GlobeNewswire Inc | Mar 4, 2021 04:05PM EST

March 04, 2021

TEMPE, Ariz., March 04, 2021 (GLOBE NEWSWIRE) -- Wrap Technologies, Inc. (Nasdaq: WRAP) (the Company), a global leader in innovative public safety technologies and services, today announced results for its fourth quarter and fiscal year ended December 31, 2020.

Fourth Quarter 2020 Summary

Net Sales of $1.4 million, Growth of 464%Gross Margin of 33%Cash, Cash Equivalents and Short-Term Investments of $41.6 millionStock Symbol Changed to: WRAP

Full Year 2020 Summary

Net Sales of $3.9 million, Growth of 466%Gross Margin of 34%Sold Product to 15 New Countries 36 Countries to DateTrained Agencies Increased to Over 450 Agencies BolaWrap Certified Instructors Increased to 1,360

Management Commentary Tom Smith, President

As public safety experienced historic challenges in 2020, WRAP adapted to a quickly-evolving market by putting increased focus on building a global brand and broadening our impact as a leader in de-escalation solutions and technology. As safe and effective uses of BolaWrap increased in the United States, the device has also been sold globally to 36 countries. Our international business is only anticipated to grow, due to a rapidly expanding pipeline and international distribution network.

In the wake of global protests surrounding excessive use of force, 2021 is expected to be a year focused on domestic police and public safety reform, with an increased focus from community groups, government organizations and the media on safer tactics and tools. In Q4 2020, we completed the acquisition of NSENA, Inc. with the expressed purpose of providing an immersive training solution to a market that we believe is seeking fresh ideas towards police education and training. We expect 2021 to be a year of continued growth and insights as we pursue our goal of becoming the global leader in de-escalation solutions and best practices.

Three Months Ended Year Ended December31, December 31,(amounts inthousands, 2020 2019 2020 2019except pershare data)Total revenues $ 1,415 $ 251 $ 3,944 $ 697 Net sales 464 % NM % 466 % NM %growth ^(1)Gross margin 33 % 34 % 34 % 40 %rateNet loss $ (3,556 ) $ (2,543 ) $ (12,580 ) $ (8,325 )Net loss per $ (0.10 ) $ (0.09 ) $ (0.37 ) $ (0.29 )diluted share

(1) As compared to the prior year period.

FOURTH QUARTER 2020 FINANCIAL AND OPERATIONS HIGHLIGHTS

Net Sales

-- Generated revenue of $1.4 million for the 4Q20, 464% growth as compared to 4Q19. -- 40% sequential increase as compared to the 3Q20 ($1.0 million). -- The pandemic impacted 2020 sales efforts both in the U.S. and internationally. Our pipeline, however, is robust.

Gross Profit

-- Generated $0.5 million of gross profit for the 4Q20. -- Gross margin was 33% for the 4Q20, a slight improvement compared to the 32% for 3Q20. -- We continue to expect our gross margins to be fluid as we ramp our revenue base during this early-stage of growth. -- Based on current initiatives, we expect to improve gross margins in future periods.

Selling, General and Administrative (SG&A) Expense

-- SG&A expense increased $1.6 million in 4Q20 compared to 4Q19. -- Increase was driven primarily by a $0.8 million increase in compensation costs as we ramp our sales force and training teams, and $0.4 million of increased marketing and promotion expenditures.

Research and Development (R&D) Expense

-- R&D expense increased 22% in 4Q20 to $0.7 million compared to 4Q19. -- We expect our R&D expense to increase in 2021 as we add staff and expand important research initiatives in response to identified market opportunities.

Inventory

-- Inventory increased to $2.7 million at end of 4Q20, compared to $2.0 million at 3Q20 in response to growing market opportunities.

Capital Structure and Liquidity

-- Cash, cash equivalents and short-term investments was $41.6 million at end of 4Q20 compared to $45.1 million at 3Q20, representing 85% of total assets. -- In December 2020 we acquired NSENA, a virtual reality-based training simulator business targeting law enforcement and corrections. Our balance sheet at the end of 4Q20 reflected $0.3 million of assumed debt related to the NSENA acquisition.

FULL YEAR 2020 FINANCIAL AND OPERATIONS HIGHLIGHTS

Net Sales

-- Generated $3.9 million of revenue in 2020, a 466% increase over 2019. The reflects the continued ramp of our business and adoption of our platform at this early stage. -- In spite of severe travel restrictions and logistic challenges caused by COVID, our international business accounted for 64% of 2020 revenue compared to 28% in 2019, reflecting 1,188% growth. -- We have sold BolaWrap products to 36 countries, adding 15 new countries in 2020 in spite of travel restrictions. -- The number of international distributors grew from 16 at the end of 2019 to 35 at the end of 2020.

Gross Profit

-- Generated $1.3 million of gross profit in 2020. Our gross margin for 2020 was 34%.

Selling, General and Administrative (SG&A) Expense

-- SG&A expense increased $5.0 million in fiscal 2020, which reflects our investment in our business during our initial ramp in sales and production.

Research and Development (R&D) Expense

-- R&D expense increased $0.6 million in 2020 due to increased staffing.

Non-Cash Stock Compensation Expense

-- Operating expense included $2.2 million of non-cash stock compensation expense in 2020 compared to $1.5 million in 2019.

Outlook

We continue to expect near-term headwinds to our growth as international travel remains limited. We expect this to continue through at least the first half of 2021 then soften as we proceed through the second half of 2021.

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, March 4, 2021. The call will be hosted by Tom Smith, President; Jim Barnes, CFO; and Paul Manley, VP of Investor Relations.

WEBCAST LINK: Webcast Registration Link

Participants may access the live webcast by visiting the Companys Investor Relations page at www.wrap.com. A webcast replay of the call will be available on the Companys 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 innovating public safety technologies and services that deliver advanced solutions focused on avoiding escalation. The BolaWrap Remote Restraint device, WRAPs first product, is a patented, hand-held device that discharges a Kevlar tether to temporarily restrain from a safe distance. Through many field uses and growing adoption by agencies across the globe, BolaWrap is proving to be an effective tool to safely detain persons without injury. WRAP Reality, the Companys virtual reality training system, is an immersive training simulator and comprehensive public safety training platform designed to empower first responders with the necessary knowledge to perform in the field. WRAPs headquarters are located 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 distributors, agencies and training and amounts of non-cash stock-based compensation expense, which the Company believes provide helpful information to investors with respect to evaluating the Companys 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 Companys 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 Companys control. The Companys 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 Companys ability to successful implement training programs for the use of its products; the Companys ability to manufacture and produce product for its customers; the Companys 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 Companys 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 Companys ability to maintain and enhance its brand, as well as other risk factors mentioned in the Companys 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) December 31, 2020 2019 ASSETS Current assets: Cash and cash equivalents $16,647 $16,984 Short-term investments 24,994 - Accounts receivable, net 1,871 195 Inventories, net 2,655 2,245 Prepaid expenses and other current assets 760 251 Total current assets 46,927 19,675 Property and equipment, net 357 243 Operating lease right-of-use asset, net 139 261 Intangible assets, net 1,396 230 Other assets, net 13 13 Total assets $48,832 $20,422 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $1,953 $601 Customer deposits 2 344 Deferred revenue 16 3 Operating lease liability - short term 94 128 Note payable to bank - short term 275 - Total current liabilities 2,340 1,076 Long-term liabilities 79 150 Total liabilities 2,419 1,226 Stockholders' equity 46,413 19,196 Total liabilities and stockholders' equity $48,832 $20,422

Wrap Technologies, Inc.Condensed Consolidated Statements of Operations and Comprehensive Loss(unaudited - dollars In thousands, except share and per share data) Three Months Ended December 31, Year Ended December 31, 2020 2019 2020 2019 Revenues: Product sales $1,382 $237 $3,868 $656 Other revenue 33 14 76 41 Total revenues 1,415 251 3,944 697 Cost of 942 165 2,601 420 revenuesGross profit 473 86 1,343 277 Operating expenses (i):Selling,general and 3,698 2,106 11,631 6,653 administrativeResearch and 751 616 2,789 2,237 developmentTotaloperating 4,449 2,722 14,420 8,890 expensesLoss from (3,976 ) (2,636 ) (13,077 ) (8,613 )operations Other income (expense):Interest 2 95 83 291 incomeOther 418 (2 ) 414 (3 ) 420 93 497 288 Net loss ($3,556 ) ($2,543 ) ($12,580 ) ($8,325 ) Net loss perbasic common ($0.10 ) ($0.09 ) ($0.37 ) ($0.29 )shareWeightedaverage commonshares used to 37,399,195 29,704,067 33,846,338 28,652,625 compute netloss per basiccommon share Comprehensive loss:Net loss ($3,556 ) ($2,543 ) ($12,580 ) ($8,325 )Net unrealizedgain on 8 - 15 - short-terminvestmentsComprehensive ($3,548 ) ($2,543 ) ($12,565 ) ($8,325 )loss (i) includesstock-basedcompensation expense asfollows: Three Months Ended December 31, Year Ended December 31, 2020 2019 2020 2019 Selling,general and $1,538 $1,408 $1,957 $1,410 administrativeResearch and 84 (70 ) 280 126 developmentTotalstock-based $1,622 $1,338 $2,237 $1,536 compensationexpense

Wrap Technologies, Inc.Condensed Consolidated Statements of Cash Flows(unaudited - dollars in thousands) Year Ended December 31, 2020 2019 Cash Flows From Operating Activities: Net loss ($12,580 ) ($8,325 )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization 163 47 Warranty provision 30 13 Inventory obsolescence (68 ) (194 )Non-cash lease expense 122 80 Share-based compensation 2,237 1,536 Debt forgiveness income (416 ) - Non-cash interest expense 2 - Common shares issued for services - 103 Provision for doubtful accounts 10 - Changes in assets and liabilities: Accounts receivable (1,686 ) (191 )Inventories (343 ) (1,893 )Prepaid expenses and other current assets (508 ) (136 )Accounts payable 825 174 Operating lease liability (128 ) (63 )Customer deposits (342 ) 344 Accrued liabilities and other 493 112 Deferred compensation - (96 )Warranty settlement 4 - Deferred revenue (2 ) 3 Net cash used in operating activities (12,187 ) (8,486 ) Cash Flows From Investing Activities: Purchase of short-term investments (34,979 ) - Proceeds from maturities of short-term 10,000 - investmentsCapital expenditures for property and (249 ) (257 )equipmentInvestment in patents and trademarks (129 ) (114 )Purchase of intangible assets (544 ) - Business acquisition (210 ) - Long-term deposits - (11 )Net cash used in investing activities (26,111 ) (382 ) Cash Flows From Financing Activities: Sale of common stock and warrants 12,400 12,500 Offering costs paid on sale of common stock (733 ) (1,149 )and warrantsProceeds from exercise of warrants 26,191 2,112 Offering costs paid on exercise of warrants (1,016 ) (28 )Proceeds from exercise of stock options 705 58 Proceeds from bank note 414 - Net cash provided by financing activities 37,961 13,493 Net increase (decrease) in cash and cash (337 ) 4,625 equivalentsCash and cash equivalents, beginning of 16,984 12,359 periodCash and cash equivalents, end of period $ 16,647 $ 16,984 Supplemental Disclosure of Non-Cash Investing and Financing Activities:Business acquisition liability $ 298 $ - Business acquisition cost in deferred $ 15 $ - revenueChange in unrealized gain on short-term $ 15 $ - investmentsRight-of-use assets and liabilities recorded $ - $ 341 during periodIssuance costs relating to warrants issued $ - $ 206 to public offering selling agent