Executive Summary / Key Takeaways

• Wrap Technologies is transforming from a single-product company into an end-to-end public safety solutions provider, leveraging its core BolaWrap technology alongside recent acquisitions in VR training and digital evidence management.
• Recent internal data indicates BolaWrap is achieving an 84% success rate in reported use cases and is being deployed more frequently than other tools on an officer's belt in certain departments, providing a powerful, data-driven sales narrative.
• The strategic acquisitions of Intrensic and W1 Global have expanded the product portfolio, added recurring revenue streams, and significantly enhanced the company's network and credibility within law enforcement and government circles, particularly accelerating international opportunities.
• While Q1 2025 saw a revenue decline year-over-year due to lower product volume, gross margins improved significantly to 78%, reflecting the contribution of higher-margin acquired businesses and cost containment efforts which also reduced overall operating expenses.
• The company is actively pursuing large international opportunities, including an anticipated multiyear rollout in Chile, and is leveraging U.S. government resources like the EXIM Bank to facilitate financing for overseas sales, fueling optimism for future growth despite ongoing operating losses.

Setting the Scene: A New Era for Public Safety Technology

Wrap Technologies, Inc. (NASDAQ:WRAP) operates at the intersection of public safety and technology, aiming to provide solutions that enable safer outcomes for law enforcement officers and the communities they serve. At its core, Wrap developed the BolaWrap remote restraint device, a tool designed to de-escalate encounters and control individuals from a distance without the need for painful force options. Launched initially in late 2018, the BolaWrap 150, the current generation, represents the company's foundational technology.

The public safety landscape is undergoing significant shifts. Increasing scrutiny on use-of-force incidents and evolving policies are making it more challenging for officers to rely on traditional tools like Tasers, batons, and pepper spray. This often leads to officers resorting to hands-on physical engagement, which carries a high risk of injury for both the officer and the subject. This dynamic creates a critical gap in the use-of-force continuum, a gap that Wrap believes its technology is uniquely positioned to fill.

In this market, Wrap faces competition from established players like Axon Enterprise (AXON), which dominates the body camera and Taser markets, as well as other less-lethal providers like Byrna Technologies (BYRN) and digital evidence management companies like Digital Ally (DGLY). Axon, with its estimated 95-96% market share in overlapping segments, boasts significantly larger scale, robust revenue growth (20-30% annually), and higher profitability margins (60-65% gross, 10-15% net) compared to Wrap. Byrna competes in the less-lethal space with a focus on affordability, while Digital Ally offers video and data solutions. Wrap's challenge has been to carve out its niche and demonstrate a compelling value proposition against these larger, more financially established rivals.

Recognizing the need to evolve beyond a single product and address the broader needs of law enforcement, Wrap has embarked on a strategic transformation. This involves building an integrated, end-to-end offering and leveraging newly acquired capabilities to accelerate market penetration and establish itself as a more comprehensive solutions provider.

Technology as the Foundation: Differentiated Tools for De-Escalation

Wrap's core technological differentiator lies in the BolaWrap remote restraint device. Unlike traditional less-lethal options that rely on pain compliance or kinetic impact, the BolaWrap deploys a seven-and-a-half-foot Kevlar tether that entangles an individual's limbs from a distance of 10-25 feet. This non-painful approach is designed to safely restrict movement, allowing officers to gain control before situations escalate.

The tangible benefits of this technology, as highlighted by management, include its effectiveness in de-escalation, particularly in situations involving individuals with behavioral health issues or during domestic violence calls. Based on usage data provided to the company by agencies, BolaWrap has demonstrated an 84% success rate in reported use cases. Crucially, management asserts that in certain departments where they have connected with customers, BolaWrap is being used more frequently than any other tool on an officer's belt, indicating its utility in real-world scenarios.

Beyond the BolaWrap, Wrap's technology portfolio has expanded significantly. The Wrap Reality VR training platform offers immersive 3D simulation scenarios, providing a safe environment for officers to practice de-escalation and decision-making. Management notes that VR training can be significantly faster and lead to higher retention rates compared to traditional methods. The acquisition of Intrensic added Body Worn Camera (BWC) and Digital Evidence Management (DEM) solutions, including the cloud-based "Evidence on Cloud" platform. This platform is designed for scalability, open integration with existing law enforcement systems (like CAD and RMS), and provides features for managing digital evidence efficiently.

Wrap's R&D efforts are focused on enhancing its core products and integrating capabilities. This includes developing a next-generation BolaWrap and integrating proven technologies, potentially including AI-powered workflows for its managed services offerings. The strategic intent behind this R&D is to maintain a technological edge, improve product performance, and create a more cohesive, integrated ecosystem of public safety tools and services. The "so what" for investors is that this differentiated technology portfolio, particularly the unique value proposition of remote restraint and the integration of training and evidence management, forms the basis of Wrap's competitive moat and its strategy to capture market share by addressing the evolving needs of law enforcement for safer, more transparent policing.

Strategic Transformation and Operational Realignment

Facing historical losses and high operating expenses, Wrap undertook a significant corporate restructuring in 2024. This involved aggressively reducing cash burn and implementing cost containment initiatives to stabilize the business and provide a foundation for future growth. As part of this realignment, the company moved its manufacturing operations from Arizona to Southwest Virginia, a process completed in Q2 2025, with a new facility expected by the end of the year.

The restructuring coincided with a strategic pivot towards becoming an end-to-end solutions provider. The acquisition of Intrensic in August 2023 brought BWC and DEM capabilities, positioning Wrap to offer a more comprehensive suite of products and services, including recurring revenue streams from cloud-based evidence management. This was followed by the acquisition of W1, LLC in February 2025. W1 added assets related to advisory and investigative professional services and brought a team with deep connections and credibility within law enforcement and government networks. This acquisition is seen as a key accelerator, particularly for international sales opportunities, providing enhanced access to senior leadership and leveraging existing relationships.

The new go-to-market strategy is heavily data-driven. Management is focused on collecting and packaging the BolaWrap usage data to demonstrate its effectiveness in reducing injuries and costs (workers' comp, lawsuits). This data is being used to re-engage with agencies, including major cities that previously cancelled pilot programs, with the belief that the validated results will compel adoption. Sales and marketing efforts are being built out to support this data-driven narrative and pursue a "scalable and repeatable sales motion."

Furthermore, Wrap is actively engaging with political leadership at federal and state levels and seeking partnerships with communities and advocacy groups. This broader outreach aims to influence policy and build support for de-escalation tools. The company is also establishing a presence in Washington D.C. to pursue federal opportunities and is leveraging U.S. government resources, such as the Export and Import Bank (EXIM Bank), to facilitate financing for international sales of its U.S.-assembled products. This strategic focus on government channels and financing options is expected to significantly accelerate large international deals.

Financial Performance and Liquidity

Wrap's financial performance in the first quarter of 2025 reflected the ongoing strategic transition and cost containment efforts. Total revenues for the three months ended March 31, 2025, were $765 thousand, a decrease of 48% compared to $1.476 million in the same period of 2024. This decline was primarily attributed to lower product sales volume ($353 thousand in Q1 2025 vs. $1.327 million in Q1 2024), partially offset by the addition of $234 thousand in managed services revenue from the W1 acquisition.

Despite the lower revenue, gross profit margin saw a significant increase, rising to 78% in Q1 2025 from 57% in Q1 2024. This improvement was driven by the contribution of higher-margin revenue from the Intrensic and W1 acquisitions, offsetting the lower volume of BolaWrap sales.

Operating expenses decreased by 9%, from $4.975 million in Q1 2024 to $4.517 million in Q1 2025. This reduction was a result of cost containment initiatives implemented in the first half of 2024. However, this decrease was partially offset by an increase in share-based compensation expense ($1.665 million in Q1 2025 vs. $675 thousand in Q1 2024) and increased occupancy expenses. Research and development expense saw a notable decrease, falling by 50% from $755 thousand to $378 thousand, primarily due to lower compensation costs from personnel reductions.

The company reported net income of $109 thousand in Q1 2025, compared to $117 thousand in Q1 2024. This result was significantly impacted by a large non-cash gain from the change in fair value of warrant liabilities ($4.029 million in Q1 2025 vs. $4.179 million in Q1 2024). Excluding this non-cash item and other adjustments, the company continues to experience operating losses.

From a liquidity perspective, Wrap's cash and cash equivalents increased significantly to $6.17 million as of March 31, 2025, up from $3.61 million at December 31, 2024. This increase was primarily driven by the net proceeds of approximately $5.7 million from a private placement financing completed in February 2025. While the company had negative working capital of $0.3 million as of March 31, 2025 (including warrant liabilities), working capital excluding warrants improved. Management believes the current cash position is sufficient to fund operations for the next twelve months, although they acknowledge that additional working capital may be required and access to capital markets could impact liquidity.

Comparing Wrap's financial health to its publicly traded competitors using available TTM data highlights the scale and profitability differences. Wrap's TTM Gross Profit Margin of 58.59% is competitive with Axon (60%) and Byrna (62%), and significantly better than Digital Ally (28%). However, Wrap's TTM Operating Profit Margin (-404.40%) and Net Profit Margin (-159.30%) reflect significant operating losses, starkly contrasting with Axon's positive margins (3% Operating, 18% Net) and Byrna's positive margins (8% Operating, 15% Net), though Digital Ally also shows negative operating and net margins (-0.000004% Operating, -101% Net). This quantitative comparison underscores Wrap's challenge in translating its gross margin potential into overall profitability at its current scale and cost structure, a key area management is addressing through cost containment and revenue growth initiatives.

Outlook and Key Opportunities

While Wrap does not provide specific quantitative financial guidance, management expresses strong optimism regarding the company's future prospects, particularly for the second half of 2023 and accelerating into 2024 and 2025. They believe the company is at a "tipping point" and that the strategic changes and recent data validation will drive significant growth.

A major focus is the international market, which is seen as having "massive" opportunities. The anticipated large-scale rollout in Chile is a key near-term driver, expected to be a multiyear process and potentially much larger than initially anticipated. Management is actively engaged in supporting this rollout and believes it will serve as an exemplar for other countries. The ability to leverage the W1 network and U.S. government financing options through EXIM Bank is expected to accelerate the closing of large international deals.

Domestically, the focus is on leveraging the new usage data to drive adoption in major cities and pursue federal opportunities across various sectors, including border security, prisons, and schools. The shift in use-of-force policies is viewed as a significant tailwind that is organically increasing the need for tools like BolaWrap.

Management expects operating costs to stabilize or slightly decline from the Q1 2025 run-rate due to ongoing cost containment, although SG&A is expected to increase due to the W1 acquisition. Sales of BolaWrap and Wrap Reality are expected to continue rising, and the contribution from the acquired businesses is anticipated to improve overall gross margins and potentially reduce cash burn over time. Management's confidence is high, with the belief that the company will be "unrecognizable in 12 months" due to expected growth and operational improvements.

Risks and Challenges

Despite the strategic pivot and optimistic outlook, Wrap faces several significant risks and challenges that could impact its ability to execute its growth plan and achieve profitability.

• Data Collection and Utilization: While management highlights the importance of usage data, collecting comprehensive and verifiable data from law enforcement agencies remains challenging. This is due to factors like data being part of active investigations, local policy restrictions, or the need for officer/union permission to share. The fear among chiefs of potential negative repercussions (e.g., federal oversight) also complicates data sharing. The inability to consistently collect and disseminate this data could hinder sales efforts that rely on demonstrating effectiveness.
• Policy and Social Dynamics: While policy shifts are seen as a tailwind, social unrest and movements like "Defund the Police" could negatively impact police budgets and funding availability for new technologies. Negative publicity or misleading information about Wrap's solutions could also harm the business.
• Execution of New Strategy: The transition to an end-to-end solutions provider and the integration of acquired businesses require successful execution. Failure to effectively integrate Intrensic and W1, leverage the new network, or build a scalable sales motion could limit growth.
• International Market Volatility: While promising, international deals can be subject to lengthy sales cycles, geopolitical tensions, and economic instability in target countries. The reliance on government funding options also introduces dependencies.
• Financial Sustainability: The company has historically generated significant operating losses and anticipates this will continue for the foreseeable future. While the recent financing improved liquidity, the company's ability to reach profitability and sustain operations long-term depends on achieving substantial revenue growth and maintaining cost discipline.
• Competition: Wrap operates in a competitive market against larger, more established players like Axon. These competitors have greater resources, broader product portfolios, and deeper relationships. Wrap must continue to innovate and effectively communicate its unique value proposition to compete successfully.

Conclusion

Wrap Technologies is undergoing a significant transformation, moving beyond its foundational BolaWrap device to become a more comprehensive public safety solutions provider. Driven by a strategic pivot towards an end-to-end offering, recent acquisitions, and the emergence of compelling usage data validating the BolaWrap's effectiveness in de-escalation, the company is building a new blueprint for growth.

While recent financial results show the impact of this transition with lower product revenue offset by improved margins from acquired businesses and cost controls, the focus is firmly on the future. Management's optimism is rooted in the belief that validated data, coupled with enhanced market access through the W1 acquisition and leveraged government financing for international sales, will accelerate adoption in a market increasingly demanding safer policing alternatives. The anticipated large-scale international rollouts, particularly in Chile, represent significant potential catalysts.

The core investment thesis hinges on Wrap's ability to successfully execute this expanded strategy, translate its technological differentiation into sustainable revenue growth, and navigate the inherent challenges of selling into the public safety market, including data collection complexities and competitive pressures from larger rivals. While risks remain, particularly regarding financial sustainability in the face of ongoing losses, the strategic realignment and focus on data-driven sales and international expansion signal a determined effort to unlock the potential of its unique de-escalation technology in a changing world.