Wrap Technologies, Inc.

Good afternoon, and welcome to Rapp Technology's second quarter 2025 earnings conference call. I'm Lou Springer, Vice President of Finance. Joining me today are Scott Cohen, Chief Executive Officer, Jared Novick, President and Chief Operating Officer, and Jerry Radigan, Chief Financial Officer. We appreciate your time and continued interest in Rapp. Before we begin, please note that certain statements made on today's call are forward-looking statements within the meeting of the Federal Securities Law. These statements are based on current expectations, assumptions, and projections and involve risks and uncertainties that may cause actual results to differ materially. Important factors are discussed in our filings with the U.S. Securities and Exchange Commission, which are available at sec.gov. The forward-looking statements included in this conference call are only made as of the date of this call, and we disclaim any obligation to update forward-looking statements except as required by law. Nothing on this call constitutes an offer to sell or the solicitation of an offer to buy any security. Any offering, if made, will be pursuant to an effective registration statement and prospectus. Unless otherwise indicated, our commentary compares the quarter ended June 30, 2025 with the prior year period. As a reminder, we may reference non-GAAP measures to provide additional insight into our operating performance. Reconciliations to the most directly comparable gap measures are or will be provided in our supplemental materials. With that, I'll turn the call over to our CEO, Scott Cohen.

Good afternoon, and thank you for joining us. I'm excited to get right to the point. Momentum is building for WRAP technologies across the industry, throughout our operations, and most notably with a sharp increase in purchase orders. In fact, I can share that in the first six weeks of Q3, we received more purchase orders for WRAP devices than we did in the entire six months of the year. The end of Q2 marks an important milestone, the formal conclusion of our restructuring efforts. We believe the benefits of our prior year cost control measures are now fully realized. Q2 also marked the completion of our go-to-market pivot, where we abandoned an unscalable, costly model we knew was not working in a direct response to customer needs, built a renewed strategy and solution offerings. Customers have validated the new approach with numerous agencies now using Bullwrap more than any other tool on their belt. And we're seeing a broader market of validation and regulatory changes throughout the increasing restrictive policies around higher use of force. I am happy to say that we're seeing positive results. Already in Q3, we've received new purchase orders for our new go-to-market strategy. We believe this increase in sales activity confirms initial success that we expect to continue. Later in this call, Jerry Radigan, our CFO, will shed more light into our financials. For those of you that have been on this journey with us, thank you. Your steadfast support and belief in our company's potential have helped us turn the corner, and the results we present today are a direct reflection of that transformation. To illustrate the progress we've made, today's discussion will be organized into three broad categories. The first, market and product performance. on why we believe this is a good place for an investor and a customer with supporting details including market observations, BOLRAP deployment usage, recent conducive regulatory landscape, and resulting positioning. Go-to-market strategy and team readiness and how we respond to customers' needs and aligned and improved branding and messaging and strengthen our executive team to take our solution to market. And on financial and strategic initiatives, how our financial performance showcase cost reductions, cash flow improvements, and key internal initiatives that we believe are now paying strategic dividends. You'll hear directly from our president, Jared Novak, and our CFO, Jerry Radigan, as we walk through our performance strategy and what's shaping up to be an active second half of the year. Together, They will cover improvements in cost controls and operational margin expansion, revenue growth from our recently launched bundled subscriptions, and expansion of the BOLRAP through repurpose integrations that open large addressable markets. They will also discuss emerging relationships with renewed experts in policing and respective thought leaders, both individually and through formal agreements currently in progress. further positioning the company to explore adjacent markets such as global private security, healthcare, transit, and Department of Defense applications. We have persevered, and now we have the clarity. So let's begin.

Thank you, Scott. Our first section today is about market and product performance. BOLARAP deployments are increasing across diverse law enforcement agencies, ranging from smaller departments to large, influential agencies and key geographies, as well as specialized units such as school resource officers and crisis intervention teams. The net effect is a growing record of documented trust, effective integration, and consistent field success. Agencies across Colorado, North Carolina, and Canada, as examples, have reported strong usage of BolaWrap relative to their own inventory, while several of the largest law enforcement agencies in Florida are actively evaluating it as a strategic replacement for traditional electronic control devices like tasers. Another major Floridian agency, their crisis intervention team, reports more frequent BolaWrap use than tasers. reinforcing the device's growing reputation as a safer and more appropriate tool during mental health or emotionally disturbed person calls. Now, notably, to date, there have been no reported serious injuries and zero lawsuits related to BOLORAP deployments. That's a record uncommon in most traditional use-of-force tools. Historically, use-of-force data has been difficult to gather, with many federal datasets incomplete or unreliable. Agencies are often reluctant to share their data unless there's a deep level of trust or established agency-to-agency relationship. However, through our own conversations with long-standing customers, we believe that many departments are quietly moving away from higher levels of force, such as tasers, due to declining usage, high costs, and safety concerns. The increasingly restrictive policies are promoting agencies to rethink their approach and with a new focus on minimizing risk while maintaining control. Without better tools, officers often find themselves relying on hands-on methods, which increases the risk of injury for everyone involved. These discussions reinforce what we have long believed. There is still no other effective tool to bridge the tactical gap between verbal commands and physical control. Officer injuries and lawsuits are continuing to rise, and it underscores an urgent and largely unacknowledged need in modern policing. We believe our analysis reveals a clear pattern. In agencies without comprehensive RAP programs, electronic weapon usage is declining, while low-level hands-on control tactics are increasing. That's a dangerous scenario. This is leading to more officer injuries and exposing serious gaps in their current toolkits. In contrast, when agencies have a full RAP program and they've adopted it, they're experiencing a significant rise in full RAP deployments based on their operational needs, and it's now outperforming electronic weapons and higher-level use of force incidents, delivering lower liability, higher success rates, and greater safety. It's a good news story. Now I want to talk about the favorable federal regulatory changes. We know that favorable policies and legal precedents can drive adoption, they can help deployments, and they certainly help sales. In Q2, we began to see the positive impact of some of these policy shifts, both domestically and internationally. Notably, in the United States, the unanimous Supreme Court decision in Barnes v. Felix was issued during Q2. This marks a noteworthy development in this regulatory landscape and favorable conditions to wrap. This case established a nationwide requirement that confirmed what we've known all along. Officers deserve the best tools, the best tactics, and the best training to deliver safer outcomes for themselves and the communities they serve. The totality of circumstances test. Now a federal law uniquely positions the BOLORAP to meet the needs of today's officers while addressing the evolving legal landscape of liability. In Q2, public attention and use of force tools intensified, with shows like Last Week Tonight dedicating a full segment to the dangers, risks, and fatalities associated with tasers. When combined with the unanimous Barnes v. Felix Supreme Court decision, and a recent unintended death in Central California, these events have amplified awareness and urgency around safer alternatives. And as a result, we're seeing measurable upticks in inquiries in our strategic discussions with customers and opening up new conversations about BOLARAP, and it's a central place on the duty belt. Now, if we're moving to our go-to-market strategy and team readiness and response, Within the last quarter, we completely redefined our message and repositioned our brand in the marketplace. This wasn't intended just to be a marketing refresh. This is an intentional and strategic shift that has now recognized the evolved needs of public safety. We identified a strategic need to adapt to the federal regulatory changes that are imminent, the increasingly restrictive policies of higher uses of force, and the rise of mental and behavioral health emergencies and launched what we call the era of pre-escalation. We're not just responding to the moment. We named it. And in doing so, we've granted and established that RAP is a leader in pre-escalation. We believed that we defined a new operational timeline for officers, carving out and creating space before force is necessary. a moment when tools and better training and better outcomes can occur. This is what RAP chose to operate in, called the pre-escalation period. To support this new era, we introduced key terms that became foundational across our brand training and communications, terms like pre-escalation and the pre-escalation period. We also developed a new doctrine, the RAP Window of Opportunity. a critical moment between verbal engagement and hands-on force, where officers can act with control, clarity, and compassion. But redefining a message means nothing unless our product, pricing, and systems are fully aligned. That's why we relaunched the BOLAROP 150, optimized our pricing models, and introduced a family of integrated systems designed for departments to train, deploy, and support pre-escalation operations at scale. In short, this wasn't just a relaunch. It was intended to be a redefinition of who we are and how we serve. Rath has evolved beyond being just a product company. We believe we have become the architects of the pre-escalation era.