0001654954-21-008322 | 10-Q | XBRL Viewer

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Cover - shares	6 Months Ended
Cover - shares	Jun. 30, 2021	Jul. 28, 2021
Cover [Abstract]
Entity Registrant Name	Wrap Technologies, Inc.
Entity Central Index Key	0001702924
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	true
Entity Current Reporting Status	Yes
Document Period End Date	Jun. 30, 2021
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2021
Entity Ex Transition Period	false
Entity Common Stock Shares Outstanding		40,477,753
Document Quarterly Report	true
Document Transition Report	false
Entity Interactive Data Current	Yes
Entity File Number	000-55838
Entity Incorporation State Country Code	DE
Entity Tax Identification Number	98-0551945
Entity Address Address Line 1	1817 W 4th Street
Entity Address City Or Town	Tempe
Entity Address State Or Province	AZ
Entity Address Postal Zip Code	85281
City Area Code	800
Local Phone Number	583-2652
Security 12b Title	Common Stock, par value $0.0001 per share
Trading Symbol	WRAP
Security Exchange Name	NASDAQ

Condensed Consolidated Balance Sheets - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 13,050,000	$ 16,647,000
Short-term investments	30,002,000	24,994,000
Accounts receivable, net	2,623,000	1,871,000
Inventories, net	2,837,000	2,655,000
Prepaid expenses and other current assets	824,000	760,000
Total current assets	49,336,000	46,927,000
Property and equipment, net	508,000	357,000
Operating lease right-of-use asset, net	93,000	139,000
Intangible assets, net	1,395,000	1,397,000
Other assets	9,000	13,000
Total assets	51,341,000	48,833,000
Current liabilities:
Accounts payable	1,280,000	1,232,000
Accrued liabilities	910,000	721,000
Customer deposits	10,000	2,000
Deferred revenue	186,000	16,000
Operating lease liability - short term	94,000	94,000
Business acquisition liability - short term	97,000	275,000
Total current liabilities	2,577,000	2,340,000
Long-term liabilities:
Operating Lease Liability - long term	8,000	56,000
Business acquisition liability - long term	0	23,000
Total long-term liabilities	8,000	79,000
Total liabilities	2,585,000	2,419,000
Stockholders' equity:
Preferred stock - 5,000,000 authorized; par value $0.0001 per share; none issued and outstanding	0	0
Common stock - 150,000,000 authorized; par value $0.0001 per share; 39,911,390 and 37,554,162 shares issued and outstanding each period, respectively	4,000	4,000
Additional paid-in capital	87,277,000	71,705,000
Accumulated deficit	(38,538,000)	(25,310,000)
Accumulated other comprehensive income	13,000	15,000
Total stockholders' equity	48,756,000	46,414,000
Total liabilities and stockholders' equity	$ 51,341,000	$ 48,833,000

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2021	Dec. 31, 2020
Condensed Consolidated Balance Sheets
Preferred stock, authorized	5,000,000	5,000,000
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Common stock, authorized	150,000,000	150,000,000
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, issued	39,911,390	37,554,162
Common stock, outstanding	39,911,390	37,554,162

Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenues:
Product sales	$ 1,852,000	$ 823,000	$ 3,278,000	$ 1,498,000
Other revenue	82,000	10,000	198,000	24,000
Total revenues	1,934,000	833,000	3,476,000	1,522,000
Cost of revenues:
Products and services	1,247,000	565,000	2,184,000	971,000
Product line exit expense	747,000	0	747,000	0
Total cost of revenues	1,994,000	565,000	2,931,000	971,000
Gross profit (loss)	(60,000)	268,000	545,000	551,000
Operating expenses:
Selling, general and administrative	6,579,000	2,538,000	11,557,000	4,678,000
Research and development	1,162,000	577,000	2,227,000	1,111,000
Total operating expenses	7,741,000	3,115,000	13,784,000	5,789,000
Loss from operations	(7,801,000)	(2,847,000)	(13,239,000)	(5,238,000)
Other income (expense):
Investment income	8,000	31,000	10,000	76,000
Other	(6,000)	0	1,000	0
Other income (expense)	2,000	31,000	11,000	76,000
Net loss	$ (7,799,000)	$ (2,816,000)	$ (13,228,000)	$ (5,162,000)
Net loss per basic and diluted common share	$ (0.20)	$ (0.09)	$ (0.35)	$ (0.17)
Weighted average common shares used to compute net loss per basic and diluted common share	38,162,526	31,241,470	37,938,873	30,749,532
Comprehensive loss:
Net loss	$ (7,799,000)	$ (2,816,000)	$ (13,228,000)	$ (5,162,000)
Net unrealized loss on short-term investments	(4,000)	0	(2,000)	0
Comprehensive loss	$ (7,803,000)	$ (2,816,000)	$ (13,230,000)	$ (5,162,000)

Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)	Total	Common Stock	Additional Paid-In Capital	Retained Earnings (Accumulated Deficit)	Accumulated other comprehensive loss
Balance, shares at Dec. 31, 2019		29,829,916
Balance, amount at Dec. 31, 2019	$ 19,196,000	$ 3,000	$ 31,923,000	$ (12,730,000)	$ 0
Sale of common stock and warrants at $6.00 per share in public offering, net of issuance costs, shares		2,066,667
Sale of common stock and warrants at $6.00 per share in public offering, net of issuance costs, amount	11,667,000	$ 0	11,667,000	0	0
Common shares issued upon exercise of warrants at $3.00 per share, net of issuance costs, shares		150,504
Common shares issued upon exercise of warrants at $3.00 per share, net of issuance costs, amount	440,000	$ 0	440,000	0	0
Common shares issued upon exercise of warrants at $5.00 per share, net of issuance costs, shares		1,851,003
Common shares issued upon exercise of warrants at $5.00 per share, net of issuance costs, amount	8,868,000	$ 0	8,868,000	0	0
Common shares issued upon exercise of warrants at $6.50 per share, shares		83,693
Common shares issued upon exercise of warrants at $6.50 per share, amount	544,000	$ 0	544,000	0	0
Common shares issued upon exercise of stock options, shares		293,250
Common shares issued upon exercise of stock options, amount	515,000	$ 0	515,000	0	0
Common shares issued upon vesting of restricted stock units, shares		86,558
Common shares issued upon vesting of restricted stock units, amount	0	$ 0	0	0	0
Share-based compensation expense	1,016,000	0	1,016,000	0	0
Net unrealized gain on short-term investments	0	0	0	0	0
Net loss for the period	(5,162,000)	$ 0	0	(5,162,000)	0
Common shares issued for services, amount	0
Balance, shares at Jun. 30, 2020		34,361,591
Balance, amount at Jun. 30, 2020	37,084,000	$ 3,000	54,973,000	(17,892,000)	0
Balance, shares at Mar. 31, 2020		30,073,724
Balance, amount at Mar. 31, 2020	18,118,000	$ 3,000	33,191,000	(15,076,000)	0
Sale of common stock and warrants at $6.00 per share in public offering, net of issuance costs, shares		2,066,667
Sale of common stock and warrants at $6.00 per share in public offering, net of issuance costs, amount	11,667,000	$ 0	11,667,000	0	0
Common shares issued upon exercise of warrants at $3.00 per share, net of issuance costs, shares		138,721
Common shares issued upon exercise of warrants at $3.00 per share, net of issuance costs, amount	405,000	$ 0	405,000	0	0
Common shares issued upon exercise of warrants at $5.00 per share, net of issuance costs, shares		1,731,603
Common shares issued upon exercise of warrants at $5.00 per share, net of issuance costs, amount	8,271,000	$ 0	8,271,000	0	0
Common shares issued upon exercise of warrants at $6.50 per share, shares		83,693
Common shares issued upon exercise of warrants at $6.50 per share, amount	544,000	$ 0	544,000	0	0
Common shares issued upon exercise of stock options, shares		180,625
Common shares issued upon exercise of stock options, amount	346,000	$ 0	346,000	0	0
Common shares issued upon vesting of restricted stock units, shares		86,558
Common shares issued upon vesting of restricted stock units, amount	0	$ 0	0	0	0
Share-based compensation expense	549,000	0	549,000	0	0
Net unrealized gain on short-term investments	0	0	0	0	0
Net loss for the period	(2,816,000)	$ 0	0	(2,816,000)	0
Balance, shares at Jun. 30, 2020		34,361,591
Balance, amount at Jun. 30, 2020	37,084,000	$ 3,000	54,973,000	(17,892,000)	0
Balance, shares at Dec. 31, 2020		37,554,162
Balance, amount at Dec. 31, 2020	46,414,000	$ 4,000	71,705,000	(25,310,000)	15,000
Common shares issued upon exercise of warrants at $6.50 per share, shares		1,661,320
Common shares issued upon exercise of warrants at $6.50 per share, amount	10,799,000	$ 0	10,799,000	0	0
Common shares issued upon exercise of stock options, shares		157,066
Common shares issued upon exercise of stock options, amount	278,000	$ 0	278,000	0	0
Common shares issued upon vesting of restricted stock units, shares		342,274
Common shares issued upon vesting of restricted stock units, amount	0	$ 0	0	0	0
Share-based compensation expense	3,007,000	0	3,007,000	0	0
Net unrealized gain on short-term investments	(2,000)
Net loss for the period	(13,228,000)	$ 0	0	(13,228,000)	0
Common shares issued upon exercise of warrants at $8.125 per share, shares		153,692
Common shares issued upon exercise of warrants at $8.125 per share, amount	1,249,000	$ 0	1,249,000	0	0
Common shares issued for services, shares		42,876
Common shares issued for services, amount	239,000	$ 0	239,000	0	0
Net unrealized loss on short-term investments	(2,000)	$ 0	0	0	(2,000)
Balance, shares at Jun. 30, 2021		39,911,390
Balance, amount at Jun. 30, 2021	48,756,000	$ 4,000	87,277,000	(38,538,000)	13,000
Balance, shares at Mar. 31, 2021		37,711,698
Balance, amount at Mar. 31, 2021	42,059,000	$ 4,000	72,777,000	(30,739,000)	17,000
Common shares issued upon exercise of warrants at $6.50 per share, shares		1,661,320
Common shares issued upon exercise of warrants at $6.50 per share, amount	10,799,000	$ 0	10,799,000	0	0
Common shares issued upon exercise of stock options, shares		82,066
Common shares issued upon exercise of stock options, amount	165,000	$ 0	165,000	0	0
Common shares issued upon vesting of restricted stock units, shares		277,614
Common shares issued upon vesting of restricted stock units, amount	0	$ 0	0	0	0
Share-based compensation expense	2,148,000	0	2,148,000	0	0
Net unrealized gain on short-term investments	(4,000)
Net loss for the period	(7,799,000)	$ 0	0	(7,799,000)	0
Common shares issued upon exercise of warrants at $8.125 per share, shares		153,692
Common shares issued upon exercise of warrants at $8.125 per share, amount	1,249,000	$ 0	1,249,000	0	0
Common shares issued for services, shares		25,000
Common shares issued for services, amount	139,000	$ 0	139,000	0	0
Net unrealized loss on short-term investments	(4,000)	$ 0	0	0	(4,000)
Balance, shares at Jun. 30, 2021		39,911,390
Balance, amount at Jun. 30, 2021	$ 48,756,000	$ 4,000	$ 87,277,000	$ (38,538,000)	$ 13,000

Consolidated Statements of Cash Flows (unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Cash Flows From Operating Activities:
Net loss	$ (13,228,000)	$ (5,162,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	219,000	52,000
Product line exit expense	747,000	0
Gain on sale of assets	(11,000)	0
Warranty provision	10,000	19,000
Inventory obsolescence	0	(48,000)
Non-cash lease expense	46,000	60,000
Share-based compensation	3,007,000	1,016,000
Common shares issued for services	239,000	0
Provision for doubtful accounts	46,000	10,000
Changes in assets and liabilities:
Accounts receivable	(798,000)	(307,000)
Inventories	(713,000)	206,000
Prepaid expenses and other current assets	(65,000)	(29,000)
Accounts payable	48,000	376,000
Operating lease liability	(48,000)	(62,000)
Customer deposits	8,000	(193,000)
Accrued liabilities and other	53,000	165,000
Warranty settlement	16,000	0
Deferred revenue	170,000	0
Net cash used in operating activities	(10,254,000)	(3,897,000)
Cash Flows From Investing Activities:
Purchase of short-term investments	(25,009,000)	0
Proceeds from maturities of short-term investments	20,000,000	0
Capital expenditures for property and equipment	(367,000)	(69,000)
Investment in patents and trademarks	(96,000)	(82,000)
Proceeds from long-term deposits	3,000	0
Net cash used in investing activities	(5,469,000)	(151,000)
Cash Flows From Financing Activities:
Sale of common stock and warrants	0	12,400,000
Offering costs paid on sale of common stock and warrants	0	(733,000)
Proceeds from exercise of warrants	12,048,000	10,251,000
Offering costs paid on exercise of warrants	0	(398,000)
Proceeds from exercise of stock options	278,000	515,000
Proceeds from bank note	0	414,000
Repayment of debt	(200,000)	0
Net cash provided by financing activities	12,126,000	22,449,000
Net increase (decrease) in cash and cash equivalents	(3,597,000)	18,401,000
Cash and cash equivalents, beginning of period	16,647,000	16,984,000
Cash and cash equivalents, end of period	13,050,000	35,385,000
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Change in unrealized gain on short-term investments	$ (2,000)	$ 0

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2021

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business Description

Wrap Technologies, Inc., a Delaware corporation (the “Company”, “we”, “us”, and “our”), is a publicly traded company with our Common Stock, par value $0.0001 per share (“Common Stock”), listed on the Nasdaq Capital Market (“Nasdaq”) under the trading symbol “WRAP”. The Company is a developer and supplier of public safety products and training services for law enforcement and security personnel. The Company’s primary product is the BolaWrap® remote restraint device. The principal markets for the Company’s proprietary products and services are in North and South America, Europe, Middle East and Asia.

Basis of Presentation

The Company’s unaudited interim condensed consolidated financial statements included herein have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. In management’s opinion, the accompanying financial statements reflect adjustments necessary to present fairly the financial position, results of operations, and cash flows for those periods indicated, and contain adequate disclosure to make the information presented not misleading. Adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the footnotes. The condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 4, 2021. The accompanying condensed consolidated balance sheet at December 31, 2020 has been derived from the audited consolidated balance sheet at December 31, 2020 contained in the above referenced Form 10-K. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.

Where necessary, the prior year’s information has been reclassified to conform to the current year presentation.

Principles of Consolidation

The Company has one wholly-owned subsidiary, Wrap Reality, Inc., formed in December 2020, and has commenced selling its virtual reality training system primarily targeting law enforcement and security agencies. The condensed consolidated financial statements include the accounts of this subsidiary after elimination of intercompany transactions and accounts.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions (e.g., stock-based compensation valuation, allowance for doubtful accounts, valuation of inventory and intangible assets, warranty reserve, accrued expense and recognition and measurement of contingencies) that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

Loss per Share

Basic loss per common share is computed by dividing net loss for the period by the weighted-average number of shares of Common Stock outstanding during the period. Diluted net loss per Common Share reflects the potential dilution of securities that could share in the earnings of an entity. The Company’s losses for the periods presented cause the inclusion of potential Common Stock instruments outstanding to be antidilutive. Stock options, restricted stock units and warrants exercisable or issuable for a total of 6,146,636 shares of Common Stock were outstanding at June 30, 2021. These securities are not included in the computation of diluted net loss per common share for the periods presented as their inclusion would be antidilutive due to losses incurred by the Company.

Exit Activity Expenses

During the second quarter ended June 30, 2021 the Company recorded $747 of product line exit costs related to the planned wind down and closure of the BolaWrap 100 product line related to a shift in production efforts to a new generation product requiring continued development, new tooling, new production equipment and processes and additional licensing. These non-cash inventory costs included end of life raw material write offs of $531 and tooling retirement costs of $106. An additional $110 has been recorded in accrued liabilities as a reserve for estimated non-cancelable raw material purchase commitments. These cost were recorded as a component of cost of revenues. There was no such expense recorded during the three and six months ended June 30, 2020. Development and start-up expense of new products are expensed as incurred except for capitalized equipment and tooling.

Recent Issued Accounting Guidance

Adopted the First Quarter of 2021:

In December 2019, the FASB issued Accounting Standards Update 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. We adopted ASU 2019-12 in the first quarter ended March 31, 2021 and it did not have a significant impact on our financial statements.

Other Pronouncements:

In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (“Subtopic 470-20”) and Derivatives and Hedging—Contracts in Entity’s Own Equity “(Subtopic 815-40”): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures.

The Company has reviewed other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoptions of any such pronouncements will be expected to cause a material impact on its financial condition or the results of operations.

REVENUE AND PRODUCT EXPENSE

6 Months Ended

Jun. 30, 2021

REVENUE AND PRODUCT EXPENSE

2. REVENUE AND PRODUCT EXPENSE

2.	REVENUE AND PRODUCT EXPENSE

On January 1, 2018, the Company adopted FASB ASC Topic 606, Revenue from contracts with customers (“Topic 606”) and, as it had no prior revenue or contracts with customers, there was no transition required nor any impact on prior results. Topic 606 requires entities to recognize revenue through the application of a five-step model, which includes identification of the contract, identification of the performance obligations, determination of the transaction price, allocation of the transaction price to the performance obligations and recognition of revenue as the entity satisfies the performance obligations.

The Company enters into contracts that include various combinations of products, accessories, software and services, each of which are generally distinct and are accounted for as separate performance obligations.

A performance obligation is a promise in a contract to transfer a distinct good or service to a customer, and is the unit of account in Topic 606. For contracts with a single performance obligation, the entire transaction price is allocated to the single performance obligation. For contracts with multiple performance obligations, the Company allocates the contract transaction price to each performance obligation using the Company’s estimate of the standalone selling price (“SSP” or “SSPs”) of each distinct good or service in a contract. The Company determines SSPs based on the relative SSP. If the SSP is not observable through past transactions, the Company estimates the SSP considering available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

Most of the Company’s products and accessories are sold through domestic and international distributors. Performance obligations to deliver products and accessories are generally satisfied at the point in time the Company ships the product, as this is when the customer obtains control of the asset under our standard terms and conditions. Periodically, certain customers request bill and hold transactions for future delivery as scheduled and designated by them. In such cases, revenue is not recognized until after control, title and risk of ownership has transferred which is generally when the customer has requested such transaction under normal billing and payment terms and has been notified that the product (i) has been completed according to customer specifications, (ii) has passed quality control inspections, and (iii) has been tagged and packed for shipment, separated from other inventory and ready for physical transfer to the customer. The value associated with custodial storage services is deemed immaterial in the context of such contracts and in total, and accordingly, none of the transaction price is allocated to such service.

The Company has elected to recognize shipping costs as an expense in cost of revenue when control has transferred to the customer.

Time-based virtual reality system contracts generally include setup, training and the use of software and hardware for a fixed term, generally one to five years and support and upgrade services during the same period. The Company does not sell time-based arrangements without setup, training and support services and therefore revenues for the entire arrangement are recognized on a straight-line basis over the term. When hardware is bundled and not sold separately the Company allocates the contract transaction price to each performance obligation using the SSP of each distinct good and service in the contract.

The timing of revenue recognition may differ from the timing of invoicing to customers. The Company generally has an unconditional right to consideration when customers are invoiced and a receivable is recorded. A contract asset is recognized when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized subsequent to invoicing. At June 30, 2021 the Company’s deferred revenue totaled $186, of which $105 related to virtual reality training and $81 related to BolaWrap extended product warranties and training services. At December 31, 2020 the Company’s deferred revenue totaled $16, of which $14 related to virtual reality training and $2 related to extended product warranties.

The Company may also receive consideration, per terms of a contract, from customers prior to transferring goods to the customer. The Company records customer deposits as a contract liability.

The Company recognizes an asset if there are incremental costs of obtaining a contract with a customer such as commissions. These costs are ascribed to or allocated to the underlying performance obligations in the contract and amortized consistent with the recognition timing of the revenue for any such underlying performance obligations. The Company had no such assets at June 30, 2021 and December 31, 2020. The Company applies the practical expedient to expense any sales commissions related to performance obligations with an amortization of one year or less when incurred within selling, general and administrative expense.

Estimated expense for the Company’s standard one-year warranty are charged to cost of products sold when revenue is recorded for the related product. Royalties are also charged to cost of products sold.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

+ Details

FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2021

FAIR VALUE MEASUREMENTS

3. FAIR VALUE MEASUREMENTS

3.	FAIR VALUE MEASUREMENTS

Assets and liabilities recorded at fair value on a recurring basis in the Condensed Consolidated Balance Sheets and assets and liabilities measured at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provides a framework for measuring fair value and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

Instruments Measured at Fair Value on a Recurring Basis

The Company’s cash equivalent Money Market Funds and short-term investments consisting of U.S. Treasury bill securities are classified as Level 1 because they are valued using quoted market prices.

The following table shows the Company’s cash and cash equivalents, Money Market Funds and short-term investments by significant investment category as of June 30, 2021 and December 31, 2020.

	As of June 30, 2021
	Adjusted		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Level 1:
Money Market Funds	$	35	$	-	$	-	$	35
U.S. Treasury securities considered cash equivalents		-		-		-		-
U.S. Treasury securities in short-term investments		29,989		13		-		30,002
Total Financial Assets	$	30,024	$	13	$	-	$	30,037

	As of December 31, 2020
	Adjusted		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Level 1:
Money Market Funds	$	6,035	$	-	$	-	$	6,035
U.S. Treasury securities considered cash equivalents		9,998		-		-		9,998
U.S. Treasury securities in short-term investments		24,979		15		-		24,994
Total Financial Assets	$	41,012	$	15	$	-	$	41,027

Unrealized gains or losses resulting from our short-term investments are recorded in accumulated other comprehensive gain or loss. As of June 30, 2021, $13 was recorded to accumulated other comprehensive gain.

Our financial instruments also include accounts receivable, accounts payable, accrued liabilities and business acquisition liabilities. Due to the short-term nature of these instruments, their fair values approximate their carrying values on the balance sheet.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

INVENTORIES, NET

6 Months Ended

Jun. 30, 2021

INVENTORIES, NET

4. INVENTORIES, NET

4.	INVENTORIES, NET

Inventory is recorded at the lower of cost or net realizable value. The cost of substantially all the Company’s inventory is determined by the FIFO cost method. Inventories consisted of the following:

	June 30,		December 31,
	2021		2020
Finished goods	$	2,190	$	1,249
Work in process		152		64
Raw materials		495		1,342
Inventories, net	$	2,837	$	2,655

As part of product line exit costs (see Note 1) end of life raw material costs aggregating $531 were written off during the quarter ended June 30, 2021.

PROPERTY AND EQUIPMENT, NET

6 Months Ended

Jun. 30, 2021

PROPERTY AND EQUIPMENT, NET

5. PROPERTY AND EQUIPMENT, NET

5.	PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:

	June 30,			December 31,
	2021			2020
Production and lab equipment	$	313		$	148
Tooling		-			81
Computer equipment		284			180
Furniture, fixtures and improvements		177			165
		774			574
Accumulated depreciation		(266	)		(217	)
Property and equipment, net	$	508		$	357

Depreciation expense was $66 and $122 for the three and six months ended June 30, 2021 and was $25 and $47 for the three and six months ended June 30, 2020, respectively.

As part of product line exit costs (see Note 1) unamortized production tooling costs of $106 were recorded during the quarter ended June 30, 2021.

INTANGIBLE ASSETS, NET

6 Months Ended

Jun. 30, 2021

INTANGIBLE ASSETS, NET

6. INTANGIBLE ASSETS, NET

6.	INTANGIBLE ASSETS, NET

Intangible assets consisted of the following:

	June 30,			December 31,
	2021			2020
Amortizable intangible assets:
Patents	$	336		$	280
Trademarks		122			84
Purchased software		662			662
Other		50			50
		1,170			1,076
Accumulated amortization		(119	)		(23	)
Total amortizable		1,051			1,053
Indefinite life assets (non-amortizable)		344			344
Total intangible assets, net	$	1,395		$	1,397

Amortization expense was $49 and $97 for the three and six months ended June 30, 2021 and was $3 and $5 for the three and six months ended June 30, 2020, respectively.

At June 30, 2021, future amortization expense is as follows:

2021 (6 months)	$	90
2022		151
2023		146
2024		146
2025		146
Thereafter		372
Total estimated amortization expense	$	1,051

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

6 Months Ended

Jun. 30, 2021

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

7.	ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable includes $119 and $53 due to related party Syzygy Licensing, LLC (“Syzygy”) as of June 30, 2021 and December 31, 2020, respectively. Accounts payable at December 31, 2020 also included $10 due to related party V3 Capital Partners, LLC. See Notes 12 and 13 for additional related party information.

Accrued liabilities consist of the following:

	June 30,		December 31,
	2021		2020
Patent and legal costs	$	89	$	65
Accrued compensation		615		563
Raw material purchase reserve		110		-
Warranty costs		74		48
Consulting costs		-		2
Taxes and other		22		43
Accrued liabilities	$	910	$	721

Product line exit expense (see Note 1) includes a reserve of $110 for non-cancelable raw material purchase commitments.

LEASES

6 Months Ended

Jun. 30, 2021

LEASES

8. LEASES

8.	LEASES

The Company adopted ASU 2016-02, Leases (Topic 842) on January 1, 2019 using the modified retrospective approach. The Company has elected not to apply ASC Topic 842 to arrangements with lease terms of 12 months or less.

Amortization of Right of Use operating lease assets was $20 and $46 for the three and six months ended June 30, 2020 and was $30 and $60 for the three and six months ended June 30, 2020, respectively.

Operating lease expense for capitalized operating leases included in operating activities was $23 and $50 for the three and six months ended June 30, 2021 and was $34 and $69 for the three and six months ended June 30, 2020, respectively.

Operating lease obligations recorded on the balance sheet at June 30, 2021 are:

Operating lease liability- short term	$	94
Operating lease liability - long term		8
Total Operating Lease Liability	$	102

Future lease payments included in the measurement of lease liabilities on the balance sheet at June 30, 2021 for future periods are as follows:

2021 (6 months)	$	48
2022		58
Total future minimum lease payments		106
Less imputed interest		(4	)
Total	$	102

The weighted average remaining lease term is 1.08 years and the weighted average discount rate is 7.0%.

The Company does not have any finance leases.

OTHER LIABILITIES

6 Months Ended

Jun. 30, 2021

OTHER LIABILITIES

9. OTHER LIABILITIES

9.	OTHER LIABILITIES

The Company’s other liabilities at June 30, 2021 included operating lease liabilities (see Note 8) and short-term business acquisition liabilities totaling $97 including $23 related to contingent consideration. Other liabilities at December 31, 2020 included operating lease liabilities (see Note 8) and business acquisition liabilities totaling $298 of which $275 related to short term business liabilities and $23 related to contingent consideration recorded as a long-term business acquisition liability on our balance sheet.

STOCKHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2021

STOCKHOLDERS' EQUITY

10. STOCKHOLDERS' EQUITY

10.

STOCKHOLDERS’ EQUITY

The Company’s authorized capital consists of 150,000,000 shares of Common Stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share (“Preferred Stock”).

Summary of Stock Purchase Warrants

The following table summarizes warrant activity during the six months ended June 30, 2021:

	Number			Average Price Per Share
Shares purchasable under outstanding warrants at December 31, 2020		3,206,910		$	6.36
Stock purchase warrants issued		-			-
Stock purchase warrants exercised		(1,815,012	)	$	6.64
Stock purchase warrants expired		(231	)	$	7.58
Shares purchasable under outstanding warrants at June 30, 2021		1,391,667		$	6.00

The Company has outstanding Common Stock purchase warrants as of June 30, 2021 as follows:

	Number of		Exercise Price
Description	Common Shares		Per Share		Expiration Date
Purchase Warrants		1,391,667	$	6.00	June 1, 2022

SHARE-BASED COMPENSATION

6 Months Ended

Jun. 30, 2021

STOCKHOLDERS' EQUITY

11. SHARE-BASED COMPENSATION

11.

SHARE-BASED COMPENSATION

On March 31, 2017, the Company adopted, and the stockholders approved, the 2017 Stock Incentive Plan (the “Plan”) authorizing 2,000,000 shares of Company Common Stock for issuance as stock options and restricted stock units to employees, directors or consultants. In May 2019, the stockholders ratified an increase in the Plan authorizing an additional 2,100,000 shares of Common Stock and in June 2020 ratified a further authorization of 1,900,000 shares of Common Stock for a total of 6,000,000 shares subject to the Plan. In June 2021, the stockholders ratified an increase in the 2017 Stock Incentive Plan authorizing an additional 1,500,000 shares of Common Stock to a total of 7,500,000 shares. At June 30, 2021 there were 1,755,338 shares of Common Stock available for grant under the Plan.

The Company generally recognizes share-based compensation expense on the grant date and over the period of vesting or period that services will be provided.

Stock Options

The following table summarizes stock option activity for the six months ended June 30, 2021:

				Weighted Average
	Options on					Remaining		Aggregate
	Common			Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding December 31, 2020		3,931,586		$	4.41		4.80
Granted		847,500		$	5.34
Exercised		(157,066	)	$	1.77
Forfeited, cancelled, expired		(209,799	)	$	4.95
Outstanding June 30, 2021		4,412,221		$	4.66		5.08	$	16,765
Exercisable June 30, 2021		2,316,429		$	3.13		2.27	$	11,780

Options outstanding at December 31, 2020 and June 30, 2021 include 100,000 of performance-based options exercisable at $5.46 per share with vesting based on achieving certain virtual reality revenue targets by December 1, 2024. The Company has not recorded share-based compensation expense related to these options. All other options are service-based.

The Company uses the Black-Scholes option pricing model to determine the fair value of the options granted. The following table summarizes the assumptions used to compute the fair value of options granted to employees and non-employees:

	For the Six Months
	Ended June 30,
	2021			2020
Expected stock price volatility		50	%		45	%
Risk-free interest rate		0.92	%		0.42	%
Forfeiture rate		0	%		0	%
Expected dividend yield		0	%		0	%
Expected life of options - years		5.70			6.03
Weighted-average fair value of options granted	$	2.46		$	1.86

Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of awards. The Company’s estimated volatility was based on an average of the historical volatility of peer entities whose stock prices were publicly available. The Company’s calculation of estimated volatility is based on historical stock prices of these peer entities over a period equal to the expected life of the awards. The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price.

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the options. The Company accounts for actual forfeitures as they occur. The dividend yield of zero is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends. The Company calculates the expected life of the options using the Simplified Method for the employee stock options as the Company does not have sufficient historical data.

Restricted Stock Units

The Plan provides for the grant of restricted stock units (“RSUs”). The following table summarizes RSU activity under the Plan for the six months ended June 30, 2021:

				Weighted Average		Weighted Average
	Service-Based			Grant Date		Vesting
	RSU's			Fair Value		Period
Unvested at December 31, 2020		428,006		$	6.13
Granted - service based		289,890		$	5.49
Vested		(342,274	)	$	5.42
Forfeited and cancelled		(32,874	)	$	6.10
Unvested at June 30, 2021		342,748		$	6.30	1.9 Years

Subsequent Stock Exercises

During July 2021 through the date of this report a total of 526,303 outstanding stock options were exercised for cash proceeds of $908.

Share-Based Compensation Expense

The Company recorded share-based compensation for options and RSUs in its statements of operations for the relevant periods as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Selling, general and administrative	$	2,027	$	496	$	2,629	$	925
Research and development		121		53		378		91
Total share-based expense	$	2,148	$	549	$	3,007	$	1,016

As of June 30, 2021, total estimated compensation expense of stock options granted and outstanding but not yet vested was $4,983 which is expected to be recognized over the weighted average period of 2.4 years. As of June 30, 2021, total estimated compensation cost of RSUs granted and outstanding but not yet vested was $1,759 which is expected to be recognized over the weighted average period of 1.9 years.

COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2021

COMMITMENTS AND CONTINGENCIES

12. COMMITMENTS AND CONTINGENCIES

12.

COMMITMENTS AND CONTINGENCIES

Facility Leases

See Note 8.

Related Party Technology License Agreement

The Company is obligated to pay royalties and pay development and patent costs pursuant to that certain exclusive Amended and Restated Intellectual Property License Agreement dated as of September 30, 2016, by and between the Company and Syzygy (the “Syzygy Agreement”), a company owned and controlled by stockholders/officers Messrs. Elwood Norris and James Barnes, both of whom are stockholders and officers of the Company. The Syzygy Agreement provides for royalty payments of 4% of revenue from products employing the licensed ensnarement device technology up to an aggregate of $1,000,000 in royalties or until September 30, 2026, whichever occurs earlier. The Company recorded $68 and $119 for royalties incurred under the Syzygy Agreement during the three and six months ended June 30, 2021 and $28 and $53 incurred for the three and six months ended June 30, 2020, respectively.

Purchase Commitments

At June 30, 2021 the Company was committed for approximately $1,005 for future component deliveries and contract services that are generally subject to modification or rescheduling in the normal course of business.

Securities Litigation

On September 23, 2020, Carone Cobden filed a putative class action complaint against the Company, former Chief Executive Officer David Norris (“Norris”), Chief Financial Officer, James A. Barnes (“Barnes”), and President, Thomas Smith (“Smith”) in the United States District Court for the Central District of California, docketed as Case No. 2-20-cv-08760-DMG-PVCx (the “Cobden Complaint”). The Cobden Complaint alleges that the named defendants, in their capacities as officers of the Company, knowingly made false or misleading statements or omissions regarding trials of the Company’s BolaWrap product conducted by the Los Angeles Police Department (the “BolaWrap Pilot Program”). The Cobden Complaint also alleges that the conduct of the named defendants artificially inflated the price of the Company’s traded securities, and that the disclosure of certain adverse information to the public led to a decline in the market value of the Company’s securities. The Cobden Complaint further alleges violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder, and defines the class period as July 31, 2020 through September 23, 2020.

On October 1, 2020, Joseph Mercurio filed a second putative class action complaint against the Company, Norris, Smith, and Barnes in the same court, which contains substantially the same factual allegations and legal claims as set forth in the Cobden Complaint, and is docketed as Case No. 2-20-cv-09030-DMG-PVCx (the “Mercurio Complaint”). On October 15, 2020, Paula Earley filed a third putative class action complaint against the Company, Smith, Norris, Barnes, Chief Strategy Officer Mike Rothans (“Rothans”), and former Chief Executive Officer, Marc Thomas (“Thomas”) in the same court, which contains many of the same factual allegations and legal claims as set forth in the Cobden and Mercurio Complaints, but defines the class period as April 29, 2020 through September 23, 2020, and alleges additional false or misleading statements in connection with BolaWrap and the BolaWrap Pilot Program (the “Earley Complaint”). The Earley Complaint is docketed as Case No. 2-20-cv-09444-DMG-PVCx.

On November 3, 2020, the Hon. Dolly M. Gee consolidated the three above-mentioned cases under the caption In re Wrap Technologies, Inc. Securities Exchange Act Litigation, Case No. 20-8760-DMG (PVCx) (the “Securities Action”). On January 7, 2021, the Court appointed a lead plaintiff in the Securities Action, who designated its attorneys as lead counsel. On January 21, 2021, Judge Gee ordered that a consolidated amended complaint be filed in the Securities Action on or before March 12, 2021, with defendants’ motion to dismiss to be filed on or before April 26, 2021, and a hearing on the motion to dismiss to be held on July 23, 2021. On March 12, 2021, lead plaintiff filed an amended complaint, naming the Company, Norris, Thomas, Smith, and Barnes as defendants. Those defendants jointly filed a motion to dismiss on April 26, 2021. Briefing on the motion to dismiss is now complete, and the motion is currently under submission before Judge Gee. The Company believes that the Securities Action is without merit and will continue to vigorously defend against the claims raised therein.

Shareholder Derivative Litigation

On November 13, 2020, Naresh Rammohan filed a shareholder derivative action in the United States District Court for the Central District of California against Smith, Barnes, Rothans, Thomas, Norris, and Messrs. Scot Cohen, Patrick Kinsella, Michael Parris, and Wayne Walker, alleging unjust enrichment, breach of fiduciary duty, waste of corporate assets, and contribution claims under the Securities Exchange Act of 1934, docketed as Case No. 2:20-cv-10444-DMG-PVCx (the “Rammohan Complaint”). The Rammohan Complaint names the Company as a nominal defendant and recites many of the allegations set forth in the Securities Action relating to the BolaWrap Pilot Program. On January 20, 2021, Ray Westerman filed a second derivative complaint in the same court against the same parties, alleging breach of fiduciary duty and contribution claims under the Securities Exchange Act of 1934, docketed as Case No. 2:21-cv-00550-DMG-PVCx (the “Westerman Complaint”). On January 22, 2021, Jesse Lowe filed a third derivative complaint in the same court against the same parties, alleging breach of fiduciary duty and asserting various claims under the Securities Exchange Act of 1934, docketed as Case No. 2:21-cv-00597-DMG-PVCx (the “Lowe Complaint”).

The above-mentioned derivative cases were each been transferred to Judge Gee as cases related to the Securities Action. On February 16, 2021, Judge Gee issued an order consolidating these cases under the caption In re Wrap Technologies, Inc. Shareholder Derivative Litigation, Case No. 2:20-10444-DMG-PVCx, (the “Derivative Action”), and stayed the Derivative Action pending the resolution of the motion to dismiss in the Securities Action. On March 9, 2021, the Lowe Complaint was designated as the operative complaint in the Derivative Action. As with the Securities Action, the Company believes that the Derivative Action is without merit and will vigorously defend against the claims raised therein.

Other Legal Information

The Company may at times be involved in other litigation in the ordinary course of business. The Company will, from time to time, when appropriate in management’s estimation, record adequate reserves in the Company’s consolidated financial statements for pending litigation. Currently, other than described above there are no other pending material legal proceedings to which the Company is a party or to which any of its property is subject. At June 30, 2021 the Company had no provision for liability under existing litigation.

RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2021

RELATED PARTY TRANSACTIONS

13. RELATED PARTY TRANSACTIONS

13.

RELATED PARTY TRANSACTIONS

Commencing in October 2017 the Company began reimbursing Mr. Elwood Norris, a former officer and current stockholder of the Company, $1.5 per month on a month-to-month basis for laboratory facility expense, for an aggregate of $9 during the six months ended June 30, 2021 and 2020, respectively. Effective July 1, 2021 Mr. Norris commenced serving as a consultant to the Company and the facility rent costs are expected to continue during such consultancy.

See Notes 7, 11 and 12 for additional information on related party transactions and obligations.

MAJOR CUSTOMERS AND RELATED INFORMATION

6 Months Ended

Jun. 30, 2021

MAJOR CUSTOMERS AND RELATED INFORMATION

14. MAJOR CUSTOMERS AND RELATED INFORMATION

14.

MAJOR CUSTOMERS AND RELATED INFORMATION

For the three months ended June 30, 2021, revenues from two distributors accounted for approximately 37% and 22% of revenues with no other single customer accounting for more than 10% of total revenues. For the three months ended June 30, 2020, revenues from two distributors and one agency accounted for approximately 32%, 19% and 11% of revenues with no other single customer accounting for more than 10% of total revenues.

For the six months ended June 30, 2021, revenues from four distributors accounted for approximately 20%, 17%, 13% and 12% of revenues with no other single customer accounting for more than 10% of total revenues. For the six months ended June 30, 2020, revenues from four distributors accounted for approximately 22%, 19%, 18% and 10% of revenues with no other single customer accounting for more than 10% of total revenues.

At June 30, 2021, accounts receivable from three distributors accounted for 30%, 28% and 14% of accounts receivable with no other single customer accounting for more than 10% of the accounts receivable balance. Two distributors accounted for 28% and 26% of accounts receivable at December 31, 2020 with no other single customer accounting for more than 10% of the accounts receivable balance.

The following table summarizes revenues by geographic region. Revenues are attributed to countries based on customer’s delivery location.

	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2021		2020		2021		2020
Americas	$	1,123	$	295	$	1,750	$	404
Europe, Middle East and Africa		803		293		1,679		602
Asia Pacific		8		245		47		516
	$	1,934	$	833	$	3,476	$	1,522

SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2021

SUBSEQUENT EVENTS

15. SUBSEQUENT EVENTS

15.

SUBSEQUENT EVENTS

See Note 11 regarding stock options exercised between July 1, 2021 to the date of the filing of this Report.

The Company evaluated other subsequent events for their potential impact on the financial statements and disclosures through the date the financial statements were available to be issued, and determined that, except as disclosed herein, no subsequent events occurred that were reasonably expected to impact the financial statements presented herein.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	6 Months Ended
	Jun. 30, 2021
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business Description	Wrap Technologies, Inc., a Delaware corporation (the “Company”, “we”, “us”, and “our”), is a publicly traded company with our Common Stock, par value $0.0001 per share (“Common Stock”), listed on the Nasdaq Capital Market (“Nasdaq”) under the trading symbol “WRAP”. The Company is a developer and supplier of public safety products and training services for law enforcement and security personnel. The Company’s primary product is the BolaWrap® remote restraint device. The principal markets for the Company’s proprietary products and services are in North and South America, Europe, Middle East and Asia.
Basis of Presentation	The Company’s unaudited interim condensed consolidated financial statements included herein have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. In management’s opinion, the accompanying financial statements reflect adjustments necessary to present fairly the financial position, results of operations, and cash flows for those periods indicated, and contain adequate disclosure to make the information presented not misleading. Adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the footnotes. The condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 4, 2021. The accompanying condensed consolidated balance sheet at December 31, 2020 has been derived from the audited consolidated balance sheet at December 31, 2020 contained in the above referenced Form 10-K. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year. Where necessary, the prior year’s information has been reclassified to conform to the current year presentation.
Principles of Consolidation	The Company has one wholly-owned subsidiary, Wrap Reality, Inc., formed in December 2020, and has commenced selling its virtual reality training system primarily targeting law enforcement and security agencies. The condensed consolidated financial statements include the accounts of this subsidiary after elimination of intercompany transactions and accounts.
Use of Estimates	The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions (e.g., stock-based compensation valuation, allowance for doubtful accounts, valuation of inventory and intangible assets, warranty reserve, accrued expense and recognition and measurement of contingencies) that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.
Loss per share	Basic loss per common share is computed by dividing net loss for the period by the weighted-average number of shares of Common Stock outstanding during the period. Diluted net loss per Common Share reflects the potential dilution of securities that could share in the earnings of an entity. The Company’s losses for the periods presented cause the inclusion of potential Common Stock instruments outstanding to be antidilutive. Stock options, restricted stock units and warrants exercisable or issuable for a total of 6,146,636 shares of Common Stock were outstanding at June 30, 2021. These securities are not included in the computation of diluted net loss per common share for the periods presented as their inclusion would be antidilutive due to losses incurred by the Company.
Exit Activity Expenses	During the second quarter ended June 30, 2021 the Company recorded $747 of product line exit costs related to the planned wind down and closure of the BolaWrap 100 product line related to a shift in production efforts to a new generation product requiring continued development, new tooling, new production equipment and processes and additional licensing. These non-cash inventory costs included end of life raw material write offs of $531 and tooling retirement costs of $106. An additional $110 has been recorded in accrued liabilities as a reserve for estimated non-cancelable raw material purchase commitments. These cost were recorded as a component of cost of revenues. There was no such expense recorded during the three and six months ended June 30, 2020. Development and start-up expense of new products are expensed as incurred except for capitalized equipment and tooling.
Recent Issued Accounting Guidance	Adopted the First Quarter of 2021: In December 2019, the FASB issued Accounting Standards Update 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. We adopted ASU 2019-12 in the first quarter ended March 31, 2021 and it did not have a significant impact on our financial statements. Other Pronouncements: In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (“Subtopic 470-20”) and Derivatives and Hedging—Contracts in Entity’s Own Equity “(Subtopic 815-40”): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures. The Company has reviewed other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoptions of any such pronouncements will be expected to cause a material impact on its financial condition or the results of operations.

FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2021

FAIR VALUE MEASUREMENTS

Schedule of Financial instruments

	As of June 30, 2021
	Adjusted		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Level 1:
Money Market Funds	$	35	$	-	$	-	$	35
U.S. Treasury securities considered cash equivalents		-		-		-		-
U.S. Treasury securities in short-term investments		29,989		13		-		30,002
Total Financial Assets	$	30,024	$	13	$	-	$	30,037

	As of December 31, 2020
	Adjusted		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Level 1:
Money Market Funds	$	6,035	$	-	$	-	$	6,035
U.S. Treasury securities considered cash equivalents		9,998		-		-		9,998
U.S. Treasury securities in short-term investments		24,979		15		-		24,994
Total Financial Assets	$	41,012	$	15	$	-	$	41,027

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References + Details

INVENTORIES, NET (Tables)

6 Months Ended

Jun. 30, 2021

INVENTORIES, NET

Schedule of Inventories

	June 30,		December 31,
	2021		2020
Finished goods	$	2,190	$	1,249
Work in process		152		64
Raw materials		495		1,342
Inventories, net	$	2,837	$	2,655

PROPERTY AND EQUIPMENT, NET (Tables)

6 Months Ended

Jun. 30, 2021

PROPERTY AND EQUIPMENT, NET

Schedule of Property and equipment

	June 30,			December 31,
	2021			2020
Production and lab equipment	$	313		$	148
Tooling		-			81
Computer equipment		284			180
Furniture, fixtures and improvements		177			165
		774			574
Accumulated depreciation		(266	)		(217	)
Property and equipment, net	$	508		$	357

INTANGIBLE ASSETS, NET (Tables)

6 Months Ended

Jun. 30, 2021

INTANGIBLE ASSETS, NET

Schedule of Intangible assets

	June 30,			December 31,
	2021			2020
Amortizable intangible assets:
Patents	$	336		$	280
Trademarks		122			84
Purchased software		662			662
Other		50			50
		1,170			1,076
Accumulated amortization		(119	)		(23	)
Total amortizable		1,051			1,053
Indefinite life assets (non-amortizable)		344			344
Total intangible assets, net	$	1,395		$	1,397

Schedule of Future amortization expense

2021 (6 months)	$	90
2022		151
2023		146
2024		146
2025		146
Thereafter		372
Total estimated amortization expense	$	1,051

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2021

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Schedule of Accrued liabilities

	June 30,		December 31,
	2021		2020
Patent and legal costs	$	89	$	65
Accrued compensation		615		563
Raw material purchase reserve		110		-
Warranty costs		74		48
Consulting costs		-		2
Taxes and other		22		43
Accrued liabilities	$	910	$	721

LEASES (Tables)

6 Months Ended

Jun. 30, 2021

LEASES

Schedule of Operating lease liabilities

Operating lease liability- short term	$	94
Operating lease liability - long term		8
Total Operating Lease Liability	$	102

Schedule of Future lease payments

2021 (6 months)	$	48
2022		58
Total future minimum lease payments		106
Less imputed interest		(4	)
Total	$	102

STOCKHOLDERS' EQUITY (Tables)

6 Months Ended

Jun. 30, 2021

Stockholders' equity:

Schedule of Warrant activity

	Number			Average Price Per Share
Shares purchasable under outstanding warrants at December 31, 2020		3,206,910		$	6.36
Stock purchase warrants issued		-			-
Stock purchase warrants exercised		(1,815,012	)	$	6.64
Stock purchase warrants expired		(231	)	$	7.58
Shares purchasable under outstanding warrants at June 30, 2021		1,391,667		$	6.00

Schedule of Stock purchase warrants

	Number of		Exercise Price
Description	Common Shares		Per Share		Expiration Date
Purchase Warrants		1,391,667	$	6.00	June 1, 2022

SHARE-BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2021

STOCKHOLDERS' EQUITY

Schedule of Stock option activity

				Weighted Average
	Options on					Remaining		Aggregate
	Common			Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding December 31, 2020		3,931,586		$	4.41		4.80
Granted		847,500		$	5.34
Exercised		(157,066	)	$	1.77
Forfeited, cancelled, expired		(209,799	)	$	4.95
Outstanding June 30, 2021		4,412,221		$	4.66		5.08	$	16,765
Exercisable June 30, 2021		2,316,429		$	3.13		2.27	$	11,780

Schedule Of Assumptions used to to determine the fair value of the options granted

	For the Six Months
	Ended June 30,
	2021			2020
Expected stock price volatility		50	%		45	%
Risk-free interest rate		0.92	%		0.42	%
Forfeiture rate		0	%		0	%
Expected dividend yield		0	%		0	%
Expected life of options - years		5.70			6.03
Weighted-average fair value of options granted	$	2.46		$	1.86

Schedule Of Service-based RSU activity

				Weighted Average		Weighted Average
	Service-Based			Grant Date		Vesting
	RSU's			Fair Value		Period
Unvested at December 31, 2020		428,006		$	6.13
Granted - service based		289,890		$	5.49
Vested		(342,274	)	$	5.42
Forfeited and cancelled		(32,874	)	$	6.10
Unvested at June 30, 2021		342,748		$	6.30	1.9 Years

Schedule Of Stock-based compensation

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Selling, general and administrative	$	2,027	$	496	$	2,629	$	925
Research and development		121		53		378		91
Total share-based expense	$	2,148	$	549	$	3,007	$	1,016

MAJOR CUSTOMERS AND RELATED INFORMATION (Tables)

6 Months Ended

Jun. 30, 2021

MAJOR CUSTOMERS AND RELATED INFORMATION

Schedule of Revenues by geographic region

	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2021		2020		2021		2020
Americas	$	1,123	$	295	$	1,750	$	404
Europe, Middle East and Africa		803		293		1,679		602
Asia Pacific		8		245		47		516
	$	1,934	$	833	$	3,476	$	1,522

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Product line exit expense	$ 747,000	$ 0	$ 747,000	$ 0
Write off inventory cost			531,000
Retiring cost			106,000
Raw material purchase reserve	$ 110,000		$ 110,000		$ 0
Stock options, restricted stock units and warrants exercisable or issuable			6,146,636

REVENUE AND PRODUCT EXPENSE (Details Narrative) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Deferred revenue	$ 186	$ 16
Virtual Reality Training
Deferred revenue	105	14
Extended Product Warranties
Deferred revenue	$ 81	$ 2

FAIR VALUE MEASUREMENTS (Details) - Level 1 - USD ($)	6 Months Ended	12 Months Ended
FAIR VALUE MEASUREMENTS (Details) - Level 1 - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Adjusted cost	$ 30,024,000	$ 41,012,000
Unrealized gains	13,000	15,000
Unrealized losses	0	0
Market value	30,037,000	41,027,000
U.S. Treasury Securities Considered Cash Equivalents [Member]
Adjusted cost	0	9,998,000
Unrealized gains	0	0
Unrealized losses	0	0
Market value	0	9,998,000
U.S. Treasury Securities in Short-term Investments [Member]
Adjusted cost	29,989,000	24,979,000
Unrealized gains	13,000	15,000
Unrealized losses	0	0
Market value	30,002,000	24,994,000
Money Market Funds [Member]
Adjusted cost	35,000	6,035,000
Unrealized gains	0	0
Unrealized losses	0	0
Market value	$ 35,000	$ 6,035,000

FAIR VALUE MEASUREMENTS (Details Narrative) $ in Thousands	6 Months Ended
FAIR VALUE MEASUREMENTS (Details Narrative) $ in Thousands	Jun. 30, 2021 USD ($)
FAIR VALUE MEASUREMENTS
Unrealized gains/losses on short-term investments	$ 13

INVENTORIES NET (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
INVENTORIES, NET
Finished goods	$ 2,190	$ 1,249
Work in process	152	64
Raw materials	495	1,342
Inventory, net	$ 2,837	$ 2,655

INVENTORIES NET (Details Narrative) $ in Thousands	6 Months Ended
INVENTORIES NET (Details Narrative) $ in Thousands	Jun. 30, 2021 USD ($)
INVENTORIES, NET
Write off inventory cost	$ 531

PROPERTY AND EQUIPMENT NET (Details) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Property and equipment, gross	$ 774,000	$ 574,000
Accumulated depreciation	(266,000)	(217,000)
Property and equipment, net	508,000	357,000
Production and lab equipment
Property and equipment, gross	313,000	148,000
Tooling
Property and equipment, gross	0	81,000
Computer Equipment
Property and equipment, gross	284,000	180,000
Furniture, Fixtures and Improvements
Property and equipment, gross	$ 177,000	$ 165,000

PROPERTY AND EQUIPMENT NET (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
PROPERTY AND EQUIPMENT, NET
Depreciation expense	$ 66	$ 25	$ 122	$ 47
Unamortized production cost			$ 106

INTANGIBLE ASSETS NET (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Intangible assets, gross	$ 1,170	$ 1,076
Accumulated amortization	(119)	(23)
Total amortizable	1,051	1,053
Indefinite life assets (non-amortizable)	344	344
Intangible assets, net	1,395	1,397
Trademark [Member]
Intangible assets, gross	122	84
Patents
Intangible assets, gross	336	280
Purchased Software
Intangible assets, gross	662	662
Other
Intangible assets, gross	$ 50	$ 50

INTANGIBLE ASSETS NET (Details 1) $ in Thousands	Jun. 30, 2021 USD ($)
INTANGIBLE ASSETS, NET
2021 (6 months)	$ 90
2022	151
2023	146
2024	146
2025	146
Thereafter	372
Total estimated amortization expense	$ 1,051

INTANGIBLE ASSETS NET (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
INTANGIBLE ASSETS, NET
Amortization expense	$ 49	$ 3	$ 97	$ 5

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Patent and legal costs	$ 89,000	$ 65,000
Accrued compensation	615,000	563,000
Raw material purchase reserve	110,000	0
Warranty costs	74,000	48,000
Consulting costs	0	2,000
Taxes and other	22,000	43,000
Accrued liabilities	$ 910,000	$ 721,000

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details Narrative) - USD ($)	Jun. 30, 2021	Dec. 31, 2020
Raw material purchase reserve	$ 110,000	$ 0
Syzygy Licensing, LLC [Member]
Accounts payable	$ 119,000	53,000
V3 Capital Partners, LLC [Member]
Accounts payable		$ 10,000

LEASES (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
LEASES
Operating lease liability - short term	$ 94	$ 94
Operating lease liability - long term	8	$ 56
Total operating lease liability	$ 102

LEASES (Details 1) $ in Thousands	Jun. 30, 2021 USD ($)
LEASES
Remainder of 2021 (6 months)	$ 48
2022	58
Total future minimum lease payments	106
Less imputed interest	(4)
Total	$ 102

LEASES (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
LEASES (Details Narrative) - USD ($) $ in Thousands	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
LEASES
Amortization of ROU operating lease assets	$ 20	$ 30	$ 46	$ 60
Operating lease expense	$ 23	$ 34	$ 50	$ 69
Weighted average remaining lease term			1 year 29 days
Weighted average discount rate	7.00%		7.00%

OTHER LIABILITIES (Details Narrative) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
OTHER LIABILITIES
Business acquisition liability - short term	$ 97	$ 275
Contingent consideration	23	$ 23
Business acquisition, total	$ 298

STOCKHOLDERS EQUITY (Details)	6 Months Ended
STOCKHOLDERS EQUITY (Details)	Jun. 30, 2021 $ / shares shares
Stockholders' equity:
Shares purchasable under outstanding warrants at December 31, 2020 beginning \| shares	3,206,910
Stock purchase warrants issued \| shares	0
Stock purchase warrants exercised \| shares	(1,815,012)
Stock purchase warrants expired \| shares	(231)
Shares purchasable under outstanding warrants at June 30, 2021, ending \| shares	1,391,667
Average purchase price per share outstanding, beginning \| $ / shares	$ 6.36
Issued \| $ / shares	0.00
Exercised \| $ / shares	6.64
Expired, price per share \| $ / shares	7.58
Average purchase price per share outstanding, ending \| $ / shares	$ 6.00

STOCKHOLDERS EQUITY (Details 1) - Purchase Warrants	6 Months Ended
STOCKHOLDERS EQUITY (Details 1) - Purchase Warrants	Jun. 30, 2021 $ / shares shares
Number of common shares \| shares	1,391,667
Exercise price per share \| $ / shares	$ 6.00
Expiration Date	Jun. 01, 2022

STOCKHOLDERS EQUITY (Details Narrative) - $ / shares	Jun. 30, 2021	Dec. 31, 2020
Stockholders' equity:
Common stock, authorized	150,000,000	150,000,000
Common stock, par value	$ 0.0001	$ 0.0001
Preferred stock, authorized	5,000,000	5,000,000
Preferred stock, par value	$ 0.0001	$ 0.0001

SHARE-BASED COMPENSATION (Details) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2021 USD ($) $ / shares shares
STOCKHOLDERS' EQUITY
Number of options outstanding, beginning \| shares	3,931,586
Number of options granted \| shares	847,500
Number of options exercised \| shares	(157,066)
Number of options forfeited/cancelled/expired \| shares	(209,799)
Number of options outstanding, ending \| shares	4,412,221
Number of options vested and exercisable \| shares	2,316,429
Weighted average exercise price outstanding, beginning \| $ / shares	$ 4.41
Weighted average exercise price granted \| $ / shares	5.34
Weighted average exercise price exercised \| $ / shares	1.77
Weighted average exercise price forfeited/cancelled/expired \| $ / shares	4.95
Weighted average exercise price outstanding, ending \| $ / shares	4.66
Weighted average exercise price vested and exercisable \| $ / shares	$ 3.13
Weighted average remaining contractual term outstanding, beginning	4 years 9 months 18 days
Weighted average remaining contractual term outstanding, ending	5 years 29 days
Weighted average remaining contractual term vested and exercisable	2 years 3 months 7 days
Aggregate intrinsic value outstanding, ending \| $	$ 16,765
Aggregate intrinsic value vested and exercisable \| $	$ 11,780

SHARE-BASED COMPENSATION (Details 1) - $ / shares	6 Months Ended
SHARE-BASED COMPENSATION (Details 1) - $ / shares	Jun. 30, 2021	Jun. 30, 2020
STOCKHOLDERS' EQUITY
Expected stock price volatility	50.00%	45.00%
Risk-free interest rate	0.92%	0.42%
Forfeiture rate	0.00%	0.00%
Expected dividend yield	0.00%	0.00%
Expected life of options - years	5 years 8 months 12 days	6 years 10 days
Weighted-average fair value of options granted	$ 2.46	$ 1.86

SHARE-BASED COMPENSATION (Details 2)	6 Months Ended
SHARE-BASED COMPENSATION (Details 2)	Jun. 30, 2021 $ / shares shares
Unvested service-based RSUs outstanding, beginning \| shares	428,006
Vested \| shares	(342,274)
Forfeited and cancelled \| shares	(32,874)
Unvested service-based RSUs outstanding, ending \| shares	342,748
Grant date fair value, beginning \| $ / shares	$ 6.13
Vested \| $ / shares	5.42
Forfeited and cancelled \| $ / shares	6.10
Grant date fair value, ending \| $ / shares	$ 6.30
Vesting period	1 year 10 months 24 days
Service Based
Grant date fair value, ending \| $ / shares	$ 5.49
Granted \| shares	289,890

SHARE-BASED COMPENSATION (Details 3) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Stock-based compensation	$ 2,148	$ 549	$ 3,007	$ 1,016
Selling, General and Administrative Expenses [Member]
Stock-based compensation	2,027	496	2,629	925
Research and Development Expense [Member]
Stock-based compensation	$ 121	$ 53	$ 378	$ 91

SHARE-BASED COMPENSATION (Details Narrative) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Estimated compensation cost of stock options and RSUs granted but not yet vested	$ 1,759
Estimated compensation cost of stock options and RSUs granted but not yet vested, recognition period	1 year 10 months 24 days
Total stock option granted and outstanding but not yet vested	$ 4,983
Weighted average period	2 years 4 months 24 days
Proceeds from stock option exercises	$ 278	$ 515
Common stock, share authorized	150,000,000		150,000,000
July 2021 [Member]
Outstanding stock options	526,303
Proceeds from stock option exercises	$ 908
Mar 31, 2017 [Member] \| Incentive Plan [Member]
Additional shares authorized	2,100,000
Additional shares further authorized	1,900,000
Total numbers of shares authorized	6,000,000
Common stock, share authorized	2,000,000
Common stock shares available for grant	1,755,338
Description of stockholders ratified increase in stock incentive plan	in June 2020 ratified a further authorization of 1,900,000 shares of Common Stock for a total of 6,000,000 shares subject to the Plan. In June 2021, the stockholders ratified an increase in the 2017 Stock Incentive Plan authorizing an additional 1,500,000 shares of Common Stock to a total of 7,500,000 shares
Description of performance based options exercisable shares	at December 31, 2020 and June 30, 2021 include 100,000 of performance-based options exercisable at $5.46 per share with vesting based on achieving certain virtual reality revenue targets by December 1, 2024

COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Commitments and contingencies (Note 12)
Royalties	$ 68	$ 119	$ 28	$ 53
Purchase commitment	$ 1,005		$ 1,005
Description of commitment and contengencies			royalty payments of 4% of revenue from products employing the licensed ensnarement device technology up to an aggregate of $1,000,000 in royalties or until September 30, 2026

RELATED PARTY TRANSACTIONS (Details Narrative) - Mr. Elwood Norris [Member] - USD ($)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Expense description	$1.5 per month on a month-to-month basis for laboratory facility expense
Payment to related party during period	$ 9,000	$ 9,000

MAJOR CUSTOMERS AND RELATED INFORMATION (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenue by geographic region	$ 1,934	$ 833	$ 3,476	$ 1,522
Americas
Revenue by geographic region	1,123	295	1,750	404
Europe, Middle East and Africa
Revenue by geographic region	803	293	1,679	602
Asia Pacific
Revenue by geographic region	$ 8	$ 245	$ 47	$ 516

- Definition

Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-Subparagraph (a)
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 323
-SubTopic 10
-Section 50
-Paragraph 3
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=114001798&loc=d3e33918-111571

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 10
-Section 50
-Paragraph 28
-Subparagraph (f)
-URI http://asc.fasb.org/extlink&oid=75031198&loc=d3e14064-108612

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8933-108599

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e8736-108599

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 40
-URI http://asc.fasb.org/extlink&oid=120311839&loc=d3e9031-108599

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
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+ Details

MAJOR CUSTOMERS AND RELATED INFORMATION (Details Narrative)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020
Distributor 1 \| Accounts Receivable [Member]
Concentration risk			30.00%		28.00%
Distributor 1 \| Revenues
Concentration risk	37.00%	32.00%	20.00%	22.00%
Distributor 3 \| Accounts Receivable [Member]
Concentration risk			14.00%
Distributor 3 \| Revenues
Concentration risk			13.00%	18.00%
Distributor 2 \| Accounts receivable
Concentration risk			28.00%		26.00%
Distributor 2 \| Revenues
Concentration risk	22.00%	19.00%	17.00%	19.00%
Distributor 4 \| Revenues
Concentration risk			12.00%	10.00%
Total [Member] \| Accounts Receivable [Member]
Concentration risk			10.00%		10.00%
Agency 1 [Member] \| Revenue
Concentration risk		11.00%