~months~~with ~~following~~Mr. ~~this~~Ratigan’s ~~Report~~employment onand ~~Form~~separation ~~10-Q~~from the Company. ~~However~~On October 25, we2025, ~~may~~the ~~require~~board ~~additional~~of ~~working capital~~directors ~~and~~of ~~liquidity~~the ~~constraints~~Company ~~and~~appointed ~~access~~Scot toCohen, ~~capital~~who ~~markets~~serves ~~could~~as ~~still~~the ~~negatively~~Company’s ~~affect~~Chief ~~our~~Executive ~~liquidity~~Officer and ~~may~~Principal ~~require~~Executive ~~changes~~Officer, to ~~our~~ ~~plan~~the position of ~~operations~~Chief Executive Officer, Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer, effective immediately.

~~Our~~ ~~Company~~Appointment ~~may~~of beJohn ~~positively~~Shulman or negatively impacted by continued social unrest and protests against law enforcement. Such unrest may be further fueled by misleading information or negative publicity about our solutions. We believe our solutions are the answer to ~~reducing use of force and driving safer outcomes for officers and~~ the ~~citizens~~Board ~~they interact with each day. Although the intensity~~ of ~~these events~~Directors may have subsided, some may still indirectly or directly, influence police agency budgets and the funding available to current and potential customers. In addition, participants in these events may attempt to create the impression that our solutions are contributing to the perceived problems, potentially harming our business and operations, including our revenues, earnings, and cash flows from operations.

~~Changes~~ inOn ~~our~~October ~~management~~25, ~~and~~2025, ~~other~~the ~~critical~~Board ~~personnel~~increased ~~have~~the size of the ~~potential~~Board to ~~positively~~six or(6) ~~negatively~~members ~~affect~~and ~~our~~appointed ~~business.~~John ~~Such~~Shulman ~~disruptions~~to ~~could have~~serve anas ~~adverse~~a ~~impact~~member onof ~~our~~the ~~operations,~~Company’s ~~programs~~Board, ~~growth,~~to ~~financial~~serve ~~condition,~~until orthe ~~results~~Company’s ofnext ~~operations.~~annual Onmeeting ~~the~~of ~~other~~stockholders ~~hand,~~or ~~improvements in~~until ~~our~~his ~~operations,~~successor ~~operating~~is ~~expenses,~~duly elected and ~~go-~~qualified. Mr. Shulman will be entitled to~~-market~~ ~~approaches~~the ~~could~~standard ~~positively~~compensation ~~influence~~paid by the ~~success~~Company ofto ~~our~~all ~~business~~its innonemployee directors under the ~~future~~Company’s director compensation program.

~~Critical Accounting Policies and Estimates~~23

~~The preparation~~Item ~~of financial statements in accordance with accounting principles generally accepted in the United States (“U~~2.~~S. GAAP”)~~ ~~requires~~Management’s usDiscussion ~~to make estimates~~ and ~~judgments~~Analysis ~~that affect the reported amounts~~ of ~~assets,~~Financial ~~liabilities,~~Condition ~~revenue~~ and ~~expense, and~~Results ~~related disclosure~~ of contingent assets and liabilities. We evaluate our estimates, on an on-going basis, including those estimates related to recognition and measurement of contingencies and accrued expense. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.Operations

AsYou should read the following discussion in ~~part~~conjunction ofwith the ~~process~~financial ofstatements ~~preparing~~and ~~our~~other financial information included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) and with our audited financial statements, weand ~~are~~other ~~required~~information topresented ~~estimate~~in our ~~provision~~Annual Report on Form 10-K for ~~income~~the ~~taxes~~year ended December 31, 2024 (as amended, the “Annual Report”). This ~~Significant~~Report ~~management~~may contain or incorporate by reference forward-looking statements ~~judgment~~within isthe ~~required~~meaning inof ~~determining~~Section ~~our~~27A ~~provision~~of ~~for~~the ~~income~~Securities ~~taxes~~Act of 1933, ~~deferred~~as ~~tax~~amended (the ~~assets~~“Securities Act”), and ~~liabilities,~~Section ~~tax~~21E ~~contingencies~~of the Securities Exchange Act of 1934, ~~unrecognized~~as amended (the “Exchange Act”). Such ~~tax~~forward-looking ~~benefits~~statements are based upon management’s assumptions, expectations, projections, intentions and ~~any~~beliefs ~~required~~about ~~valuation~~future ~~allowance~~events. Except for historical information, ~~including~~the ~~taking~~use ~~into~~of ~~consideration~~predictive, future-tense or forward-looking words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “continue,” “may,” “will,” “could,” “would,” or the ~~probability~~negative or plural of such words and similar expressions or variations of such words are intended to identify forward-looking statements but are not the ~~tax~~only ~~contingencies~~means ~~being~~of ~~incurred~~identifying forward-looking statements. ~~Management~~Such ~~assesses~~forward-looking ~~this~~statements ~~probability~~are subject ~~based~~to ~~upon~~several ~~information~~risks, ~~provided~~uncertainties, byassumptions ~~its~~and ~~tax~~other ~~advisers,~~factors ~~its~~that could ~~legal~~cause ~~advisers~~actual results and ~~similar~~the ~~tax~~timing of certain events to differ ~~cases.~~materially Iffrom ~~later~~future ~~our~~results ~~assessment~~expressed ofor implied by the ~~probability~~forward-looking statements. ofFactors that could cause or contribute to these ~~tax~~differences include, ~~contingencies~~but ~~changes~~are not limited to, those discussed below and elsewhere in this Report and in our ~~accrual~~other ~~for~~filings ~~such~~with ~~tax~~the ~~uncertainties~~Securities ~~may~~and ~~increase~~Exchange Commission (“SEC”), orincluding ~~decrease~~particularly matters set forth under Part I, Item 1A (Risk Factors) of the Annual Report. ~~Our~~Furthermore, ~~effective~~such ~~tax~~forward-looking ~~rate~~statements ~~for~~speak ~~annual~~only as ~~and~~of ~~interim~~the ~~reporting~~date ~~periods~~of ~~could~~this beReport. ~~impacted~~Except ifas ~~uncertain~~required ~~tax~~by ~~positions~~law, ~~that~~we ~~are~~undertake ~~not~~no ~~recognized~~obligation ~~are~~to ~~settled~~update atany anforward-looking ~~amount~~statements ~~which~~to ~~differs~~reflect ~~from~~events ~~our~~or circumstances ~~estimates~~after the date of such statements.

~~Some~~References ~~of our accounting policies require higher degrees of judgment than others~~ in ~~application.~~this ~~These~~management’s ~~include~~discussion ~~share-based compensation~~ and ~~contingencies~~ ~~and~~analysis ~~areas~~to ~~such~~“we,” as“us,” ~~revenue~~“our,” ~~recognition~~“the Company,” ~~allowance~~“our ~~for doubtful accounts~~Company,” ~~valuation~~or of“Wrap” ~~inventory~~refer ~~and~~to ~~intangible~~Wrap ~~assets~~Technologies, ~~warranty liabilities~~Inc. and ~~impairments~~its subsidiaries.

Revenue Recognition. We sell our products to customers including law enforcement agencies, domestic distributors and international distributors and revenue from such transactions is recognized in the periods that products are shipped (free on board (“FOB”) shipping point) or received by customers (FOB destination), when the fee is fixed or determinable and when collection of resulting receivables is reasonably assured. We identify customer performance obligations, determine the transaction price, allocate the transaction price to the performance obligations and recognize revenue as we satisfy the performance obligations. Our primary performance obligations are products/accessories and VR software licensing or sale. Our customers do not have the right to return product unless the product is found to be defective.Overview

21We are a global public safety technology and services company that delivers safe and effective policing solutions to law enforcement and security personnel worldwide. We are leading the movement for safer outcomes by equipping law enforcement with safer, non-painful compliance tools, and immersive training fit for modern society. We began sales of our first public safety product, the BolaWrap 100 remote restraint device, in late 2018. In the first quarter of 2022, we delivered 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 has since been phased out. In late 2020 we added a new solution to our public safety technologies, our virtual reality (“VR”) training platform, Wrap Reality, and in August 2023 we acquired Intrensic, LLC, a Delaware limited liability company (“Intrensic”), which added a Body-Worn Camera (“BWC”) and Digital Evidence Management (“DEM”) solution to our portfolio of policing solutions. Wrap Reality is now sold to law enforcement agencies for simulation training as well as corrections departments for the societal reentry scenarios.

~~Share-Based Compensation.~~In We2025, ~~follow~~we ~~the~~expanded ~~fair~~our ~~value~~product ~~recognition~~portfolio ~~provisions~~with ~~issued by~~ the ~~Financial~~launch ~~Accounting~~of ~~Standards~~WrapTactics, ~~Board~~a ~~(“FASB”) in~~digital ~~Accounting~~pre-escalation ~~Standards~~and ~~Codification~~performance ~~(“ASC”)~~training ~~Topic 718~~platform, ~~Stock Compensation (“ASC 718”)~~ and weWrapVision, ~~adopted Accounting~~a ~~Standards~~North ~~Update (“ASU”) 2018~~American-07made ~~for share~~body-~~based~~worn ~~transactions~~camera ~~with~~solution ~~non-employees.~~designed ~~Share-based~~to ~~compensation expense~~meet ~~recognized~~federal ~~includes~~procurement ~~stock option and restricted stock unit compensation expense~~standards. ~~The~~We ~~grant~~also ~~date~~advanced ~~fair~~several ~~value of stock options is determined using the Black~~counter-~~Scholes~~unmanned-aircraft-system ~~option~~(“C-~~pricing~~UAS”) ~~model.~~initiatives, ~~The~~including ~~grant~~our ~~date~~MERLIN isand ~~the~~PAN-DA ~~date~~programs, at which anapply ~~employer~~our ~~and~~tether-deployment ~~employee~~technology orto non-~~employee reach~~lethal adrone ~~mutual~~interdiction ~~understanding of the key terms~~ and ~~conditions~~defense ~~of a share-based payment award~~applications. ~~The~~These ~~Black-Scholes~~developments ~~option-pricing~~broaden ~~model~~our ~~requires inputs~~reach ~~including~~beyond ~~the~~traditional ~~market~~policing ~~price of the Company’s Common Stock on the date of grant, the term that the stock options are expected~~ to beinclude ~~outstanding~~defense, ~~the~~homeland ~~implied stock volatilities of several publicly traded peers over the expected term of stock options~~security, ~~risk-free interest rate~~ and ~~expected~~other ~~dividend.~~public-safety ~~Each~~markets, ofwhile ~~these~~maintaining ~~inputs~~our isfocus ~~subjective and generally requires significant judgment to determine. The grant date fair value of restricted stock units is based upon the market price of the Company’s Common Stock~~ on ~~the date of the grant. We determine the amount of share~~de-~~based~~escalation, ~~compensation~~accountability, ~~expense based on awards that we ultimately expect to vest~~ and ~~account~~safer ~~for forfeitures as they occur~~outcomes. ~~The fair value of share-based compensation is amortized to compensation expense over the vesting term.~~

~~Allowance for~~Our ~~Doubtful~~target ~~Accounts.~~market ~~Our~~for ~~products~~our ~~are~~product ~~sold~~and totechnology ~~customers~~enabled inservices ~~many~~includes ~~different~~approximately ~~markets~~900,000 ~~and~~full-time ~~geographic~~sworn ~~locations.~~law Weenforcement ~~estimate~~officers ~~our~~in ~~bad~~over 18,000 ~~debt~~ federal, ~~reserve~~state, onand alocal ~~case-by-case~~law ~~basis~~enforcement ~~and~~agencies in the ~~aging~~U.S. ofand ~~accounts~~over ~~due~~12 tomillion apolice ~~limited~~officers ~~number~~in ofmore ~~customers,~~than ~~mostly~~100 ~~government~~countries. ~~agencies~~Additionally, orwe ~~well-established distributors.~~are Weexploring ~~base~~opportunities ~~these~~to ~~estimates~~increase onour ~~many~~presence ~~factors~~in ~~including~~other ~~customer~~adjacent ~~creditworthiness~~markets, ~~past~~such ~~transaction~~as ~~history~~military ~~with~~and private ~~the~~security. ~~customer, current~~Our ~~economic~~international ~~industry~~focus ~~trends~~is ~~and~~on ~~changes~~countries inwith ~~customer~~the ~~payment~~largest ~~terms~~police forces. ~~Our~~According ~~judgments~~to ~~and~~360iResearch, ~~estimates~~a ~~regarding~~market ~~the~~research ~~collectability~~consulting firm, our non-lethal products are part of ~~accounts receivable~~a ~~have~~global anmarket ~~impact~~segment onexpected ~~our~~to ~~financial~~grow ~~statements~~to $16.1 billion by 2027.

~~Valuation of Inventory. Our inventory is comprised of raw materials, assemblies and finished products.~~ We ~~must~~focus ~~periodically~~our ~~make~~efforts ~~judgments and~~on ~~estimates regarding~~ the ~~future~~following ~~utility~~products and carrying value of our inventory. The carrying value of our inventory is periodically reviewed and impairments, if any, are recognized when the expected future benefit from our inventory is less than carrying value.services:

~~Valuation of~~BolaWrap ~~Intangible~~Remote ~~Assets.~~Restraint ~~Intangible~~Device ~~assets~~- ~~consisted of (~~a) ~~capitalized~~hand-held ~~legal~~remote ~~fees~~restraint ~~and~~device ~~filing~~that ~~expense~~discharges ~~related~~a toseven ~~obtaining patents~~ and ~~trademarks,~~ ~~(b) customer agreements, tradenames, software, non~~half-~~solicitation~~foot ~~and~~Kevlar ~~non-compete~~tether ~~agreements~~to ~~acquired~~entangle ~~in business combinations~~an ~~and~~ individual ~~valued~~ at ~~fair~~a ~~value~~range ~~at the acquisition date, and (c) the purchase cost~~ of ~~indefinite~~10-~~lived~~25 ~~website domains~~feet. WeBolaWrap ~~must~~assists ~~make~~law ~~judgments and~~enforcement ~~estimates~~to ~~regarding~~safely ~~the future utility~~ and ~~carrying~~effectively ~~value~~control ofencounters ~~intangible~~early ~~assets.~~without ~~The~~resorting ~~carrying values of such assets are periodically reviewed and impairments, if any, are recognized when the expected future benefit~~ to bepainful ~~derived~~use ~~from~~of anforce ~~individual intangible asset is less than carrying value~~options. ~~This generally could occur when certain assets are no longer consistent with our business strategy and whose expected future value has decreased.~~

Accrued Expense. We establish a warranty reserve based on anticipated warranty claims at the time product revenue is recognized. This reserve requires us to make estimates regarding the amount and costs of warranty repairs we expect to make over a period of time. Factors affecting warranty reserve levels include the number of units sold, anticipated cost of warranty repairs, and anticipated rates of warranty claims. We have a very limited history to make such estimates and warranty estimates have an impact on our financial statements. Warranty expense is recorded in cost of revenue. We evaluate the adequacy of this reserve each reporting period.24

~~Warrants. The~~Wrap ~~Company~~Reality ~~accounts for warrants as liability~~-~~classified~~ ~~instruments~~a ~~based~~law onenforcement an3D ~~assessment~~training ofsystem ~~the~~employing ~~warrant’s~~immersive ~~specific~~computer ~~terms and~~graphics ~~applicable~~VR ~~authoritative~~with ~~guidance~~proprietary insoftware-enabled ~~Financial~~content. ~~Accounting~~It ~~Standards Board (“FASB”) Accounting Standards Codification~~allows ~~(“ASC”)~~ up ~~480,~~to ~~Distinguishing~~two ~~Liabilities~~participants ~~from~~to ~~Equity~~enter ~~(“ASC~~a ~~480”)~~simulated ~~and~~training ~~ASC~~environment ~~815~~simultaneously, ~~Derivatives~~ and ~~Hedging~~customized ~~(“ASC 815”).~~weapons ~~The~~controllers ~~assessment~~enable ~~considers~~trainees ~~whether the warrants are freestanding financial instruments pursuant~~ to ~~ASC~~engage ~~480,~~in ~~meet~~strategic ~~the~~decision ~~definition of~~making aalong ~~liability pursuant to ASC 480, and whether~~ the ~~warrants~~force ~~meet~~continuum. ~~all~~Wrap ofReality ~~the~~has ~~requirements~~45 scenarios for ~~equity~~law ~~classification under ASC 815, including~~enforcement ~~whether~~ and ~~the~~corrections ~~warrants are indexed to the Company’s own shares of Common Stock~~ and ~~whether~~15 ~~the~~scenarios ~~warrant~~for ~~holders~~societal ~~could~~reentry. ~~potentially require~~Wrap ~~“net~~Reality ~~cash~~is ~~settlement”~~one ~~in a circumstance outside~~ of the ~~Company’s~~most ~~control,~~robust ~~among~~3D ~~other~~Virtual ~~conditions~~Reality ~~for~~solutions ~~equity classification.~~on ~~This assessment, which requires~~ the ~~use~~market offor ~~professional~~law ~~judgment,~~enforcement ~~is conducted at the time of warrant issuance~~ and ~~as of~~societal ~~each~~reentry ~~subsequent quarterly period end date while the warrants are outstanding~~today. ~~As of June 30, 2025, all warrants are classified as equity-classified instruments.~~

22Wrap Intrensic - a Body-Worn Camera and Digital Evidence Management solutions provider. BWC and DEM play crucial roles in capturing, storing, and managing digital evidence, such as video and audio recordings for various purposes, including criminal investigations and maintaining transparency in public interactions. The Wrap Intrensic X2 camera hardware and storage and data management capability, along with awareness of front-line operations, provides customers with a solution to meet their challenges. Wrap Intrensic Evidence on our cloud-based video storage platform provides an unlimited video storage platform that includes video and other evidence uploading, search, retrieval, redaction, and evidence sharing while reducing the need for resources required to manage this evidence.

~~Business Combination.~~WrapTactics ~~The~~Digital ~~Company~~Training ~~accounts~~Platform ~~for~~- ~~its~~a ~~business~~subscription-based ~~combinations~~digital ~~under~~learning ~~the~~and ~~provisions~~training ofsystem ~~Accounting~~that ~~Standards~~delivers ~~Codification (“ASC”) Topic 805~~short-10form, ~~Business Combinations (“ASC 805~~scenario-~~10”),~~based ~~which~~courses ~~requires~~focused ~~that~~on ~~the~~pre-escalation ~~purchase~~tactics, ~~method~~emotional ofregulation, ~~accounting be used for all business combinations. Assets acquired~~ and ~~liabilities assumed, including non~~post-~~controlling~~deployment ~~interests,~~control ~~are recorded at the date of acquisition at their respective fair values~~techniques. The ~~estimated~~platform ~~fair~~reinforces ~~value~~officer ofreadiness ~~net~~through ~~assets~~burst-learning ~~acquired,~~modules ~~including the allocation of the fair value to identifiable assets~~ and ~~liabilities,~~supports ~~was determined using established valuation techniques. ASC 805~~recurring-10revenue ~~also~~opportunities ~~specifies~~by ~~criteria~~integrating ~~that~~with ~~intangible~~Wrap’s ~~assets acquired~~bundled inofferings, aWrapReady ~~business combination must meet to be recognized~~ and ~~reported apart from goodwill~~WrapPlus. ~~Goodwill~~WrapTactics ~~represents~~includes ~~the~~an ~~excess~~exclusive ~~purchase price~~partnership ~~over~~with ~~the~~STORM ~~fair~~Training ~~value~~Group, ofwhose ~~the~~evidence-based ~~tangible~~defensive-tactics ~~net~~curriculum ~~assets~~is ~~and~~incorporated ~~intangible~~into ~~assets~~Wrap’s ~~acquired~~subscription inecosystem ato ~~business~~provide ~~combination. Acquisition~~post-~~related~~BolaWrap ~~expenses are~~arrest ~~recognized separately from the business combinations~~ and ~~are~~control ~~expensed as incurred.~~instruction

~~The~~ ~~estimated~~WrapReality ~~fair~~Training ~~value~~Simulator- ~~of the acquired intangible assets was determined using~~ a ~~method~~fully ~~which~~immersive ~~reflects~~VR ~~the~~training ~~present~~simulator ~~value~~that ofprovides ~~the~~first ~~operating cash~~responders ~~flows~~with ~~generated~~realistic, byinteractive ~~this~~scenarios ~~asset~~designed ~~after taking into account the cost~~ to ~~realize~~improve ~~the~~decision-making ~~revenue,~~under ~~and~~pressure. anThe ~~appropriate~~system ~~discount~~continues ~~rate~~ to ~~reflect the~~expand ~~time~~its ~~value~~content library and ~~risk~~complements ~~associated~~WrapTactics ~~with~~and ~~the~~BolaWrap ~~invested capital~~deployments.

~~Certain~~ ~~adjustments~~WrapVision toBody-Worn ~~the~~Camera ~~assessed~~and ~~fair~~Evidence ~~values~~Management ofSystem ~~the~~- ~~assets~~a ~~and~~North ~~liabilities~~ American-made, ~~subsequent~~Trade toAgreements ~~the~~Act-compliant ~~acquisition~~body-worn ~~date~~camera solution designed for law enforcement, ~~but~~public-safety, ~~within~~and ~~the~~healthcare ~~measurement period~~users. The device integrates LTE, ~~which~~Wi-Fi, isBluetooth, and VPN connectivity for secure live streaming, provides up to ~~one~~twelve ~~year~~hours of operation per charge, ~~are~~and ~~recorded~~is ascompatible ~~adjustments~~with toleading ~~goodwill~~video-management platforms. ~~Any~~WrapVision ~~adjustments~~complements ~~subsequent~~our topre-escalation ~~the~~and ~~measurement~~accountability ~~period~~initiatives ~~are~~by ~~recorded in~~offering ~~income~~secure domestic data storage and alignment with federal procurement standards.

~~Historically,~~ ~~our~~C-UAS ~~assumptions, judgments~~ and ~~estimates~~Drone-Based ~~relative~~Solutions to- ~~our~~we ~~critical accounting policies~~ have ~~not~~expanded ~~differed~~into ~~materially from actual results. Other than~~ the ~~warrants~~C-UAS and business combination described above, there were no significant changes or modification of our critical accounting policies and estimates involving management valuation adjustments affecting our results for the period ended June 30, 2025. Our accounting policies are more fully described in Note 1. Organization and Summary of Significant Accounting Policies in the notes to our audited consolidated financial statements included in our Annual Report on Form 10aerial-Kinterdiction ~~for~~markets ~~the~~through ~~year~~multiple ~~ended December 31~~research, ~~2024~~development, asand ~~filed~~demonstration ~~with~~programs ~~the SEC on March 31, 2025, as amended on April 25, 2025.~~including:

~~Segment~~ • MERLIN 1- a lightweight, modular, open-architecture system that equips drones and ~~Related~~ground ~~Information~~robots with Wraps BolaWrap cassette and multi-shot 1KC entanglement cassette for rapid, low-collateral interdiction of Group-1 UAS threats. Designed for plug-and-play integration and tool-less reload, it delivers precise effects and operator-simple controls for public safety and defense missions.

~~The Company~~• Project ~~operates~~PAN-DA as(Personal aAnti-Drone ~~single~~Armament) ~~segment.~~- ~~The~~a ~~Company’s~~handheld, ~~chief~~surface-to-air, ~~operating~~quick-reaction ~~decision~~C-UAS ~~maker~~launcher isderived ~~Scot~~from ~~Cohen,~~ the ~~Company’s~~BolaWrap ~~Executive Chairman~~150 ~~and Chief Executive Officer~~platform, ~~who~~providing ~~manages~~individual ~~operations~~operators ~~for~~with ~~purposes~~a ofportable ~~allocating~~non-lethal ~~resources.~~defense ~~Refer~~capability toagainst ~~Note~~small 15drones. ~~Major Customers~~ ~~and Related Information, in our financial statements for further discussion.~~

~~Operating~~• 1KC Wide Area Kinetic Anti-Drone Cassette - a patent-pending, modular cassette designed for integration with PAN-DA and MERLIN systems to enable wide-area coverage and multiple drone engagements per mission. ~~Expense~~

~~Our operating~~In ~~expense~~addition ~~includes~~to ~~(i) selling, general and administrative expense, (ii) research and development expense, and in~~ the ~~most recent fiscal quarter, and (iii) product line exit expense~~U.S. ~~Research~~law ~~and~~enforcement ~~development~~market, ~~expense~~we ishave ~~comprised~~shipped ~~of the costs incurred in performing research and development activities and developing production on~~ our ~~behalf,~~restraint ~~including~~products ~~compensation~~to ~~and~~62 ~~consulting, design and prototype costs, contract services, patent costs and other outside expense~~countries. ~~The~~We ~~scope~~have ~~and~~distribution ~~magnitude~~agreements ofwith ~~our future research and development expense~~22 is international ~~difficult~~distributors tocovering ~~predict~~43 ~~at this time and will depend on elections made regarding research projects, staffing levels and outside consulting and contract costs~~countries. ~~The~~We ~~future~~focus ~~level~~significant ~~of selling, general and administrative expense will be dependent on staffing levels, elections regarding expenditures on~~ sales, ~~marketing~~training and ~~customer~~business ~~training,~~development ~~the~~efforts ~~use~~to ofsupport ~~outside~~our ~~resources,~~distribution ~~public~~network ~~company~~in ~~and~~addition ~~regulatory~~to ~~expense,~~our ~~and~~internal ~~other factors,~~sales ~~some of which are outside of our control~~team.

We ~~expect~~ ~~our~~focus ~~operating~~significant ~~costs~~resources toon ~~remain~~research ~~flat~~and ordevelopment ~~slightly~~innovations ~~increase~~and ~~depending~~continue onto ~~the~~enhance ~~scope~~our ofproducts ~~additional sales~~ and ~~marketing~~plan ~~initiatives. We~~to ~~may~~introduce ~~incur~~new ~~additional~~products. ~~non-cash~~We believe ~~share-based~~we ~~compensation~~have ~~costs~~established ~~depending~~a onstrong ~~future~~brand ~~options~~ and ~~restricted~~market ~~stock~~presence ~~unit~~globally ~~grants that are impacted by stock prices~~ and ~~other~~have ~~valuation~~established ~~factors.~~significant ~~Historical~~competitive ~~expenditures~~advantages ~~are~~in ~~not~~our ~~indicative of future expenditures~~markets.

2325

~~Results of~~Recent ~~Operations~~Developments

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

~~The following~~In ~~table~~the ~~sets~~third ~~forth~~and ~~for~~fourth quarters of 2025, the ~~periods~~Company ~~indicated~~strengthened ~~certain~~its ~~items~~leadership ofteam ~~our~~with ~~condensed~~several ~~consolidated~~key ~~statement~~appointments. ofOn ~~operations~~July 2, 2025, Dr. ~~The~~Todd ~~financial information~~Larson, ~~and~~was named Strategic Advisor to lead the ~~discussion~~development ~~below~~of ~~should~~WrapTactics. beOn ~~read~~September in24, ~~conjunction~~2025, ~~with~~Joseph ~~the~~Cameron ~~financial~~was ~~statements~~appointed ~~and~~Chief ~~notes~~Revenue ~~contained~~Officer inof ~~this~~the ~~Quarterly Report~~Company, and on ~~Form~~October ~~10-Q~~27, 2025, Braden Frame was appointed Chief Commercial Officer of the Company.

	Three Months Ended June 30,						Change
	2025			2024			$			%
	(in thousands, except percentage change)
Revenues:
Product sales	$	197			$1,251		$	(1,054	)		(84	)%
Managed services		764			-			764			-	%
Other revenue		51			322			(271	)		(84	)%
Total revenues		1,012			1,573			(561	)		(36	)%
Cost of revenue		525			589			(64	)		(11	)%
Gross profit		487			984			(497	)		(51	)%
Operating expenses:
Selling, general and administrative		2,986			3,475			(489	)		(14	)%
Research and development		354			679			(325	)		(48	)%
Total operating expenses		3,340			4,154			(814	)		(20	)%
Loss from operations	$	(2,853	)	$	(3,170	)	$	317			(10	)%

On October 21, 2025, the Company and Jerry Ratigan, who served as the Company’s Chief Financial Officer, Principal Accounting Officer and Principal Financial Officer, mutually agreed to the separation of Mr. Ratigan from such roles, effective as of October 24, 2025. The terms of Mr. Ratigan’s separation from the Company have been memorialized pursuant to a General Release and Severance Agreement, dated as of October 21, 2025 (the “Separation Agreement”). Pursuant to the Separation Agreement, Mr. Ratigan is entitled to receive a severance payment in an amount equal to $50,000, representing three months of Mr. Ratigan’s base salary, less all lawful and authorized withholdings and deductions, payable in a lump sum on the Company’s first regular pay date following the Effective Date (as defined in the Separation Agreement). In exchange for the consideration provided to Mr. Ratigan in the Separation Agreement, Mr. Ratigan agreed to waive and release any claims in connection with Mr. Ratigan’s employment and separation from the Company.

~~Revenue~~ In connection with Mr. Ratigan’s separation, on October 25, 2025, the board of directors of the Company appointed Scot Cohen, to the position of Principal Financial Officer and Principal Accounting Officer, effective as of October 25, 2025. On October 25, 2025, the Board increased the size of the Board to six (6) members and appointed John Shulman to serve as a member of the Company’s Board, to serve until the Company’s next annual meeting of stockholders or until his successor is duly elected and qualified. Mr. Shulman will be entitled to the standard compensation paid by the Company to all its nonemployee directors under the Company’s director compensation program.

We ~~reported~~Business ~~net~~and ~~revenue~~Product ~~of $0.2 million for the three months ended June 30, 2025, as compared to $1.3 million for the three months ended~~Developments June 30, 2024, or an 84% decrease. The decrease for the three months ended June 30, 2025, as compared to June 30, 2024, is primarily a result of lower product orders offset by the added managed services revenue from the acquisition of the W1 business. 

~~Gross~~ ~~Profit~~In the third and fourth quarters of 2025, we announced the following relating to our business and products:

~~Our~~ ~~gross~~• In ~~profit~~August ~~for the three months ended June 30,~~ 2025, ~~was~~we ~~$0.5~~launched ~~million~~WrapVision, or a ~~gross~~North ~~margin of 48%. Our gross profit for the three months ended June 30~~American-made, ~~2024,~~Trade ~~was~~Agreements ~~$1.0 million~~Act-compliant, ~~or a gross margin of 63%. The decrease~~ all-in-one ~~gross~~body-worn-camera ~~profit~~and ~~represented~~digital-evidence-management aplatform ~~51%~~for ~~decrease~~law ~~compared to the three months ended June 30~~enforcement, ~~2024~~public-safety, ~~because~~and ofhealthcare ~~lower~~users. ~~volume~~WrapVision ofintegrates ~~the~~secure ~~Bola~~data ~~Wrap~~storage, ~~150~~LTE ~~product~~connectivity, ~~sales~~and ~~offset~~compatibility bywith ~~the~~major ~~added high~~video-~~margin~~management ~~revenue from the Company’s acquisition of W1 in February 2025~~systems.

~~Our~~ ~~margins~~• In ~~are~~August ~~subject~~2025, towe ~~variations based on the sales channels and product mix through which~~ initiated our ~~products~~Drone ~~are~~Counter-UAS ~~sold.~~R&D ~~At present~~Program, ~~our~~adapting ~~cassettes have~~the ~~lower margins than~~ BolaWrap ~~devices.~~150 Asfor wekinetic ~~scale~~aerial ~~cassette production, we will look to reduce our costs and drive higher cassette margins~~delivery. ~~Cassettes~~The ~~were~~program’s afirst ~~total~~concept, ofWrap ~~14% of product sales and 3% of our overall revenue in the three months ended June 30~~MERLIN-1, ~~2025, and~~ is ~~expected~~ ~~to continue to grow as~~ a ~~recurring~~modular ~~revenue~~drone-mounted ~~base~~payload asengineered ~~more~~to ~~BolaWrap~~entangle ~~devices are in the field~~ and ~~the~~neutralize ~~usage~~hostile ofdrones ~~BolaWrap increases. Additionally~~mid-flight, werepresenting ~~expect that gross margins will be impacted by growing~~ our ~~technology~~first ~~enabled~~entry ~~services~~into ~~revenue contributions in~~ the ~~second half~~defense ofand ~~2025~~allied-operations market.

~~Our~~ ~~global~~• In ~~supply~~August ~~chain~~2025, ~~has~~we ~~experienced~~unveiled ~~notable~~Project ~~component shortages~~PAN-DA, ~~extended~~a ~~lead times~~handheld, ~~cost fluctuations~~surface-to-air, ~~and~~quick-reaction ~~logistical~~C-UAS ~~constraints, all~~concept ofderived ~~which~~from ~~have affected~~ our ~~product~~BolaWrap ~~costs~~150 platform. ~~Although~~PAN-DA weis ~~have~~intended ~~seen~~to ~~these~~provide ~~supply~~individual ~~chain~~operators ~~obstacles~~with ~~ease~~a ~~in 2025~~portable, wenon-lethal ~~acknowledge~~defense ~~that~~tool ~~future supplier~~capable ~~shortages,~~of ~~quality~~disabling ~~problems,~~small ~~and~~unmanned ~~logistics~~aerial ~~delays~~systems ~~could~~at ~~impact~~close ~~our production schedules and have a material negative impact on our financial condition, results of operation, and cash flows~~range.

24 • In August 2025, we introduced the 1KC Wide Area Kinetic Anti-Drone Cassette, a patent-pending modular payload designed for defense and homeland-security operators. The 1KC system extends our C-UAS portfolio by enabling multi-drone interdiction capability using tether-and-anchor technology.

~~Selling,~~ ~~General~~ • In November 2025, in collaboration with Vector, we achieved the first known air-to-air interdiction using our BolaWrap entanglement system. The successful demonstration of the MERLIN-Interdictor payload on Vector’s Hammer drone platform bolstered our C-UAS program and ~~Administrative~~demonstrated ~~Expense~~the feasibility of non-lethal aerial interdiction in live-flight conditions.

~~Selling,~~ ~~general and administrative (“SG&A”) expense of $3.2 million for the three months ended June 30, 2025, was reduced by~~ ~~$0.3~~Strategic ~~million when compared to $3.5 million for the three months ended June 30, 2024. The decrease in SG&A expense was primarily the~~Partnerships result of the Company’s cost containment initiatives enacted beginning during the first half of 2024 which were offset by an increase of $0.5 million in share-based compensation as well as by increased occupancy expenses related to the new the corporate office.

~~Share-based~~ ~~compensation~~On ~~costs~~October ~~allocated~~2, to2025, ~~SG&A~~we ~~totaled~~announced ~~$0.8~~a ~~million~~strategic ~~for~~partnership ~~the~~with ~~three~~Carahsoft ~~months~~Technology ~~ended~~Corp. ~~June 30, 2025, compared to $0~~(“Carahsoft”).2 ~~million~~Under ~~for~~ the ~~three months ended June 30~~agreement, ~~2024,~~Carahsoft ~~primarily~~will ~~due~~serve toas ~~options~~Wrap's ~~and~~Master ~~grants~~Government ~~issued~~Aggregator, tomaking ~~new~~our ~~employees~~portfolio asof atechnologies ~~result~~available ofto the ~~acquisition~~public ~~of W1~~sector ~~Global,~~through ~~LLC~~Carahsoft's ~~(“W1”)~~reseller inpartners ~~February~~and ~~2025,~~National asAssociation ~~well~~of asState ~~incentives~~Procurements ~~provided~~Officials to(NASPO) ~~certain~~ValuePoint ~~key~~and ~~senior~~OMNIA ~~level~~Partners ~~management in 2025~~contracts.

~~Salaries and~~Acquisition ~~burden costs~~ of $1.1 million for the three months ended June 30, 2025, were $0.1 million higher than the three months ended June 30, 2024. This increase reflects the addition of high-caliber talent and higher share-based compensation, coupled with ongoing cost containment efforts, during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024.W1

~~Advertising and~~On ~~promotion~~February ~~costs~~18, ~~were~~2025, ~~$109~~we ~~thousand~~entered ~~for~~into ~~the~~an ~~three~~Asset ~~months~~Purchase ~~ended~~Agreement, ~~June~~dated 30as of February 18, 2025, orpursuant ato ~~decrease~~which, ofsubject ~~$98~~to ~~thousand~~the asterms ~~compared~~and toconditions set ~~$207~~forth ~~thousand during~~therein, we acquired substantially all the ~~three~~assets ~~months~~of ~~ended~~W1 ~~June~~Global, 30LLC, ~~2024.~~(“W1”) ~~The~~used ~~changes~~ in, ~~advertising~~held ~~costs~~for ~~were~~use ~~primarily~~in ~~related~~or relating to ~~reduced~~the ~~promotional~~business ~~items~~of advisory and ~~training~~ ~~product~~investigative ~~costs~~professional ~~offset~~services, bywhich ~~increased~~were ~~video~~primarily ~~and~~the ~~testimonial~~customer ~~costs~~contracts assigned at the closing, for a nominal purchase price.

~~Research~~ The company acquired W1 Global to integrate technology enablement into its core offerings and ~~Development~~expand ~~Expense~~ into managed technology services supporting the BolaWrap go-to-market strategy. Following a third-quarter evaluation, the company determined that W1’s investigative services were not essential to Wrap’s domestic or international expansion; however, customers strongly valued managed services related to policy and training. As a result, Wrap will continue focusing on managed services in policy governance and training to advance the next era of non-lethal technology development, delivering an integrated response package that combines technology with the support, policy alignment, and governance needed for adoption at the state and federal levels.

Research and development expenses totaling $162 thousand decreased by $511 thousand for the three months ended June 30, 2025, when compared to the three months ended June 30, 2024. We incurred a $375 thousand period-over-period decrease in compensation expense as well as a $18 thousand period-over-period increase in share-based compensation expense allocated to research and development expense because of reduction of personnel. Outside consulting costs decreased by $134 thousand for the three months ended June 30, 2025, when compared to the three months ended June 30, 2024, primarily due to the Company’s cost reduction initiatives.26

~~Operating Loss~~Entry into Series B Securities Purchase Agreement

~~Loss from~~On ~~operations~~August 18, 2025, the Company entered into a securities purchase agreement (the “Series B Purchase Agreement”) with certain accredited investors (collectively, the “Series B Purchasers”) for the issuance and sale in a private placement (the “Series B Private Placement”) of an aggregate of (i) 4,500 shares of the Company’s newly-designated Series B Convertible Preferred Stock, with a par value of $20.90001 ~~million~~per ~~during~~share ~~the~~and ~~three~~a ~~months~~stated ~~ended~~value ~~June~~of 30$1,000 ~~2025~~per share, ~~was~~initially convertible into up to 3,000,000 shares of Common Stock, at an ~~improvement~~initial conversion price of $01.350 ~~million~~per ~~compared~~share (the “Series B Preferred Stock”), and (ii) accompanying warrants (“Series B Warrants”) to ~~loss~~purchase ~~from operations~~up to 3,000,000 shares of Common Stock, with an initial exercise price of $31.250 ~~million~~per ~~during~~share. The Series B Warrants and the ~~three~~shares ~~months~~of ~~ended~~Series ~~June~~B 30Preferred Stock will be exercisable or convertible, ~~2024~~respectively, ~~primarily~~into ~~reflecting~~shares of Common Stock (“Series B Conversion Shares”) beginning on the ~~reduced~~effective ~~revenues~~date ~~offset~~of bystockholder ~~lower~~approval ~~operating costs~~of ~~from~~(i) under Nasdaq Stock Market Rule 5635(d), the issuance of shares of Common Stock in excess of 19.99% of the Company’s ~~cost~~issued ~~containment~~and ~~efforts~~outstanding shares of Common Stock at prices below the “Minimum Price” (as defined in Rule 5635 of the Rules of the Nasdaq Stock Market) on the date of the Series B Purchase Agreement pursuant to the terms of the Series B Preferred Stock and the Series B Warrants, and (ii) an increase in the authorized shares of the Company (the “Series B Stockholder Approval”). As of the date of this Quarterly Report on Form 10-Q, the Company has not obtained the Series B Stockholder Approval. However, the Company plans to hold a special meeting of its stockholders on December 12, 2025, to, among other things, obtain the Series B Stockholder Approval. The Series B Warrants will expire five years from the effective date of the Series B Stockholder Approval. On August 20, 2025, the Company filed the Certificate of Designations of Series B Preferred Stock with the Secretary of State of the State of Delaware (the “Series B Certificate of Designations”), thereby creating the Series B Preferred Stock. The Series B Certificate of Designations became effective with the Secretary of State of the State of Delaware upon filing. The terms of the Series B Convertible Preferred Stock are as set forth in the Series B Certificate of Designations.

~~Six Months~~Business ~~Ended~~Outlook ~~June~~and ~~30, 2025, Compared to Six Months Ended June 30, 2024 (Unaudited)~~Challenges

~~The following~~We ~~table~~believe ~~sets~~our ~~forth~~Company’s ~~for~~products ~~the~~and ~~periods~~solutions ~~indicated~~are ~~certain~~gaining ~~items~~global ofrecognition ~~our~~and ~~condensed~~awareness ~~consolidated~~through ~~statement~~various ofchannels ~~operations.~~such ~~The~~as ~~financial information~~social media, trade shows, and ~~the~~media ~~discussion~~exposure, ~~below~~among ~~should~~others. In part, this recognition and awareness can be ~~read~~attributed into ~~conjunction~~positive ~~with~~feedback ~~the~~from ~~financial~~law ~~statements~~enforcement agencies and ~~notes~~the ~~contained~~successful indeployment ~~this~~of ~~Quarterly~~our products. As a result, we believe our brand is becoming increasingly ~~Report~~ recognized on ~~Form~~a 10global scale as a leader in pre-Qescalation and non-lethal solutions.

	Six Months Ended June 30,						Change
	2025			2024			$			%
	(in thousands, except percentage change)
Revenues:
Product sales	$	550		$	2,578		$	(2,028	)		(79	)%
Managed services		1,000			-			1,000			-	%
Technology enabled services		228			471			(243	)		(52	)%
Total revenues		1,778			3,049			(1,271	)		(42	)%
Cost of revenue		695			1,229			(534	)		(43	)%
Gross profit		1,083			1,820			(737	)		(40	)%
Operating expenses:
Selling, general and administrative		7,128			7,695			(567	)		(7	)%
Research and development		732			1,434			(702	)		(49	)%
Total operating expenses		7,860			9,129			(1,269	)		(14	)%
Loss from operations	$	(6,777	)	$	(7,309	)	$	532			(7	)%

In addition, we are focused on sales, marketing, public and investor relations efforts. We believe there are increasing market opportunities for our products and solutions in the law enforcement and security sectors worldwide. These opportunities are driven by the increasing demand for less-lethal policing.

25In the law enforcement sector, our BolaWrap product has been successfully deployed in the field, as reported by many agencies. BolaWrap is now in use by over 900 U.S. law enforcement agencies and in 62 countries. Due to its non-lethal, non-pain-based-compliance capabilities, some agencies do not deem its usage a categorical reportable use of force and rather place it underneath early use of force such as handcuffs. In our strategic roadmap, we clarified that law enforcement agencies deploy BolaWrap when verbal commands breakdown but long before there is justifiable escalation to pepper spray, pepper ball, batons, bean bags, tasers or Conducted Electrical Weapons (CEW’s) or firearms.

~~Revenue~~Some agencies voluntarily report usage to Wrap but many do not. In the usage reports we have been provided, officers have reported successful outcomes in 85% of the use cases. This percentage is higher than what is often seen with less lethal tools. From the information we have been provided, the most common BolaWrap use case is for individuals with or experiencing behavioral health issues, and the second most common BolaWrap use case is during domestic violence calls.

~~Net revenue~~There ~~totaled~~are ~~$1.8~~many ~~million~~reasons ~~for~~why ~~the~~we ~~six~~may ~~months~~not ~~ended~~receive ~~June~~reports 30on all the use of the BolaWrap, ~~2025~~including, aswhen ~~compared~~uses toof ~~$3.0~~BolaWrap ~~million~~are ~~for~~considered ~~the~~evidence ~~six~~in ~~months~~ongoing criminal ~~ended~~cases, ~~June~~are ~~30,~~controlled ~~2024,~~ by local policy or aregulation, ~~42%~~or ~~decrease.~~require ~~The~~officer ~~decrease~~and ~~for~~union ~~the~~permission ~~six~~to ~~months~~be ~~ended~~shared ~~June~~with ~~30,~~us. ~~2025~~However, assome ~~compared~~agencies tohave ~~June~~shared ~~30,~~bodycam ~~2024~~footage of successful field deployments with us, iswhich ~~primarily~~we amay ~~result~~use ofin ~~lower~~our training ~~product~~ and ~~orders~~education ~~offset~~efforts. byWe believe that as the ~~added~~reports ~~managed~~of ~~services~~BolaWrap’s ~~revenue~~effectiveness ~~from~~in ~~the~~pre-escalation ~~acquisition~~continue ofto ~~the~~increase, W1it ~~business~~will contribute to our future revenue growth.

~~Gross~~We anticipate and believe that our portfolio of non-lethal, non-pain-based compliance products and training services has a strong and expanding pipeline ~~Profit~~ of market opportunities in the law enforcement, military, corrections, and homeland security sectors both domestically and internationally. With the increasing demand for more humane and safer policing practices, we expect a continued surge in our global business. Currently, we are exploring major international business prospects while simultaneously seeking to establish relationships with large police agencies in the U.S. However, we acknowledge that it is challenging to predict the exact timeline for closing these deals, or whether they will ultimately materialize.

Our gross profit for the six months ended June 30, 2025, was $1.1 million, or a gross margin of 61%. Our gross profit for the six months ended June 30, 2024, was $1.8 million, or a gross margin of 60%. The decrease in gross profit represented a 40% decrease compared to the six months ended June 30, 2024, because of lower volume of the Bola Wrap 150 product sales offset by the added high-margin revenue from the Company’s acquisition of W1 in February 2025.27

~~Our margins~~As ~~are~~part ~~also~~of ~~subject~~our efforts to ~~variations~~expand ~~based~~our onsales and distribution operations, we provide a comprehensive training program for law enforcement officers and trainers in using the ~~sales~~BolaWrap. ~~channels~~This training equips them with knowledge about the appropriate use and ~~product~~limitations ~~mix~~of ~~through~~BolaWrap ~~which~~in ~~our~~tandem ~~products~~with ~~are~~modern ~~sold~~policing techniques for de-escalation of encounters. AtWe ~~present,~~now ~~our cassettes~~focus ~~have~~on ~~lower~~also ~~margins~~teaching ~~than~~when and why BolaWrap ~~devices.~~should Asbe weused, ~~scale~~including ~~cassette~~the ~~production~~specific area of success, wesuch ~~will~~as ~~look~~after toverbal ~~reduce~~commands ~~our~~break ~~costs~~down and ~~drive~~before ~~higher cassette~~the ~~margins~~law enforcement officer is ready to escalate to less lethal pain compliance tools. ~~Cassettes~~We ~~were~~believe athat ~~total~~law ofenforcement ~~19%~~trainers ofand officers who have been trained to use our ~~product~~products, ~~sales~~or have witnessed demonstrations, are more inclined to support the acquisition and 6%deployment of ~~overall~~our ~~revenue~~products inby ~~the~~their ~~six~~respective ~~months~~departments ~~ended~~to ~~June~~drive successful outcomes. As of September 30, 2025, over ~~and~~ 1,590 isagencies ~~expected~~have toreceived ~~continue~~BolaWrap totraining ~~grow~~with asover a5,600 ~~recurring~~training ~~revenue~~officers ~~base~~at asthose ~~more~~agencies ~~BolaWrap~~certified ~~devices~~as ~~are~~BolaWrap ininstructors ~~the~~and ~~field~~qualified ~~and~~to train the ~~usage~~rest of ~~BolaWrap~~their ~~increases due~~departments, torepresenting ~~the~~a ~~need~~4% ofincrease ~~officers~~in toagencies ~~de-escalate~~and ~~earlier~~a to3% ~~prevent~~increase ~~injuries~~in trained ~~and~~officers ~~use~~as ofcompared ~~higher~~to ~~levels~~September of30, ~~force~~2024.

~~We regularly~~Operating ~~introduce~~expense ~~updates~~of ~~and~~$3.6 ~~revisions~~million tofor ~~our~~the ~~products,~~three ~~which~~months ~~may~~ended ~~include~~September ~~changes~~30, to2025 ~~raw~~decreased ~~materials~~by ~~and~~$0.3 ~~components~~million, ~~and~~when ~~can~~compared ~~impact on~~to ~~our product costs~~$3.9 ~~Given~~million ~~our~~for ~~limited~~the ~~experience~~three ~~with~~months ended ~~warranty~~September ~~costs~~30, ~~our~~2024, ~~estimated~~as ~~future~~a ~~warranty~~result ~~expense~~of ~~may~~the ~~affect~~Company’s ~~our~~ongoing ~~gross~~cost ~~margins. Our~~containment ~~global~~initiatives ~~supply~~enacted ~~chain~~beginning ~~has~~during ~~experienced~~the ~~notable~~first ~~component~~half ~~shortages,~~of ~~extended~~2024. ~~lead~~Operating ~~times,~~expense ~~cost fluctuations, and logistical constraints, all~~ of ~~which have affected our product costs~~$11.5 ~~Although~~million wefor ~~have~~the ~~seen~~nine ~~these~~months ~~supply~~ended ~~chain~~September ~~obstacles~~30, ~~ease in~~ 2025, wedecreased ~~acknowledge~~by ~~that~~$1.5 ~~future supplier shortages~~million, ~~quality~~when ~~problems,~~compared ~~and~~to ~~logistics~~$13.0 ~~delays~~million ~~could~~for ~~impact~~the ~~our~~nine ~~production~~months ~~schedules~~ended ~~and~~September ~~have a material negative impact on our financial condition~~30, ~~results of operation, and cash flows~~2024.

~~Selling~~Although geopolitical tensions and macroeconomic challenges have affected our quarterly results in the past and may in the future, we believe our Company ~~General~~ is uniquely positioned to provide lifesaving technologies and ~~Administrative~~training ~~Expense~~that enable law enforcement officers worldwide to conduct safe and effective encounters while reducing the use of force. With an increasing addressable market, the Company offers what we believe is a unique value proposition. Our improved pricing strategy, coupled with reduced operating expenses and our growing sales outlook, is expected to help reduce losses and improve cash flow in the future.

~~Selling, general~~We ~~and~~plan ~~administrative~~to ~~(“SG&A”)~~increase ~~expense~~the number of ~~$7.1~~product ~~million~~demonstrations ~~for~~and ~~the~~training ~~six~~sessions, ~~months~~particularly ~~ended~~in ~~June~~international ~~30,~~markets. ~~2025,~~Our ~~was~~new ~~reduced~~focus byon ~~$0.6 million~~the when ~~compared~~and towhy BolaWrap ~~$7.7~~is ~~million~~used ~~for~~has ~~the~~shown ~~six~~improved ~~months~~results. ~~ended~~This ~~June~~is ~~30,~~a ~~2024.~~departure ~~The~~from ~~decrease~~the inhardware ~~SG&A~~product ~~expense~~only ~~was~~approach ~~primarily~~of the ~~result of~~past. ~~the~~Our ~~Company’s~~sales ~~cost~~of ~~containment~~the ~~initiatives~~BolaWrap ~~enacted~~150 ~~beginning~~and ~~during~~Wrap ~~the~~Reality ~~first~~are ~~half~~expected ofto ~~2024~~continue ~~which~~to ~~were~~rise, ~~offset~~aided by anour ~~increase of~~ongoing ~~$1.2~~cost ~~million~~savings inand ~~share-based~~cost ~~compensation~~control measures, aswhich ~~well~~we asexpect byto ~~increased~~lead ~~occupancy expenses related~~ to ~~the~~an ~~new~~overall ~~the~~reduction ~~corporate~~in ~~office~~cash burn.

~~Share-based compensation~~As ~~costs~~of ~~allocated~~September to30, ~~SG&A~~2025, ~~totaled~~we had backlog of approximately $~~2.4~~80 ~~million~~thousand ~~for~~which was expected to be delivered in the ~~six~~fourth ~~months~~quarter ~~ended~~of ~~June~~2025. Additionally, as of September 30, 2025, ~~compared~~we tohad deferred revenue of $~~1.2~~400 ~~million~~thousand ~~for~~consisting ~~the six~~of ~~months~~$39 ~~ended~~thousand ~~June~~related ~~30,~~to ~~2024~~VR, ~~primarily~~$289 ~~due~~thousand related to ~~options~~Intrensic, ~~and~~$35 ~~grants~~thousand ~~issued~~related to ~~new~~BolaWrap ~~employees~~extended aswarranties aand ~~result~~services ofand ~~the~~$37 ~~acquisition~~thousand ofrelated W1to intraining. ~~February~~Distributor ~~2025,~~ and ascustomer ~~well~~orders asfor ~~incentives~~future ~~provided~~deliveries are generally subject to ~~certain~~modification, ~~key~~rescheduling ~~senior~~or ~~level~~in ~~management~~some instances, cancellation, in ~~2025~~the normal course of business.

26We believe that we have adequate financial resources to sustain our operations for the next twelve months. We recorded net loss from operations of $2.8 million during the three months ended September 30, 2025, compared to a net loss from operations of $3.6 million for the three months ended September 30, 2024; primarily driven by a decrease in operating expenses. For the nine months ended September 30, 2025 and September 30, 2024, we recorded net loss from operations of $9.5 and $10.9 million, respectively; primarily driven by a decrease in operating expenses. Net cash used in operations increased by $0.7 million, from a net cash used in operating activities of $6.9 million for the nine months ended September 30, 2024, to net cash used in operating activities of $7.6 million for the nine months ended September 30, 2025.

~~Salaries and~~We ~~burden~~expect ~~costs~~that ofwe ~~$1.9~~will ~~million~~continue ~~for~~to ~~the~~innovate ~~six~~new ~~months~~applications ~~ended June 30, 2025, were $564 thousand lower than the $1.0 million~~ for ~~the~~our ~~six~~public ~~months ended~~safety ~~June 30~~technology, ~~2024.~~open ~~This~~new ~~reduction~~geographies, ~~reflects~~develop ~~the~~new ~~reduction~~products ~~in the Company’s workforce including a reduction of certain executive~~and ~~management~~ technologies ~~positions. During the six months ended June 30, 2025, as compared~~ to ~~the~~meet ~~six~~diverse ~~months~~customer ~~ended~~requirements ~~June~~and ~~30,~~identify ~~2024,~~and ~~reflecting~~develop ~~the~~new ~~Company’s cost~~markets ~~containment~~for ~~efforts~~our products.

~~Advertising~~ Supply chain disruptions could also affect our operations and ~~promotion~~could ~~costs~~negatively ~~were~~impact ~~$189~~our ~~thousand~~ability ~~for~~to ~~the~~source ~~six~~materials, ~~months~~manufacture ~~ended~~and ~~June~~distribute products 30in the future. Moreover, ~~2025~~financial markets continue to experience significant volatility, which could potentially affect our ability to enter or amodify ~~decrease~~favorable ofterms and conditions regarding equity and debt financing activities. Nevertheless, we had $~~281~~6.0 ~~thousand~~million in cash and cash equivalents as of September 30, 2025 as compared to $~~470~~3.6 ~~thousand during~~million as of December 31, 2024. We therefore believe we have sufficient capital to fund our operations for the ~~six~~next twelve months ~~ended~~following ~~June~~the ~~30,~~date ~~2024~~of this Quarterly Report on Form 10-Q. ~~The~~However, ~~changes~~we inmay ~~advertising~~require ~~costs~~additional ~~were~~working ~~primarily~~capital ~~related~~and liquidity constraints and access to ~~reduced~~capital ~~trade~~markets ~~show~~could ~~costs~~still ~~offset by~~negatively ~~slight~~affect ~~increases~~our inliquidity ~~digital~~and ~~marketing~~may ~~campaigns~~require changes to our plan of operations.

~~Research and Development Expense~~ 28

~~Research~~ Our Company may be positively or negatively impacted by continued social unrest and ~~development~~protests ~~expenses~~against ~~totaling~~law ~~$732~~enforcement. ~~thousand~~Such ~~decreased~~unrest may be further fueled by ~~$702~~misleading ~~thousand~~information ~~for~~or ~~the~~negative ~~six~~publicity ~~months~~about ~~ended~~our ~~June~~solutions. ~~30,~~We ~~2025,~~believe ~~when~~our ~~compared~~solutions are the answer to reducing use of force and driving safer outcomes for officers and the citizens they interact with each day. Although the intensity of ~~six~~ these ~~months~~events ~~ended~~may ~~June~~have 30subsided, ~~2024~~some may still indirectly or directly, ~~primarily~~influence ~~due~~police agency budgets and the funding available to acurrent ~~reduction~~and inpotential ~~personnel~~customers. ~~Outside~~In ~~consulting~~addition, ~~costs~~participants ~~decreased~~in bythese ~~$21~~events ~~thousand~~may ~~for~~attempt ~~the six~~to ~~months~~create ~~ended~~the ~~June~~impression ~~30,~~that our ~~2025,~~solutions ~~when~~are ~~compared~~contributing to the ~~six~~perceived ~~months~~problems, ~~ended~~potentially ~~June~~harming ~~30,~~our ~~2024~~business and operations, ~~primarily~~including ~~due~~our torevenues, ~~the~~earnings, ~~Company’s~~and ~~cost~~cash ~~reduction initiatives~~flows from operations.

~~Operating~~Changes in our management and other critical personnel have the potential to positively or negatively affect our business. Such disruptions could have an ~~Loss~~ adverse impact on our operations, programs, growth, financial condition, or results of operations. On the other hand, improvements in our operations, operating expenses, and go-to-market approaches could positively influence the success of our business in the future.

~~Loss from~~Critical ~~operations~~Accounting ~~totaled~~Policies ~~$6.8~~and million during the six months ended June 30, 2025, which was a decrease of $0.5 million compared to loss from operations of $7.3 million during the six months ended June 30, 2024, reflecting the reduced revenues offset by lower operating costs from the Company’s cost containment efforts.Estimates

~~Liquidity~~The preparation of financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) requires us to make estimates and ~~Capital~~judgments ~~Resources~~that affect the reported amounts of assets, liabilities, revenue and expense, and related disclosure of contingent assets and liabilities. We evaluate our estimates, on an on-going basis, including those estimates related to recognition and measurement of contingencies and accrued expense. We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

~~Overview~~As part of the process of preparing our financial statements, we are required to estimate our provision for income taxes. Significant management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities, tax contingencies, unrecognized tax benefits, and any required valuation allowance, including taking into consideration the probability of the tax contingencies being incurred. Management assesses this probability based upon information provided by its tax advisers, its legal advisers and similar tax cases. If later our assessment of the probability of these tax contingencies changes, our accrual for such tax uncertainties may increase or decrease. Our effective tax rate for annual and interim reporting periods could be impacted if uncertain tax positions that are not recognized are settled at an amount which differs from our estimates.

~~Our primary~~Some ~~source~~ of ~~liquidity to date has been funding from~~ our ~~stockholders~~accounting ~~from~~policies ~~the~~require ~~sale~~higher ofdegrees ~~equity securities and the exercise~~ of ~~derivative securities,~~judgment ~~consisting~~than ofothers ~~options~~in ~~and warrants~~application. WeThese ~~expect~~include ~~our~~share-based ~~primary~~compensation ~~source~~and ofcontingencies and ~~future~~areas ~~liquidity~~such ~~will~~as berevenue ~~from~~recognition, ~~the~~allowance ~~sale~~for ofdoubtful ~~products~~accounts, ~~exercise~~ valuation of ~~stock~~inventory ~~options~~ and ~~warrants~~intangible ~~and~~assets, ~~future~~warranty ~~equity~~liabilities orand ~~debt financing~~impairments.

~~We have~~Revenue ~~experienced~~Recognition. ~~net~~We ~~losses~~sell ~~and~~our ~~negative~~products ~~cash~~to ~~flows~~customers ~~from~~including ~~operations~~law ~~since~~enforcement ~~our inception. As of June 30~~agencies, ~~2025,~~domestic wedistributors ~~had cash~~ and ~~cash~~international ~~equivalents~~distributors of and ~~$4.2~~revenue ~~million~~from ~~and~~such ~~had~~transactions ~~sustained~~is ~~cumulative~~recognized ~~losses~~in ~~attributable~~the toperiods ~~stockholders~~that ofproducts ~~$105.1~~are ~~million.~~shipped ~~Our~~(free ~~working~~on ~~capital~~board ~~net~~(“FOB”) ofshipping ~~the~~point) ~~warrants-short term~~or asreceived ofby ~~June~~customers ~~30,~~(FOB ~~2025~~destination), ~~was~~when ~~$3.6~~the ~~million~~fee ~~higher~~is ~~compared~~fixed toor ~~December~~determinable ~~31,~~and ~~2024,~~when ~~primarily~~collection ~~as a result~~ of ~~the~~resulting receivables ~~cash~~is ~~received~~reasonably inassured. ~~the~~We ~~Private Placement~~identify ~~offset~~customer byperformance ~~operating~~obligations, ~~losses~~determine ofthe ~~$6.8~~transaction ~~million~~price, ~~for~~allocate the ~~six~~transaction ~~months~~price ~~ended~~to ~~June~~the ~~30,~~performance ~~2025.~~obligations Weand ~~believe~~recognize werevenue ~~have~~as ~~sufficient~~we ~~capital~~satisfy ~~to fund our operations for~~ the ~~next~~performance ~~twelve~~obligations. ~~months~~Our primary ~~from~~performance ~~the~~obligations ~~date~~are ofproducts/accessories ~~this~~and ~~Quarterly~~VR ~~Report~~software onlicensing ~~Form~~or ~~10-Q~~sale. ~~However,~~Our ~~liquidity~~customers ~~constraints~~do ~~and access~~not tohave ~~capital~~the ~~markets~~right ~~could~~to ~~still~~return ~~negatively~~product ~~affect~~unless ~~our~~the ~~liquidity~~product ~~and~~is ~~may~~found ~~require changes~~ to ~~our~~be ~~investment strategy~~defective.

~~Capital~~Share-Based Compensation. We follow the fair value recognition provisions issued by the Financial Accounting Standards Board (“FASB”) in ~~Requirements~~ Accounting Standards Codification (“ASC”) Topic 718, Stock Compensation (“ASC 718”) and we adopted Accounting Standards Update (“ASU”) 2018-07 for share-based transactions with non-employees. Share-based compensation expense recognized includes stock option and restricted stock unit compensation expense. The grant date fair value of stock options is determined using the Black-Scholes option-pricing model. The grant date is the date at which an employer and employee or non-employee reach a mutual understanding of the key terms and conditions of a share-based payment award. The Black-Scholes option-pricing model requires inputs including the market price of the Company’s Common Stock on the date of grant, the term that the stock options are expected to be outstanding, the implied stock volatilities of several publicly traded peers over the expected term of stock options, risk-free interest rate and expected dividend. Each of these inputs is subjective and generally requires significant judgment to determine. The grant date fair value of restricted stock units is based upon the market price of the Company’s Common Stock on the date of the grant. We determine the amount of share-based compensation expense based on awards that we ultimately expect to vest and account for forfeitures as they occur. The fair value of share-based compensation is amortized to compensation expense over the vesting term.

Our future liquidity requirements or future capital needs will depend on, among other things, capital required to introduce new products and the operational staffing and support requirements, as well as the timing and amount of future revenue and product costs. We anticipate that demands for operating and working capital may grow depending on decisions on staffing, development, production, marketing, training and other functions and based on other factors outside of our control, including the timing of receipt of revenue.29

Allowance for Doubtful Accounts. Our products are sold to customers in many different markets and geographic locations. We estimate our bad debt ~~future~~ reserve ~~capital~~on ~~requirements,~~a ~~cash~~case-by-case ~~flows~~basis and ~~results~~the aging of ~~operations~~accounts ~~could~~due beto ~~affected~~a bylimited number of customers, ~~and~~mostly ~~will~~government ~~depend~~agencies or well-established distributors. We base these estimates on, many factors including customer creditworthiness, ~~some~~past transaction history with the customer, current economic industry trends and changes in customer payment terms. Our judgments and estimates regarding the collectability of ~~which are~~accounts ~~currently~~receivable ~~unknown~~have toan ~~us,~~impact ~~including,~~on ~~among~~our ~~other~~financial ~~things:~~statements.

●Valuation ~~Any~~of Inventory. Our inventory is comprised of raw materials, assemblies and finished products. We must periodically make judgments and estimates regarding the future ~~outbreaks~~utility ~~pandemics~~and orcarrying ~~contagious~~value ~~diseases~~of orour ~~fear~~inventory. The carrying value of ~~such~~our ~~outbreaks;~~inventory is periodically reviewed and impairments, if any, are recognized when the expected future benefit from our inventory is less than carrying value.

27Valuation of Intangible Assets. Intangible assets consisted of (a) capitalized legal fees and filing expense related to obtaining patents and trademarks, (b) customer agreements, tradenames, software, non-solicitation and non-compete agreements acquired in business combinations and valued at fair value at the acquisition date, and (c) the purchase cost of indefinite-lived website domains. We must make judgments and estimates regarding the future utility and carrying value of intangible assets. The carrying values of such assets are periodically reviewed and impairments, if any, are recognized when the expected future benefit to be derived from an individual intangible asset is less than carrying value. This generally could occur when certain assets are no longer consistent with our business strategy and whose expected future value has decreased.

●Accrued ~~Decisions~~Expense. ~~regarding~~We ~~staffing,~~establish ~~development,~~a ~~production,~~warranty ~~marketing~~reserve ~~and~~based ~~other~~on ~~functions;~~anticipated ●warranty ~~The~~claims ~~timing~~at ~~and~~the ~~extent~~time ofproduct ~~market~~revenue ~~acceptance~~is ofrecognized. ~~our~~This ~~products;~~reserve requires ●us ~~Costs,~~to ~~timing~~make ~~and~~estimates ~~outcome~~regarding ofthe ~~planned~~amount ~~production~~ and ~~required~~costs ~~customer~~of ~~and~~warranty ~~regulatory~~repairs ~~compliance~~we ofexpect ~~our~~to ~~products;~~make ●over ~~Costs~~a period of ~~preparing,~~time. ~~filing~~Factors ~~and~~affecting ~~prosecuting~~warranty ~~our~~reserve ~~patent~~levels ~~applications~~include ~~and~~the ~~defending~~number ~~any~~of ~~future~~units ~~intellectual~~sold, ~~property-related~~anticipated ~~claims;~~cost ●of ~~Costs~~warranty repairs, and anticipated ~~timing~~rates of ~~additional~~warranty ~~product~~claims. ~~development;~~We ●have ~~Costs,~~a ~~timing~~very ~~and~~limited ~~outcome~~history ofto ~~any~~make ~~future~~such ~~warranty~~estimates ~~claims~~and orwarranty ~~litigation~~estimates ~~against~~have usan ~~associated~~impact ~~with~~on ~~any~~our offinancial ~~our~~statements. ~~products;~~Warranty ●expense ~~Ability~~is torecorded ~~collect~~in ~~accounts~~cost ~~receivable;~~of ~~and~~revenue. ●We ~~Timing~~evaluate ~~and~~the ~~costs~~adequacy ~~associated~~of ~~with~~this ~~any~~reserve each ~~new~~reporting ~~financing~~period.

~~Principal~~Warrants. The Company accounts for warrants as liability-classified instruments based on an assessment of the warrant’s specific terms and ~~factors~~ applicable ~~that~~authoritative ~~could~~guidance ~~affect~~in ~~our~~Financial ~~ability~~Accounting toStandards ~~obtain~~Board ~~cash~~(“FASB”) ~~from~~Accounting ~~external~~Standards ~~sources~~Codification ~~including~~(“ASC”) 480, Distinguishing Liabilities from ~~exercise~~Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of ~~outstanding~~a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own shares of Common Stock and ~~options~~whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for ~~include:~~ equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. As of September 30, 2025, all warrants are classified as equity-classified instruments.

●Business ~~Volatility~~Combination. inThe Company accounts for its business combinations under the ~~capital~~provisions ~~markets;~~of Accounting Standards Codification (“ASC”) Topic 805-10, Business Combinations (“ASC 805-10”), which requires that the purchase method of accounting be used for all business combinations. Assets acquired and ●liabilities ~~Market~~assumed, ~~price~~including non-controlling interests, are recorded at the date of acquisition at their respective fair values. The estimated fair value of net assets acquired, including the allocation of the fair value to identifiable assets and ~~trading~~liabilities, ~~volume~~was determined using established valuation techniques. ASC 805-10 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of ~~our~~the ~~Common~~tangible ~~Stock~~net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred.

~~2023~~The estimated fair value of the acquired intangible assets was determined using a method which reflects the present value of the operating cash flows ~~Offering~~ generated by this asset after taking into account the cost to realize the revenue, and an appropriate discount rate to reflect the time value and risk associated with the invested capital.

~~On June~~Certain ~~29,~~adjustments ~~2023,~~to the ~~Company~~assessed ~~entered~~fair ~~into~~values aof ~~Series Purchase Agreement (“Series A Purchase Agreement”) with certain accredited investors, including~~ the ~~Company’s~~assets ~~Executive Chairman~~ and ~~Chief~~liabilities ~~Executive~~made ~~Officer~~subsequent ~~(collectively, the “Series A Investors”), pursuant~~ to ~~which it agreed to sell to~~ the ~~Series~~acquisition ~~A Investors in a registered direct offering (the “Series A Offering”) (i) an aggregate of 10~~date,~~000~~ ~~shares~~but ofwithin ~~Series A Preferred Stock, initially convertible into up to 6,896,553 shares of~~ the ~~Company’s~~measurement ~~Common Stock~~period, which atis ~~an initial conversion price of $1.45 per share, and (ii) warrants (the “Series A Warrants”) to acquire~~ up to ~~an aggregate~~one ~~of 6~~year,~~896,553~~ ~~shares~~are ofrecorded ~~Common~~as ~~Stock (the “Series A Warrant Shares”). The conversion price of the Series A Preferred Stock is subject to customary~~ adjustments ~~for stock dividends, stock splits, reclassifications and the like, and subject~~ to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable conversion price (subject to certain exceptions)goodwill. ~~The~~Any ~~closing~~adjustments ofsubsequent ~~the Series A Offering occurred on July 3, 2023. The aggregate gross proceeds from the Series A Offering were $10 million. The Company expects~~ to ~~use~~ the ~~net~~measurement ~~proceeds~~period ~~from the~~are ~~Series~~recorded Ain ~~Offering for general corporate purposes~~income.

~~The Company~~Historically, ~~engaged~~our ~~Katalyst~~assumptions, ~~Securities~~judgments ~~LLC~~and ~~(the~~estimates ~~“Placement~~relative ~~Agent”)~~ to ~~act~~our ascritical ~~exclusive~~accounting ~~placement~~policies ~~agent~~have innot ~~connection~~differed ~~with~~materially ~~the Series~~from Aactual ~~Offering~~results. There ~~Pursuant~~were tono ansignificant ~~Engagement~~changes ~~Letter~~or ~~with~~modification ~~the~~of ~~Placement~~our ~~Agent,~~critical weaccounting ~~paid~~policies toand ~~the~~estimates ~~Placement~~involving ~~Agent~~management orvaluation ~~its~~adjustments ~~designees~~affecting ~~(i)~~our aresults ~~cash~~for the period ~~fee~~ ended ~~equal~~September to30, 8%2025. ofOur ~~the~~accounting ~~gross~~policies ~~proceeds~~are ofmore ~~the~~fully ~~Series~~described Ain ~~Offering~~Note 1. Organization and ~~(ii)~~Summary ~~warrants~~of toSignificant ~~purchase~~Accounting anPolicies ~~aggregate~~in ofthe ~~551,725~~notes ~~shares~~to ofour ~~Common Stock~~audited ~~(equal~~consolidated tofinancial 8%statements ofincluded ~~the~~in ~~shares~~our ofAnnual ~~Common~~Report ~~Stock~~on ~~underlying~~Form 10-K for the ~~Series~~year Aended ~~Preferred~~December ~~Stock~~31, ~~sold~~2024, inas filed with the ~~Series~~SEC Aon ~~Offering)~~March at31, an2025, ~~exercise price~~as ofamended ~~$1.45~~on ~~per~~April ~~share~~25, 2025.

2830

~~Series A~~Segment ~~Preferred~~and ~~Stock~~Related Information

~~On July~~The ~~3, 2023, the~~ Company ~~filed~~operates the Certificate of Designations of the Series A Preferred Stock (the “Certificate of Designations”) with the Secretary of State of the State of Delaware, designating 10,000 shares of its Preferred Stock as ~~Series~~a Asingle ~~Convertible Preferred Stock~~segment. The ~~Series~~Company’s Achief ~~Preferred~~operating ~~Stock~~decision maker is ~~convertible~~Scot ~~into~~Cohen, ~~shares of Common Stock (~~the ~~“Conversion~~Company’s ~~Shares”)~~Executive atChairman ~~the~~and ~~election~~Chief of Executive ~~the~~Officer, ~~holder~~who atmanages ~~any~~operations ~~time~~for atpurposes ~~an initial conversion price~~ of ~~$1.45~~allocating ~~(the “Conversion Price”)~~resources. ~~The~~Refer ~~Conversion Price is subject~~ to ~~customary~~Note ~~adjustments~~15. ~~for~~Major ~~stock~~Customers ~~dividends, stock splits, reclassifications~~ and ~~the~~Related ~~like~~Information, ~~and subject~~ to ~~price-based~~our ~~adjustment~~unaudited ~~in the~~condensed ~~event~~consolidated offinancial ~~any~~statements ~~issuances~~ of ~~Common~~this ~~Stock,~~Quarterly orReport ~~securities~~on ~~convertible,~~Form ~~exercisable~~10-Q ~~or exchangeable~~ for ~~Common~~further ~~Stock, at a price below the then-applicable Conversion Price (subject to certain exceptions)~~discussion.

~~The holders~~Operating of the Series A Preferred Stock are entitled to dividends of 8% per annum, compounded monthly, which are payable in cash or shares of Common Stock, or a combination thereof, at the Company’s option in accordance with the terms of the Certificate of Designations. Upon the occurrence and during the continuance of a Triggering Event (as defined in the Certificate of Designations), the Series A Preferred Stock will accrue dividends at the rate of 20% per annum. If the Company elects to pay any dividends in shares of Common Stock, the Conversion Price used to calculate the number of shares issuable will equal to the lower of (i) the then applicable Conversion Price and (ii) 85% of the arithmetic average of the three (3) lowest closing prices of the Company’s Common Stock during the twenty (20) consecutive trading day period ending on the trading day immediately preceding the dividend payment date, provided that such price shall not be lower than the lower of (x) $0.2828 (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events ) and (y) 20% of the “Minimum Price” (as defined in Nasdaq Stock Market Rule 5635) on the date of the Stockholder Approval (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) or, in any case, such lower amount as permitted, from time to time, by the Nasdaq Stock Market.Expense

~~On August~~Our ~~19,~~operating ~~2024,~~expense ~~the~~includes ~~Company entered into an Amendment Agreement~~ (~~the “August 2024 Amendment”~~i) ~~with~~selling, ~~the~~general ~~Required~~and ~~Holders (as~~administrative ~~defined in the Certificate of Designations). Pursuant to the August 2024 Amendment~~expense, ~~the Required Holders agreed that~~ (Aii) ~~the~~research ~~unpaid~~ and ~~accrued~~development ~~dividends on the Series A Preferred Stock due July 1~~expense, ~~2024~~and (in the ~~“July~~most ~~Delinquent~~recent ~~Dividend Amount”), shall be~~fiscal ~~payable~~ quarter, ~~at the option of the Company, in (i) cash~~ and~~/or~~ (iiiii) ~~shares~~product ofline ~~Common~~exit ~~Stock, at a price per share of Common Stock equal to the lower of (x) $1~~expense.00 Research and ~~(y)~~development ~~the~~expense ~~Dividend~~is ~~Conversion~~comprised ~~Price (as defined in the Certificate~~ of ~~Designations), using July 1, 2024, as~~ the ~~applicable~~costs ~~date~~incurred ~~of determination~~ in ~~accordance~~performing ~~with~~research ~~the~~and ~~Certificate~~development ofactivities ~~Designations;~~and ~~(B)~~developing ~~the~~production ~~dividends due~~ on ~~October~~our 1behalf, ~~2024~~including ~~(the “October~~compensation ~~Dividend Amount”~~ and, ~~together with the July Delinquent Dividend Amount~~consulting, ~~the “Delinquent Dividend Amounts”),~~design shall be payable in shares of Common Stock based on a per share price of Common Stock equal to 80% of the arithmetic average of the three (3) lowest closing sale prices of the Common Stock during the month of September 2024; and ~~(C)~~prototype ~~such Delinquent Dividend Amounts and any Dividend Balance Shares (as defined in the Certificate of Designations)~~costs, ~~with~~contract ~~respect thereto~~services, ifpatent ~~applicable,~~costs ~~shall~~and beother ~~delivered~~outside ~~on October 1, 2024~~expense. The ~~Company~~scope and ~~the~~magnitude ~~Required~~of ~~Holders~~our ~~further~~future ~~agreed~~research ~~pursuant~~and todevelopment ~~the~~expense ~~August~~is ~~2024~~difficult ~~Amendment~~ to ~~amend~~predict ~~(i)~~at ~~the~~this ~~Certificate~~time ofand ~~Designations, as~~will ~~described~~depend ~~below,~~on byelections ~~filing~~made aregarding ~~Certificate~~research ofprojects, staffing ~~Amendment~~levels toand ~~the~~outside ~~Certificate~~consulting ~~of Designations (the “August 2024 Certificate of Amendment”)~~ and ~~(ii)~~contract ~~the Series A Purchase Agreement to amend the definition of “Excluded Securities~~costs.” The ~~August~~future ~~2024~~level ~~Certificate~~ of ~~Amendment~~ ~~amends the Certificate of Designations to~~selling, ~~among~~general ~~other~~and ~~things,~~administrative ~~(A)~~expense ~~allow~~will ~~for~~be ~~the~~dependent ~~payment~~on ofstaffing ~~dividends~~levels, inelections ~~the~~regarding ~~form~~expenditures ofon ~~Common Stock~~sales, tomarketing aand ~~holder~~customer ~~of the Series A Preferred Stock who serves as a director~~training, ~~officer or employee of~~ the ~~Company;~~use ~~provided that such issuance~~of is outside ~~approved~~resources, bypublic ~~the~~company ~~Company’s stockholders prior to such issuance,~~ and ~~(B)~~regulatory ~~amend certain conditions required for (i) a mandatory conversion of the Series A Preferred Stock~~expense, and ~~(ii)~~other ~~the Company’s right to redeem~~factors, ~~all~~some ~~or a portion,~~ of ~~the~~which ~~Series~~are Aoutside ~~Preferred Stock outstanding pursuant to an optional redemption, in each case, pursuant to the terms~~ of ~~the~~our ~~Certificate of Designations~~control.

~~On October~~We ~~14,~~expect ~~2024,~~our ~~the~~operating ~~Company~~costs ~~entered into an Amendment Agreement with the Required Holders (as defined in the Certificate of Designations), pursuant~~ to ~~which,~~remain ~~the~~flat ~~Required~~or ~~Holders~~slightly ~~agreed~~increase todepending ~~amend~~on the ~~Certificate~~scope of ~~Designations~~additional ofsales ~~the~~and ~~Company’s~~marketing ~~Series A Preferred Stock, as described below, by filing a Certificate of Amendment to the Certificate of Designations (the “October 2024 Certificate of Amendment”)~~initiatives. ~~The~~ ~~October~~We ~~2024~~may ~~Certificate of Amendment amends the Certificate of Designations to, among other things, provide that, except as required~~incur by additional ~~applicable~~non-cash ~~law,~~share-based ~~the~~compensation ~~holders~~costs ofdepending ~~the Series A Preferred Stock will be entitled to vote with holders of the Common Stock~~ on anfuture asoptions converted basis, with the number of votes to which each holder of Series A Preferred Stock is entitled to be calculated assuming a conversion price of $1.414 per share, which was the Minimum Price (as defined in Rule 5635 of the Rule of the Nasdaq Stock Market) applicable immediately before the execution and ~~delivery~~restricted ofstock ~~the~~unit ~~Series~~grants ~~A Purchase Agreement, subject to certain beneficial ownership limitations as set forth in the Certificate of Designations. The October 2024 Certificate of Amendment further provides~~ that ~~(i)~~are ~~certain~~impacted ~~holders~~by ofstock ~~the~~prices ~~Series A Preferred Stock will not be subject to certain beneficial ownership limitations as described in the Certificate of Designations,~~ and ~~(ii)~~ ~~stockholder~~other ~~approval~~valuation ~~will not be required in connection with the payment of dividends in the form of Common Stock to a holder of the Series A Preferred Stock who serves as a director, officer or employee of the Company~~factors. ~~The~~Historical ~~October~~expenditures ~~2024~~are ~~Certificate~~not ofindicative ~~Amendment was filed with the Secretary~~ of ~~State~~future ~~of the State of Delaware, effective as of October 14, 2024~~expenditures. ~~The holders of the Series A Preferred Stock have no voting rights, other than with respect to certain matters affecting the rights of the Series A Preferred Stock.~~

29Results of Operations

~~On November~~Three ~~25,~~Months ~~2024,~~Ended ~~the~~September ~~Company entered into an Amendment and Agreement with the Series A Investors (the “November 2024 Amendment Agreement”)~~30, ~~pursuant to which~~2025, ~~(i)~~Compared ~~the Series A Investors agreed~~ to ~~amend~~Three ~~the~~Months ~~Certificate~~Ended ofSeptember ~~Designations~~30, ~~as described below, by filing a Certificate of Amendment to the Certificate of Designations with the Secretary of State (the “November~~ 2024 ~~Certificate of Amendment”), and~~ (iiUnaudited) the Series A Investors and the Company agreed that all payment amounts that have accrued and are unpaid as of November 25, 2024, pursuant to the Certificate of Designations and the August 2024 Amendment will be satisfied by delivery of shares of Common Stock on or prior to November 25, 2024, with each Series A Investor entitled to receive the number of shares of Common Stock specified below such Series A Investor’s name on its respective signature page thereto. The November 2024 Certificate of Amendment amends the Certificate of Designations to provide that upon the occurrence of a Triggering Event (as defined in the Certificate of Designations), the Series A Preferred Stock will accrue dividends compounded monthly at the rate of 20% per annum. The Certificate of Amendment became effective with the Secretary of State on December 6, 2024.

The ~~Company~~ ~~may~~following ~~require~~table ~~holders~~sets toforth ~~convert~~for ~~their~~the ~~shares~~periods ofindicated ~~Series~~certain Aitems ~~Preferred Stock into shares~~ of ~~Common~~our ~~Stock~~condensed ifconsolidated ~~the~~statement ~~closing price~~ of ~~the Company’s Common Stock exceeds $8~~operations.00 ~~per~~The ~~share~~financial ~~(subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations~~information ~~or other similar events) for 20 consecutive trading days~~ and the ~~daily~~discussion ~~dollar~~below ~~trading~~should ~~volume~~be ofread ~~the~~in ~~Common~~conjunction ~~Stock~~with ~~exceeds $2,000,000 per day during~~ the ~~same~~financial ~~period,~~statements ~~provided~~and ~~that~~notes ~~certain~~contained ~~equity conditions described~~ in ~~the~~this ~~Certificate~~Quarterly ofReport ~~Designations~~on ~~are~~Form ~~satisfied~~10-Q.

At any time beginning 18 months from the date of the issuance, provided that provided that that the Company has filed all reports required to be filed by it pursuant to the Exchange Act on a timely basis for a continuous period of one year and provided further that certain equity conditions described in the Certificate of Designations are satisfied, the Company has the right to redeem in cash all or some of the shares of the Series A Preferred Stock outstanding at such time at a redemption price equal to the product of (x) 125% multiplied by (y) the sum of (A) the stated value of the Series A Preferred Stock plus (B) all declared and unpaid Dividends on such Preferred Stock and any other unpaid amounts then due and payable hereunder with respect to such Series A Preferred Stock, plus (C) the make-whole amount, plus (D) any accrued and unpaid late charges with respect to such stated value and amounts payable pursuant to clause (B) as of such date of determination.


	Three Months Ended September 30,						Change
		2025			2024			$		%
				(in thousands, except percentage change)
Revenues:
Product sales	$	1,743		$	434		$	1,309		302	%
Managed services		242			-			242		-	%
Technology enabled services		37			159			(122	)	(77	)%
Total revenues, gross		2,022			593			1,429		241	%
Sales returns and allowances		(531	)		-			(531	)	-	%
Total revenues, net		1,491			593			898		151	%
Cost of revenue		608			358			250		70	%
Gross profit		883			235			648		276	%

Operating Expenses:
Selling, general and administrative		3,477			3,334			143		4	%
Research and development		167			527			(360	)	(68	)%
Total operating expenses		3,644			3,861			(217	)	(6	)%
Loss from operations	$	(2,761	)	$	(3,626	)	$	865		(24	)%

The Certificate of Amendment amends the Certificate of Designations to, among other things, (A) allow for the payment of dividends in the form of Common Stock to a holder of the Series A Preferred Stock who serves as a director, officer or employee of the Company; provided that such issuance is approved by the Company’s stockholders prior to such issuance, and (B) amend certain conditions required for (i) a mandatory conversion of the Series A Preferred Stock, and (ii) the Company’s right to redeem, all or a portion, of the Series A Preferred Stock outstanding pursuant to an optional redemption, in each case, pursuant to the terms of the Certificate of Designations.Revenue

~~There is~~We noreported ~~established~~gross ~~public~~revenue ~~trading~~for ~~market~~the three months ended September 30, 2025 of $2.0 million, an increase of 241% compared to the three months ended September 30, 2024. We reported net revenue of $1.5 million for the ~~Series~~three Amonths ~~Preferred~~ended ~~Stock~~September 30, 2025, as compared to $593 thousand for the three months ended September 30, 2024, or a 151% increase. The gross revenue and wenet dorevenue ~~not~~for ~~intend~~the three months ended September 30, 2025 was offset by a sales return and allowances of $0.5 million related to ~~list~~the return of product from a distributor in connection with a change in the ~~Series~~Company’s Ago-to-market ~~Preferred~~strategy. ~~Stock~~The ~~on any~~increase ~~national~~for ~~securities~~the ~~exchange~~three ormonths ~~nationally~~ended ~~recognized~~September ~~trading~~30, ~~system~~2025, as compared to September 30, 2024, is primarily a result of increases in product sales combined with added revenue from managed services. 

~~Warrants~~31

~~The Company~~Gross issued the Series A Warrants to purchase up to an aggregate of 6,896,553 shares of Common Stock. Each Series A Warrant has an exercise price of $1.45 per share, became exercisable after the date that was six months from the date of issuance and will expire 5 years following the date of issuance. The exercise price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable exercise price (subject to certain exceptions).  Profit

~~On June~~Our ~~30,~~gross ~~2025,~~profit ~~the~~for ~~Company entered into a warrant amendment (~~the ~~“Series~~three Amonths ~~Warrant~~ended ~~Amendment”)~~September ~~with~~30, ~~the Required Holders (as defined in the Series A Purchase Agreement)~~2025, ~~pursuant~~was to$0.9 ~~which~~million, ~~the~~or ~~Required~~a ~~Holders~~gross ~~agreed~~margin ~~to amend the terms~~ of ~~the~~59%. ~~Series~~Our Agross ~~Warrants to~~profit ~~make~~for ~~certain adjustments to~~ the ~~definition~~three ofmonths ~~“Black~~ended ~~Scholes~~September ~~Value”~~30, ~~in each of the Series A Warrants~~2024, aswas ~~described~~$235 ~~in the Series A Warrant Amendment~~thousand, ~~such~~or ~~that~~a ~~the~~gross ~~underlying~~margin ~~price~~of ~~per~~40%. ~~share~~The asincrease ~~used~~ in ~~such~~gross ~~calculation~~profit ~~equals~~represented ~~the~~a ~~sum~~276% ofincrease ~~the~~compared ~~price~~to ~~per share being offered in cash in~~ the ~~applicable~~three ~~Fundamental~~months ~~Transaction~~ended ~~(as~~September ~~defined in the Series A Warrants)~~30, ~~if any~~2024, ~~plus~~because ~~the value~~ of ~~the~~ ~~non-cash~~increased ~~consideration~~volume ~~being~~of ~~offered in~~ the ~~applicable~~Bola ~~Fundamental~~Wrap ~~Transaction,~~150 ifproduct ~~any.~~sales Asand ~~consideration for entering into~~ the ~~Series~~added high-margin A revenue ~~Warrant~~from ~~Amendment,~~ the Company’s ~~and~~acquisition ~~the Required Holders agreed to amend the term~~ of ~~the~~W1 ~~Series~~in AFebruary ~~Warrants to be six and one-half years from the date of issuance~~2025.

Our margins are subject to variations based on the sales channels and product mix through which our products are sold. At present, our cassettes have lower margins than BolaWrap devices. As we scale cassette production, we will look to reduce our costs and drive higher cassette margins. Cassettes were a total of 6% of product sales and 7% of our overall revenue in the three months ended September 30, 2025, and is expected to continue to grow as a recurring revenue base as more BolaWrap devices are in the field and the usage of BolaWrap increases.

~~Nasdaq~~Our global supply chain has experienced notable component shortages, extended lead times, cost fluctuations, and logistical constraints, all of which ~~Stockholder~~ have ~~Approval~~affected our product costs. Although we have seen these supply chain obstacles ease in 2025, we acknowledge that future supplier shortages, quality problems, and logistics delays could impact our production schedules and have a material negative impact on our financial condition, results of operation, and cash flows.

~~The Company’s~~Selling, ~~ability~~General ~~to issue Conversion Shares~~ and ~~Series~~Administrative A Warrant Shares using shares of Common Stock is subject to certain limitations set forth in the Certificate of Designations. Prior to receiving the Nasdaq Stockholder Approval, such limitations included a limit on the number of shares that may be issued until the time, if any, that the Company’s stockholders have approved the issuance of more than 19.99% of the Company’s outstanding shares of Common Stock in accordance with the rules of the Nasdaq Stock Market (the “Nasdaq Stockholder Approval”). Such Nasdaq Stockholder Approval was received at a special meeting of stockholders held on September 19, 2023.Expense

Selling, general and administrative (“SG&A”) expense of $3.5 million for the three months ended September 30, 2025 ~~Offering~~, an increase of $0.2 million when compared to $3.3 million for the three months ended September 30, 2024. The increase in SG&A expense was primarily the result of increased professional fees.

~~On February~~Share-based ~~24,~~compensation ~~2025,~~costs ~~the~~allocated ~~Company~~to ~~entered~~SG&A ~~into~~totaled a$0.6 ~~securities~~million ~~purchase~~for ~~agreement (~~the ~~“PIPE~~three ~~Purchase~~months ~~Agreement”)~~ended ~~with~~September ~~certain accredited investors (collectively~~30, ~~the “PIPE Purchasers”) for the issuance and sale in a private placement (the “Private Placement”) of an aggregate of 3~~2025,~~216,666~~ ~~shares~~compared ~~(the “Common Shares”) of Common Stock and accompanying warrants (“PIPE Warrants”)~~ to ~~purchase up to 3,216,666 shares of Common Stock, with an exercise price of~~ $10.809 ~~per~~million ~~share. The purchase price~~ for the ~~one~~ three ~~Common~~months ~~Share~~ended ~~and~~September ~~accompanying~~30, ~~PIPE~~2024, ~~Warrant~~primarily ~~was~~due ~~$1.80. The gross proceeds~~ to the ~~Company~~cancellation ~~were~~or ~~$5,790~~forfeiture ~~before~~of ~~estimated~~options ~~offering~~and ~~expenses payable by the Company~~grants.

OnSalaries ~~June~~and ~~30,~~burden ~~2025,~~costs ~~the~~of ~~Company~~$1.1 ~~entered~~million ~~into~~for ~~a warrant amendment (~~the ~~“2025~~three ~~Warrant~~months ~~Amendment”)~~ended ~~with~~September ~~certain of the PIPE Purchasers~~30, ~~pursuant to which~~2025, ~~such~~were ~~PIPE~~$0.2 ~~Purchasers~~million ~~agreed to~~higher ~~amend~~than the ~~terms~~three ofmonths ~~their~~ended ~~respective~~September ~~PIPE~~30, ~~Warrants~~2024. This toincrease ~~make~~reflects ~~certain adjustments to~~ the ~~definition~~addition of ~~“Black~~high-caliber ~~Scholes~~talent ~~Value,” as~~offset ~~described~~by ina ~~the~~decrease ~~2025 Warrant Amendment, such that the underlying price per share as used~~ in ~~such calculation equals the sum of the price per~~ share-based ~~being~~compensation, ~~offered~~coupled inwith ~~cash~~ongoing incost ~~the~~containment ~~applicable Fundamental Transaction (as defined in the PIPE Warrants)~~efforts, ifduring ~~any, plus~~ the ~~value of~~three ~~the~~months ~~non-cash~~ended ~~consideration~~September ~~being offered in the applicable Fundamental Transaction~~30, ~~if any. As consideration for entering into the~~ 2025 ~~Warrant Amendment~~, ~~the~~as ~~Company~~compared ~~and the applicable PIPE Purchasers agreed~~ to ~~amend~~ the ~~term~~three ofmonths ~~their~~ended ~~respective~~September ~~PIPE~~30, ~~Warrants to be five and one-half years from the date of issuance~~2024.

~~Off-Balance~~Advertising and promotion costs were $80 thousand for the three months ended September 30, 2025, or a decrease of $1 thousand as compared to $81 thousand ~~Sheet~~ during ~~Arrangements~~the three months ended September 30, 2024. The changes in advertising costs were primarily related to increased promotion and advertising activities, partially offset by decreases in tradeshow and promotional item expenses.

~~The Company~~Research has not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties. The Company has not entered into any derivative contracts that are indexed to the Company’s shares and ~~classified~~Development as stockholder’s equity or that are not reflected in the Company’s financial statements included in this Quarterly Report on Form 10-Q. Furthermore, the Company does not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. The Company does not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.Expense 

~~Cash~~Research and development expenses totaling $167 thousand decreased by $360 thousand for the three months ended September 30, 2025, when compared to the three ~~Flows~~ months ended September 30, 2024. We incurred a $375 thousand period-over-period decrease in compensation expense as well as a $12 thousand period-over-period decrease in share-based compensation expense allocated to research and development expense because of reduction of personnel. Outside consulting costs decreased by $21 thousand for the three months ended September 30, 2025, when compared to the three months ended September 30, 2024, primarily due to the Company’s cost reduction initiatives.

~~Cash Flows from~~ Operating ~~Activities~~Loss

~~During~~ Loss from operations of $2.8 million during the ~~six~~three months ended ~~June~~September 30, 2025, ~~net cash used in operating activities~~ was ~~$5.0~~an ~~million.~~improvement ~~The net loss~~ of $30.69 million ~~was~~compared ~~decreased by~~to ~~non-cash~~loss ~~income~~from ofoperations of $3.26 million ~~related~~during to the ~~change~~three inmonths ~~fair~~ended ~~value~~September of30, ~~warrants~~2024, ~~and increased by non-cash expense of $8.2 million consisting~~ primarily ofreflecting ~~share-based~~the ~~compensation~~increased ~~and~~revenues ~~depreciation~~offset ~~and~~by ~~amortization~~lower ~~of $304 thousand. Other major component changes using~~ operating ~~cash~~costs ~~included~~from athe ~~decrease~~Company’s ofcost ~~$156~~containment ~~thousand in prepaids and a $453 thousand decrease in accounts receivable as well as a decrease in accrued liabilities of $523 thousand~~efforts.

During the six months ended June 30, 2024, net cash used in operating activities was $7.2 million. The net loss of $268 thousand was decreased by non-cash income of $6.9 million related to the change in fair value of warrants and increased by non-cash expense of $918 thousand consisting primarily of share-based compensation expense. Other major component changes using operating cash included a decrease of $707 thousand in inventories and a decrease in accounts receivable of $236 thousand.32

~~Cash Flows~~Nine ~~from~~Months ~~Investing~~Ended ~~Activities~~September 30, 2025, Compared to Nine Months Ended September 30, 2024 (Unaudited)

~~During the~~The ~~six~~following ~~months~~table ~~ended~~sets ~~June~~forth ~~30,~~for ~~2025,~~the ~~net~~periods ~~cash~~indicated ~~used~~certain initems ~~investing~~of ~~activities~~our ~~was~~condensed ~~$152~~consolidated ~~thousands~~statement of ~~cash~~operations. ~~for~~The financial information and the ~~acquisition~~discussion ofbelow W1should be read in conjunction with the financial statements and ~~investment~~ notes contained in ~~patents~~this Quarterly Report on Form 10-Q.


	Nine Months Ended September 30,						Change
		2025			2024			$		%
				(in thousands, except percentage change)
Revenues:
Product sales	$	2,293		$	3,012		$	(719	)	(24	)%
Managed services		1,241			-			1,241		-	%
Technology enabled services		265			630			(365	)	(58	)%
Total revenues, gross		3,799			3,642			157		(4	)%
Sales returns and allowances		(531	)		-			(531	)	-	%
Total revenues, net		3,268			3,642			(374	)	(10	)%
Cost of revenue		1,303			1,587			(284	)	(18	)%
Gross profit		1,965			2,055			(90	)	(4	)%

Operating Expenses:
Selling, general and administrative		10,887			11,029			(142	)	(1	)%
Research and development		619			1,960			(1,341	)	(68	)%
Total operating expenses		11,506			12,989			(1,483	)	(11	)%
Loss from operations	$	(9,541	)	$	(10,934	)	$	1,393		(13	)%

During the six months ended June 30, 2024, we had net cash provided by investing activities totaling $4.9 million from proceeds from maturities of short-term investments of $5.0 million. During the six months ended June 30, 2024, we used $13 thousand cash for the purchase of property and equipment and invested $97 thousand in patents and equipment.Revenue

~~Cash Flows~~Gross revenue totaled $3.8 million for the nine months ended September 30, 2025, as compared to $3.6 million in the three months ended September 30, 2024. Net revenue totaled $3.3 million for the nine months ended September 30, 2025, as compared to $3.6 million for the nine months ended September 30, 2024, or a 10% decrease. The gross revenue and net revenue for the nine months ended September 30, 2025 was offset by a sales return and allowances of $0.5 million related to the return of product from ~~Financing~~a ~~Activities~~distributor in connection with a change in the Company’s go-to-market strategy. The decrease for the nine months ended September 30, 2025, as compared to September 30, 2024, is primarily a result of lower product orders offset by the added managed services revenue from the acquisition of the W1 business.

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

~~During~~ Our gross profit for the ~~six~~nine months ended ~~June~~September 30, ~~2024~~2025, ~~net~~was ~~cash~~$2.0 ~~provided~~million, byor ~~financing~~a ~~activities~~gross margin of 61%. Our gross profit for the nine months ended September 30, 2024, was $~~468~~2.1 ~~thousand~~million, ~~because~~or a gross margin of ~~proceeds~~56%. ~~from~~The decrease in gross profit represented a 4% decrease compared to the ~~exercise of~~nine ~~previously~~months ~~issued~~ended ~~stock~~September ~~options~~30, 2024, because of ~~$588~~lower ~~thousand~~volume ~~offset~~of ~~$120~~the ~~thousand~~Bola inWrap ~~cash~~150 ~~dividends~~product ~~paid~~sales onoffset by the added high-margin revenue from the Company’s ~~Series~~acquisition Aof ~~Preferred Stock~~W1 in February 2025.

~~Contractual~~Our margins are also subject to variations based on the sales channels and product mix through which our products are sold. At present, our cassettes ~~Obligations~~ have lower margins than BolaWrap devices. As we scale cassette production, we will look to reduce our costs and ~~Commitments~~drive higher cassette margins. Cassettes were a total of 9% of our product sales and 6% of overall revenue in the nine months ended September 30, 2025, and is expected to continue to grow as a recurring revenue base as more BolaWrap devices are in the field and the usage of BolaWrap increases due to the need of officers to de-escalate earlier to prevent injuries and use of higher levels of force.

~~In September~~We ~~2023~~regularly introduce updates and revisions to our products, wewhich ~~committed~~may include changes to araw ~~lease~~materials and components, and can impact on our product costs. Given our limited experience with warranty costs, our estimated future warranty expense may affect our gross margins. Our global supply chain has experienced notable component shortages, extended lead times, cost fluctuations, and logistical constraints, all of ~~office~~which ~~space~~have affected our product costs. Although we have seen these supply chain obstacles ease in ~~Coconut~~2025, ~~Grove~~we acknowledge that future supplier shortages, ~~Florida~~quality inproblems, aand ~~multi-year~~logistics ~~term~~delays ~~concluding~~could inimpact ~~2031~~our ~~which~~production ~~includes~~schedules ~~aggregate~~ and ~~lease~~have ~~payments~~a ~~remaining~~material ~~totaling~~negative ~~$3.5~~impact ~~million~~on our financial condition, results of operation, and cash flows.

As of June 30, 2025, we were committed to approximately $509 thousand for future component deliveries and contract services that are generally subject to modification or rescheduling in the normal course of business.33

~~Anticipated to begin in October 2025~~Selling, weGeneral ~~committed to a lease of manufacturing~~ and ~~office~~Administrative ~~space in Southwest Virginia in a multi-year term concluding in 2031, which includes aggregate lease payments remaining totaling $600 thousand.~~Expense

~~Effects~~Selling, general and administrative (“SG&A”) expense of $10.9 million for the nine months ended September 30, 2025, was reduced by $0.1 million when compared to $11.0 million for the nine months ended September 30, 2024. The decrease in SG&A expense was primarily the result of ~~Inflation~~the Company’s cost containment initiatives enacted beginning during the first half of 2024 which were offset by an increase of $1.0 million in share-based compensation.

~~During the~~Share-based ~~six~~compensation ~~months~~costs ~~ended~~allocated ~~June~~to ~~30,~~SG&A ~~2025,~~totaled ~~and~~$3.1 million for the ~~year~~nine months ended ~~December~~September 3130, ~~2024~~2025, wecompared ~~experienced~~to ~~increased~~$1.8 ~~costs~~million infor ~~labor~~the ~~and~~nine ~~materials~~months ~~due to~~ended ~~inflation.~~September We30, ~~believe~~2024, ~~throughout~~primarily ~~2025~~due ~~that~~to ~~low~~options ~~unemployment~~ and ~~higher~~grants ~~salaries~~issued ~~will~~to ~~create~~new ~~higher~~employees ~~payroll~~as ~~costs~~a ~~and~~result ~~increased~~of ~~operating expenses~~the inacquisition ~~the~~of ~~business.~~W1 Wein ~~have~~February ~~seen~~2025, ~~increases~~as inwell ~~costs~~as ~~from~~incentives ~~multiple~~provided ~~suppliers~~to ~~for~~certain ~~materials~~key assenior ~~well~~level asmanagement ~~labor~~in 2025.

~~Item~~ Salaries and burden costs of $3.0 ~~Quantitative~~million ~~and~~for ~~Qualitative~~the ~~Disclosures~~nine ~~about~~months ~~Market~~ended ~~Risk~~September 30, 2025, were $180 thousand lower than the $3.2 million for the nine months ended September 30, 2024. This reduction reflects the reduction in the Company’s workforce including a reduction of certain executive management positions.

~~We are~~Advertising aand ~~smaller~~promotion ~~reporting~~costs ~~company~~were as$205 ~~defined~~thousand byfor ~~Rule~~the ~~12b-2~~nine months ended September 30, 2025, or a decrease of $63 thousand as compared to $268 thousand during the ~~Exchange~~nine ~~Act~~months ~~and~~ended ~~are~~September ~~not~~30, ~~required~~2024. The changes in advertising costs were primarily related to ~~provide~~reduced ~~the~~trade ~~information~~show ~~required under~~costs ~~this~~and ~~item~~promotional items.

~~Item 4.~~Research ~~Controls~~ and ~~Procedures.~~Development Expense 

~~Evaluation of~~Research ~~Disclosure~~and ~~Controls~~development ~~and~~expenses ~~Procedures~~totaling $619 thousand decreased by $1.3 million for the nine months ended September 30, 2025, when compared to the nine months ended September 30, 2024, primarily due to a reduction in personnel. Outside consulting costs decreased by $164 thousand for the nine months ended September 30, 2025, when compared to the nine months ended September 30, 2024, primarily due to the Company’s cost reduction initiatives

~~We carried~~Operating out an evaluation, under the supervision and with the participation of our management, including our Executive Chairman and Chief Executive Officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the period covered by this report. Based upon that evaluation, our Executive Chairman and Chief Executive Officer concluded that, as of the end of the period covered in this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed by us under the Exchange Act is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our Executive Chairman and Chief Executive Officer, as appropriate to allow timely decisions regarding required disclosure.Loss

~~Changes~~Loss from operations totaled $9.5 million during the nine months ended September 30, 2025, which was a decrease of $1.4 million compared to loss from in operations ~~Internal~~of ~~Control~~$10.9 ~~over~~million ~~Financial~~during ~~Reporting~~the nine months ended September 30, 2024, reflecting the reduced revenues offset by lower operating costs from the Company’s cost containment efforts.

~~There have~~Liquidity ~~been~~and noCapital changes in our internal control over financial reporting during our fiscal quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Resources

32Overview

~~PART~~Our primary source of liquidity to date has been funding from our stockholders from the sale of equity securities and the exercise of derivative II securities, consisting of options and warrants. ~~OTHER~~We ~~INFORMATION~~expect our primary source of future liquidity will be from the sale of products, exercise of stock options and warrants and future equity or debt financing.

~~Item~~We have experienced net losses and negative cash flows from operations since our inception. As of September 30, 2025, we had cash and cash equivalents of $6.0 million and had sustained cumulative losses attributable to stockholders of $112.0 million. Our working capital net of the warrants-short term as of September 30, 2025, was $3.6 million higher compared to December 31, 2024, primarily as a result of the 1 cash received in the Private Placement (as defined herein) offset by operating losses of $9.5 ~~Legal~~million ~~Proceedings~~for the nine months ended September 30, 2025. We believe we have sufficient capital to fund our operations for the next twelve months from the date of this Quarterly Report on Form 10-Q. However, liquidity constraints and access to capital markets could still negatively affect our liquidity and may require changes to our investment strategy.

~~From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of business.~~34

~~The information~~Capital ~~set forth in Note 13 Commitments and Contingencies of the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q is incorporated by reference herein.~~Requirements

~~Item~~Our future liquidity requirements or future capital needs will depend on, among other things, capital required to introduce new products and the 1A operational staffing and support requirements, as well as the timing and amount of future revenue and product costs. ~~Risk~~We ~~Factors~~anticipate that demands for operating and working capital may grow depending on decisions on staffing, development, production, marketing, training and other functions and based on other factors outside of our control, including the timing of receipt of revenue.

~~Management is~~Our ~~not~~future ~~aware~~capital ofrequirements, ~~any~~cash ~~material~~flows ~~changes~~and toresults ~~the risk factors discussed in Part 1, Item 1A,~~ of ~~the~~operations ~~Company’s~~could ~~Annual~~be ~~Report~~affected ~~on Form 10-K for the year ended December 31~~by, ~~2024.~~and Inwill ~~addition~~depend ~~to the other information set forth in this Quarterly Report~~ on ~~Form 10-Q~~, ~~you~~many ~~should carefully consider the risk~~ factors ~~discussed in Part 1~~, ~~Item~~some ~~1A,~~ of ~~the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, and subsequent reports filed pursuant to the Exchange Act~~ which could materially and adversely affect the Company’s business, financial condition, results of operations, and stock price. The risks described in the Company’s Annual Report on Form 10-K and subsequent reports filed pursuant to the Exchange Act are ~~not the only risks facing the Company. Additional risks and uncertainties~~currently ~~not~~ unknown ~~presently known~~ to ~~management~~us, ~~or that management presently believes not to be material~~including, ~~may~~among ~~also~~other ~~result in material and adverse effects on our business, financial condition, and results of operations.~~things:

~~Item 2.~~● ~~Unregistered~~Decisions ~~Sales~~regarding staffing, development, production, marketing and other functions; ● The timing and extent of ~~Equity~~market ~~Securities~~acceptance of our products; ● Costs, timing and ~~Use~~outcome of ~~Proceeds~~planned production and required customer and regulatory compliance of our products; ● Costs of preparing, filing and prosecuting our patent applications and defending any future intellectual property-related claims; ● Costs and timing of additional product development; ● Costs, timing and outcome of any future warranty claims or litigation against us associated with any of our products; ● Ability to collect accounts receivable; and ● Timing and costs associated with any new financing.

~~There were~~Principal nofactors ~~unregistered~~that ~~sales~~could ofaffect ~~the~~our ~~Company’s~~ability ~~equity~~to ~~securities~~obtain ~~during~~cash ~~the~~from ~~six~~external ~~months~~sources ~~ended~~including ~~June~~from ~~30,~~exercise ~~2025,~~of ~~other~~outstanding ~~than~~warrants ~~those~~and ~~previously reported~~options ~~in a Current Report on Form 8-K.~~include:

~~Item 3.~~● ~~Defaults~~Volatility ~~Upon~~in ~~Senior~~the ~~Securities~~capital markets; and ● Market price and trading volume of our Common Stock.

~~There has~~2023 ~~been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.~~Offering

~~Item~~On June 29, 2023, the Company entered into a Series Purchase Agreement (“Series A Purchase Agreement”) with certain accredited investors, including the 4 Company’s Executive Chairman and Chief Executive Officer (collectively, the “Series A Investors”), pursuant to which it agreed to sell to the Series A Investors in a registered direct offering (the “Series A Offering”) (i) an aggregate of 10,000 shares of Series A Preferred Stock, initially convertible into up to 6,896,553 shares of the Company’s Common Stock, at an initial conversion price of $1.45 ~~Mine~~per ~~Safety~~share ~~Disclosures~~(the "Series A Conversion Price"), and (ii) warrants (the “Series A Warrants”) to acquire up to an aggregate of 6,896,553 shares of Common Stock (the “Series A Warrant Shares”). The Series A Conversion Price of the Series A Preferred Stock is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable Series A Conversion Price (subject to certain exceptions). The closing of the Series A Offering occurred on July 3, 2023. The aggregate gross proceeds from the Series A Offering were $10 million. The Company expects to use the net proceeds from the Series A Offering for general corporate purposes.

~~Not~~The Company engaged Katalyst Securities LLC (the “Placement Agent”) to act as exclusive placement agent in connection with the Series A Offering. ~~Applicable~~ Pursuant to an Engagement Letter with the Placement Agent, we paid to the Placement Agent or its designees (i) a cash fee equal to 8% of the gross proceeds of the Series A Offering and (ii) warrants to purchase an aggregate of 551,725 shares of Common Stock (equal to 8% of the shares of Common Stock underlying the Series A Preferred Stock sold in the Series A Offering) at an exercise price of $1.45 per share.

~~Item 5. Other Information~~35

~~None.~~Series A Preferred Stock

33On July 3, 2023, the Company filed the Certificate of Designations of the Series A Convertible Preferred Stock (the “Series A Certificate of Designations”) with the Secretary of State of the State of Delaware, designating 10,000 shares of its Preferred Stock as Series A Convertible Preferred Stock. The Series A Preferred Stock is convertible into shares of Common Stock (the “Series A Conversion Shares”) at the election of the holder at any time at an initial conversion price of $1.45. The Series A Conversion Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable Series A Conversion Price (subject to certain exceptions).

~~Item~~The holders of the Series A Preferred Stock are entitled to dividends of 8% per annum, compounded monthly, which are payable in cash or shares of Common 6 Stock, or a combination thereof, at the Company’s option in accordance with the terms of the Series A Certificate of Designations. ~~Exhibits~~Upon the occurrence and during the continuance of a Triggering Event (as defined in the Series A Certificate of Designations), the Series A Preferred Stock will accrue dividends at the rate of 20% per annum. If the Company elects to pay any dividends in shares of Common Stock, the Series A Conversion Price used to calculate the number of shares issuable will equal to the lower of (i) the then applicable Series A Conversion Price and (ii) 85% of the arithmetic average of the three (3) lowest closing prices of the Company’s Common Stock during the twenty (20) consecutive trading day period ending on the trading day immediately preceding the dividend payment date, provided that such price shall not be lower than the lower of (x) $0.2828 (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events ) and (y) 20% of the “Minimum Price” (as defined in Nasdaq Stock Market Rule 5635) on the date of the requisite stockholder approval (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) or, in any case, such lower amount as permitted, from time to time, by the Nasdaq Stock Market.

Exhibit Number		Description
10.1		Form of Series A Warrant Amendment, dated as of June 30, 2025, by and among Wrap Technologies, Inc. and the investors signatory thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the SEC on July 7, 2025)
10.2		Form of 2025 Warrant Amendment, dated as of June 30, 2025, by and among Wrap Technologies, Inc. and the investors signatory thereto (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the SEC on July 7, 2025).
31.1*		Rule 13a-14(a)/15d-14(a) Certification - Principal Executive Officer.
31.2*		Rule 13a-14(a)/15d-14(a) Certification - Principal Financial Officer.
32.1**		Section 1350 Certification - Principal Executive Officer.
32.2**		Section 1350 Certification - Principal Financial Officer
Extensible Business Reporting Language (XBRL) Exhibits*
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL Document and include in Exhibit 101)

On August 19, 2024, the Company entered into an Amendment Agreement (the “August 2024 Amendment”) with the Required Holders (as defined in the Series A Certificate of Designations). Pursuant to the August 2024 Amendment, the Required Holders agreed that (A) the unpaid and accrued dividends on the Series A Preferred Stock due July 1, 2024 (the “July Delinquent Dividend Amount”), shall be payable, at the option of the Company, in (i) cash and/or (ii) shares of Common Stock, at a price per share of Common Stock equal to the lower of (x) $1.00 and (y) the Dividend Conversion Price (as defined in the Series A Certificate of Designations), using July 1, 2024, as the applicable date of determination in accordance with the Series A Certificate of Designations; (B) the dividends due on October 1, 2024 (the “October Dividend Amount” and, together with the July Delinquent Dividend Amount, the “Delinquent Dividend Amounts”), shall be payable in shares of Common Stock based on a per share price of Common Stock equal to 80% of the arithmetic average of the three (3) lowest closing sale prices of the Common Stock during the month of September 2024; and (C) such Delinquent Dividend Amounts and any Dividend Balance Shares (as defined in the Series A Certificate of Designations), with respect thereto, if applicable, shall be delivered on October 1, 2024. The Company and the Required Holders further agreed pursuant to the August 2024 Amendment to amend (i) the Series A Certificate of Designations, as described below, by filing a Certificate of Amendment to the Series A Certificate of Designations (the “August 2024 Certificate of Amendment”) and (ii) the Series A Purchase Agreement to amend the definition of “Excluded Securities.” The August 2024 Certificate of Amendment amends the Series A Certificate of Designations to, among other things, (A) allow for the payment of dividends in the form of Common Stock to a holder of the Series A Preferred Stock who serves as a director, officer or employee of the Company; provided that such issuance is approved by the Company’s stockholders prior to such issuance, and (B) amend certain conditions required for (i) a mandatory conversion of the Series A Preferred Stock, and (ii) the Company’s right to redeem, all or a portion, of the Series A Preferred Stock outstanding pursuant to an optional redemption, in each case, pursuant to the terms of the Series A Certificate of Designations.

*On October 14, 2024, the Company entered into an Amendment Agreement with the Required Holders (as defined in the Series A Certificate of Designations), pursuant ~~Filed~~ to ~~concurrently~~which, ~~herewith~~the Required Holders agreed to amend the Series A Certificate of Designations of the Company’s Series A Preferred Stock, as described below, by filing a Certificate of Amendment to the Series A Certificate of Designations (the “October 2024 Certificate of Amendment”). The October 2024 Certificate of Amendment amends the Series A Certificate of Designations to, among other things, provide that, except as required by applicable law, the holders of the Series A Preferred Stock will be entitled to vote with holders of the Common Stock on an as converted basis, with the number of votes to which each holder of Series A Preferred Stock is entitled to be calculated assuming a conversion price of $1.414 per share, which was the Minimum Price (as defined in Rule 5635 of the Rule of the Nasdaq Stock Market) applicable immediately before the execution and delivery of the Series A Purchase Agreement, subject to certain beneficial ownership limitations as set forth in the Series A Certificate of Designations. The October 2024 Certificate of Amendment further provides that (i) certain holders of the Series A Preferred Stock will not be subject to certain beneficial ownership limitations as described in the Series A Certificate of Designations, and (ii) stockholder approval will not be required in connection with the payment of dividends in the form of Common Stock to a holder of the Series A Preferred Stock who serves as a director, officer or employee of the Company. The October 2024 Certificate of Amendment was filed with the Secretary of State of the State of Delaware, effective as of October 14, 2024. The holders of the Series A Preferred Stock have no voting rights, other than with respect to certain matters affecting the rights of the Series A Preferred Stock.

** Furnished herewith.36

34On November 25, 2024, the Company entered into an Amendment and Agreement with the Series A Investors (the “November 2024 Amendment Agreement”), pursuant to which, (i) the Series A Investors agreed to amend the Series A Certificate of Designations, as described below, by filing a Certificate of Amendment to the Series A Certificate of Designations with the Secretary of State (the “November 2024 Certificate of Amendment”), and (ii) the Series A Investors and the Company agreed that all payment amounts that have accrued and are unpaid as of November 25, 2024, pursuant to the Series A Certificate of Designations and the August 2024 Amendment will be satisfied by delivery of shares of Common Stock on or prior to November 25, 2024, with each Series A Investor entitled to receive the number of shares of Common Stock specified below such Series A Investor’s name on its respective signature page thereto. The November 2024 Certificate of Amendment amends the Series A Certificate of Designations to provide that upon the occurrence of a Triggering Event (as defined in the Series A Certificate of Designations), the Series A Preferred Stock will accrue dividends compounded monthly at the rate of 20% per annum. The Certificate of Amendment became effective with the Secretary of State on December 6, 2024.

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

~~Pursuant to~~At any time beginning 18 months from the ~~requirements~~date of the ~~Securities~~issuance, provided that the Company has filed all reports required to be filed by it pursuant to the Exchange Act on a timely basis for a continuous period of ~~1934,~~one asyear ~~amended~~and provided further that certain equity conditions described in the Series A Certificate of Designations are satisfied, the ~~registrant~~Company has ~~duly~~the ~~caused~~right ~~this~~to ~~report~~redeem in cash all or some of the shares of the Series A Preferred Stock outstanding at such time at a redemption price equal to bethe ~~signed~~product onof ~~its behalf~~(x) 125% multiplied by (y) the ~~undersigned~~sum ~~thereunto~~of ~~duly~~(A) ~~authorized~~the stated value of the Series A Preferred Stock plus (B) all declared and unpaid Dividends on such Preferred Stock and any other unpaid amounts then due and payable hereunder with respect to such Series A Preferred Stock, plus (C) the make-whole amount, plus (D) any accrued and unpaid late charges with respect to such stated value and amounts payable pursuant to clause (B) as of such date of determination.

	Wrap Technologies, Inc.
August 14, 2025	By:	/s/ Scot Cohen
		Scot Cohen Chief Executive Officer (Principal Executive Officer)

The Certificate of Amendment amends the Series A Certificate of Designations to, among other things, (A) allow for the payment of dividends in the form of Common Stock to a holder of the Series A Preferred Stock who serves as a director, officer or employee of the Company; provided that such issuance is approved by the Company’s stockholders prior to such issuance, and (B) amend certain conditions required for (i) a mandatory conversion of the Series A Preferred Stock, and (ii) the Company’s right to redeem, all or a portion, of the Series A Preferred Stock outstanding pursuant to an optional redemption, in each case, pursuant to the terms of the Series A Certificate of Designations.

August 14, 2025	By:	/s/ Jerry Ratigan
		Jerry Ratigan Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

There is no established public trading market for the Series A Preferred Stock and we do not intend to list the Series A Preferred Stock on any national securities exchange or nationally recognized trading system.

35Warrants

The Company issued the Series A Warrants to purchase up to an aggregate of 6,896,553 shares of Common Stock. Each Series A Warrant has an exercise price of $1.45 per share, became exercisable after the date that was six months from the date of issuance and will expire 5 years following the date of issuance. The exercise price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable exercise price (subject to certain exceptions).  

On June 30, 2025, the Company entered into a warrant amendment (the “Series A Warrant Amendment”) with the Required Holders (as defined in the Series A Purchase Agreement), pursuant to which, the Required Holders agreed to amend the terms of the Series A Warrants to make certain adjustments to the definition of “Black Scholes Value” in each of the Series A Warrants, as described in the Series A Warrant Amendment, such that the underlying price per share as used in such calculation equals the sum of the price per share being offered in cash in the applicable Fundamental Transaction (as defined in the Series A Warrants), if any, plus the value of the non-cash consideration being offered in the applicable Fundamental Transaction, if any. As consideration for entering into the Series A Warrant Amendment, the Company and the Required Holders agreed to amend the term of the Series A Warrants to be six and one-half years from the date of issuance.

Nasdaq Stockholder Approval

The Company’s ability to issue Conversion Shares and Series A Warrant Shares using shares of Common Stock is subject to certain limitations set forth in the Series A Certificate of Designations. Prior to receiving the Nasdaq Stockholder Approval, such limitations included a limit on the number of shares that may be issued until the time, if any, that the Company’s stockholders have approved the issuance of more than 19.99% of the Company’s outstanding shares of Common Stock in accordance with the rules of the Nasdaq Stock Market (the “Nasdaq Stockholder Approval”). Such Nasdaq Stockholder Approval was received at a special meeting of stockholders held on September 19, 2023.

February 2025 Offering

On February 24, 2025, the Company entered into a securities purchase agreement (the “PIPE Purchase Agreement”) with certain accredited investors (collectively, the “PIPE Purchasers”) for the issuance and sale in a private placement (the “Private Placement”) of an aggregate of 3,216,666 shares (the “Common Shares”) of Common Stock and accompanying warrants (“PIPE Warrants”) to purchase up to 3,216,666 shares of Common Stock, with an exercise price of $1.80 per share. The purchase price for one Common Share and accompanying PIPE Warrant was $1.80. The gross proceeds to the Company were $5,790 before estimated offering expenses payable by the Company.

On June 30, 2025, the Company entered into a warrant amendment (the “2025 Warrant Amendment”) with certain of the PIPE Purchasers, pursuant to which, such PIPE Purchasers agreed to amend the terms of their respective PIPE Warrants to make certain adjustments to the definition of “Black Scholes Value,” as described in the 2025 Warrant Amendment, such that the underlying price per share as used in such calculation equals the sum of the price per share being offered in cash in the applicable Fundamental Transaction (as defined in the PIPE Warrants), if any, plus the value of the non-cash consideration being offered in the applicable Fundamental Transaction, if any. As consideration for entering into the 2025 Warrant Amendment, the Company and the applicable PIPE Purchasers agreed to amend the term of their respective PIPE Warrants to be five and one-half years from the date of issuance.

August 2025 Offering

On August 18, 2025, the Company entered into the Series B Purchase Agreement with the Series B Purchasers for the issuance and sale in a private placement of an aggregate of (i) 4,500 shares of the Company’s Series B Preferred Stock initially convertible into up to 3,000,000 shares of Common Stock, at an initial conversion price of $1.50 per share, and (ii) accompanying Series B Warrants to purchase up to 3,000,000 shares of Common Stock, with an initial exercise price of $1.50 per share. The Series B Warrants and the shares of Series B Preferred Stock will be exercisable or convertible, respectively, into shares of Common Stock beginning on the effective date of stockholder approval of (i) under Nasdaq Stock Market Rule 5635(d), the issuance of shares of Common Stock in excess of 19.99% of the Company’s issued and outstanding shares of Common Stock at prices below the “Minimum Price” (as defined in Rule 5635 of the Rules of the Nasdaq Stock Market) on the date of the Series B Purchase Agreement pursuant to the terms of the Series B Preferred Stock and the Series B Warrants, and (ii) an increase in the authorized shares of the Company. As of the date of this Quarterly Report on Form 10-Q, the Company has not obtained the Series B Stockholder Approval. However, the Company plans to hold a special meeting of its stockholders on December 12, 2025, to, among other things, obtain the Series B Stockholder Approval. The Series B Warrants will expire five years from the effective date of the Series B Stockholder Approval.

Series B Preferred Stock

On August 20, 2025, the Company filed the Series B Certificate of Designations, thereby creating the Series B Preferred Stock. The Series B Certificate of Designations became effective with the Secretary of State of the State of Delaware upon filing. The terms of the Series B Convertible Preferred Stock are as set forth in the Series B Certificate of Designations. The Series B Preferred Stock are convertible into the Series B Conversion Shares at the election of the holders of the Series B Preferred Stock at any time at an initial conversion price of $1.50 per share. The conversion price is subject to customary adjustments for stock dividends, stock splits, reclassifications, stock combinations and the like (subject to certain exceptions).

Holders of the Series B Preferred Stock shall be entitled to receive dividends when and as declared by the Board, from time to time, in its sole discretion, which dividends will be paid by the Company out of funds legally available therefor, payable, subject to the conditions and other terms of the Series B Certificate of Designations, in cash, in securities of the Company or using assets as determined by the Board on the stated value of such Series B Preferred Stock.

There is no established public trading market for the Series B Preferred Stock and the Company does not intend to list the Series B Preferred Stock on any national securities exchange or nationally recognized trading system.

Warrants

A holder of the Series B Warrants may not exercise any portion of such holder’s Series B Warrants to the extent that the holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s outstanding shares of Common Stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to the Company, the holder may increase the beneficial ownership limitation to up to 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise.

There is no established public trading market for the Series B Warrants and the Company does not intend to list the Series B Warrants on any national securities exchange or nationally recognized trading system.

The Series B Warrants will expire five years from the effective date of the Series B Stockholder Approval.

Registration Rights Agreement

In connection with the Series B Private Placement, the Company entered into a registration rights agreement, dated as of August 18, 2025, with the Series B Purchasers (the “Series B Registration Rights Agreement”), pursuant to which the Company agreed to prepare and file a registration statement with the SEC registering the resale of the Series B Conversion Shares no later than 60 days following the date of the Registration Rights Agreement, and to use best efforts to have the registration statement declared effective as promptly as practical thereafter, and in any event no later than 90 days following the date of the Registration Rights Agreement (or 120 days following the date of the Registration Rights Agreement in the event of a “full review” by the SEC). On October 17, 2025, the Company filed a resale registration statement on Form S-3 (File No. 333-290946) with the SEC.

Off-Balance Sheet Arrangements

The Company has not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties. The Company has not entered into any derivative contracts that are indexed to the Company’s shares and classified as stockholder’s equity or that are not reflected in the Company’s financial statements included in this Quarterly Report on Form 10-Q. Furthermore, the Company does not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. The Company does not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.

Cash Flows

Cash Flows from Operating Activities

During the nine months ended September 30, 2025, net cash used in operating activities was $7.6 million. The net loss of $6.4 million was decreased by non-cash income of $3.2 million related to the change in fair value of warrants and increased by non-cash expense of $2.9 million consisting primarily of share-based compensation of $3.1 million and depreciation and amortization of $0.5 million. Other major component changes using operating cash included a increase in accounts receivable of $1.3 million, a decrease in accrued liabilities of $0.9 million and offset by a decrease in inventories of $1.1 million.

During the nine months ended September 30, 2024, net cash used in operating activities was $6.9 million. The net income of $1.7 million was decreased by non-cash income of $12.5 million related to the change in fair value of warrants and increased by non-cash expense of $2.4 million consisting primarily of share-based compensation expense of $1.8 million and depreciation and amortization of $646 thousand. Other major component changes using operating cash included an increase of $529 thousand in inventories and a decrease in both accounts receivable of $2.3 million and customer deposits of $1.0 million.

Cash Flows from Investing Activities

During the nine months ended September 30, 2025, net cash used in investing activities was $249 thousands of cash for capital expenditures and investment in patents.

During the nine months ended September 30, 2024, we had net proceeds from maturities of short-term investments of $7.5 million. During the nine months ended September 30, 2024, we used $13 thousand cash for the purchase of property and equipment and invested $124 thousand in patents and equipment.

Cash Flows from Financing Activities

During the nine months ended September 30, 2025, net cash provided by financing activities was $10.2 million as a result of proceeds from Private Placements.

During the nine months ended September 30, 2024, net cash provided by financing activities was $588 thousand because of proceeds from the exercise of previously issued stock options of $588 thousand offset $120 thousand in cash dividends paid on the Company’s Series A Preferred Stock.

Contractual Obligations and Commitments

In September 2023, we committed to a lease of office space in Coconut Grove, Florida in a multi-year term concluding in 2031 which includes aggregate lease payments remaining totaling $3.5 million.

As of September 30, 2025, we were committed to approximately $391 thousand for future component deliveries and contract services that are generally subject to modification or rescheduling in the normal course of business.

We committed to a lease of manufacturing and office space in Southwest Virginia in a multi-year term commencing October 2025 and concluding in 2031, which includes aggregate lease payments remaining totaling $600 thousand. The Company was granted early occupancy of the facility for use beginning on August 18, 2025.

Effects of Inflation

During the nine months ended September 30, 2025, and for the year ended December 31, 2024, we experienced increased costs in labor and materials due to inflation. We believe throughout 2025 that low unemployment and higher salaries will create higher payroll costs and increased operating expenses in the business. We have seen increases in costs from multiple suppliers for materials as well as labor.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Executive Chairman and Chief Executive Officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the period covered by this report. Based upon that evaluation, our Executive Chairman and Chief Executive Officer concluded that, as of the end of the period covered in this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed by us under the Exchange Act is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our Executive Chairman and Chief Executive Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during our fiscal quarter ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of business.

The information set forth in Note 13 Commitments and Contingencies of the Notes to Consolidated Financial Statements of this Quarterly Report on Form 10-Q is incorporated by reference herein.

Item 1A. Risk Factors

The following description of risk factors includes any material changes to, and supersedes the description of, risk factors associated with our business, financial condition and results of operations previously disclosed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024 on Form 10-K, as filed with the SEC on March 31, 2025, as amended on April 25, 2025. Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause our actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and stock price.

The following discussion of risk factors contains forward-looking statements. These risk factors may be important to understanding other statements in this Form 10-Q. The following information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q.

Our recent expansion into drone and counter-UAS technologies may not be successful, and we may fail to achieve commercial adoption or generate meaningful revenue from these initiatives.

We have recently expanded beyond our core BolaWrap® products into new areas such as drone payload systems, drone-first-responder technologies, and counter-unmanned aerial systems (“C-UAS”). These initiatives are in early stages, and their success depends on our ability to complete development, meet regulatory and technical standards, and achieve customer adoption. The markets for drone and C-UAS solutions are emerging, highly competitive, and subject to rapid technological change, and we face established and well-funded competitors. If our new products fail to perform as expected, experience development delays, or do not achieve meaningful market traction, our anticipated growth, brand reputation, and financial results could be materially adversely affected. There can be no assurance that our investments in these technologies will generate the expected returns or lead to sustainable revenue growth.

Our business strategy depends heavily on government and law-enforcement customers, who are subject to lengthy procurement cycles, budget constraints, and shifting priorities.

We expect that much of the demand for our new drone and C-UAS solutions will come from U.S. and international government, defense, and law-enforcement agencies. These customers face complex approval processes, long evaluation periods, and budget limitations that can delay or reduce procurement decisions. Political and policy changes, including shifts in funding for public safety or defense, may reduce demand or delay adoption of new technologies like ours. Furthermore, changes in public perception regarding the use of drones or non-lethal force tools could impact purchasing decisions or restrict deployment. As a result, even strong interest from these customers may not translate into timely or predictable revenue, and any sustained reduction in public-sector demand could materially affect our results of operations.

Our drone and aerial-interdiction systems are subject to evolving regulatory, legal and liability risks that could restrict our operations or expose us to claims.

Our drone-based and counter-UAS technologies may be regulated by multiple federal and international authorities, including the Federal Aviation Administration (“FAA”) and U.S. export-control agencies. As these regulatory frameworks evolve, new restrictions, certification requirements, or licensing limitations could arise that delay product approvals, increase compliance costs or limit deployment opportunities. Because these systems are designed for public-safety and defense use, any operational incident, misuse, or unintended injury could lead to product-liability claims, investigations, or negative publicity. Any regulatory action, litigation, or reputational harm related to these risks could materially and adversely affect our business and financial condition.

We may face manufacturing and supply-chain challenges as we expand production of new technologies.

To support our entry into drone-related markets, we are increasing production capacity, including at our new Virginia facility. Scaling manufacturing for new and technically complex products requires reliable suppliers, quality control systems, and efficient production processes. We may face challenges securing critical components, many of which come from limited sources or may be subject to long lead times. Disruptions in the supply chain, cost increases, or quality issues could delay deliveries, increase expenses, and impact customer satisfaction. If we are unable to scale production effectively or control manufacturing costs, our margins, liquidity, and ability to meet demand could be adversely affected.

The Series B Certificate of Designations provides for the payment of cumulative dividends in shares of our Common Stock which will require us to have shares of Common Stock available to pay the dividends.

Each share of the Series B Preferred Stock is entitled to receive dividends as and when declared by the Board, from time to time, in its sole discretion, which dividends shall be paid by the Company out of funds legally available therefor, payable, subject to the conditions and other terms hereof, in cash, in securities of the Company, or using assets as determined by the Board on the stated value of such preferred share in accordance with the terms of the Series B Certificate of Designations. As such, we may rely on having available shares of common stock to pay such dividends, which will result in dilution to our stockholders. If we do not have such available shares, we may not be able to satisfy our obligations as related to these dividends pursuant to the terms of the Series B Certificate of Designations

The Series B Warrants contain certain anti-dilution provisions, which may dilute the interests of our stockholders, depress the price of our Common Stock, and make it difficult for us to raise additional capital.

Certain events may reduce the exercise price of the Series B Warrants, which in turn may lead to further dilution to the holders of our Common Stock. In addition, the perceived risk of dilution may cause our stockholders to be more inclined to sell their Common Stock, which may in turn depress the price of shares of our Common Stock regardless of our business performance. We may also find it more difficult to raise additional equity capital while any of the shares of Series B Preferred Stock and the Series B Warrants remain outstanding.

Under the Series B Purchase Agreement, we are subject to certain covenants that may make it difficult to procure additional financing.

The Series B Purchase Agreement contains customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the Series B Purchasers, including for liabilities under the Securities Act and other obligations of the parties and termination provisions.

Among other covenants, the Series B Purchase Agreement requires the Company to hold a meeting of its stockholders at the earliest practical date for the purpose of obtaining such Series B Stockholder Approval. If the Company does not obtain the Series B Stockholder Approval at the first meeting, the Company is required to call a meeting every 60 days thereafter to seek such Series B Stockholder Approval until the earlier of the date Series B Stockholder Approval is obtained or the shares of Series B Preferred Stock are no longer outstanding, which may be time consuming and costly.

If needed to in the future, we may be unable to effect additional financing transactions on terms acceptable to us, or at all, while also remaining in compliance with the terms of the Series B Purchase Agreement, or we may be forced to seek a waiver from the investor party to the Series B Purchase Agreement, which such investor is not obligated to grant to us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no unregistered sales of the Company’s equity securities during the nine months ended September 30, 2025, other than those previously reported in a Current Report on Form 8-K.

Item 3. Defaults Upon Senior Securities

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None of the Company's officers or directors adopted, modified or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company's fiscal quarter ended September 30, 2025, as such terms are defined under Item 408(a) of Regulation S-K.

Item 6. Exhibits

Exhibit Number		Description
3.1		Second Amendment to the Amended and Restated Bylaws of Wrap Technologies, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, filed with the SEC on November 5, 2025).
3.2		Certificate of Designations of Series B Convertible Preferred Stock of Wrap Technologies, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, filed with the SEC on August 26, 2025).
4.1		Form of Warrant (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K, filed with the SEC on August 18, 2025).
10.1		Securities Purchase Agreement, dated August 18, 2025, by and among the Company and the investors signatory thereto (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on August 18, 2025).
10.2		Registration Rights Agreement, dated August 18, 2025, by and among the Company and the investors signatory thereto (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed with the SEC on August 18, 2025).
10.3		General Release and Severance Agreement, dated October 21, 2025 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, filed with the SEC on October 27, 2025).
10.4		Form of 2025 Warrant Amendment, dated as of June 30, 2025, by and among Wrap Technologies, Inc. and the investors signatory thereto (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, filed with the SEC on July 7, 2025).
31.1*		Rule 13a-14(a)/15d-14(a) Certification - Principal Executive Officer
31.2*		Rule 13a-14(a)/15d-14(a) Certification - Principal Financial Officer.
32.1**		Section 1350 Certification - Principal Executive Officer
32.2**		Section 1350 Certification - Principal Financial Officer
Extensible Business Reporting Language (XBRL) Exhibits*
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL Document and include in Exhibit 101)

* Filed concurrently herewith

** Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Wrap Technologies, Inc.

November 13, 2025	By:	/s/ Scot Cohen
		Scot Cohen Chief Executive Officer (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

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