WRAP TECHNOLOGIES, INC.WRAP
WRAP TECHNOLOGIES, INC. Stock Compensation Disclosure
13. SHARE-BASED COMPENSATION
On March 28, 2017, the Company adopted, and the Company’s stockholders approved, the Wrap Technologies, Inc. 2017 Equity Incentive Plan (the “2017 Plan”) subject to stockholder approval. Under the 2017 Plan as originally adopted, the Company initially reserved 2,000,000 shares of Common Stock for issuance as awards under the 2017 Plan. The 2017 Plan was amended by the First Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 4,100,000 shares, which was adopted by the Board on March 16, 2019, and by stockholders on May 23, 2019. The 2017 Plan was also amended by the Second Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 6,000,000 shares which was adopted by the Board on April 8, 2020, and by stockholders on June 5, 2020. The 2017 Plan was also amended by the Third Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 7,500,000 shares which was adopted by the Board on April 23, 2021, and by stockholders on June 22, 2021. The 2017 Plan was also amended by the Fourth Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 9,000,000 shares which was adopted by the Board on April 22, 2022, and by our stockholders on June 23, 2022.The 2017 Plan was amended by the Fifth Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 16,500,000 shares which was adopted by the Board on November 12, 2024, and by our stockholders on December 23, 2024. The 2017 Plan was amended by the Sixth Amendment to the 2017 Plan to increase the total number of shares of Common Stock for issuance under the 2017 Plan to 20,500,000 shares which was adopted by the Board of Directors on October 20, 2025, and by the Company stockholders on December 12, 2025.
As of December 31, 2025, there were 8,011,625 shares of Common Stock remaining available for grant under the 2017 Plan.
Stock Options
The following table summarizes stock option activity for the year ended December 31, 2025:
| Weighted Average | |||||||||||||||
| Options on Common Shares | Exercise Price | Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||
| Outstanding January 1, 2025 | 3,944,284 | $ | 2.12 | 8.30 | $ | 1,486 | |||||||||
| Granted | 5,273,927 | 1.98 | - | - | |||||||||||
| Exercised | (171,415 | ) | 1.43 | - | - | ||||||||||
| Forfeited, cancelled, expired | (2,597,262 | ) | 2.05 | - | - | ||||||||||
| Outstanding December 31, 2025 | 6,449,534 | $ | 2.05 | 8.56 | $ | 3,469 | |||||||||
| Exercisable December 31, 2025 | 1,713,774 | $ | 2.41 | 7.37 | $ | 936 | |||||||||
At December 31, 2025, there were 5,159,368 service-based stock options outstanding, and 1,290,166 performance-based stock options outstanding which were granted in October 2023 to the Company’s current Chief Executive Officer, subject to vesting based on future market capitalization targets.
The Company uses the Black-Scholes option pricing model to determine the fair value of service-based options granted. The following table summarizes the assumptions used to compute the fair value of options granted to employees and non-employees:
| For the Year Ended December 31, | |||||||
| 2025 | 2024 | ||||||
| Expected stock price volatility | 76 | % | 76 | % | |||
| Risk-free interest rate | 4.06 | % | 3.82 | % | |||
| Expected dividend yield | 0 | % | 0 | % | |||
| Expected life of options | 6 | 6 | |||||
| Weighted-average fair value of options granted | $ | 1.38 | $ | 1.44 | |||
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 Company records forfeitures as they are incurred.
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 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," whereby the expected term is calculated as the average of the vesting term and the contractual term of the option, as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
Stock option expense was $1,759 and $1,132 for the years ended December 31, 2025 and 2024, respectively.
The following table summarizes information about stock options outstanding at December 31, 2025:
| Weighted | |||||||||||||||||||||||
| Average | Weighted | Weighted | |||||||||||||||||||||
| Remaining | Average | Average | |||||||||||||||||||||
| Range of | Number | Contractual | Exercise | Number | Exercise | ||||||||||||||||||
| Exercise Prices | Outstanding | Life (Years) | Price | Exercisable | Price | ||||||||||||||||||
| $1.00 | – | $2.00 | 4,282,059 | 8.60 | $ | 1.58 | 982,542 | $ | 1.43 | ||||||||||||||
| $2.01 | – | $3.00 | 1,735,000 | 9.26 | $ | 2.48 | 398,758 | $ | 2.45 | ||||||||||||||
| $3.01 | – | $4.00 | 150,000 | 8.09 | $ | 3.88 | 49,999 | $ | 3.88 | ||||||||||||||
| $4.01 | – | $5.00 | 83,975 | 5.02 | $ | 4.37 | 83,975 | $ | 4.37 | ||||||||||||||
| $5.01 | – | $6.58 | 198,500 | 3.54 | $ | 5.96 | 198,500 | $ | 5.96 | ||||||||||||||
Restricted Stock Units
The 2017 Plan provides for the grant of restricted stock units (“RSUs”). RSUs are settled in shares of the Company’s Common Stock as the RSUs become vested. The following table summarizes RSU activity for the years ended December 31, 2025 and 2024:
| Weighted | Weighted | ||||||||||
| Service-Based | Average Grant | Average Vesting | |||||||||
| RSU's | Date Fair Value | Period (Years) | |||||||||
| Unvested at December 31, 2023 | 810,588 | 1.73 | 2.52 | ||||||||
| Granted-service based | 881,004 | 2.60 | |||||||||
| Vested | (465,763 | ) | 2.03 | ||||||||
| Forfeited and cancelled | (237,727 | ) | 2.26 | ||||||||
| Unvested at December 31, 2024 | 988,102 | $ | 2.25 | 3.67 | |||||||
| Granted-service based | 897,225 | 1.88 | - | ||||||||
| Vested | (870,794 | ) | 1.89 | - | |||||||
| Forfeited and cancelled | - | - | - | ||||||||
| Unvested at December 31, 2025 | 1,014,563 | $ | 2.23 | 3.62 |
The Company used the Monte Carlo Simulation Model to value at the grant date the aggregate of 632,911 market condition performance RSUs granted in January 2024 to the Company’s Chief Executive Officer. The assumptions used in the Monte Carlo Simulation were stock price on the date of grant equal to $3.40, a contract term of 10 years, expected volatility of 78% and risk-free interest rate of 4.10%. Vesting is based on sustained market capitalization of $1,000,000 in consecutive two months, and the derived service period is 4.3 years.
RSU expense was $2,317 and $1,301 for the years ended December 31, 2025 and 2024, respectively.
Share-Based Compensation Expense
The Company recorded share-based compensation in its statements of operations for the relevant periods for options and RSUs as follows:
| For the Year ended December 31, | |||||||
| 2025 | 2024 | ||||||
| Selling, general, and administrative | $ | 4,076 | $ | 2,296 | |||
| Research and development | - | 137 | |||||
| Total share-based expense | $ | 4,076 | $ | 2,433 | |||
As of December 31, 2025, total estimated compensation cost of stock options granted and outstanding but not yet vested was $4,847 which is expected to be recognized over the weighted average period of 3.08 years.
As of December 31, 2025, total estimated compensation cost of RSUs granted and outstanding but not yet vested was $1,112 which is expected to be recognized over the weighted average period of 2.12 years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 26, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.