Wrap Technologies, Inc. (Nasdaq: WRAP) (“Wrap” or the “Company”), a
global leader in innovative public safety technologies and
services, today announced results for the second quarter ended June
30, 2022.
Second Quarter Highlights
- New management completed its initial business review and
developed a multi-year strategic roadmap for growth, profitability,
and enhanced value creation.
- Operating expense was $5.2 million in Q2 2022, representing a
32% year-over-year decline and reflecting new management’s focus on
achieving greater efficiencies.
- Net Revenues were $1.2 million in Q2 2022, compared to $1.9
million in Q2 2021, reflecting the Company’s transition to the next
generation BolaWrap.
- Gross Profit was $0.5 million in Q2 2022, resulting in a 39%
Gross Margin, compared to a loss of ($0.1) million in Q2 2021.
- Net Loss per share was ($0.12) in Q2 2022, compared to ($0.20)
in Q2 2021.
- Trained law enforcement agencies grew to more than 1,130,
representing 41% year-over-year growth.
- Certified officer instructors grew to more than 3,660, up 31%
year-over-year growth.
|
Three Months Ended |
|
Six Months Ended |
|
Unaudited |
June 30, |
|
June 30, |
|
(Amounts in thousands,
except per share data) |
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
Total revenues |
$1,165 |
|
|
|
$1,934 |
|
|
|
$2,764 |
|
|
|
$3,476 |
|
|
|
Net sales growth (1) |
|
(39.8 |
) |
|
% |
|
132 |
|
|
% |
|
(20 |
) |
|
% |
|
128 |
|
|
% |
Gross margin rate |
|
39 |
|
|
% |
|
(3) (2) |
|
% |
|
41 |
|
|
% |
|
16 (2) |
|
% |
Net loss |
$(4,785 |
) |
|
|
$(7,799 |
) |
|
|
$(10,217 |
) |
|
|
$(13,228 |
) |
|
|
Net loss per basic and diluted
share |
$(0.12 |
) |
|
|
$(0.20 |
) |
|
|
$(0.25 |
) |
|
|
$(0.35 |
) |
|
|
(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.
Management Commentary
TJ Kennedy, Chief Executive Officer and a
Director of Wrap, commented:
“In the second quarter, our new management team
assessed all facets of the business and developed a multi-year
strategic roadmap for accelerating growth, achieving profitability,
and enhancing value for shareholders. To achieve sustained revenue
growth, we’re focused on driving recurring sales in the U.S.,
ramping up sales of the new BolaWrap 150 internationally, and
implementing a customer success function to help expand existing
agencies to full patrol-wide BolaWrap deployments. In support of
these priorities, we have added a dedicated inside sales function
to improve our velocity of new leads and started pursuing expanded
distributor and partner relationships. To drive stronger margins
and support long-run profitability, our strategic roadmap also
accounts for improved pricing on BolaWrap 150 devices and
cassettes, and we began to charge fees for our respected training
services. We have also implemented changes to how we sell Wrap
Reality resulting in new wins and solidified our go-forward virtual
reality offering as a Software as a Service (SaaS) model.
Management is already implementing its new
strategic roadmap with urgency and purpose, meaning changes and new
initiatives will become increasingly evident in the coming
quarters. Our commitment to action should be evidenced by the 32%
reduction in operating expense achieved in the second quarter. By
containing costs, optimizing pricing, and sustaining sales growth,
we expect to be able to reduce losses and improve cash flow. We
have a viable path to getting to a break-even position by the end
of 2023 and potentially achieve profitability by the end of
2024.
While the transition from the BolaWrap 100 to
the Bola Wrap 150 as well as geopolitical tensions and
macroeconomic headwinds have impacted us in recent quarters, we
remain uniquely positioned to deliver best-in-class technologies
and services that can empower law enforcement officers across the
globe to have safe, effective encounters with minimal use of force.
Wrap has a distinct value proposition in a growing addressable
market. We firmly believe that our planned changes and strategic
priorities will drive significant sales growth in the future and
put us on a path to sustainable profitability.”
Second Quarter Financial and Operational
Summary
Net Sales
- Generated net revenue of $1.2
million for 2Q22, compared to $1.9 million for 2Q21.
- Incurred discounts of approximately
$0.2 million during 2Q22 as a result of promotional programs
intended to encourage customers to upgrade to the BolaWrap 150.
Gross revenue prior to promotion discounts and incentives were $1.4
million.
- Backlog at the end of the 2Q22 was
$0.1M.
Gross Profit
- Generated approximately $0.5
million of gross profit in 2Q22 resulting in a 39% gross margin,
compared to a loss of $60 thousand for 2Q21. The prior year
included $0.7 million of one-time expense incurred related to a
line change and transition to building the BolaWrap 150.
- We were impacted by higher raw
material prices in the second quarter to obtain certain parts and
delays in our supply chain that affected our production in Q2. Our
margin is expected to improve significantly in future quarters as
these issues dissipate.
- We expect our recently released
upgraded model of our flagship BolaWrap 150 product will contribute
to meaningful gross margin expansion over time.
Selling, General and Administrative
(SG&A) Expense
- SG&A expense decreased
approximately $2.8 million in 2Q22 compared to 2Q21 due to
significant new cost containment efforts focused on reducing
SG&A expense to be more in line with overall sales.
- Share-based compensation decreased
to $0.6 million compared to $2.0 million for 2Q21, due to the stock
price in 2Q22 compared to 2Q21, as well as certain issuances of
stock in the prior year period.
- We expect expenditures for SG&A
expense for the balance of 2022 to remain below the prior year due
to active cost containment efforts.
Research and Development (R&D)
Expense
- R&D expense increased
approximately $0.3 million in 2Q22 to $1.5 million, as compared to
2Q21, due primarily to enhancements to the new BolaWrap 150,
development of Wrap Reality, and other new R&D
initiatives.
- We continue to invest in R&D as
we expand important research initiatives in response to identified
market opportunities in the non-pain compliance and non-injurious
law enforcement market, including further development of WRAP
Reality for law enforcement, correction, and others in public
safety.
Outlook
Although near-term growth is difficult to
project, management anticipates full-year sales will grow in 2022
as supply chain disruptions ease and the transition from the
BolaWrap 100 to the BolaWrap 150 accelerates. We also expect to see
increased sales momentum in the back half of 2022 internationally
as we raise awareness for the BolaWrap 150 and transition
international customers to the next generation device.
Looking beyond this transitional year, we expect
strong sales growth for the BolaWrap 150 and Wrap Reality in 2023
and beyond. Our new strategic roadmap and the expected growth,
coupled with continued cost savings and expense management, should
lead to further reduction of the Company’s cash burn going forward.
As a result, we are targeting a cash flow break-even point by the
end of 2023 and see the potential for profitability by the end of
2024.
Webcast and Earnings Conference
Call
The Company will host an investor conference
call at 5:00 pm ET today to review its results. The investor
conference call can be accessed using the following link. Please
join the webcast 5-10 minutes prior to the start time.
WEBCAST LINK: Link to Wrap
webcast
This call and all supplemental information can
be accessed on Wrap’s investor relations
website: https://wrap.com/investors/A recording of the
conference call will also be available on the Company’s investor
relations website.
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 gross revenues before
promotion discounts and incentives, which the Company believes
provide helpful information to investors with respect to evaluating
the Company’s performance.
Trademark InformationBolaWrap, 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 successfully 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, including the
acceptance of the BoloWrap 150; the risk that distributor and
customer orders for future deliveries are modified, rescheduled or
cancelled in the normal course of business; 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 impact resulting from geopolitical
conflicts and any resulting sanctions; the ability to obtain export
licenses for countries 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, |
|
|
2022 |
|
2021 |
|
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
$3,643 |
|
$4,937 |
|
Short-term investments |
|
24,862 |
|
|
29,983 |
|
Accounts receivable and contract assets |
|
1,405 |
|
|
3,859 |
|
Inventories, net |
|
2,033 |
|
|
1,566 |
|
Prepaid expenses and other current assets |
|
700 |
|
|
868 |
|
Total current assets |
|
32,643 |
|
|
41,213 |
|
Property and equipment, net |
|
907 |
|
|
976 |
|
Operating lease right-of-use asset, net |
|
337 |
|
|
51 |
|
Intangible assets, net |
|
1,941 |
|
|
1,982 |
|
Other assets |
|
11 |
|
|
9 |
|
Total assets |
$35,839 |
|
$44,231 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable and accrued liabilities |
$2,274 |
|
$2,603 |
|
Customer deposits |
|
4 |
|
|
43 |
|
Deferred revenue |
|
178 |
|
|
155 |
|
Operating lease liability - short term |
|
102 |
|
|
56 |
|
Total current liabilities |
|
2,558 |
|
|
2,857 |
|
Long-term liabilities |
|
414 |
|
|
110 |
|
Total liabilities |
|
2,972 |
|
|
2,967 |
|
Stockholders' equity |
|
32,867 |
|
|
41,264 |
|
Total liabilities and stockholders' equity |
$35,839 |
|
$44,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
Revenues: |
|
|
|
|
|
|
|
|
Product sales |
$969 |
|
|
$1,852 |
|
|
$2,431 |
|
|
$3,278 |
|
|
Other revenue |
|
196 |
|
|
|
82 |
|
|
|
333 |
|
|
|
198 |
|
|
Total revenues |
|
1,165 |
|
|
|
1,934 |
|
|
|
2,764 |
|
|
|
3,476 |
|
|
Cost of revenues |
|
708 |
|
|
|
1,994 |
|
|
|
1,640 |
|
|
|
2,931 |
|
|
Gross profit (loss) |
|
457 |
|
|
|
(60 |
) |
|
|
1,124 |
|
|
|
545 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses (i): |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
3,764 |
|
|
|
6,579 |
|
|
|
8,370 |
|
|
|
11,557 |
|
|
Research and development |
|
1,476 |
|
|
|
1,162 |
|
|
|
2,971 |
|
|
|
2,227 |
|
|
Total operating expenses |
|
5,240 |
|
|
|
7,741 |
|
|
|
11,341 |
|
|
|
13,784 |
|
|
Loss from operations |
|
(4,783 |
) |
|
|
(7,801 |
) |
|
|
(10,217 |
) |
|
|
(13,239 |
) |
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
(2 |
) |
|
|
2 |
|
|
|
- |
|
|
|
11 |
|
|
Net loss |
($4,785 |
) |
|
($7,799 |
) |
|
($10,217 |
) |
|
($13,228 |
) |
|
|
|
|
|
|
|
|
|
|
Net loss per basic and diluted common share |
($0.12 |
) |
|
($0.20 |
) |
|
($0.25 |
) |
|
($0.35 |
) |
|
Weighted average common shares used to compute net loss per basic
and diluted common share |
|
40,978,820 |
|
|
|
38,162,526 |
|
|
|
40,943,241 |
|
|
|
37,938,873 |
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
Net loss |
($4,785 |
) |
|
($7,799 |
) |
|
($10,217 |
) |
|
($13,228 |
) |
|
Net unrealized gain (loss) on short-term investments |
|
12 |
|
|
|
(4 |
) |
|
|
(11 |
) |
|
|
(2 |
) |
|
Comprehensive loss |
($4,773 |
) |
|
($7,803 |
) |
|
($10,228 |
) |
|
($13,230 |
) |
|
|
|
|
|
|
|
|
|
|
(i) includes stock-based compensation expense as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Three Months Ended June 30, |
|
|
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
|
Selling, general and administrative |
$591 |
|
|
$2,027 |
|
|
$1,485 |
|
|
$2,629 |
|
|
Research and development |
|
136 |
|
|
|
121 |
|
|
|
271 |
|
|
|
378 |
|
|
Total share-based compensation expense |
$727 |
|
|
$2,148 |
|
|
$1,756 |
|
|
$3,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wrap Technologies, Inc. |
Condensed Consolidated Statements of Cash
Flows |
(unaudited - dollars in thousands) |
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Cash Flows From Operating Activities: |
|
|
|
|
|
Net loss |
|
($10,217 |
) |
|
($13,228 |
) |
|
Adjustments to reconcile net loss to net cash |
|
|
|
|
|
used in operating activities: |
|
|
|
|
Depreciation and amortization |
|
380 |
|
|
|
219 |
|
|
Restructuring and other costs |
|
- |
|
|
|
747 |
|
|
Gain on sale of assets |
|
- |
|
|
|
(11 |
) |
|
Warranty provision |
|
45 |
|
|
|
10 |
|
|
Non-cash lease expense |
|
49 |
|
|
|
46 |
|
|
Share-based compensation |
|
1,756 |
|
|
|
3,007 |
|
|
Common shares issued for services |
|
- |
|
|
|
239 |
|
|
Provision for doubtful accounts |
|
8 |
|
|
|
46 |
|
|
Changes in assets and liabilities: |
|
|
|
|
Accounts receivable |
|
|
2,446 |
|
|
|
(798 |
) |
|
Inventories |
|
|
(467 |
) |
|
|
(713 |
) |
|
Prepaid expenses and other current assets |
|
|
168 |
|
|
|
(65 |
) |
|
Accounts payable |
|
|
(417 |
) |
|
|
48 |
|
|
Operating lease liability |
|
|
(41 |
) |
|
|
(48 |
) |
|
Customer deposits |
|
|
(39 |
) |
|
|
8 |
|
|
Accrued liabilities and other |
|
|
106 |
|
|
|
53 |
|
|
Warranty settlement |
|
|
(63 |
) |
|
|
16 |
|
|
Deferred revenue |
|
|
79 |
|
|
|
170 |
|
|
Net cash used in operating activities |
|
|
(6,207 |
) |
|
($10,254 |
) |
|
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
|
Purchase of short-term investments |
|
|
(14,890 |
) |
|
|
(25,009 |
) |
|
Proceeds from maturities of short-term investments |
|
|
20,000 |
|
|
|
20,000 |
|
|
Capital expenditures for property and equipment |
|
|
(168 |
) |
|
|
(367 |
) |
|
Investment in patents and trademarks |
|
|
(102 |
) |
|
|
(96 |
) |
|
Investment in long-term deposits |
|
|
(2 |
) |
|
|
- |
|
|
Proceeds from long-term deposits |
|
|
- |
|
|
|
3 |
|
|
Net cash provided by (used) in investing activities |
|
4,838 |
|
|
|
(5,469 |
) |
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
Proceeds from exercise of warrants |
|
|
- |
|
|
|
12,048 |
|
|
Proceeds from exercise of stock options |
|
|
75 |
|
|
|
278 |
|
|
Repayment of debt |
|
|
- |
|
|
|
(200 |
) |
|
Net cash provided by financing activities |
|
|
75 |
|
|
|
12,126 |
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(1,294 |
) |
|
|
(3,597 |
) |
|
Cash and cash equivalents, beginning of
period |
|
|
4,937 |
|
|
|
16,647 |
|
|
Cash and cash equivalents, end of period |
|
$3,643 |
|
|
$13,050 |
|
|
|
|
|
|
|
|
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