Q4 2019 Earnings Call
[laughter].
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue standby and thank you for your patience.
[music].
Good afternoon, ladies and gentlemen, and welcome to the wrap technologies fourth quarter and full year 2000.
The 19 conference call.
At this time, all participants will listen only mode. After the speakers presentation. There will be a question answer session at that time, you need to press star one on the telephone ask question.
As a reminder, this call is being recorded.
Before we get started we'll be referring to the press release filed today, which.
Details the company's fourth quarter full year 2019 result in can be downloaded from the company's events in presentation page.
Www Dot wrap technologies dotcom.
Finally, he recording the call will be available on the same events and presentations section of the company's website later this evening.
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Be aware that some of the comments made during this call may include forward looking statements within the meaning of the federal security laws.
Statements about the company's beliefs and expectations contain words, such as May will could believe expect anticipate and similar expressions constitute forward looking statements. These statements involve.
Risk and uncertainties regarding the company's operation and pizza results. They could wrap that calls wrapped technologies adult differ materially from the managements current expectations.
The company encourages you to review the Safe Harbor statement and risk factors contained in today's press release in the company's filings with the.
Securities and exchange Commission, including without limitation that help. These most recent annual report on the 10-K in other periodic reports, which identifies specific risk factors that may cause actual results were then to differ materially from the described and forward looking statements.
The company does not undertake publicly update.
Dave or revise any forward looking statements. After the date of this conference call.
The company also knows the on this call they will be discussed in certain non-GAAP operational metrics, such as backlog number of trainers agencies and distributors.
The company, you're providing that information as to supplement the information prepared and accordingly.
With accounting principles generally accepted in the United States for gap.
And now I'll turn the call over to David North the company's Chief Executive Officer, Sir. Please proceed.
Thank you Jeff. Thank you everyone for joining us today after the market close we used to their fourth quarter and full year results for the period ended this.
Number 31st 2019.
A copy of which is available on your basket page on our web page Www Dot wrap technologies Dot com, Oh, well start out by turning the call over to Jim Barnes our CFO.
Thank you David and good afternoon, everyone. Our detailed operating results.
Her ports in the press release filed today and our annual report on form 10-K also filed today.
As a reminder, we're still in the early stage of addressing that large worldwide mark market for our remote restraint product I'm accessories.
Fourth quarter revenues increased from a mix of agency.
Bitter and international order from settlement.
Revenues were 251000 for the fourth quarter 2019, compared to 21000 and the fourth quarter 2018.
For the for year ended December 31st 2019 revenues were $697000 compared to.
Revenues up $23000 in 2018.
At the end of Q4 2019, we had 344000 of customer deposits and a backlog of orders up approximately 1.7 million expected to be delivered over the next 12 months.
Hello.
A reminder, distributor in customer orders for future deliveries are journalist subject to modification rescheduling or in some instances cancellation in a normal course of business.
We do not have enough insight into the timing and the nature of large international and domestic orders to determine exactly how.
Periodic backlog war relate to future revenues.
Gross profit margin was 34% for the fourth quarter 2019, compared to 20% and the fourth quarter of 2018.
For the full year 2019, gross profit margin was 39.7% compared to 19.6.
<unk> percent in 2018.
We rely on direct and distributor sales, both domestically and internationally and changes in sales channel mix can significantly impact product margins.
Other factors impact margins, including product updates raw material one component changes.
And warranty costs.
Due to the startup nature of our sales and production activities. We do not believe historical margins should be relied upon as an indicator of future margins.
The recent move to our larger facility in Tempe, Arizona May also impact margins again depended on volume and mix.
S DNA cost for the fourth quarter 2019 were 2.1 million compared to 1 million during a year ago quarter.
That's DNA cost for the full year ended December 31st 2019 were 6.7 million compared to two point sixmillion for the prior year.
For both importer in the or the increase in ASP in areas predominantly due to planned expansions and sales training and other activities to support future growth.
And then deer term, we expect to extend additional resources on the marketing and selling of our products training distributors and customers and.
In our domestic and international operations.
R&D cost for the fourth quarter 2019 were 616000.
Compared to $277000 during a year ago quarter research and development cost for the for year ended December 31st 2019 or two point.
Point 2 million compared to 735000.
Dollars in the prior year.
We expect our R&D costs will continue to vary depending on specific research product projects and levels of internal and external staffing.
The GAAP net loss for the fourth quarter 2019.
Was 2.5 million or nine cents per share compared to 1.3 million or five cents per share during the prior years fourth quarter.
Net loss for the full year 2019 was eight point threemillion or 29 cents per share compared to 3.3 million or 14.
<unk> cents per share for the prior year. The net loss for each year included approximately 1.5 million and $513000, respectively of noncash stock based compensation expenses.
We ended the fourth quarter 2019 was $17 million and cash.
Cash equivalents.
Which compares to cash and cash equivalents up 12.4 million at the end of 2018.
Working capital as of December 30, Onest 2019 was 18.6 million.
We have minimal debt and stockholders equity was 19.2 million at year end.
For more detailed analysis of our financial results. Please reference our form 10-K filed earlier today, David back over to you.
Thank you Jim.
2019, with a banner year for route then it marked the business this transition from a developmental stage of the product into an actual growth.
In 2008 paying much of our focus was on research and develop and development and refining or product to ensure it was commercially viable. However in March or a may 2019, with our product ready for market and much of the necessary infrastructure in place we transitioned our business the focus on sales and strategically.
From the company to capitalize on the large market opportunities ahead of us.
As those of you have followed our story will be readily aware, we made substantial operational progress starting 2000 might pay which has begun to be reflected on our in our improved revenue performance and which I'd like to provide an overview of today.
At the end of Q1 comps map who's on the call with US today and will be speaking next joined our team as president.
Many of you are familiar with his background is a co founder and former president pays or why is he he is uniquely qualified to lead our sales initiative.
Since joining the company has done an amazing job scaling.
Both our domestic and international sales, which should be evident for the uptick and from the uptick in revenues order volume and the 1.7 million dollar backlog that we built up by the end of the year.
With a very strong management team and great leaders in place. We then opened our 11000 square foot manufacturing facility in Tempe, Arizona.
By consolidating our manufacturing into a single location, we're able to operate more efficiently and were able to more effectively scale to meet market demand. Currently our facility is operating at about 225 device capacity a week and about 1800 cartridges per week It falls.
Scale with all of our lines running we can build 54000 cartridges a year and 324th that are actually sorry about 54000 devices. The year 324000 cartridges a year before we would need to move to a new facility.
That also will be increasing as we develop.
Devote engineering talent and our manufacturing team makes aligned more efficient.
So we'll only see these numbers improve.
As more agencies become a wearable rapid its unique ability to fill a critical gap. These increased volumes will be able to cheat through these efficiencies and there's a investment in manufacturing.
And operations.
Also we made the decision in 2019 to pursue a distributor model as our primary go to market strategy.
By leveraging distributors were able to target a much broader customer base was much more quickly. We're also able to keep our internal cost lower.
Organization more flexible so far.
This is proved to be an effective strategy for us as evidenced by the increasing revenues relative to 2018 and the contract momentum we generated the second half of 2019, which has carried us to the start of 2020.
I'm going to let Tom fill you in on some of the details here, but before I do I'd like a focus on some other.
Other factors that contributed to our recent success is our brand strategy.
It's hard to underestimate the impact of a successful ban brand awareness campaign.
And what it can have on our sales growth in our industry and for our product there's no better evangelists than the line level officer, who has had the opportunity.
To use the bowl arrived in the field because then they immediately get it [noise].
There are the ones, who everyday deal with the gap were.
Trying to fill.
So the more we can do that educate the public and the broader law enforcement committee on or product and its viability the more will drive our topline growth and.
2019, we began to see tangible evidence of this strategy graining gaining traction.
Polarized feature features aired across National International television networks more than 1000 times in 2019, a product that featured on networks, such as CNN BBC World News Fox News.
CBS USA today box business, Yahoo, Finance business insider and many other major networks.
Additionally, we generated tens of millions of viewers across multiple social media platforms, including Facebook, Instagram and Twitter you tube and snapshot.
In large part due to the buzz created from.
Yes, well marketing campaigns, we've now demonstrated the boulder up to over 409 be law enforcement agencies to date across the country.
When I say demonstrated I mean, our actual people that have done demonstration.
This is report this is not only resulted in hundreds of media reports, but over 1900.
Inquiries from domestic and international prospects in 2019.
Maybe as an excellent means of introducing our new our product a new audiences, but at the end of the day officers need to actually use the boulder rap seeking an action to become customers and ultimately advocates.
Therefore, we've also doubled the number of Boulder.
Master instructors suits, a third quarter of 2009, <unk> as a reminder, a master instructor teachers, the seminars, which.
They train line level officers at the end of lease seminars, whose line level officers become bowler op instructor, who then go back to their department to train their colleagues.
So while we may.
They run a lean internal sales team at RAF reality is that each officer, who has received training from us to becoming a structure functions as an advocate for our company and the broader adoption of bowler route.
During 2019, we conducted 53 crane the trainer courses in 26 states.
To date, we've added 50 bowler wrap master instructors and the total number of officers certified a ball or App instructors, who are qualified to train their apartment increase over 520 [noise].
As a result of our marketing and training initiatives. We've also noticed a material shift and the type of conversations we're happy to.
Slide shows.
In 2018 were spending a great deal of time at industry events, explaining the product and the need for high level.
Prospects than peers 2019, we mostly had people coming to us.
Regardless of whether we're at mill, Paul I see p. or any other industry of.
Conversations were much more advance and questions more nuance.
Suffice it to say more and more people understand who we are what we do and why our solutions are critical to improving the efficacy of law enforcement and the safety of our communities.
We're extremely pleased with the changing settlement, we've seen as a result of <unk>.
Our margin this initial but at the end of the day these initiatives need to drive sales. So to provide an overview of how we're leveraging our operational progress to convert prospects into partners I'm going to turn the call over to Tom Smith, our president.
Thanks, David Good afternoon, everyone.
As David mentioned last May.
Hey, we came out with our production ready product and started really focusing in the market to get the sales started for the company.
With that endeavor, we added a distribution models of our business for a variety of reasons as David touched on in 2018, our sales came directly from the management team led primarily by Mike.
Greetings and Don to Luca and by having the distributors now onboard focusing on doing those demonstrations as well that management team and Mike and Don can really focused on the major agencies, the influential agencies and agencies that that we deem as strategic areas and locations and yet watch more refined and how.
Now we're presenting the models.
We've also seen an exponential increase in the demonstrations and exposures to law enforcement agencies now that we're working with the distributors and one of the big factors distributors have forces the relationship that they already have with buyers. They are there in the business Upselling and they are they're partnering with us on.
The opportunities that they'll have to grow their business in addition to ours.
Through these existing relationships I can comment on my previous experience with only a handful of salespeople using a distribution model. The sales was able to grow to over 100 million. So without a lot of increase in direct costs, we were able to really exponentially increase the sales volumes.
Through a distributor model since launching launching this strategy last summer we've signed agreements with 11 domestic and 16 International law enforcement distributors. The cover 45 states and 26 countries and within the first two months of implementing this strategy. We received our first large international distributor order, which was valued at over a million dollars and as we've discussed.
Before we do expect that our initial large orders to come from the overseas markets. We're typically departments are more centralized and much larger.
So here in the United States, we have 18 to 20000 different agencies that means 18 to 20000 decision makers, where when you go overseas. It's much more centralized to just a handful of decision makers representing at least that many.
Our officers as a result, the sales cycle is longer and more complex, but the average dollar value of each contract is offered is about much larger opportunity. The international market continues to hold great potential for the bowler app because in many countries officers have fewer tools at their disposal then their U.S. counterparts in the United States many officers.
Area Baton Pepper spray of Taser, a firearm while none of these are substitutes for wraps ability to restrain someone from a distance without causing harm. They are options. However in many countries line level officers are not authorized attorney firearms or other tools add there, they're usually having to do the their jobs by just hands on restraints and and taking.
We need to custody therefore, many countries or did it literally looking desperately for our kind of a device a remote restraint solution that enables them to establish compliance early in that confrontation before escalates, requiring a however level of force and the bowler App is the only tool that allows someone to be restrained without pain compliance compared to all the other devices and.
The available to them.
That being said international agencies tend to look to the U.S. and follow suit. So two weeks to expedite these international sales processes. It's important to first prove the viability of our products here in the United States. We are seeing an increase in the actual number of field uses.
And that's that's obviously the best news for Us because.
Weve conceptually talked about it for years, we thought into prototypes weve done numerous new with demonstrations, but now that the bowler apps are getting into the hands of the line level officers. The guys that are that are walk in the beat and there were starting to see an increasing the number of uses just really proves out the model and where we believe the tool is.
The other thing that we've also.
As we kind of started from a flat start last year without agencies being aware of our remote restrain device or having budget set aside to spend the money to buy this.
So if you look at the sales increases that we've had a I'm very excited about that the budgets in the larger agencies, obviously take a lot longer and that you smaller agencies can react much quicker.
Therefore, we're continuing to focus on selling to those smaller domestic law enforcement agencies, which have less than a 100 officers and that's really where the distributors at a huge help for us to to have contact with those sides agencies. This has been and will probably remain our bread and butter in the short term as the larger agencies will take time to go through Teeny, that's test and evaluation.
And processes as well as get their budgets aligned to purchase our equipment through our just are you distribution partners, we've been able to accelerate the sales by targeting these agencies more efficiently and since partnering with distributors. We've seen that increased number of quotes and orders from smaller agencies, who are now coming forward and purchasing our products.
As an example.
Sample in the past where people used to come to our demonstrations to learn about the product. We now have seen a trip transition. We're actually some of the agencies are showing up at our demos with the purchase order in hand.
As a result, we were able to build a $1.7 million backlog by the end of 2019 and to date, we've already delivered product to more than 180 law.
And agencies and 20 distributors for demonstrations testing and evaluations as we shifted into 2020, we saw much of this momentum continue through the started the year in January of 2020, we received an international purchase order for tuner bowler apps in 2000 cartridges that had been worked on for many months and finally came to fruition.
Even our ongoing.
Discussions with prospects were optimistic that we're going to be able to continue building momentum throughout 2020.
Before I turn the call back over to David I'd like to briefly touch on one of the highlights from our fourth quarter.
During the fourth quarter, the Los Angeles Police Department announced they would be conducting field testing with the bowler App LAPD is the pinning me a forward thinking police departments and the third largest in.
The country, they're constantly evaluating and testing new technology in their notoriously diligent in particular in any technology that they're going to implement therefore extremely encouraged by the positive reviews, they've given the bowler apt to date and for per spread that for perspective, the bowl wrap as the first.
Tools from restraint system that they considered since.
Turning to Taser, which was nearly 20 years ago.
Actually if they had it even prior to that but it's obviously been a long long time since they've had any new tool.
LAPD began field testing our product with hundreds of officers of cross selling county in early February this year, and we intend to share progress updates on this with this from the department is they materialize, but please bear in mind.
Mine because they're large it is going to take time. This is a very large agency that decision, making processes. Therefore much longer than it would be for smaller department. However that doesn't mean the opportunity that doesnt mean at the opportunity as much much larger and we look forward to supporting them throughout their evaluations, where we can and one final comment on the quarter already this quarter, it's going.
To be our best quarter to date, and I look forward to talking to you and another month or so about the results of our first quarter of 2020 and with that I'll turn the call back over to David.
Thank you Tom.
As evidenced by the contract momentum and the improvement in our financial performance from 2018, 2019 were clearly making progress from the.
Business and moving on the right direction, but as we all know past performance does not necessarily would get future success. So before we open the call to question I'd like to take a few moments just speak about our expectations for 2020.
As you're all aware the second order effects of a co bid 19, a coal equally.
Third to as a corona virus habit of had a material impact on supply chain to markets worldwide, we'd like everyone.
We like everyone. It felt the effects, but they have been very minimal for our business. The primary challenges that have risen from their primark perspective, or more logistical rather than operational with less international.
Travel and lighter International conference attendance attendance as we have a few additional hurdles to clear to sell internationally.
But at the end of the day the need hasn't changed in the opportunity remains intact operationally, we don't see any negative impacts to our business consolidating our manufacturing and the tempo.
Facility was incredibly timely.
Today, most of the parts that we win that we received our all manufactured within the U.S. The only piece that really as a stand out is the laser diode, which is manufactured in Germany, and we have placed a forward supply order in the have inventory to suffice for this year's order.
So we do not expect a the krona virus to have any material cost increases due to kind of current macro events.
We do however anticipate.
Continuing to scale, our business capitalize when the opportunities ahead of us and there the opportunity remains fast for us the primary difference between two.
Thousand 18, 2009 from 2020 is that we're much better position now than we were even a year ago.
We have a commercially viable product, we have a robust, but expanding network of distributors rate a helped drive our product to market. We have a solid brand that it's only getting stronger.
We're generating romance momentum for.
Hi, volume and high profile dumb demonstrations, what's your converting into orders and as a result, we started the year with $1.7 million backlog, which we're working to expand so ultimately we're confident that we're entering 2020 <unk> strong position to deliver continued growth we look forward to.
Renewing our work to make believe police officers more effective and all of its safer.
With that I'd like to turn the call over to the operator in questions.
Thank you as a reminder to ask a question you need to press star one on your telephone to withdraw your question West the pound Keith Please standby with compiled acuity roster.
And again that is star one if you'd like to ask a question.
And our first question comes from Greg Gibbons from Northland Securities.
Your line is now open.
Good afternoon, guys. Thanks for taking my questions in a nice progress you've made this quarter.
Okay, Great first of all.
With the current backlog I guess as we think about that the 1.7 million, which you said is gonna be recognized in 2020, how should we think about the timing of that I know you said, it's difficult, but let me think about that on maybe a quarterly basis.
When should we realize.
Hey, Greg Tom So I would say if you kind of look at that.
That.
Fair number those are some of the international order. So I would say, it's going to be spread over the next couple of three quarters.
In terms of timing, it's yet to remain how much corona virus is going to impact that in terms of the government response for that but I would say in terms of timing you know over the next one to three quarters would.
Good good marker.
Great that's super helpful.
And then other you made quite a bit progress just expanding the distribution network.
What are kind of your top priorities with respect to how you're going to continue to expand that channel I mean, I think you're in 11 distributors in the U.S. 16 internationally I guess would have any goals at the where.
Do you like these numbers to be going forward.
Well, obviously in the U.S., we just got five more states, we need to get covered so now it's really just tightening up the the relationships with the distributors as they get out there in there there are doing their demonstrations.
Internationally with the 26 countries, we've got covered that'll obviously expand as we go forward, but we.
To focus our efforts to make those current distributors in those countries successful because again there will be for thought leaders in other countries in the region, because we do have distributors pretty much on.
The African South America Asia. So we've got the world covered in there the countries that are going to be looked at as as people that are going to be progressive. So we did the mill a.
Trade show, David I went over there with us with a four or five of our staff and the.
The booth is just swaps so there's a huge interest a huge need for this technology.
So we want to make sure that we're having the sales revenue numbers grow as we're expanding this distribution model and just making that more efficient more up to speed.
So you know the distributors that are not 100% focused on this like our team is with Mike Don ROE Spacey Jose the whole group, we're living breathing everyday for this so were making sure that the distributors are getting the follow up in place a that all of the communications or content and connecting with the customers were establishing those relationships. So it's not so much the numbers.
Is that we're going to look for increasing its the sales revenue numbers that we're going to increase through the distribution model and then the internationally, making the current ones that we have a success.
Because obviously they are the ones as I mentioned that are going to be the leaders there.
All all sales ultimately up to start with the demonstration because the the law enforcement agency needs will be able to.
See the product before they can buy their product currently are.
Our our team led by microphones is doing probably 10 to 15 demonstrations a month and usually the three to seven departments of 10 those demonstration the onetime we really focus their energies on major.
During the strategic Department.
With their on top of their say 10 to 15, a month, we're probably adding another hundred demonstrations a month, but the distributors, they're able to do as well. So it's really just starting that sales prospects. It he starts out with a demonstration of the product. It also explains the why other.
It helps them position I understand the need and so that it without them out would be very hard to pack 118000 department country like the U.S., let alone the international support we get from from distribution and that ties back into our training. We got our training processes work done with the learning management system in place to really synthesize the information were.
Turning to the officers and to the instructors so that the.
Different policies can be shared the different experiences that to the training that's standardizes being delivered and so it's really kind of rolling everybody together from from the sales operations with the distributors the demos the trainings and ensuring it it's moved process for.
The departments.
Got it that makes a lot offense and that's good to hear appreciate all that detail.
I guess I mean, you talked about this on the call already but.
You said, it's going to be a long process, but is there anything you can really provide us with how talks are going with the LAPD just regarding them furthering the bowler wrap deployment I just.
Yeah, I think there's doubling the field trials right now.
Yeah. There has been there clearly they have their experience the product they're seeing other product works they've gone through significant training Omar I know I've exact numbers, but about 1100 officers at 200 devices.
But we need to wait for them to come back with official results that.
Yes.
Okay.
Got it thanks guys.
You're welcome.
Thank you.
And our next question comes from Jon Hickman from Ladenburg Thalman. Your line is now open.
Hey, John how are you doing.
I'm Good Hey, My question, if you could.
I wanted to circle back on the L.A. test can you tell me what kind of stats or information that department is looking forward to decide if this is going to be.
Like purchased or non like.
Do they want officers, saying no. This is a great tool I use it all the time I mean, what what are they would.
Formal information are they looking to come back.
I just shared at a great question actually when when Steve Moore.
Let us wrap in live on on on.
Vision.
One of the report is ask them not exact same questions, how how you're going to be evaluating this thing says that the it'll today. If my offices are using it. Then then this tool we're going to want to have so they clearly few the value of because they put tremendous resources into a putting it out in the field.
And and I'm sure, there's going to be more quantitative measures as we move forward.
As as wraps occur right, we they share.
Yeah. Those the those incidence is with us so that we can all learned together and the but ultimately there the opportunity is going to want to watch the.
Cool.
We talk.
Two two calls ago that we needed to be able to move the devices that are out in the field from the supervisor from the Swat officer to more of the first responder line level officer.
LAPD in a couple other departments now we've we've had the opportunity to have that happen and that.
To significantly increase the number of actual wraps, we're getting and we've learned a lot and you know darden understanding things are going extremely well.
Could you be they have 200 devices right to too.
Could you tell me how many do you how many cartridges.
Did you ship.
Initially.
I believe for training and everything it was 3600 or something total cartoons I'd have to be the number exactly offline, but train roughly a 1000 officers with a couple of cartridges. Each there and then they had some of the other cartridges where for the field deployments.
So you're hoping that you get some reorders faster than we hoped.
Just countries reviews that yeah, we had for yes.
This is are important and yoga.
Go as is.
Well, we're making I think tremendous progress every time the devices views, we learned something no big plus for us.
It is what we're learning is not band that we need to go make modifications that product for products seems to be working extremely well, but we're definitely having learnings around holster options. So how to improve how an officer carries that make it more readily available for them. So it's a you know that this has been very healthy for the so definitely the next step we went.
From.
You know kind of developing the product along fine law enforcement picking their feedback incorporating it and making a commercialized product doing demonstrations and doing training and.
Going through the test phase them be delivered a feel they're mostly swabbed and supervisors now where at the line level in and we're learning a lot.
And a lot of that's very very positive in and the Pumas engage it also allows us to make sure that you know we're continually following up with our customer service and engaging.
With departments and if I can elaborate on that this was not unlike what what I went through 20 years ago. When we came out with our first.
Product, the Taser and 26.
I was large device, but the officers weren't carrying it on their person they were keeping them and their trunk or they're waiting for a supervisor to show up with them.
Whereas in the in the case here, David mentioned holdings, a key Keith part of the success of the device. So that the officers have a way to conveniently carry with them with all the other.
Is that they have so that's obviously a focus for us is making sure that it's on the officers. They can use it early in that it intervention before drugs.
Requires a higher level of force because if the tools not they're the most almost every time they are going to have the opportunity to go back to a cargo somewhere and get it and bring it back to them. So that's one of the things were really focused.
Just on right now and some of the agencies for example, there mandatory policy in the trial is to carry it in summer are leaving it still did the discretion of the officers. So we're we're doing everything we can to make it easy and convenient to carry and get on the officer. So that it's available as many opportunities as possible to get those field uses so the command staff can have data.
Look at.
Okay.
And then I have one financial question.
Could you.
Tell us anything about them.
Warrant conversion.
The five dollar warrants because the stock price was.
Well above that for a period of time.
I'm really glad they finally asked Jim.
All right.
Okay.
Hey, I'm looking through some paperwork here real quick here.
Yes.
This year end, we've had over $600000 worth of warrants that's reported in the 10.
10, K., so we have seen.
Good morning, its exercise.
In the first couple of months of 2020.
So that's a good number that we've reported and.
The future exercises will be based upon the stock price and.
Shareholder activity I guess, so so pleased with $5 that.
Those five dollar warrants expire in June nine.
In October and October Okay, great. Thank you that's it for me.
Thanks, John Thanks, Okay. Thank you.
Next question comes from Jim like Hillary from Bradley Whats. Your line is now open.
[noise].
Yes, Thank you and good afternoon.
Can you share with us how many certified trainers you expect to have by the end of this year.
By the end of this year and will that we got to over 500 instructors. This year. So will it will be in 1000.
And this year and again, that's really going to relate to the number of agencies adopting and expanding the use the 50 master instructors.
Our where we wanted to get too 'cause that's going to carry us to be able to get to those numbers.
Actually the number of instructors continues to increase but that will be just directly proportional to the number of.
Agencies implementing that product.
And got on top of that Tom to answer I think was domestic and international both his number and like I can't tell the whole group here, how impressed I am with the the level the caliber of our master instructors. We just we truly got the ATM here that's been amazing.
And the number of master instructors.
It's expected to grow this year or is that you're satisfied with where youre no I'm satisfied with where we're at the and the master instructors kind of if you look at at from a level. So the master instructors. We have 50 of them. They can go out and train do that what we call to train the trainer.
Course, it's a five hour course.
For the instructors add at that point that the agency may have one or two instructors per department to train and implement the product. So with those 50 master instructors, we have nor we have plenty of coverage domestically and yeah for sure on on doing the train the trainer programs and then as the.
National market starts to.
Increase again, because the consolidation of.
The way that training departments work overseas, you, we won't need a big increasing the number of master instructors to get to train the trainers.
But you will see thousands of instructors overtime coming from that and master.
Your base of 50, that's not going to really grow too much.
Okay. Thank you the.
The 26 countries that you.
Cover internationally can you give us an estimate of how many law enforcement officers are in those 26 countries.
I can't.
That number down, but what I can tell you is like in the U.S. Theres roughly 800000 2 million just in ballpark law enforcement, depending on fluctuation internationally, it's 12 million.
Law enforcement officers worldwide. So the 26 countries that we have right now are obviously the the.
I would call them the larger countries at the moment the one country that we continually to get asked about as is China. That's a country that that our department of Commerce will not allow not only us, but any police products to be sold to.
So if you take that went out of the map and looked at kind of the other major players out there. It's a it's a huge country.
Is that as an example, one of the one of the 26 represents a one third of the officers here in the United States. So the opportunity when you add those 26 together is obviously much larger than the U.S. than.
In proportion.
And and again, it's a 12 X number in total officers worldwide versus us.
Okay.
Two more if I might is there any change on the pricing strategy for either the cartridges or the devices.
No we have not had an impact on our.
Cost or anything so we're just focusing on in product improvements for margins, increasing the pricing the costing on the pricing is not changing.
All right.
And Jim in your commentary you talked about SGN, a increasing in this year.
Can you ballpark that it's there are we talking about.
An increase that's driven by sales increases or is it preceding sales increases is just kind of.
Looking for kind of a back of the envelope, what it might get too for the year.
Yes, it's not a big increase in some of the fixed cost will be more if we have to train a lot more departments, you'll have the variable costs of traveling so far so we're not looking for a huge increases in SGN a other than.
Driven by by activity. So that's the primary focus.
Understood.
Okay. That's it for me Thanks, a lot good luck with everything.
Thank you appreciate it.
And thank you and ladies and gentlemen, as a reminder to ask a question you'll need to press star one on your telephones withdraw your question.
Well the pound.
And our next question comes from Rich eight from Evercore. Your line is now open.
Thank you congratulations they've been Tom.
Great successful year.
Thank you rich Gabby.
Now let me ask you got you guys question how.
How do you determined successes with the.
Deployment.
How successful have the deployments been today in the field.
To be chasing the field and how do you a success based on it on a successful wrap isn't based on just the escalation but.
How would you how do you how do you look at that today and had and what kind of data do you have to back that up I'm, saying whether it be.
We didn't feel Holly.
Yes, so great question and Thats, one that's always debated within the law enforcement Committee. So the way we look at success in the field is if the tool the bowl wrap as you did it prevents a higher level of forcing required to end confrontation for the officer so that.
That's kind of like a benchmark. So if the device came out and it was used and it didn't require a higher level of course, that's a successful used the product and to give you. An example.
Just because I was over there last week in the United Kingdom.
They just published annually in there they do track all of their you support so they had I think it was over 400000.
The over 600000 incidence of people being arrested in one year span 400000 that those required to use of force and then they break down those you support model. So if we look at there is an example, there taser use the AD I think it was 24000 documented uses in that one year span, 85% of those we gained compliance or.
What they consider a success without ever even having to deploy it meaning they just pulled it out of the holster put the red dot on somebody they complied without ever having to do to deploy.
To put the device. So they were considering that a success because it didnt require in that case the use of force. So with a bowl wrap just the fact that were a remote restraint device.
Which by the way that was not nearly 80% I think of the use of force in the UK was restraint device or restrain techniques. So we're going to fit into that much broader category in terms of used before so we talk in our demos about this being throwing handcuffs on someone from a distance the earlier implementation and use of this again before.
Prevent that escalation of a higher level of course being used means that was the successful use because you didn't have to use the pain compliance tools and that confrontation and take someone into custody.
It also in clearly those who is not an exact science, but we we look at all of the reports.
Even down to a department level Im.
And get an idea how often is everything besides the gums, all the less leasehold tools to use whether it be password pepper spray and ask taser or any other product and then we look at how many of those are actually deployed out in the field on how many uses so they actually get kind of get a benchmark of is our product that's in the field.
They're getting is more or less than other products in the field today, our product seems to be useful seem to be on par with the most skews other non LIFO tools that are out there today.
You know some things that we've got against such as where a brand new tool your.
We've spoken one offs are we rapidly arms, which as you know.
That work, but the legs, probably would have been better. The response with them was the I was pretty amped up the one I did it so.
It's a new tool, they're getting used to it they're getting comfortable with it.
The other side of that is because of the new and exciting too and it's so easy to use was so easy and maybe they're using it more than they would so right now the numbers based on every.
Other product that they have in their belt seems to be a you know looking in our favor and we'll learn more over time.
Do you I appreciate that thank you both you know how I P D.
Rolling It out you know if they are looking at the same way that the K does so.
Tom if you were to pull it out and and pointing at someone in a situation.
And.
That that that individual listens to fleas and drops as weaponry or does wherever they are asking the do would that be considered a successful use would that be are they going it or is LPD looking at it from successful uses an actual rap.
They're looking at has successfully used but it into confrontation without a higher level of force being used and I think thats the vast majority.
We already have agencies out there.
We're obviously going to be more self critical on ourselves compared to everyone else, but that that's ultimately the end of the day if that tool was the only tool that had to be used in it ended that confrontation without any other tool or force having to be used and that was successful outcome.
And you got all and.
Attracting that internally as well.
Such as we can whenever we get the data but.
Do they get rid of the element.
Every department Thats gone from.
Buying a couple of devices the fully outfitting their department not one of them today is actually had a physical rap, but they loved the product because they when they.
Put the alignment somebody it's actually given encouragement actually did what they wanted them to do so it's clearly departments are still making buying decisions on the de escalation rather than the active the the rapid itself, but for US we're very focused on the wrap internally because we need that to work at a very very high rate.
One more question.
You guys go ours is only PD, giving you the actual data on the wraps that they use them or they just is the oneq up getting public based on individuals using their cell phones will they show your video evolve if something happens, but there's been no individuals around too.
Video it or are they keeping that private.
Oh, it's been very forthcoming.
Coming with a wraps actually color ill call our team, usually microphones or Lee and let US know they did a route they give us kind of.
You know a verbal play by play.
And then.
I can't tell you debate that we've actually seen a body come up for them, but we have for many other departments.
Okay.
Great well, it's not again, congratulations last year you guys.
Somebody grade hearing.
Future.
Yes, do we are looking forward into the next call we get to have together, it's a we're moving into good direction. So thank you. How is this is great. Thank you.
[noise] and.
Operator, I would say that's a route.
<unk>.
So we aren't having any other questions.
I think we have one more question and then that is that there have been more okay. Okay got it I'm still our next question comes from Dennis Laval from Lantern your.
Let's now open.
You guys are globally.
But anyway nice can appreciate that.
But I guess, you're you're saying.
To wrap that you.
But had any successful wraps, but just the fact that it's out of it as the escalated the situation.
Because I mean right bomb shelter I haven't done here right.
Yeah, No we've had a number of successful raft, we're just saying that even when they don't deploy the product and they just use the line laser.
That can also be considered successful bakay, Katy ops man, but yes, we've got a number of successful wraps well, that's what I thought.
Can you give us an quantifiable.
Yeah.
Position rate of placed product in the field currently.
Well Mark it's a one more time the utilization rate the product placement field weather would you got to you have 180.
Agencies that have the product in the field will have those.
I would have 10% of and used the device.
Or is it too early to tell or.
Compared to other non lethal devices, abbvie pepper spray bullets et cetera, or rubber bullets et cetera.
I can't really give me an antenna in large part it's because departments. Many times consider that's a non reportable use of force we don't guide.
We don't always hear about it so okay.
Okay, very good referred to that to the UK because there they do mandate the tracking where the U.S. doesn't so.
For us it's a lot of the smaller agencies, we may never hear from it or we here at tangentially, it's usually the large ones that will be more directly communicating with US. Okay. And then you information is that online engagement.
Yes.
No.
They publish that data online if you search use of force that was published between yes. The dates of that used to force report from April 2018 through March of 2019, so ill actually be updating that again here. The next couple of months, but they actually at the 24 page document that goes through.
Makes down.
A number of different ways, how they use force in their 43.
Agencies in England and Wales, Okay very good.
And I'd be hundred 80 law enforcement agencies, you said something that shocked the hell ought to be okay and that is when a taser first came out they may be had to go back to the trunk could occur to get it et cetera.
[laughter] just wait let me look at my tenure, so I can stop you from doing what you're doing I mean does that sound.
Yeah Yeah.
No not doing I mean, as learn from that and they're not doing that with the ball wrap are they.
I wish I could say that they had learned but now we still have some agencies doing.
So thats why were focusing on holster carry options.
Sure. It's on the officer, because like you pointed out there's not they can't call a time out and go back and get the tool. So whether it was in the truck or in the car we need to make sure we're making a convenient to carry on the person okay and have you.
Oh, I don't have consultant or something to figure out where they should put this.
Their body for ease of use and convenient.
Well I think.
Yes, Theres a number of companies that are specialized and manufacturing holsters for all different kinds of tools. So we're working with the.
Five or six different companies right now, including the departments are doing the same so as an example, LAPD they have their vendors.
They prefer and have relationships with so where it's coming at it from a number of different aspects and ways to carry it we'd be at lake holsters on the vast on the belt. So it's being looked at.
By us and by the <unk>. They end users. Okay. My final question is up 180 law enforcement agencies that you have.
Please product with whether or not you gave it to a more they paid flight what percent of those hundred 80 agencies are putting on the line up says how many wasting the right I shouldnt say that the waste limit product by giving it to the swap or.
Superiors, because it brings in the right officers.
Hence they get the.
Usage, that's my personal opinion, sorry lots points with agencies, but can you give some color on that.
Just because there's some as communication on the first question I want to make sure those wins clear we have a number of bolster options. Today every single one of those hold corruptions is being used in the field. We're just.
Continuing to refine that because.
Our goal there obviously the same to put it on every belt of every officer and utilize it often.
We don't know that we don't know they actual number of that have have it on their belt and not some departments leave it optional and the officer level. Some ELD mandate that the officer carry it and they call them exactly how and when they're going to carry it so it's different.
For every department.
And to answer your question on the 180, it's I can't quantify that I can tell you some of the departments. It's just their policy internally that this Swat team is going to test any new technology and then other departments will go right to the line level Guy. So obviously thats our push because that's the guys that are going to have that most benefit from this type of.
Remote restraint device, but its just really is going to depend on how the department handles it internally their evaluation of any new technology, Okay, well like I guess I understand that.
We did I don't if you don't want I mean, but thank you for their hard work you guys keep up wrapping away.
We will do well keep wrap and.
Okay.
Thanks.
Right way to leave our Mark on the World. So thank you and again, we highly highly highly recommend as hard as we can that they have it on the officers. So thank you for the questions and I think we'll turn it back to just in the operator.
At this time. This concludes our question and answer session I'd now like to turn the call back over to Mr. noise for closing.
Remarks.
No. That's for closing remarks, so we can just glad and wrap it up but thank you very much operator.
Thank you.
And thank you for joining us today for rat technologies fourth quarter and full year 2019 Conference call Me I'll now disconnect.
Okay.
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