Checking out Curzio’s “Inside the 20X ‘Air Cuff’ Opportunity”

Checking out a returning teaser pitch from Curzio Research Advisory

By Travis Johnson, Stock Gumshoe, June 24, 2020

It’s been a year since we first covered this Frank Curzio teaser, and it’s back in the news again in recent weeks… with a new teaser pitch for his Curzio Research Advisory ($49/yr) over the past few days… so I thought I’d check in with some updates.

First, though, we’ll get quickly to our solution, for those new to the story… I don’t expect most folks would have any trouble identifying the stock that Curzio hints at in his video ad, but we’ll share the clues…

“Today, Taser is a household name.

“Soon, I believe this tiny company – and its incredible new device – will be one too.

“I mentioned how moved I was after I talked to the officers involved in creating, refining, and testing this product.

“This is going to change the narrative about police in this country.

“It’s going to make communities safer.

“It’s going to save lives.”

He also calls this the “batman device” and shares a video of himself being shot with it — the same video he shared last year — so we can remind you that yes, this is still a teaser pitch for Wrap Technologies (WRTC) and its BolaWrap device.

If you haven’t seen the device in action, it’s a handheld device, about the size of a big cellphone and intentionally not shaped like a gun, that fires a kevlar bola cord with little barbs on the end to immobilize people — wrapping either their arms or legs tightly and preventing them from either using a weapon, like a knife, or running toward or away from police. The idea was to give police a non-lethal device that can be used at a distance instead of a Taser (which does sometimes kill people) or a gun (which often kills people) in cases where someone is threatening somehow, running around with a knife or not responding to police instructions, but doesn’t need to be killed. It is effective in a range of roughly 10-25 feet, so the BolaWrap is similar to a Taser in that way.

This is one of their videos showing the BolaWrap in slow motion…

The BolaWrap itself has had a few improvements made since it was first talked about a year or so ago, and since Curzio recorded his ad last year, including the addition of a laser line that shows where the wrap will hit (it’s fired by a partial round of gunpowder, so unlike the gas-powered Taser it’s probably technically a firearm, so the laser sight and the sound create some deterrence and shock value, though they’re also talking about a silenced version). It was created by prolific inventor Woody Norris, whose work we’ve covered a few times in the past (it didn’t lead to riches, he was involved in LRAD hailers and “hypersound,” but it was cool stuff), and it seems to be getting a good reception from police… who might be reluctant to add yet another device to their belt, but are certainly interested in ways to subdue people at a distance in a way that will definitely not be lethal — particularly people who are mentally ill, distraught or on drugs and not responding to verbal commands.

And if the device ever does get widely adopted, the potential market is huge — including pretty much every police force and military agency in the world, since this could be a useful tool even in places where police do not routinely carry guns. It’s also the beloved “razor and blade” or “printer and ink” business model, with the strong likelihood of fast revenue growth up front from selling the devices at a cost that customers can accept, maybe even selling at a loss in the initial years, but with recurring profits likely to come (many years from now) from the sale of replacement cartridges.

When I first covered Frank Curzio’s first teaser pitch about Wrap Technologies, about a year ago, I saw the clear potential for WRTC to possibly ramp up with Taser-like performance… but also a strong chance that the device would not be widely adopted and the company could wither. So I resolved to buy a position I could afford to lose and just hold it for a year or two, not worrying about stop losses or taking profits, while we wait to see whether police departments start placing orders. I still have that position, though I’ve also dabbled in call options at times when it seemed that interest might heat up — this is what I wrote on May 29, the day one of the first “used in the field” stories I’ve seen about the BolaWrap really got some attention:

5/29 Friday File: “Just as I was finishing up today’s note we saw a press release about the first “stopped a suspect who was fleeing” story involving a BolaWrap deployed by a police officer in the field (that I’ve seen, anyway), and that, combined with the awful stories of deadly police force that have sparked protests this week, is likely to further raise the profile of Wrap Technologies (WRTC)… which is presumably why the stock popped higher today. This is very much a “story” stock, there are very few BolaWraps deployed at this point and the revenues are almost meaningless so far… but if we get to the point that city councils, legislators and police leaders are calling for the deployment of this non-lethal restraint then the price could go bonkers. The last story like WRTC was Taser (now AXON), and that had some wild swings up and down that inform expectations about what might happen with Wrap (which now has Tom Smith, one of Taser’s founders, as President).

“The adoption or evolution of the product is not at all certain, it took Taser ten years and a new model introduction (in 2003) before they really began to enjoy widespread adoption by police forces… but the exciting thing for investors is that when Taser was at roughly this stage of police adoption, and roughly the same market cap as Wrap carries today (about $200 million), they were on the cusp of a massive stock price move. The shares also disappointed massively for a long time after that first surge, so there were a couple 60-80% drops along the way, but that first 800% run in 2003-2004 was pretty fun to see (and those who held on for 17 years have gotten returns of 4,500% or so, though it’s hard to imagine many folks held through the long years of disappointment from 2005-2015).

“I’ve mentioned a few times that this is a stock I’ve resolved to hold for a year or two to see how the adoption proceeds, ignoring the share price and note taking profits or setting a stop loss — so we’re almost at a year and the stock after this big run mid-afternoon today is… right about where it was when I first bought it. So we’ll see where the story takes us, but this isn’t a stock that will be a 20-30% story, I’m guessing that it will either gain 500-1,000 percent or lose 80% over the coming years. The shares have already bounced from $3 to $8 and back down a couple times in their young life as a public company, so we’ll see if this is just another blip or the beginning of a big move. Hopefully it will generate some fantastic returns and save some lives.”

Axon’s story began changing a decade or so ago with their move into police body cameras and online evidence storage, but it was all built on the Taser in the beginning… and it was certainly quite an exciting story for a while, built, like Wrap so far, on the potential for widespread police adoption of the Taser weapon.

Just as it was a year ago, Wrap is a story with an uncertain outcome — but they have been making some progress. The stock dipped a few days ago because some insiders filed for a secondary offering of three million shares, but it has mostly been soaring higher as Wrap announces new purchase orders or interest among police departments both in the US and overseas. They announced a grant program not long ago as well, essentially hoping to spur more rapid adoption by giving away the devices or subsidizing them heavily, and they announced just yesterday that they’ve received more than 100 demonstration/training requests in the last month… which is good to hear, but it’s still about the same pace they were on right before the coronavirus hit.

The company was also chugging along reasonably well in building out their distribution networks and training potential customers before the conavirus and before the latest police brutality atrocities caught everyone’s attention, but clearly there’s more public attention on police tactics and tools now than we’ve seen in many years (George Floyd was killed on May 26, and the protests that ignited also created a lot of discussion about “less lethal” and “nonlethal” police weapons, partly because of police use of things like rubber bullets, tear gas and beanbags on groups of protesters in some areas).

It might be that this will cause a lot of police departments to embrace the non-lethal “air cuffs” that Wrap promises, but we also shouldn’t get too far ahead of ourselves as investors — the cries to defund police departments or to reallocate police funding to social services in some way could certainly also slow down the actual progress of making BolaWrap sales and getting police departments to invest in new tools. I have no idea how this will shake out, and it’s likely to be different in every city, but I think there’s still a decent chance of Wrap continuing to catch on fire as a “story stock,” with an appealing solution for both police and some of their critics.

Does it make sense right now if you judge them by theine income statement? Nope, not if you just go by the financials and the orders they’ve received. They have only sold a few of these devices, they are primarily a local news novelty at this point and have only generated a few “used in the field” stories to keep awareness rising, so the company is valued on guesses about what sales might be like in the coming years — they’ve only generated a total of about one million dollars in revenue in their two years or so since they started raising money (including a private placement in 2018, in which Frank Curzio also participated, before they went public), and the sales process seems to be quite long, which I guess should be expected for any new device when you’re dealing with municipal bureaucracies.

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There was an interesting study done in the UK last month assessing the risk and benefits of the BolaWrap, putting it at a lower risk even than handcuffs, and they have made more international sales in the last month or so through the distribution network that they’ve been building, along with all those 100+ new demonstrations for US police departments that they’ll be scheduling as soon as travel and in-person demos are reasonable, and it seems to me that things are building… but that doesn’t mean we’re guaranteed to win here as investors.

Wrap Technologies is now up to a $300 million market cap, so it’s trading at well over 200X revenue. Unlike a year ago, they have actually attracted some analyst attention now — so the estimates are that they’ll hit about $4.5 million in sales this year and grow that to $38 million by 2022, which those analysts think will be enough to make Wrap profitable. That may or may not be how it plays out, it’s extremely uncertain now as we wait to see how orders progress, but even if it works out that way we’re still talking about a stock trading at 90X 2022 estimated earnings. Right now, they say they have a backlog of $1.4 million that they’re converting into orders and sales (often in stages), and the prices I’ve seen for the device is roughly $1,200/ea, so I guess those orders are for only about 1,000 BolaWraps (assuming they’re also ordering some cartridges, holsters, and other “accessories”). Fully deploying to every sworn LAPD officer would bring in at least 10X that much, and while the LAPD is the largest department in the country that’s still just one city, so that’s where the potential lies.

This is a story, and it can either build on itself or fall on its face if they have an accident, or a major rejection — so instead of watching those income statement fundamentals I’ll watch the story. The sales in a given quarter may not matter much, but orders and public attention are a big deal.

The high-profile LAPD test was clearly delayed a bit by the coronavirus, even before the latest wave of police controversy, this is what Wrap said about the LA field trial on their first quarter conference call (I haven’t heard anything from them since, and it’s worth checking out that conference call to get a feel for how the company is talking about their order flow and the field use of the device):

“As many of you are aware, LAPD began field testing the BolaWrap in February of this year. 200 BolaWraps have been circulating among approximately 1,100 trained officers throughout L.A. City. As of today, they are a little over two-thirds of the way through their original 90-day trial period, however given what the complications the department has faced from the coronavirus, we expect that they will likely extend the field trial and we will be more than happy to continue to support the department….

“We are limited in what we can say regarding field testing with LAPD because the department itself doesn’t usually comment on cases until they have been reviewed internally and their use of force reviews, as well as worked its way through the criminal justice process to a conclusion. However, I can share that the device has been deployed and everything that we’re hearing so far has been positive.

“In fact, just since the LAPD field trial began, we have also had field uses in Sacramento, Minneapolis, and just this past week in West Palm Beach. With the nature of the low-level of force with the BolaWrap, we do not receive the reports on all of the incidents, but the responses from the users that we are aware of that continue to show the success of BolaWrap and its benefits are not hurting its suspects.”

Stories are exciting, but when buying a story stock that’s disassociated from the current financials you need to know that stories change rapidly as sentiment shifts — if the LAPD orders 10,000 BolaWraps, the stock might rise 200% in a day or two… but if someone gets shot with a BolaWrap and catches a barb in their eye, or if someone is able to escape from a BolaWrap and stab a police officer or bystander, well, be ready for the stock to be cut in half that day. Stories go both ways.

I’m still inclined to agree with Frank Curzio on this one… I like the device, I love that it’s a new tool that can be used to subdue erratic people and de-escalate situations without anyone getting hurt, particularly when dealing with people who are mentally ill. I would expect most police officers to generally be excited about another tool like this that can give them more options at low risk (and it’s just plain cool… who can resist a Batman tool?), and as an investor I like the potential to create a really bubblicious story, like Taser 18 years ago, as it gets into the mainstream press. I’ll probably sell the balance of my options position at some point in the next few months, depending on what the shares do, but I’ll plan to hold my equity stake for at least another 6-12 months while we wait to see how the story develops (no promises… in the unlikely event that we get a 800% move like the early Taser stock jump, I’m sure I’ll take some profits).

So that’s what I’m thinking about for Wrap Technologies these days — the focus on police tactics and weapons could bring more attention to the stock and help them get adopted by some large departments, which is what is needed to bring the business up to scale, so I’m particularly curious to hear what folks like the LAPD end up doing… but police departments are also at the center of controversy and protest in many cities, and have a lot to deal with right now, and it is entirely possible that adoption hits some hiccups even with the pretty rational “story” of the device’s nonlethal appeal.

But with your money, of course, it’s your call to make — interested in this latest police gadget? Think it’s worth trying to ride the story, or are you skeptical of the early-stage revenue? Let us know with a comment below… thanks for reading!

P.S. We’re always looking for reader feedback about the investment newsletters they subscribe to — so if you’ve ever tried out Curzio Research Advisory, please click here to share your experience with your fellow investors. Thank you!

Disclosure: As of this writing I own shares of and call options on Wrap Technologies. I will not trade in that stock or any other covered stock for at least three days after publication, per Stock Gumshoe’s trading rules.

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Mike Canant
Mike Canant
June 24, 2020 1:20 pm

I saw it demonstrated to a Peace Officers group about a year