Wrap Reports Fourth Quarter 2020 Results

March 4, 2021 4:05 PM EST

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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
  December 31, December 31,
(amounts in thousands, except per share data) 2020 2019 2020 2019
Total revenues $1,415  $251  $3,944  $697 
Net sales growth (1)  464%  NM%  466%  NM%
Gross margin rate  33%  34%  34%  40%
Net loss $(3,556) $(2,543) $(12,580) $(8,325)
Net loss per diluted share $(0.10) $(0.09) $(0.37) $(0.29)

(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 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 innovating public safety technologies and services that deliver advanced solutions focused on avoiding escalation. The BolaWrap® Remote Restraint device, WRAP’s 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 Company’s 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. WRAP’s 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 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)
     
  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 revenues  942   165   2,601   420 
Gross profit  473   86   1,343   277 
         
Operating expenses (i):        
Selling, general and administrative  3,698   2,106   11,631   6,653 
Research and development  751   616   2,789   2,237 
Total operating expenses  4,449   2,722   14,420   8,890 
Loss from operations  (3,976)  (2,636)  (13,077)  (8,613)
         
Other income (expense):        
Interest income  2   95   83   291 
Other  418   (2)  414   (3)
   420   93   497   288 
Net loss ($3,556) ($2,543) ($12,580) ($8,325)
         
Net loss per basic common share ($0.10) ($0.09) ($0.37) ($0.29)
Weighted average common shares used to compute net loss per basic common share  37,399,195   29,704,067   33,846,338   28,652,625 
         
Comprehensive loss:        
Net loss ($3,556) ($2,543) ($12,580) ($8,325)
Net unrealized gain on short-term investments  8   -   15   - 
Comprehensive loss ($3,548) ($2,543) ($12,565) ($8,325)
         
(i) includes stock-based compensation expense as follows:        
         
  Three Months Ended December 31,Year Ended December 31,
   2020   2019   2020   2019 
Selling, general and administrative $1,538  $1,408  $1,957  $1,410 
Research and development  84   (70)  280   126 
Total stock-based compensation expense $1,622  $1,338  $2,237  $1,536 

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 investments  10,000   - 
Capital expenditures for property and equipment  (249)  (257)
Investment 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 and warrants  (733)  (1,149)
Proceeds 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 equivalents  (337)  4,625 
Cash and cash equivalents, beginning of period  16,984   12,359 
Cash 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 revenue $15  $- 
Change in unrealized gain on short-term investments $15  $- 
Right-of-use assets and liabilities recorded during period $-  $341 
Issuance costs relating to warrants issued to public offering selling agent $-  $206 

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Source: Wrap Technologies, Inc.


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