Wrap Technologies, Inc 10-K for FY2020

Wrap Technologies, Inc. (WRAP)

10-K 2021-03-04 For: 2020-12-31

Added on April 08, 2026

About this 10-K

Wrap Technologies, Inc filed this 10-K on March 4, 2021, covering the fiscal year ended December 31, 2020 (FY2020).

Headline figures

Fiscal year ended December 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $3.94M; up 466.0% from $696.79K a year earlier
Net loss: $12.58M; compared with a net loss of $8.33M a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →

Delaware	98-0551945
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

Large Accelerated Filer [ ]	Accelerated filer [ ]
Non-accelerated filer [X]	Smaller reporting company [X] Emerging growth company [X]

		Page

	PART I

ITEM 1.	Business
ITEM1A.	Risk Factors
ITEM 1B.	Unresolved Staff Comments
ITEM 2.	Properties
ITEM 3.	Legal Proceedings
ITEM 4.	Mine Safety Disclosures

	PART II

ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
ITEM 6.	Selected Financial Data
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7A.	Quantitative and Qualitative Disclosures about Market Risk
ITEM 8.	Financial Statements and Supplementary Data
ITEM 9.	Changes in and Disagreement with Accountants on Accounting and Financial Disclosure
ITEM 9A.	Controls and Procedures
ITEM 9B.	Other Information
	PART III

ITEM 10.	Directors, Executive Officers and Corporate Governance
ITEM 11.	Executive Compensation
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
ITEM 13.	Certain Relationships and Related Transactions and Director Independence
ITEM 14.	Principal Accounting Fees and Services

	PART IV

ITEM 15.	Exhibits, Financial Statement Schedules
	Signatures
	Financial Statements	F-1

Date	Milestone
March 2, 2016	Organized as Wrap Technologies, LLC, a Delaware limited liability company on by our founders Elwood G. Norris, Scot Cohen and James A. Barnes.
December 2016	Demonstrated our first prototype BolaWrap device.
March 31, 2017	Reorganized as a corporation and renamed Wrap Technologies, Inc.
November 2017	Began demonstrations and trial field deployments of our first production devices to a small number of U.S. law enforcement agencies.
December 2017	Wrap became a public company by completing a self-underwritten public offering, raising gross proceeds of approximately $3.49 million from the sale of 2,328,533 shares of our common stock, par value $0.0001 per share (“Common Stock”), at a public offering price of $1.50 per share.
July 31, 2018	First U.S. patent granted on the BolaWrap deployment system.
October 2018	Wrap demonstrated our new BolaWrap green line laser to the first law enforcement agency.
November 2018	First international sale of BolaWrap.
December 2018	Common Stock uplisted to trade on the Nasdaq Capital Market under symbol “WRTC”.
May 2019	Commenced distributing production green line laser equipped BolaWrap 100 devices and associated cartridges.
September 2019	Relocated corporate headquarters from Las Vegas, Nevada to a new sales, manufacturing, training and product development facility in Tempe, Arizona.
December 1, 2020	Changed stock symbol to “WRAP” to align with our global branding strategy.
December 14, 2020	Acquired NSENA, a developer and provider of a law enforcement training platform employing immersive computer graphics virtual reality with proprietary software, hardware and content. We have rebranded the business as Wrap Reality and believe our content library is one of the largest targeting law enforcement currently consisting of 47 training modules.

			Number of securities
			remaining available for
	Number of securities to be	Weighted-average exercise	future issuance under
	issued upon exercise of	price of outstanding	equity compensation plans
	outstanding options,	options, warrants and	(excluding securities
Plan Category	warrants and rights	rights	reflected in column (a))
	(a)	(b)	(c)

Equity compensation plans approved by security holders	4,359,592	$4.58	1,150,055
Equity compensation plans not approved by security holders	-	-	-
Total	4,359,592	$4.58	1,150,055

	Year Ended December 31,		Change
	2020	2019	$	%
Revenues:
Product sales	$3,868,384	$656,071	$3,212,313	490%
Other revenue	75,673	40,719	34,954	86%
Total revenues	3,944,057	696,790	3,247,267	466%
Cost of revenues	2,601,323	420,016	2,181,307	519%
Gross profit	1,342,734	276,774	1,065,960	385%

Operating expenses:
Selling, general and administrative	11,630,644	6,653,465	4,977,179	75%
Research and development	2,788,887	2,236,985	551,902	25%
Total operating expenses	14,419,531	8,890,450	5,529,081	62%
Loss from operations	$(13,076,797)	$(8,613,676)	$(4,463,121)	52%

(a) List of documents filed as a part of this report:
(1) Index to Financial Statements
Report of Independent Registered Public Accounting Firm		F-2
Balance Sheets as of December 31, 2020 and 2019		F-3
Statements of Operations for the Years Ended December 31, 2020 and 2019		F-4
Statements of Stockholders’ Equity for the Years Ended December 31, 2020 and 2019		F-5
Statements of Cash Flows for the Years Ended December 31, 2020 and 2019		F-6
Notes to Financial Statements		F-7

(2) Financial Statement Schedules
All schedules have been omitted because the information is not applicable, is not material or because the information required is included in the financial statements or the notes thereto.
(3) Index to Exhibits
The exhibits listed on the accompanying index to exhibits immediately following the financial statements are filed as part of, or hereby incorporated by reference into, this Form 10-K.

Exhibit Number	Description
2.1	Stock Purchase Agreement, dated March 22, 2017, by and between Wrap Technologies, LLC, Petro River Oil Corp., and Megawest Energy Montana Corp. Incorporated by reference to Exhibit 2.1 to the Registration Statement on Form S-1, filed on April 17, 2017.
2.2	Merger Agreement between Wrap Technologies, LLC and Megawest Energy Montana Corp., dated March 30, 2017. Incorporated by reference to Exhibit 2.2 to the Registration Statement on Form S-1, filed on April 17, 2017.
3.1	Amended and Restated Certificate of Incorporation of the Registrant. Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1, filed on April 17, 2017.
3.2	Bylaws of the Registrant. Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1, filed on April 17, 2017.
4.1	Form of Common Stock Certificate. Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registration Statement on Form S-1, filed on May 30, 2017.
4.2	Form of Investor Warrant, dated October 30, 2018. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, filed on November 5, 2018.
4.3	Form of Placement Agent Warrant, dated October 30, 2018. Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K, filed on November 5, 2018.
4.4	Form of Investor Warrant, dated June 18, 2019. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, filed on June 18, 2019.
4.5	Form of Offering Agent Warrant, dated June 18, 2019. Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, filed on June 18, 2019.
4.6	Form of Warrant Agreement. Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K, filed on June 2, 2020.
10.1	Amended and Restated Intellectual Property License Agreement, dated September 30, 2016, by and between Wrap Technologies, LLC and Syzygy Licensing LLC. Incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-1, filed on April 17, 2017.
10.2+	2017 Equity Compensation Plan. Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1, filed on April 17, 2017.
10.3	Form of Placement Agent Agreement, dated October 30, 2018. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed on November 5, 2018.
10.4	Form of Registration Rights Agreement, dated October 30, 2018. Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed on November 5, 2018.
10.5	Supplemental Engagement Letter by and between Wrap Technologies, Inc. and Katalyst Securities LLC, dated June 7, 2019. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed on June 13, 2019.
10.6	Engagement Letter by and between Wrap Technologies, Inc., Dinosaur Financial Group, LLC and Katalyst Securities LLC, dated June 12 , 2019. Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed on June 18, 2019.
10.7	Amended 2017 Equity Compensation Plan. Incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-8, filed on June 24, 2019.
10.8	Industrial Real Estate Lease, dated May 10, 2019, by and between Wrap Technologies, Inc. and JM Sky Harbor Properties LLC. Incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K, filed on June 6, 2019.
10.9	Promissory Note by and between Wrap Technologies, Inc. and Bank of America, N.A. dated May 1, 2020. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed on May 5, 2020.
10.10	Consulting Agreement by and between the Company and V3, effective April 1, 2020. Incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-8, filed on May 29, 2020.
10.11	Amendment No. 2 to the Wrap Technologies, Inc. 2017 Equity Compensation Plan. Incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-8, filed on June 17, 2020.
10.12	Form of Subscription Agreement. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed on June 2, 2020.
10.13	Employment Agreement by and between Wrap Technologies, Inc., and Marc T. Thomas, dated July 30, 2020. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed on July 31, 2020.
10.14	At-Will Employment, Confidential Information, Non-Compete/Non-Solicitation, Invention Assignment, and Arbitration Agreement, dated September 9, 2020 between the Company and Thomas Smith. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed on September 14, 2020.
10.15	Asset Purchase Agreement between NSENA Inc. and Wrap Reality, Inc. dated as of December 14, 2020. In accordance with the instructions to Item 601(b)(2) of Regulation S-K, the schedules and exhibits to the Asset Purchase Agreement are not filed herewith. The Asset Purchase Agreement identifies such schedules and exhibits, including the general nature of their content. The Company undertakes to provide such schedules and exhibits to the SEC upon request. Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K, filed on September 14, 2020.
10.16	Form of At-Will Employment, Confidential Information, Non-Compete/ Non-Solicitation, Invention Assignment, and Arbitration Agreement between the Key Employees and the Company dated December 14, 2020. Incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K, filed on September 14, 2020.
14.1	Code of Ethics of the Registrant Applicable to Directors, Officers and Employees.*
21.1	Subsidiaries of Wrap Technologies, Inc.*
23.1	Consent of Independent Registered Public Accounting Firm - Rosenberg Rich Baker Berman, P.A. *
31.1	Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 *
31.2	Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 *
32.1	Certifications pursuant to 18 U.S.C. Section 1350. This certification is being furnished solely to accompany this Annual Report on Form 10-K and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company.*

	Extensible Business Reporting Language (XBRL) Exhibits*
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase.
101.DEF	XBRL Taxonomy Extension Definition Linkbase.
101.LAB	XBRL Taxonomy Extension Labels Linkbase.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase.

		Page

Audited Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Balance Sheets as of December 31, 2020 and 2019		F-3

Consolidated Statements of Operations for the Years Ended December 31, 2020 and 2019		F-4

Consolidated Statements of Stockholders’ Equity for Years Ended December 31, 2020 and 2019		F-5

Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019		F-6

Notes to Consolidated Financial Statements		F-7

/s/ Rosenberg Rich Baker Berman P.A.

We have served as the Company’s auditor since 2016.

Somerset, New Jersey

March 4, 2021

	December 31,
	2020	2019
ASSETS
Current assets:
Cash and cash equivalents	$16,646,811	$16,983,864
Short-term investments	24,994,360	-
Accounts receivable, net	1,870,934	195,347
Inventories, net	2,655,390	2,244,541
Prepaid expenses and other current assets	759,445	250,947
Total current assets	46,926,940	19,674,699
Property and equipment, net	357,287	242,876
Operating lease right-of-use asset, net	139,088	260,931
Intangible assets, net	1,396,484	230,283
Other assets	12,681	12,681
Total assets	$48,832,480	$20,421,470

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$1,232,349	$406,967
Accrued liabilities	721,075	194,294
Customer deposits	2,095	343,724
Deferred revenue	16,015	2,684
Operating lease liability - short term	94,011	128,131
Business acquisition liability - short term	275,000	-
Total current liabilities	2,340,545	1,075,800

Long-term liabilities:
Operating Lease Liability - long term	56,006	150,018
Business acquisition liability - long term	22,500	-
Total long-term liabilities	78,506	150,018
Total liabilities	2,419,051	1,225,818

Commitments and contingencies (Note 13)

Stockholders' equity:
Preferred stock - 5,000,000 authorized; par value $0.0001 per share; none issued and outstanding	-	-
Common stock - 150,000,000 authorized; par value $0.0001 per share; 37,554,162 and 29,829,916 shares issued and outstanding each period, respectively	3,756	2,983
Additional paid-in capital	71,704,857	31,922,493
Accumulated deficit	(25,310,033)	(12,729,824)
Accumulated other comprehensive income	14,849	-
Total stockholders' equity	46,413,429	19,195,652
Total liabilities and stockholders' equity	$48,832,480	$20,421,470

					Accumulated
			Additional		Other	Total
	Common Stock		Paid-In	Accumulated	Comprehensive	Stockholders'
	Shares	Amount	Capital	Deficit	Income	Equity
Balance at December 31, 2018	27,364,607	$2,736	$16,791,254	$(4,404,336)	$-	$12,389,654
Sale of Common Stock and warrants at $6.50 per share and placement agent warrants in public offering, net of issuance costs	1,923,076	192	11,351,022	-	-	11,351,214
Common shares issued upon exercise of warrants at $3.00 per share	127,649	13	382,934	-	-	382,947
Common shares issued upon exercise of warrants at $5.00 per share	345,834	35	1,700,469	-	-	1,700,504
Common shares issued upon exercise of stock options	38,750	4	58,121	-	-	58,125
Share-based compensation expense			1,536,096	-	-	1,536,096
Common shares issued for services	30,000	3	102,597	-	-	102,600
Net loss for the period	-	-	-	(8,325,488)	-	(8,325,488)
Balance at December 31, 2019	29,829,916	$2,983	$31,922,493	$(12,729,824)	$-	$19,195,652
Sale of Common Stock and warrants at $6.00 per share in public offering, net of issuance costs	2,066,667	207	11,666,999	-	-	11,667,206
Common shares issued upon exercise of warrants at $3.00 per share, net of issuance costs	328,458	33	960,993	-	-	961,026
Common shares issued upon exercise of warrants at $5.00 per share, net of issuance costs	3,890,839	389	18,718,605	-	-	18,718,994
Common shares issued upon exercise of warrants at $6.00 per share, net of issuance costs	675,000	68	3,847,432	-	-	3,847,500
Common shares issued upon exercise of warrants at $6.50 per share, net of issuance costs	261,679	26	1,646,292	-	-	1,646,318
Common shares issued upon exercise of stock options	371,000	37	705,313	-	-	705,350
Common shares issued upon vesting of restricted stock units	130,603	13	(13)	-	-	-
Share-based compensation expense	-	-	2,236,743	-	-	2,236,743
Net unrealized gain on short-term investments	-	-	-	-	14,849	14,849
Net loss for the period	-	-	-	(12,580,209)	-	(12,580,209)
Balance at December 31, 2020	37,554,162	$3,756	$71,704,857	$(25,310,033)	$14,849	$46,413,429

Equipment	$10,250
Software	460,250
Customer contracts	40,000
Tradenames	2,000
Noncompete agreements	10,000
Deferred revenue	(15,000)
Total consideration	$507,500

Description	Useful life in years	Fair Value
Software	5	$460,250
Customer contracts	1	40,000
Tradenames	1	2,000
Noncompete agreements	2	10,000
Total acquired intangible assets		$512,250

	December 31,	December 31,
	2020	2019
Finished goods	$1,248,893	$653,323
Work in process	64,451	413
Raw materials	1,342,046	1,590,805
Inventories, net	$2,655,390	$2,244,541

	December 31,	December 31,
	2020	2019
Production and lab equipment	$147,781	$44,454
Tooling	80,936	59,004
Computer equipment	180,573	83,368
Furniture, fixtures and improvements	165,465	128,782
	574,755	315,608
Accumulated depreciation	(217,468)	(72,732)
Property and equipment, net	$357,287	$242,876

	December 31,	December 31,
	2020	2019
Amortizable intangible assets:
Patents	$279,294	$176,425
Trademarks	83,964	57,919
Purchased software	662,250	-
Other	50,000	-
	1,075,508	234,344
Accumulated amortization	(22,587)	(4,061)
Total amortizable	1,052,921	230,283
Indefinite life assets (non-amortizable)	343,563	-
Total intangible assets-net	$1,396,484	$230,283

2021	$186,266
2022	150,766
2023	145,766
2024	145,766
2025	145,766
Thereafter	278,591
Total estimated amortization expense	$1,052,921

	As of December 31, 2020
	Adjusted	Unrealized	Unrealized	Market
	Cost	Gains	Losses	Value
Level 1:
Money Market Funds	$6,034,757	$-	$-	$6,034,757
U.S. Treasury securities considered cash equivalents	9,997,812	-	-	9,997,812
U.S. Treasury securities in short-term investments	24,979,511	14,849		24,994,360
Total Financial Assets	$41,012,080	$14,849	$-	$41,026,929

Operating lease liability- short term	$94,011
Operating lease liability - long term	56,006
Total Operating Lease Liability	$150,017

2021	101,406
2022	57,328
Total future minimum lease payments	158,734
Less imputed interest	(8,717)
Total	$150,017

	Number	Average Purchase Price Per Share
Shares purchasable under outstanding warrants at December 31, 2018	5,017,181	$4.82
Stock purchase warrants issued	2,076,922	$6.62
Stock purchase warrants exercised	(473,483)	$4.46
Shares purchasable under outstanding warrants at December 31, 2019	6,620,620	$5.41
Stock purchase warrants issued	2,066,667	$6.00
Stock purchase warrants exercised	(5,155,976)	$5.08
Stock purchase warrants cancelled	(324,401)	$5.00
Shares purchasable under outstanding warrants at December 31, 2020	3,206,910	$6.36

	Number of	Exercise Price
Description	Common Shares	Per Share	Expiration Date
Purchase Warrants	1,661,397	$6.50	June 18, 2021
Agent Warrants	153,846	$8.125	June 18, 2021
Purchase Warrants	1,391,667	$6.00	June 1, 2022
	3,206,910

		Weighted Average
	Options on		Remaining	Aggregate
	Common	Exercise	Contractual	Intrinsic
	Shares	Price	Term	Value
Outstanding December 31, 2018	2,067,500	$1.68	4.44
Granted	1,000,000	$5.41	-
Exercised	(38,750)	$1.50	-
Forfeited, cancelled, expired	(100,000)	$1.50	-
Outstanding December 31, 2019	2,928,750	$2.96	3.71
Granted	1,423,836	$6.66	-
Exercised	(371,000)	$1.90	-
Forfeited, cancelled, expired	(50,000)	$3.00	-
Outstanding December 31, 2020	3,931,586	$4.41	4.89	$5,176,337
Vested and exercisable at December 31, 2020	2,091,084	$2.68	2.60	$4,965,155

	For the Year Ended
	December 31,
	2020	2019
Expected stock price volatility	47%	49%
Risk-free interest rate	0.38%	2.41%
Forfeiture rate	0%	0%
Expected dividend yield	0%	0%
Expected life of options - years	5.64	3.50
Weighted-average fair value of options granted	$2.90	$2.06

		Weighted
		Average	Weighted		Weighted
		Remaining	Average		Average
Range of	Number	Contractual	Exercise	Number	Exercise
Exercise Prices	Outstanding	Life (Years)	Price	Exercisable	Price
$1.50	1,422,750	2.39	$1.50	1,422,750	$1.50
$3.15 - $3.61	85,000	2.86	$3.75	85,000	$3.75
$4.26 - $6.58	2,073,836	5.89	$5.29	583,334	$5.41
$11.22	350,000	9.58	$11.22	-	-

		Weighted Average	Weighted Average
	Service-Based	Grant Date	Vesting
	RSU's	Fair Value	Period
Unvested at December 31, 2018	-	-
Granted - service based	308,087	$6.77	3.00 Years
Unvested at December 31, 2019	308,087	$6.77
Granted - service based	310,874	$6.02	3.02 Years
Granted - performance based	35,211	$4.26
Vested	(144,687)	$5.17
Forfeited and cancelled	(81,479)	$6.47
Unvested at December 31, 2020	428,006	$6.13	2.27 Years

	For the Year
	Ended December 31,
	2020	2019
Americas	$1,442,822	$481,622
Europe, Middle East and Africa	1,046,499	116,547
Asia Pacific	1,454,736	98,621
	$3,944,057	$696,790

	WRAP TECHNOLOGIES, INC

Date: March 4, 2021	By:	/s/ Thomas Smith
		Thomas Smith
		Interim Chief Executive Officer

Name	Position	Date

/s/ THOMAS SMITH	Interim Chief Executive Officer	March 4, 2021
Thomas Smith	(Principal Executive Officer)

/s/ JAMES A. BARNES	Chief Financial Officer, Secretary and Treasurer	March 4, 2021
James A. Barnes	(Principal Accounting Officer)

/s/ SCOT COHEN	Executive Chair of Board	March 4, 2021
Scot Cohen
/s/DAVID G. NORRIS	Director	March 4, 2021
David G. Norris
/s/PATRICK KINSELLA	Director	March 4, 2021
Patrick Kinsella
/s/MICHAEL PARRIS	Director	March 4, 2021
Michael Parris

/s/WAYNE R. WALKER	Director	March 4, 2021
Wayne R. Walker

Subsidiary Name	Jurisdiction of Incorporation
Wrap Reality, Inc.	Arizona

/s/ Rosenberg Rich Baker Berman, P.A. Rosenberg Rich Baker Berman, P.A.

Somerset, New Jersey
March 4, 2021

	WRAP TECHNOLOGIES INC

Date: March 4, 2021	By:	/s/ Thomas P. Smith
		Thomas P. Smith
		Interim Chief Executive Officer and President (Principal Executive Officer)