Wrap Technologies(US:WRAP)2025-05-15 21:07Financial Performance - The company reported a net income of $109,000 for the three months ended March 31, 2025, compared to $117,000 for the same period in 2024, indicating stable performance despite ongoing challenges [123]. - Net revenue for the three months ended March 31, 2025, was $765 thousand, a 48% decrease from $1.5 million for the same period in 2024 [150]. - Gross profit for the three months ended March 31, 2025, was $595 thousand, representing a gross margin of 78%, compared to $836 thousand and a gross margin of 57% in the same period of 2024 [151]. - Loss from operations for the three months ended March 31, 2025, was $3.9 million, a decrease of $0.2 million from a loss of $4.1 million in the same period of 2024 [160]. - The decrease in gross profit was primarily due to lower sales volume of the Bola Wrap 150 product, offset by high-margin revenue from the Intrensic acquisition [151]. - The company experienced operating losses of $3.9 million for the three months ended March 31, 2025, despite an increase in working capital net of warrants-short term to $3.6 million compared to December 31, 2024 [162]. - For the three months ended March 31, 2025, net cash used in operating activities was $3.1 million, with a net income of $109 thousand, adjusted for non-cash items [180]. - During the same period, the company recorded a non-cash expense of $1.9 million, primarily due to share-based compensation of $1.7 million and depreciation and amortization of $155 thousand [180]. - In the three months ended March 31, 2024, net cash used in operating activities was $3.7 million, with a net income of $117 thousand, also adjusted for non-cash items [181]. Operating Expenses - Operating expenses decreased to $4.5 million for the three months ended March 31, 2025, down from $5.0 million in the same period of 2024, due to cost containment initiatives [119]. - Selling, general and administrative (SG&A) expenses were $4.1 million for the three months ended March 31, 2025, a slight decrease of $0.1 million compared to $4.2 million in the same period of 2024 [155]. - Research and development expenses totaled $378 thousand for the three months ended March 31, 2025, a decrease of $377 thousand compared to the same period in 2024 [159]. - SG&A expenses are expected to increase in 2025 due to the W1 acquisition, despite cost containment efforts [157]. - The company experienced increased costs in labor and materials due to inflation, impacting operating expenses throughout 2025 [187]. Product and Market Development - The BolaWrap product is now in use by over 900 U.S. law enforcement agencies and in 62 countries, demonstrating significant market penetration [113]. - The company anticipates a continued surge in global business driven by increasing demand for humane and safer policing practices [116]. - Over 1,530 agencies have received BolaWrap training, with more than 5,400 officers certified as instructors, representing a 10% increase in both agencies and trained officers compared to the previous year [118]. - The global market for non-lethal products is expected to grow to $16.1 billion by 2027, presenting significant opportunities for the company [104]. - The company has established distribution agreements with 35 international distributors covering 75 countries, enhancing its global reach [108]. - The company plans to increase product demonstrations and training sessions, particularly in international markets, to drive sales growth [121]. - Cassettes accounted for 10% of overall revenue in the three months ended March 31, 2025, with expectations for growth as more BolaWrap devices are deployed [152]. - The company anticipates that gross margins will be impacted by the addition of managed services and software revenue contributions in the second half of 2025 [152]. Cash Flow and Liquidity - The company had $6.2 million in cash and cash equivalents as of March 31, 2025, providing sufficient capital to fund operations for the next twelve months [125]. - As of March 31, 2025, the company had cash of $6.2 million and cumulative losses attributable to stockholders of $105.1 million [162]. - The company anticipates future liquidity requirements will depend on capital needed for new product introductions and operational support [163]. - The company has negative cash flows from operations since inception, which may affect its ability to obtain cash from external sources [164]. - The company received $5.7 million in net proceeds from a Private Placement during the three months ended March 31, 2025 [183]. Financing Activities - The Series A Offering on July 3, 2023, generated gross proceeds of $10 million from the sale of 10,000 shares of Series A Preferred Stock and warrants to acquire up to 6,896,553 shares of Common Stock [165]. - The Series A Preferred Stock has an initial conversion price of $1.45 per share and accrues dividends at a rate of 8% per annum, compounded monthly [168]. - On February 24, 2025, the company entered into a PIPE Purchase Agreement, resulting in gross proceeds of $5.79 million from the sale of 3,216,666 shares of Common Stock and accompanying warrants [178]. - The exercise price for the PIPE Warrants is set at $1.80 per share [178]. - The Series A Warrants allow for the purchase of up to 6,896,553 shares of Common Stock at an exercise price of $1.45 per share [176]. Commitments and Obligations - The company is obligated to pay a 4% royalty fee on future product sales to Syzygy, with a maximum payout of $1.0 million or until September 30, 2026, whichever occurs first [184]. - As of March 31, 2025, the company was committed to approximately $509 thousand for future component deliveries and contract services [186]. - The company committed to lease payments totaling $126 thousand in 2024 and $75 thousand in 2025 for its Tempe, Arizona facility [185]. - The company recorded $66 thousand in royalties during the three months ended March 31, 2025, with an accrued liability of $81 thousand [184].