Executive Summary

Q3 2025 was WRAP’s strongest revenue quarter in eight quarters: gross revenue rose 241% YoY to $2.02M and net revenue rose 151% YoY to $1.49M; gross margin expanded to 59% from 40% YoY, driven by pricing discipline, mix and efficiencies .
Operating loss improved to $(2.76)M from $(3.63)M YoY, while OpEx fell 6% YoY to $3.64M; cash ended at $6.0M (up from $3.6M at 12/31/24), reflecting financing and improved working capital; warrants liability was eliminated via prior reclassification, reducing future earnings volatility .
Strategic execution advanced: managed/recurring offerings (WrapReady/WrapPlus) gained traction (subscriptions were 12% of Q3 gross revenue, $236k), a federal go-to-market structure was stood up (Wrap Federal), and the company launched DFR-X and achieved a “first known” air-to-air interdiction with MERLIN-Interdictor, expanding into CUAS .
No numeric guidance was issued; S&P Global consensus estimates for Q3 2025 were unavailable, so no beat/miss can be measured. Potential stock catalysts: accelerating subscription mix, demonstrated CUAS milestones (DFR-X/MERLIN), and international pipeline (e.g., Chile) . Values retrieved from S&P Global.*

What Went Well and What Went Wrong

What Went Well
- Revenue inflected: $2.02M gross (+241% YoY) and $1.49M net (+151% YoY), with gross margin at 59% (vs. 40% YoY); operating loss narrowed to $(2.76)M .
- Subscription transition gaining traction: recurring subscription sales were $236k (12% of gross), supported by WrapReady, WrapPlus, WrapTactics and managed services .
- Strategic proof points in CUAS: “first known air-to-air interdiction” using MERLIN-Interdictor payload, plus DFR-X launch to transform drones from observers into non-lethal interdiction platforms .
- Quote: “BolaWrap 150 has now demonstrated a 92% field success rate with zero reported deaths, zero serious injuries, and zero lawsuits” — Scott Cohen (CEO) .
What Went Wrong
- The company remains unprofitable: Q3 net loss $(2.77)M; YTD operating cash outflow $(7.62)M) .
- YoY leverage still building: OpEx (though down YoY) remains high vs. current scale ($3.64M in Q3), and the model is still transitioning from one-time hardware to subscriptions .
- Sales returns/allowances of $(0.53)M in Q3 tempered net revenue from gross, highlighting execution and channel hygiene items to monitor .
- Investor concern: quantitative guidance and consensus estimates are not available, limiting near-term visibility for beat/miss frameworks. Values retrieved from S&P Global.*

Financial Results

Headline P&L vs prior year and prior quarter

Metric	Q3 2024	Q2 2025	Q3 2025
Total Revenues (Gross) ($)	$593,000	$1,012,000	$2,022,000
Sales Returns & Allowances ($)	$0	$0	$(531,000)
Total Revenues (Net) ($)	$593,000	$1,012,000	$1,491,000
Gross Profit ($)	$235,000	$487,000	$883,000
Gross Margin (%)	40%	48.1% (calc from )	59%
Operating Expenses ($)	$3,861,000	$3,343,000	$3,644,000
Loss from Operations ($)	$(3,626,000)	$(2,856,000)	$(2,761,000)
Net Income (Loss) ($)	$1,990,000	$(3,727,000)	$(2,773,000)
Diluted EPS ($)	$0.04	$(0.07)	$(0.06)

Notes: Q2 2025 figures reflect the “Three Months ended June 30, 2025” column in the 8-K exhibits . Gross margin in Q2 2025 is calculated from reported revenue and gross profit .

Revenue mix

Revenue Component	Q3 2024	Q2 2025	Q3 2025
Product Sales ($)	$434,000	$197,000	$1,743,000
Managed Services ($)	$0	$764,000	$242,000
Technology-Enabled Services ($)	$159,000	$51,000	$37,000
Total Revenues, Gross ($)	$593,000	$1,012,000	$2,022,000

KPIs and balance sheet/cash flow

KPI	Q3 2024	Q2 2025	Q3 2025
Recurring Subscription Sales ($)	n/a	n/a	$236,000
Recurring as % of Gross Revenue	n/a	n/a	12%
Cash & Equivalents (period end, $)	n/a	$4,177,000	$5,965,000
Accounts Receivable, net ($)	n/a	$906,000	$1,822,000
Inventories, net ($)	n/a	$5,904,000	$5,461,000
Operating Cash Flow (YTD, $)	$(6,919,000) (9M’24)	$(5,009,000) (6M’25)	$(7,624,000) (9M’25)

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
All metrics	FY/Q4 2025	Not provided	Not provided	n/a

No quantitative guidance was issued in the press release or on the call .

Earnings Call Themes & Trends

Topic	Q1 2025 (prior)	Q2 2025 (prior)	Q3 2025 (current)	Trend
Non-lethal platform & adoption	LMS/training ramp; customer adoption anecdotes	“Pre-escalation” strategy; subscription bundles; adoption data building	Strongest quarter in 8; 92% BolaWrap field success; subscription 12% gross	Improving adoption narrative
Federal & international go-to-market	Building foundations (leadership hires)	WrapVision rebrand; Merlin proto; federal programs under review	Wrap Federal stood up; D.C. presence; Chile opportunity active	Scaling federal/international pipeline
CUAS/DFR-X & R&D	—	Merlin Phase I; counter-UAS repurpose	DFR-X launch; MERLIN Stage One complete; air-to-air interdiction demo	Rapid technical validation
Manufacturing/supply chain	Move to VA facility completing	Fully moved; scalable production	VA hub supports parallel commercialization; made-in-America roadmap	Capacity in place
Regulatory/legal backdrop	—	Barnes v. Felix favorable; policy tightening	Management emphasizes policy-led adoption & non-lethal category positioning	Supportive environment

Management Commentary

“The third quarter represented our strongest in the past two years, delivering $2 million in gross revenue, 12% of which came from subscription-based sales” — Scott Cohen, CEO .
“We’re building a connected ecosystem of training, policy, and tools… transforming what was a one-time hardware sale into a multi-year subscription contract” — Jared Novick, President & COO .
“BolaWrap 150 has now demonstrated a 92% field success rate with zero reported deaths, zero serious injuries, and zero lawsuits” — Scott Cohen .
“We have onboarded close to 18 people that touch sales and marketing, including the D.C. office… it’s the biggest hiring spree we’ve done” — Scott Cohen .
On DFR-X: “Now you’re allowing [drones] to do something… deter, delay and distract with BolaWrap technology” — Jared Novick .

Q&A Highlights

Capital markets: Management indicated openness to tapping public equity markets as needed: “Yes, we will continue to evaluate those options” .
Positioning: Emphasis on “non-lethal” vs. “less-lethal” based on data; no plans for a reverse split; bylaw amendment was protective flexibility only .
Pipeline: Ongoing, frequent engagement with Chile; targeting non-lethal solution demand in-country; timing hopeful for next year .
Sales force: Headcount ramp in sales/marketing to seize opportunity post-repositioning; signals offensive posture .
Product roadmap: DFR-X differentiation explained; multi-cassette drone payload enabling non-lethal interdiction; platform-agnostic partnerships .

Estimates Context

S&P Global consensus estimates for Q3 2025 (revenue, EPS, EBITDA) were unavailable; consequently, we cannot assess beat/miss versus Street for the quarter. Values retrieved from S&P Global.*
Management did not issue numerical guidance, limiting forward estimate anchoring; given subscription mix and CUAS initiatives, we expect Street models (where they exist) to revisit revenue cadence and contribution margins as adoption and federal/international traction evolve .

Key Takeaways for Investors

Inflection on volume and margin: Q3 net revenue of $1.49M and 59% gross margin validate mix/pricing progress; watch for sequential momentum into Q4/FY25 as subscription and product sales scale .
Operating leverage path: OpEx down YoY and operating loss narrowing, but profitability still requires more scale; cash of ~$6.0M provides near-term runway; warrants reclassification reduces P&L volatility .
Subscription transition is working: Subscriptions were 12% of Q3 gross; agency adoption supported by WrapTactics (LMS), policy alignment, and managed services; monitor attach and churn .
New vectors (DFR-X/MERLIN/CUAS): Technical validations and demos (including first known air-to-air interdiction) expand TAM into defense/homeland markets; execution focus shifts to trials, procurement, and commercialization .
Federal/international catalysts: Wrap Federal/D.C. presence, made-in-America manufacturing, and active international opportunities (e.g., Chile) represent 2026+ revenue optionality .
Data-driven non-lethal positioning: Management cites 92% BolaWrap success rate with zero deaths/injuries/lawsuits; narrative tailwinds from policy/reform could drive broader adoption .
Trading setup: Absence of consensus and guidance can elevate volatility; near-term stock drivers likely include additional subscription wins, CUAS pilots/POs, and international contract announcements .

Footnote: *Values retrieved from S&P Global.

WRAP TECHNOLOGIES, INC. (WRAP)·Q3 2025 Earnings Summary