Wrap Technologies, Inc. (Nasdaq: WRAP) (the “Company”), a global
leader in innovative public safety technologies and services, today
announced results for its second quarter ended June 30, 2021.
Second Quarter 2021 Summary
- Net sales of $1.9 million,
growth of 132% year-over-year
- Gross margin impacted by
one-time non-cash $0.7 million planned product line improvement
expense
- Trained agencies increased
to over 800, growth of 85% from December 31, 2020
- Certified officer
instructors increased to over 2,800, up 106% from December 31,
2020
- Generated $12.0 million of
cash through exercise of 1.8 million warrants
- Glenn Hickman appointed
Chief Operating Officer
Management Commentary – Tom Smith, CEO
and President
“We delivered another strong and steady quarter
of performance while continuing to expand our worldwide presence as
a leader in modern police technology. We had our first quarter with
over $1 million in revenue for the domestic market, a great
milestone accomplishment. We continue to highlight bodycam videos
showing the field uses of the BolaWrap, which is incredibly
powerful to show agencies the numerous different ways the BolaWrap
is being used to prevent higher levels of force thru early
engagement by officers. Despite international COVID travel
restrictions, we continue to see growth in international revenue on
a consistent basis. Our revenue growth reflects the gains that
we’ve made in penetrating the market and we reported a nice
sequential bump in revenue as demand for our platform from trained
agencies and certified officer instructors continues to grow. We
believe these financial and operational metrics are leading
indicators for future sales.”
“During the second quarter, we also appointed
Glenn Hickman, former Axon VP of R&D, as our new COO to help
further advance our BolaWRAP family of products. Finally, we
reiterate our commitment to make policing safe and effective
through our de-escalation and non-lethal solutions and believe that
we are positioned extremely well to be an important player in the
world of safer policing, which continues to remain in the global
spotlight.”
|
|
Three Months Ended |
|
Six Months Ended |
|
Unaudited |
|
June 30, |
|
June 30, |
|
(Amounts in thousands,
except per share data) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
Total revenues |
|
$ |
1,934 |
|
|
$ |
833 |
|
|
$ |
3,476 |
|
|
$ |
1,522 |
|
|
Net sales growth (1) |
|
|
132 |
|
% |
|
1,300 |
|
% |
|
128 |
|
% |
|
759 |
|
% |
Gross margin rate |
|
|
(3) (2) |
|
% |
|
32 |
|
% |
|
16 (2) |
|
% |
|
36 |
|
% |
Net loss |
|
$ |
(7,799 |
) |
|
$ |
(2,816 |
) |
|
$ |
(13,228 |
) |
|
$ |
(5,162 |
) |
|
Net loss per basic and diluted
share |
|
$ |
(0.20 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.35 |
) |
|
$ |
(0.17 |
) |
|
(1) As compared to the
prior-year period.(2) Excluding one-time expenses
of $0.7 million the gross margin rate was 36% for QTD 2021 and 37%
for the YTD 2021.
SECOND QUARTER 2021 FINANCIAL AND OPERATIONS
HIGHLIGHTS
Net Sales
- Generated revenue of $1.9 million for 2Q21, 132% growth as
compared to 2Q20.
- 27% sequential revenue increase as compared to $1.5 million in
1Q21.
- The pandemic is expected to
continue to impact sales efforts both in the U.S. and
internationally. Our sales pipeline remains robust and active, as
evidenced by our backlog which was $0.7 million at the end of
2Q21.
Gross Profit
- Incurred one-time costs of $0.7
million related to the planned transition of production lines.
- Generated $0.1 million of gross
loss for 2Q21.
- Excluding the $0.7 million product
line exit expense, gross profit would have been $0.7 million, or
36%. This was down from 1Q21 gross margin of 39% and up from the
32% for 2Q20.
- We anticipate our gross margins to
fluctuate as we ramp our revenue base and continue to enhance our
product offering.
- Based on current initiatives, we
expect gross margins to generally improve in future periods.
Selling, General and Administrative
(SG&A) Expense
- SG&A expense increased $4.0 million in 2Q21 compared to
2Q20.
- Increase was driven primarily by a
$1.5 million increase in non-cash share-based compensation related
mostly to board of director compensation, $1.0 million in
compensation and consultancy costs as we ramp our sales force and
training teams, and $0.4 million of public reporting
expenditures.
- Travel expense was up modestly during 2Q21, but remain under
historical norms. There was virtually no travel in the prior-year
quarter due to COVID-19.
Research and Development (R&D)
Expense
- R&D expense increased $0.6 million in 2Q21 to $1.2 million
compared to 2Q20.
- We expect to continue to invest in
R&D as we expand important research initiatives in response to
identified market opportunities, including further development of
our virtual training platform.
Capital Structure and
Liquidity
- Cash, cash equivalents and
short-term investments were $43.0 million at end of 2Q21 compared
to $37.0 million at 1Q21, representing 84% of total assets.
- Generated $12.0 million of cash during the quarter through the
exercise of 1.8 million warrants.
Outlook
As international travel remains limited we
continue to expect near-term headwinds to our growth. We anticipate
this to continue through the remainder of 2021. Accordingly,
near-term growth rates are difficult to project.
Webcast and Earnings Conference
Call
The Company will host a live Zoom video webcast
for investors and other interested parties beginning at 4:30 p.m.
Eastern Time on Thursday, July 29, 2021. The call will be hosted by
Tom Smith, CEO and President, Jim Barnes, CFO Secretary and
Treasurer, and Paul Manley, VP of Investor Relations.
Glenn Hickman, COO, will also be introduced on Zoom video
call.
WEBCAST LINK: Webcast Registration Link
Participants may access the live webcast by
visiting the Company’s Investor Relations page at www.wrap.com. A
webcast replay of the call will be available on the Company’s
Investor Relations page within 24 hours of the live call
ending.
Contact
Investors and Media:Paul M. ManleyVice President
of Investor Relations(612) 834-1804pmanley@wrap.com
About Wrap Technologies
WRAP Technologies (Nasdaq: WRAP) is a global
leader in innovative public safety technologies and services. WRAP
develops creative solutions to complex issues and empowers public
safety officials to protect and serve their communities through its
portfolio of advanced technology and training solutions.
WRAP’s BolaWrap® Remote Restraint device is a
patented, hand-held pre-escalation and apprehension tool that
discharges a Kevlar® tether to temporarily restrain uncooperative
suspects and persons in crisis from a distance. Through its many
field uses and growing adoption by agencies across the globe,
BolaWrap is proving to be an effective tool to help law enforcement
safely detain persons without injury or the need to use higher
levels of force.
WRAP Reality, the Company’s virtual reality
training system, is a fully immersive training simulator and
comprehensive public safety training platform providing first
responders with the discipline and practice in methods of
de-escalation, conflict resolution, and use-of-force to better
perform in the field.
WRAP’s headquarters are in Tempe, Arizona. For
more information, please visit wrap.com.
Use of Non-GAAP Information
Included in this press release are non-GAAP
operational metrics regarding agencies and training, amounts of
non-cash stock-based compensation expense and adjusted gross
margin, which the Company believes provide helpful information to
investors with respect to evaluating the Company’s performance.
Trademark Information
BolaWrap, Wrap and Wrap Reality are trademarks
of Wrap Technologies, Inc. All other trade names used herein are
either trademarks or registered trademarks of the respective
holders.
Cautionary Note on Forward-Looking Statements - Safe
Harbor Statement
This press release contains “forward-looking
statements” within the meaning of the “safe harbor” provisions of
the Private Securities Litigation Reform Act of 1995, including but
not limited to: statements regarding the Company’s overall
business; total addressable market; and, expectations regarding
future sales and expenses. Words such as “expect”, “anticipate”,
“should”, “believe”, “target”, “project”, “goals”, “estimate”,
“potential”, “predict”, “may”, “will”, “could”, “intend”, and
variations of these terms or the negative of these terms and
similar expressions are intended to identify these forward-looking
statements. Moreover, forward-looking statements are subject to a
number of risks and uncertainties, many of which involve factors or
circumstances that are beyond the Company’s control. The Company’s
actual results could differ materially from those stated or implied
in forward-looking statements due to a number of factors, including
but not limited to: the Company’s ability to successful implement
training programs for the use of its products; the Company’s
ability to manufacture and produce product for its customers; the
Company’s ability to develop sales for its new product solution;
the acceptance of existing and future products; the availability of
funding to continue to finance operations; the complexity, expense
and time associated with sales to law enforcement and government
entities; the lengthy evaluation and sales cycle for the Company’s
product solution; product defects; litigation risks from alleged
product-related injuries; risks of government regulations; the
business impact of health crises or outbreaks of disease, such as
epidemics or pandemics; the ability to obtain export licenses for
counties outside of the US; the ability to obtain patents and
defend IP against competitors; the impact of competitive products
and solutions; and the Company’s ability to maintain and enhance
its brand, as well as other risk factors mentioned in the Company’s
most recent annual report on Form 10-K, quarterly report on Form
10-Q, and other SEC filings. These forward-looking statements are
made as of the date of this press release and were based on current
expectations, estimates, forecasts and projections as well as the
beliefs and assumptions of management. Except as required by law,
the Company undertakes no duty or obligation to update any
forward-looking statements contained in this release as a result of
new information, future events or changes in its expectations.
Wrap Technologies, Inc. |
Condensed Consolidated Balance Sheets |
(unaudited - dollars in thousands) |
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2021 |
|
|
|
2020 |
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
13,050 |
|
|
$ |
16,647 |
|
Short-term investments |
|
30,002 |
|
|
|
24,994 |
|
Accounts receivable, net |
|
2,623 |
|
|
|
1,871 |
|
Inventories, net |
|
2,837 |
|
|
|
2,655 |
|
Prepaid expenses and other current assets |
|
824 |
|
|
|
760 |
|
Total current assets |
|
49,336 |
|
|
|
46,927 |
|
Property and equipment, net |
|
508 |
|
|
|
357 |
|
Operating lease right-of-use asset, net |
|
93 |
|
|
|
139 |
|
Intangible assets, net |
|
1,395 |
|
|
|
1,397 |
|
Other assets, net |
|
9 |
|
|
|
13 |
|
Total assets |
$ |
51,341 |
|
|
$ |
48,833 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
Current liabilities: |
|
|
|
Accounts payable and accrued liabilities |
$ |
2,190 |
|
|
$ |
1,953 |
|
Customer deposits |
|
10 |
|
|
|
2 |
|
Deferred revenue |
|
186 |
|
|
|
16 |
|
Operating lease liability - short term |
|
94 |
|
|
|
94 |
|
Business acquisition liability - short term |
|
97 |
|
|
|
275 |
|
Total current liabilities |
|
2,577 |
|
|
|
2,340 |
|
Long-term liabilities |
|
8 |
|
|
|
79 |
|
Total liabilities |
|
2,585 |
|
|
|
2,419 |
|
Stockholders' equity |
|
48,756 |
|
|
|
46,414 |
|
Total liabilities and stockholders' equity |
$ |
51,341 |
|
|
$ |
48,833 |
|
Wrap Technologies, Inc. |
Condensed Consolidated Statements of Operations and
Comprehensive Loss |
(unaudited - dollars In thousands, except share and per
share data) |
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
Revenues: |
|
|
|
|
|
|
|
Product sales |
$ |
1,852 |
|
|
$ |
823 |
|
|
$ |
3,278 |
|
|
$ |
1,498 |
|
Other revenue |
|
82 |
|
|
|
10 |
|
|
|
198 |
|
|
|
24 |
|
Total revenues |
|
1,934 |
|
|
|
833 |
|
|
|
3,476 |
|
|
|
1,522 |
|
Cost of revenues: |
|
|
|
|
|
|
|
Products and services |
|
1,247 |
|
|
|
565 |
|
|
|
2,184 |
|
|
|
971 |
|
Product line exit expense |
|
747 |
|
|
|
- |
|
|
|
747 |
|
|
|
- |
|
Total cost of revenues |
|
1,994 |
|
|
|
565 |
|
|
|
2,931 |
|
|
|
971 |
|
Gross profit (loss) |
|
(60 |
) |
|
|
268 |
|
|
|
545 |
|
|
|
551 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Selling, general and administrative |
|
6,579 |
|
|
|
2,538 |
|
|
|
11,557 |
|
|
|
4,678 |
|
Research and development |
|
1,162 |
|
|
|
577 |
|
|
|
2,227 |
|
|
|
1,111 |
|
Total operating expenses |
|
7,741 |
|
|
|
3,115 |
|
|
|
13,784 |
|
|
|
5,789 |
|
Loss from operations |
|
(7,801 |
) |
|
|
(2,847 |
) |
|
|
(13,239 |
) |
|
|
(5,238 |
) |
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
Investment income |
|
8 |
|
|
|
31 |
|
|
|
10 |
|
|
|
76 |
|
Other |
|
(6 |
) |
|
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
2 |
|
|
|
31 |
|
|
|
11 |
|
|
|
76 |
|
Net loss |
$ |
(7,799 |
) |
|
$ |
(2,816 |
) |
|
$ |
(13,228 |
) |
|
$ |
(5,162 |
) |
|
|
|
|
|
|
|
|
Net loss per basic and diluted common share |
$ |
(0.20 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.35 |
) |
|
$ |
(0.17 |
) |
Weighted average common shares used to compute net loss per basic
and diluted common share |
|
38,162,526 |
|
|
|
31,241,470 |
|
|
|
37,938,873 |
|
|
|
30,749,532 |
|
|
|
|
|
|
|
|
|
Comprehensive loss: |
|
|
|
|
|
|
|
Net loss |
$ |
(7,799 |
) |
|
$ |
(2,816 |
) |
|
$ |
(13,228 |
) |
|
$ |
(5,162 |
) |
Net unrealized gain on short-term investments |
|
(4 |
) |
|
|
- |
|
|
|
(2 |
) |
|
|
- |
|
Comprehensive loss |
$ |
(7,803 |
) |
|
$ |
(2,816 |
) |
|
$ |
(13,230 |
) |
|
$ |
(5,162 |
) |
|
|
|
|
|
|
|
|
(i) includes stock-based compensation expense as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
Selling, general and administrative |
$ |
2,027 |
|
|
$ |
496 |
|
|
$ |
2,629 |
|
|
$ |
925 |
|
Research and development |
|
121 |
|
|
|
53 |
|
|
|
378 |
|
|
|
91 |
|
Total stock-based compensation expense |
$ |
2,148 |
|
|
$ |
549 |
|
|
$ |
3,007 |
|
|
$ |
1,016 |
|
Wrap Technologies, Inc. |
Condensed Consolidated Statements of Cash
Flows |
(unaudited - dollars in thousands) |
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
2021 |
|
|
|
2020 |
|
Cash Flows From Operating Activities: |
|
|
|
|
Net loss |
|
$ |
(13,228 |
) |
|
$ |
(5,162 |
) |
Adjustments to reconcile net loss to net cash |
|
|
|
|
used in operating activities: |
|
|
|
Depreciation and amortization |
|
219 |
|
|
|
52 |
|
Product line exit expense |
|
747 |
|
|
|
- |
|
Gain on sale of assets |
|
(11 |
) |
|
|
- |
|
Warranty provision |
|
10 |
|
|
|
19 |
|
Inventory obsolescence |
|
- |
|
|
|
(48 |
) |
Non-cash lease expense |
|
46 |
|
|
|
60 |
|
Share-based compensation |
|
3,007 |
|
|
|
1,016 |
|
Common shares issued for services |
|
239 |
|
|
|
- |
|
Provision for doubtful accounts |
|
46 |
|
|
|
10 |
|
Changes in assets and liabilities: |
|
- |
|
|
|
- |
|
Accounts receivable |
|
|
(798 |
) |
|
|
(307 |
) |
Inventories |
|
|
(713 |
) |
|
|
206 |
|
Prepaid expenses and other current assets |
|
|
(65 |
) |
|
|
(29 |
) |
Accounts payable |
|
|
48 |
|
|
|
376 |
|
Operating lease liability |
|
|
(48 |
) |
|
|
(62 |
) |
Customer deposits |
|
|
8 |
|
|
|
(193 |
) |
Accrued liabilities and other |
|
|
53 |
|
|
|
165 |
|
Warranty settlement |
|
|
16 |
|
|
|
- |
|
Deferred revenue |
|
|
170 |
|
|
|
- |
|
Net cash used in operating activities |
|
($ |
10,254 |
) |
|
$ |
(3,897 |
) |
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
Purchase of short-term investments |
|
|
(25,009 |
) |
|
|
- |
|
Proceeds from maturities of short-term investments |
|
|
20,000 |
|
|
|
- |
|
Capital expenditures for property and equipment |
|
|
(367 |
) |
|
|
(69 |
) |
Investment in patents and trademarks |
|
|
(96 |
) |
|
|
(82 |
) |
Proceeds from long-term deposits |
|
|
3 |
|
|
|
- |
|
Net cash used in investing activities |
|
(5,469 |
) |
|
|
(151 |
) |
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
Sale of common stock and warrants |
|
|
- |
|
|
|
12,400 |
|
Offering costs paid on sale of common stock and warrants |
|
|
- |
|
|
|
(733 |
) |
Proceeds from exercise of warrants |
|
|
12,048 |
|
|
|
10,251 |
|
Offering costs paid on exercise of warrants |
|
|
- |
|
|
|
(398 |
) |
Proceeds from exercise of stock options |
|
|
278 |
|
|
|
515 |
|
Proceeds from bank note |
|
|
- |
|
|
|
414 |
|
Repayment of debt |
|
|
(200 |
) |
|
|
- |
|
Net cash provided by financing activities |
|
|
12,126 |
|
|
|
22,449 |
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents |
|
|
(3,597 |
) |
|
|
18,401 |
|
Cash and cash equivalents, beginning of
period |
|
|
16,647 |
|
|
|
16,984 |
|
Cash and cash equivalents, end of period |
|
$ |
13,050 |
|
|
$ |
35,385 |
|
|
|
|
|
|
Supplemental Disclosure of Non-Cash Investing |
|
|
|
|
and Financing Activities: |
|
|
|
|
Change in unrealized gain on short-term investments |
|
$ |
(2 |
) |
|
$ |
- |
|
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