Wrap Technologies, Inc. (WRAP) Earnings

Management highlights

### Strategic Market Expansions From Regulatory Changes - The ATF issued a July 2026 determination that the company's bull wrap product is not classified as a firearm or weapon, removing long-standing regulatory uncertainty that blocked access to the large private security market - Combined with the 2025 Supreme Court *Barnes v. Felix* ruling that expanded judicial consideration of the totality of law enforcement encounter circumstances, WRAP's products and training now sit at the intersection of two favorable regulatory and legal changes - The ATF ruling opens an addressable market of over 1.2 million licensed U.S. security officers, a larger population than domestic law enforcement, most of whom are under-trained and unarmed - DOJ public safety grant funding has reopened, with 11 active programs that can fund WRAP's bull wrap, body cameras, and de-escalation/virtual training products, which is critical for the company's core small and mid-sized law enforcement customer base ### Business Model Shift To Recurring Revenue - The company is transitioning from selling one-time physical devices to selling sustained readiness as a subscription service via its Rap Tactics program - Core content for the company's cloud-based learning management system (LMS) is now complete, enabling a blended training model: pre-digital foundational instruction, followed by in-person scenario-based coaching and certification - The LMS allows for ongoing post-training engagement and proficiency refreshers, addressing the problem of decaying skills after one-time in-person training, and creates recurring revenue streams for the company ### Exclusive Differentiated Technology Access - WRAP secured exclusive U.S. and NATO rights to Fresnel Tricor polymetric sensing technology, which can detect RF-silent and camouflaged threats (including drones) in dense, GPS-denied, and RF-contested environments where conventional thermal and RF systems fail - This detection capability has critical applications for border security, urban defense, national defense, water security, maritime surveillance, military ISR, and potentially space-based applications - The technology provides a structural competitive advantage that cannot be replicated or acquired by competitors - Under the new RAP Shield platform, WRAP is extending its core competency of early intervention across these new defense and homeland security markets ### Key Go-To-Market Developments - The company has already received its first grant-funded training order from the private security market, and is pursuing this market aggressively - The company completed an initial training delivery to the Department of Homeland Security under a received purchase order, marking its first formal federal operational support engagement - WRAP is positioning its technology to align with existing federally funded requirements in Washington D.C., focusing on counter-UAS and public safety threat detection priorities

Guidance

- The company reaffirms its prior full-year 2026 guidance targeting 100% year-over-year revenue growth, with no updates to this projection at the time of the call - Management notes that overall annual revenue is highly sensitive to the timing of one or two large orders, so the final full-year result could move up or down as more timing visibility is gained throughout the year - The company currently expects no dramatic near-term increase to its spending profile, with current cash burn aligned to a $3 million annual revenue breakeven point - Management states its bias is toward accelerating spending to capture the newly opened market opportunities if traction develops as expected, which would require accessing capital markets to support accelerated growth - No Chilean revenue is included in the 2026 revenue forecast, as the project is currently delayed by a Chilean government funding gap, though the opportunity is still being actively pursued - Management notes that prospective federal defense and homeland security opportunities are not included in current guidance, as contracts have not yet been awarded

Segment performance

WRAP Technologies does not break out performance into separate formal product segments in this earnings call. Aggregate total company results for Q2 2026 (compared to Q2 2025): total revenue increased 103% to $2.1 million (from $1.0 million), gross profit increased 217% to $1.5 million (from $0.5 million), gross margin expanded to 75% (from 48%), operating loss improved 21% to $2.3 million (from $2.9 million), net loss improved 39% to $2.3 million (from $3.7 million; the prior year quarter included a $0.9 million non-recurring non-cash loss from warrant liability fair value changes). As of June 30, 2026, the company held $4.8 million in cash and cash equivalents, and total liabilities were reduced to $2.0 million from $3.9 million at December 31, 2025 following the termination of its former office lease.

Risks & headwinds

- All forward-looking statements related to new market opportunities, technology adoption, and revenue growth are subject to known and unknown risks that could cause actual results to differ materially from expectations, per the safe harbor disclosure - Revenue outcomes are heavily dependent on the timing of large customer orders and government funding availability, creating volatility in annual performance - The ATF declassification only applies to the BOLRAP 150 product, and future classification outcomes for other WRAP products remain uncertain - The company may need to raise additional equity capital to fund growth acceleration, which would result in shareholder dilution - International opportunities, such as the Chile deployment, are subject to foreign government funding delays that can push out revenue recognition - New market opportunities in federal defense and private security are still in early stages, and there is no guarantee of customer adoption or contract awards

Analyst Q&A

• Q: What is the current status of the business opportunity in Chile? /

  A: WRAP met with its Chilean distributor recently, who confirmed ongoing interest but cited a domestic government funding gap that has delayed the project. The company is exploring the possibility of U.S. government INL funding to support the opportunity, but is not including any Chilean revenue in its 2026 forecast to maintain conservative projections, and will update investors as the situation develops.

• Q: What are WRAP's plans for partnership with insurance companies? /

  A: The ATF declassification of bull wrap as a non-weapon now enables meaningful insurance industry engagement, which was previously blocked by regulatory classification. For private security, WRAP can coordinate with insurance underwriters to offer preferred policy terms to customers that adopt the company's device and training, creating a strong go-to-market value proposition. For public law enforcement, the new standardized outcome-focused LMS training has renewed insurance carrier interest, with two large insurers already engaging post-ruling.

• Q: Will WRAP raise new capital, and what would it be used for? /

  A: Management regularly explores financing options that benefit all shareholders, and as a significant personal shareholder, the CEO is highly sensitive to dilution. Any capital raise will only be pursued if the expected value created by the capital outweighs dilution costs. Capital would primarily be used to accelerate growth and investment in the newly opened private security and Fresnel threat detection markets to capture emerging opportunities.

• Q: What is WRAP's strategy for its Washington DC federal government efforts? /

  A: The core DC strategy is to align the company's existing capabilities (BOLRAP 150 training, RAP Shield Fresnel detection) with already identified funded federal requirements. Unlike the company's early history, when it had to create a new market requirement for its restraint devices, relevant federal requirements for counter-UAS and public safety capabilities already exist, so the company is focused on connecting its solutions to available appropriated funding.

• Q: At what revenue level will WRAP reach cash flow breakeven, and how will cash burn change if revenue doubles? /

  A: There is no current change to the company's existing spending profile, with current operations targeting breakeven at approximately $3 million in annual revenue. If market traction develops as expected, management is biased toward accelerating spending to capture new opportunities, which would require accessing capital markets, making it impossible to predict an exact breakeven revenue level at this time.