Q1 2021 Wrap Technologies Inc Earnings Call

It's a fragmented market.

The demand for our platform is growing and there is a public call for change we don't expect that to diminish anytime soon the officers we serve have some of the toughest jobs on the planet let's.

Let's keep in mind they put their lives on the line every day. It is a heavy responsibility often with zero room for error that is exactly why the training must be sophisticated and involves a completely immersive real world scenarios.

Police officers across the world resolve thousands of situations safely and effectively every day, but we generally don't hear about most of those the analogy I like to use the media does not cover when airplanes land safely every day. Similarly, most bull wrap uses are often not reported or covered by the media we were amazed.

By what police agencies do over the past few decades, they have been and are asked to do more with less plus many cities are considering decreasing the number of police officers, while criminal activity has increased and of course the calls for defunding of reducing the number of officers is growing louder. This makes an officer's job.

More complex and difficult than ever before and it's all happening today under an enormous spotlight.

Now that the bowler wrap is being used more and more on the field and we were able to share the body Cam videos. We are also having the agencies discuss for US. This is the best messaging for our Boulder wrap products because it is the customer discussing its success not us let's watch about a two minute video of the cheap from fruitless Marilyn discuss there recently.

Yes.

Sometimes people need to be taken into custody that don't need to be injured.

You get a call to assist Tms Young man.

Really intense season when he comes out of the seizures, she's going to confuse state is not coherent is a big strong guy and he comes out swinging they knew that they were being threatened by him and they didn't want a hurting two conditioning weren't as bad as it needs to be already we don't need to make it worse local mills was able to explain to the family.

The device is going to do so.

The noise came they weren't thinking that it was a gunshot or a taser or anything like that deployed the device. It was a perfect deployment. In this particular case he is somebody who dropped or on suicide. So he took the shot and it worked perfectly.

We'll wrap was deployed they come running in with the scrubber and Theyre getting getting the hoping these right away. This is the first thing that we've ever been able to.

To our Arsenal other than <unk>.

Verbal commands that isn't supposed to hurt anybody on the way we look at it this isn't a use of force.

And apprehension tool I don't see how anybody could say that having a device like this.

Isn't worthwhile that it isn't worth the money, it's how many times does something like that has to be effective pay for itself.

Not very many.

Maybe one.

In this particular case they had to go to you know.

If you continue to be violent and they had to go to some other type of device.

The outcome may have been different.

Steve Swofford makes a lot of great points in his comments, especially as he refers to the bowl wrap is on apprehension tool and not a use of force since I mentioned previously that most bowler app users arent covered by the media. It is great to have cheap talking about our product.

Turning for other law enforcement executives to here.

As I have said previously the bread and butter of our domestic growth comes from these small agencies that can move quickly through training trials purchasing and ultimately to full deployment.

Smaller agencies generally have the ability to be the most nimble and move quickest and are responsible for much of our early success, especially in releasing body Cam videos.

Specific to wrap we had several notable wins this quarter. Most importantly, we grew U S agencies trained 628, that's up 41% from the fourth quarter and nearly three times year over year. This is critical because it serves as a leading indicator for future growth more agencies with trainers continues to build on.

Our pipeline for future sales opportunities as we scale our agency penetration.

Generally two to four officers are trained and certified and an agency to train other officers.

After an agency has trained they generally on or in a trial phase we invest in training devices on cartridges to educate these agencies as with anything new it takes time to understand the new device and obtain meaningful use before purchasing or full deployment, which is our goal with an agency <unk>.

Actual field uses are critical decision makers understanding of many situations, where <unk> can be used and is critical in continuing to highlight the body Cam videos as we receive them instead of just demo videos.

This new messaging is a major focus for the company to law enforcement.

Police officers can go months without using anything other than verbal commands.

I think that's one of the myths about law enforcement officers simply don't use force every day to control the situation.

Also there are times when just a threat of using the force can resolve the situation without deployment. This is classified as a success by many agencies since there was a safe outcome.

I would now like to provide you with a brief update on each area of our growth strategy.

The first is our <unk> family of apprehension devices. The foundation of our company is to provide the right level of education. The officers worldwide on preventing escalation of force D. Escalating our situation in apprehending subject safely using the bowler wrap.

We invest considerable time on how to deal with subjects suffering from mental illness or are in a state of crisis or are under the influence. These are areas. We believe existing tools may be excessive that's.

That's an issue more and more incidents involved these types of subjects in crisis.

The second is training, which is a wrap reality platform.

On the virtual reality training front, we currently have 47 different training modules today.

We have several modules in development and have a long term target of continuing to develop modules similar to major training platforms for other industries.

Every state in the United States is evaluating how to enhance training for officers on.

Our virtual reality platform allows officers to participate in immersive realistic training scenarios, which we believe are most impactful.

We expect access to wrap reality will be subscription based to fuel regular use which we believe is critical to officer acceptance and the ability to affect future outcomes. One of our wrap reality customers as Pennsylvania, Northern New York County Regional Police agency debt recently signed a five year subscription agreement.

They were very impressed with the 360 degree immersive experience, especially when compared to the existing alternative training methods. This is the exact type of model, we expect going forward and our team looks forward to building on this success.

Our third growth area is our innovative portfolio.

Our primary product is the bola wrap which is on apprehension tool that does not rely on pain for compliance we are committed to being a leader in escalation avoidance, our research and development team continues to make advancements in the quarter on new product development, which will include expansion of our product portfolio in the future.

Wrap will continue to invest in research and development of future generations of the bowl wrap technology to help solve these complex law enforcement problems, including in other markets such as private security.

Right now I would like to share our latest body Cam video and discussion with cheap terrace from growth Glenwood Springs, Colorado.

This body Cam video Soc, the successful resolution of a subject who did not follow simple verbal commands.

Rather than use of a pain compliance tool the bowler wrap was deployed in the subject was apprehended safely and they were able to get him to help he needs.

As a reminder, body cam videos are not often made available to the public since they are used as evidenced in final resolution and many agencies have policies prohibiting sharing this type of information due to consent complexities.

Good news is that we're getting access to more and more of these videos, which we will continue to share so our customers and stakeholders can see for themselves how easy and effective our products are to use when we come back Jim will provide you with some financial details from our first quarter.

The vast majority of our cost of service.

With people and mental distress, although it seems to be increasing and so on the day that we dealt with them that we're talking about here.

Without running in traffic he was head of rambling and yelling at motor vehicle I want you to go on at some point. He was yelling that he wanted to speak to the coast Guard, just really making no sense understanding using mental distress one of the authors referred to him by his first day of Michael I don't want to have that you know we talked before to you Remember me Michael It's me and tried to really establish that personal relationship continued to.

Walk away from strength in the opposite chose to deploy the bubble wrap device, which shows that it's lower body on they were able to secure him very quickly without any injuries or to get used to.

The officers Michael and then following that they continue to have dialogue with them. We're fortunate that we were able to end. This encounter early with this device because it could have immediately change to an entirely different outcome had we not been able to control him.

As quickly as we were on this particular case you can see the gentleman Michael walking away at a pretty good clip as he also from moving in one of the benefits to those devices that are green laser that horizontal green laser, which you've clearly seen the video, particularly in low light conditions.

Really provides the officer, barings about where they're at and where that.

They are targeting on the body. Conversely, some of the like in Tasers case. For example, you have read that laser or two of them.

And at a distance in somebody's moving and Theyre very small it's a little hard to see so I appreciate that feature on this device because it really does provide the after the better.

Targeting areas easier for them to see and even though the subject was moving on the officers are moving and get that movement debt balance of that balance.

Laser I think that was very helpful for them to be able to acquire their target and deliver that bipolar RF.

You saw on the video once we start to research this device and I had those conversations with our elected officials are completely on board with what we're trying to do in the way of again minimizing the exposure on liability to our community members and to our to our city as an organization.

Good afternoon, we had another quarter of solid financial performance, we achieved $1 $5 million on revenue for the first quarter, which is 123% growth year over year.

International revenues represented 61% of Q1, 2020, one revenues compared to 64% for the 2020 full year.

We expect our international business to continue to be a major part of our growth going forward.

Even though we grew our revenue on the first quarter COVID-19 continues to be a significant headwind for our company and there is a lot of uncertainty going forward regarding increasing social unrest and deep on the police movement travel.

Travel is still challenge worldwide and hotspots to continue to pop up but we continue to adapt this is evidenced by our topline growth and the growth in domestic agencies trend in Q1.

We reiterate our expectation that our revenue will grow in 2021.

However, until the environment becomes more stable, our revenue growth could fluctuate materially quarter to quarter, especially international revenues, where our inability to travel logistics challenges and government shutdowns have delayed sales our gross margins were 39% on the first quarter, which is an improvement from Q4 2020.

But comparable to the first quarter of the prior year.

Mix in domestic and international sales mix impact gross margin, we continue to implement manufacturing and purchasing efficiencies and make product changes with the goal of increasing margins, but we cannot predict future margins and past margins should not be relied on as an indicator of future margins.

Selling general and administrative expenses were 5 million for Q1.

And included $800000 of shareholder activism related costs, which we consider as non recurring costs. In Q1, we also experienced increased demand for domestic demonstration and training and expended approximately $800000 on these activities.

We believe increased trained agencies as Tom mentioned earlier on.

Indicator of future sales.

Research and development expenses of $1 1 million are expected to increase somewhat throughout 2021, as we have important research and it initiatives that we believe will respond to significant market opportunities.

Our balance sheet remains strong and gives us the flexibility to execute on our roadmap.

We are pleased with our financial performance.

Thanks to our entire finance team for their work in Q1.

With that I will turn the call back to Tom.

Yeah.

Thanks, Jim Great insight as always now I would like to give you our business review of the first quarter as I highlighted earlier at March 31, we had 628 agencies trained which is a strong metric. We now have over 1960 officers certified.

Their departments, which is up over 40% from the fourth quarter and up nearly three times year over year. We have now shipped product to 49 individual states domestically. We have now shipped product of 41 countries. We recently launched a formal environmental social and governance initiatives also known as ESG.

We believe that sustainability diversity inclusiveness and strong governance are all important to our long term success wrap is committed to doing business as a good corporate citizen in the future you will see more examples of our work to bolster our ESG efforts integrated into our strategy.

We have conducted business the right way in an inclusive manner since day, one, but we recognize it is important to formalize our efforts and to have constant improvements.

Some accomplishments, we are particularly proud of our product platforms directly help solve these complex community issues. Our products are American made in Tempe, Arizona, We have very limited raw materials coming from overseas safety is always a major focus on our manufacturing facility.

She is not only important internally, but also for our customers and investors in matters related to environmental protection corporate responsibility and employee and community health and safety, we are committed to environmental and social good and we look forward to sharing our progress as we move forward.

We recently hosted an all employee kickoff event here in Tempe, Arizona, and we will take a collaborative approach to this effort with the entire organization upbeat.

As it becomes an even larger part of our culture and how we do business.

Another corporate milestone for US is that our company recently became ISO 9001, 2015 certified for our quality management system. The internationally recognized standard is based on several quality management principles, including strong customer focus the motivation and implication of top management process.

<unk> and continual improvement.

The scope of wrap certification includes design manufacturing Assembly training sales and service and.

So on behalf of our entire organization. We are pleased with our progress we are moving fast and making calculated moves to drive the wrap the adoption of our technology platform by police agencies across the globe. Despite the continued headwinds related to the COVID-19 pandemic we.

We are honored to have the ability to make a difference and to help police officers be more effective and safer and we never take that for granted.

I now invite you to watch our short first quarter video highlight which will show more examples of the traction that we're getting we are proud of each instance, and that's outcome. After the video Paul will moderate our question and answer session with Gemini.

Yeah.

Let me flip on.

Turning to a new high tech tools, denying the strain subject without causing serious injury Chicago police training with a neutral it might just be a game changer. When it comes to taking people is it custody.

Okay.

On the threat to the community.

On proposal.

Thanks, Ramon Hancock for new non lethal device to quickly and safely bring suspects in the compliance when they are resisting really especially designed for people in crisis. So the police can quickly stopped them with not doing any harm.

Okay.

Yeah.

[music].

Okay.

Moving on.

Yeah.

[music] Buffalo please use the bola wrap on the first time ever over the weekend Malaysians the deployment of the new safety tool was a success.

Oh.

Uh huh.

Thank you.

Uh huh.

Yeah.

That was great I really hope you enjoyed that video now, let's move to Q&A with Tom and Jim. Thank you for all the great questions I already submitted but we will start our with our three research analysts who are currently publishing research on wrap Ladenburg Thalmann Northland capital markets and the Maxim group. Thank you to each of you for your.

Support we're gonna start with Allen Klee from Maxim. Please go ahead Alan.

Troops are on mute Alan Alan I think you're muted.

Okay.

Okay.

Hear me Okay.

Great I thought you guys put up very good top line growth in a difficult economic environment.

Wanted to touch on the international space, which is such a big opportunity.

Could you.

Say, a little more about how you expect to approach it in the first half of the year given COVID-19 challenges and then after that.

What what Youre planning to do it and maybe talk a little about the opportunity. Thank you.

Sure. Thanks, Alan So yeah International we've talked about repeatedly as well on the U S market and obviously, we're going to be a majority of our business for the next year or two years and the thing that really.

Really working well for us we've got great distributors on the ground, we have a super distributor network in these countries and now sits at 41 different countries. So we're still able to effectively do these demonstrations on our highlight video there Turkey.

On.

Thailand, India, So I I am joining one of those by zoom overnight so that on.

On being able to do the beta version to answer questions and then our distributors on the ground as it happens mainly on the device for polyethylene person demo and the Jacksons over in London is doing the same. So we are getting a lot of progress obviously would be quicker. If we didn't go in person you know there's a lot of the countries in Europe. Just went on Lockdown again, if I could you talked to.

Certainly earlier day their own full locked down again, so even despite these challenges we are still getting orders, we're still getting progress because we've gotten great partnership with these distributors.

Because again, we're able to do this.

Joining me virtually zone I think we've got 90.

To continue on your progress on our international space.

And as long as it's continuing to grow that part of our goal obviously and then we expect that to pick up.

Hopefully once we get from the restrictions have now gone through the vaccine I believe that's required for international travel and so on.

With that Jack.

<unk> position so as soon as growth countries you.

You open up and travel will be doing that again and again I think with the distributors that we have on the ground. We're very excited about that so I'm very happy very pleased and I'm still very optimistic on what international is going to do for us, especially in the second half of this year. We've got so many exciting things going on right now and demonstrations were very excited from the second half.

Thank you.

So your virtual reality training.

Can you explain how you are.

Doing your go to market with the same distributors I'm, just just maybe give us a little understanding on that.

Sure Great question. So we're actually still working through that on her plate is yes, our current distributors to help us there, especially on the hardware side.

And then it is also working with a lot of agencies right now that we're getting a lot of feedback on areas for improvement, we're kind of changing the paradigm right.

Partly as you go to their Academy and then once they graduate the niche off once or twice a year for <unk>.

Recurring free where where you keep the mindshare from talk about kind of debt to retire when theyre going to be using as much more intensively on a much more regular basis for maybe 10 or 15 minutes a day.

And really presented on things that you've been doing virtual reality in 30 minutes what was between two hours in a classroom sources much more immersive you would just about anywhere.

And so a lot of it you can keep already reaching out to us that are current customers on both large and small and filing the system that are giving us feedback in the moroccans and other partners about how we're going to be rolling it out across the cloud growing net bringing information. During these updates so right now we're really focused on the integration with the platform getting on recurring demos.

On the awareness of the wrap reality.

The rooms that are using it both in law enforcement from that are out in law enforcement, but moving parking lot soon it's been expense.

Continuing to develop that market for us because it is such a focus I mean, when you look at the event going on right now in the United States and trading volume.

Priority.

We're going to you'll regret overstating, where the puck is going to be in actually moving the screening using virtual reality is really going to make a difference from leasing and that's why we're so excited about it and really focused on it as are.

Distributor network as well as our current relationships with existing customers to make sure we can get from investing impossible to make their jobs more safe and effective.

Thank you.

My last question is with the numbers.

Discuss a little.

What actions you plan to take to get to your goals of higher gross margins and then I thought I heard you say, which was supporting that there was around 500000 of one time costs in the quarter. So it's the way to think about SG&A and R&D as kind of.

On a run rate from where it was this quarter extra that force and thank you. So much that's it.

Well. Thank you on I'll have Jim answer part of that but let me talk about the margins first obviously, we saw an uptick during the quarter and that was really a result of running efficiently.

On an every day.

So between that and some of the product changes that we're investing you from research and development will reduce our cost and healthy margins.

On that before that we've got long term goals of getting that margin up over 50%.

And between price.

Efficiency in manufacturing spaces on the raw material cost focus isn't changing.

And we're starting to see some trending on that we have a lot of work still to do there, but very happy with where that's going I'll, let Jim jump in here and kind of talked about the second part.

Yeah. So I think you identified that correctly that you looked at the quarter ex that are non recurring cost was about $800000 and you look at that moving forward as more of a base right now we're pretty full totally staff. So we believe that we will not see huge increases in SG&A over the back.

From 'twenty to 'twenty one.

That could change if we see opportunities internationally, but right now that's a good base to look at.

Alright. Thank you so much. Thank you Alan those are great questions, let's move on to Greg gives us from Northland Capital markets go ahead, Greg.

Great Hey, Tom Jim and Bob Thanks for taking the questions and congrats on the sales.

Now that we've seen you know wrap get a lot of coverage in the media recently are you noticing I guess any impact from the greater awareness being reflected on request for quotes from demos, maybe you could talk a little bit about how those inbound requests have trended this year.

Great question Dragon, absolutely. We're seeing you know theres kind of two things number one is the body I can't emphasize enough from body cameras are so critically important for the man now need to see how other agencies are using it and so that's why we're putting amount on press releases really putting forward because you know.

Every officer.

Finally on video, but they won't be immune video where they show the cash.

Whereas on the needs of things situations, ending quickly and safely and nobody getting hurt. So those are really key aspect for us and then with obviously, what's going on over the last year and especially in the last few months, we have seen an uptick we've seen a big increase in the number of training. That's why you see on the numbers the number of instructors.

These are grown variety to the three times year over here.

40% over last quarter, so our tree our demos the inbound inquiries all of those are trending up which is fantastic because that meeting.

As a matter of experts available out there too.

Talk to their agencies popular city council that elected officials about how the technology works.

Moving in with a platform that can wrap reality, even low rack.

How it can make a difference in their community and that's really what's giving us a solid robust pipelines and feel very very good about from a teacher and continuous EBIT growth domestically.

That coupled with internationally, there's something that we're really excited and those are trends to watch for sure. We talk about regularly the number of instructors trained and the number of agencies trained.

And again that's.

Leading indicators on pipelines going in addition to all those inbound leads that we're getting from all of the.

News is kind of all over you can't avoid it right. So it's really making a difference on the number of inquiries we're receiving.

Great that's good to hear.

One of the follow up.

Domestic versus international dynamics, I know youre seeing a lot of research.

Departments here domestically, but.

When when should we think about the growth here on the U S.

When would that catch up I guess with the success that you're seeing internationally.

Yeah. That's a great question is wonder we are talking about and if you look at the body Cam videos right. There were a bunch of agencies that are small in nature.

Up on the math, because theyre not been known names like in L. A to year on had my T. D. Everybody knows dosing, but there are also the biggest agencies Theyre also the slowest moving it takes a long time for them to work through a process I remember at my previous company in my previous life. It took almost four years, but that would be the testing never made money.

We go forward and this was talking specifically about the only PD. It took from many years on follow on orders to get that going forward. So the big agencies.

And months, usually years, whereas the smaller agencies as I mentioned much quicker much faster than on the ones that get the body Cams and then go out and show people. How these are working so I think as you see that momentum continue to build that would be the number of agencies that are required.

And then are starting to use it.

Larger agency bolt on but it's just going to take them a lot longer because they're also dealing you know that's where all the with the locals.

Opposition is coming for defunding. This leaves the reducing their budgets, so while they're dealing with those issues and trying to figure out you know.

How many opportunities are going to have what their budgets are really going to be on the increase are they going to decrease.

It just makes it that much harder for them to try and bring on a new technology.

You know with L. A and D was I'm sure everybody is curious about we're still talking to them, we expect from announcements from them here in the month of day is not.

Next couple of weeks.

We can't even believe you received just taking very long time, they have a lot of committee elected officials City Council.

Nancy on all of those people have to get on the same page and that can take on just due to the sheer size of the agency versus a smaller agency. That's 2030 40 officers are there much quicker much easier to move so hopefully that gives a little bit of a feel that it's really hard to kind of a timeframe on it other than the small ones are.

For the foreseeable future, we're gonna be the ones moving on and where it is much.

Much quicker than the large and then when the alarm on galore.

Obviously, it will be a great thing for instance.

In.

I can't nail down the exact guidance, but candidly, we're moving forward with a number of them.

Great. Good to hear that does makes sense, Tom I guess the last one from me it was really nice to see debt first.

<unk> five year subscription agreement.

Well reality trading operations.

I was just wondering your comment I guess on the general demand or interest you're seeing.

Our departments.

For that particular subscription offering.

Yeah, great questions on one of the things that you know when we look at this market is there.

They're still learning about that technology. So they're trying to understand is the more progressive cheap out there I have already reached out and are seeing demonstration.

We've had large and small do on it and in this case on cheese lashup on northern ignored you'll.

You'll see it laid off the ball of wrap early on and John for all the officers.

And then in addition to that with <unk> coming in with wrap reality and signing up for a five year subscription. He has already seen the value of that and for example on our guys are out there doing the training on the he has on the ground. After the train that day and change the on the program that actually when we were putting bringing some recruits through on putting down into the technology and just kind of on watch.

How they reacted to some of the different scenarios, so kind of an area that we hadn't been really addressed initially but from the chi.

He didn't understand that and the difference we can make more on them.

We're getting a lot of interest in it but it's really one of those you have to see it because the leader so immersive EBITDA. When you are looking around and easy thing in every direction versus the training. They think they used to again, it's not replacing their live fire exercises, but he's really immersing them in a lot of those scenarios that you could never duplicate.

Fire, but its in the 300 bookings based on you might have somebody behind your guidance I view that would really be hard to duplicate without this training and that's why I think there is such an interest in it and looking at this five year subscription cheap, obviously low bleed or wants to make sure you're getting all the updates keeping all these officers current whether it's the hardware is going to be supported so there's a lot of debt.

For him finding really good questions.

Just getting started and he can be a great reference point for us talking to other agencies.

Okay, great. Thank you.

Any other questions from.

Right now.

Alright, Thank you very much Greg and now onto our third analyst Jon Hickman from Ladenburg Thalmann go ahead John.

Hi.

Can you clarify Jim what was being dragged out one.

One time expense.

Yeah.

That was the shareholder activism.

Matter that you saw on the 13 vs. In the 8-K that rolled out during Q1 related to the board governance and a shareholder.

Activism related to the structure of the board going forward, you're seeing some changes in the board.

And we're seeing some improvements there and I think you'll continue to see changes in the governance and the growth of this company as we move forward.

So day term.

On.

Could you give us some details about how you get paid for the wrap.

Reality.

Yeah. So as we do a subscription model, it's going to be different for each agency. So a lot of times because they wanted to get the funding upfront and then they pay us for a five year on advance other times they'll do it and incorporating their annual budget. So it's really going to depend on the agency and what their preferences, whether theyre going on again.

It is an upfront payment or theyre going to pay it on a quarter or annual basis, and that's gonna be determined obviously on the city management City Council on the approval of those budget. So there's not one stock answer there, but obviously when they commit to the longer term financing for that and that just gives US you know forward looking revenue that won't carry on the balance sheet.

As future revenue opportunities and then those payments will be corresponding depending on the terms on the city of.

Council on the purchase order when it comes from that Department.

So is the hardware purchase separate.

On the hardware is included as part of their package and so as the maintenance and the warranty on it depending on the different options that they can have that this is like really high end hardware as a lot of the gaming community uses that we're using for the virtual reality, but it is.

Obviously, you have to have that and it's relatively inexpensive.

Laptops that you would use at home or even desktop stations that you would use at home just really built for gaming. So its not crazy expensive you know one of the hardware pieces, maybe around $10000, but then they can run a whole number of officers to that compared to tens of thousands or hundreds of thousands of if you look at simulators are different scenarios. So the hardware.

It's something that we built into it because they obviously need it but it's not a huge expense and then we do covered from warranty from them on hardware manufacturers once they acquire those systems.

Can you give us some idea of what a yearly.

Ascription costs.

So on them.

Still working through some of those different numbers, but on the low end, it's anywhere from $30 per officer per month, and then there is from high end from some of our other.

Vendors that are out there telling from D. A couple of hundred dollars per officer per month. It just depends on the options that they want either wanted to include different opportunities whether they want to include all wrap up their subscription agreements.

On bundling opportunity for <unk> for the two platforms of all of our family. In addition to the wrap reality family. So theres a variety of different options and as we get a little bit more clarity on that over the next.

Six months or even into next year with the platform will be able to publish that a little bit more but right now were still kind of working through some of those issues and again, it's just working with the agencies on how they want to.

See it presented to their city council for their budget approvals.

Lump sum numbers on a monthly numbers of processor number.

It's just different breakdown from and when we get more clarity, we'll be able to show that.

Okay.

My I.

I guess last question.

Do you have.

Or can you give us an idea of what percentage of revenues came from.

Existing customers versus new customers.

That's a great question, and we arent breaking that out yet because we're still so new you know we're only at 400 and some agencies 450 on agencies out of 18000. So it is still a lot of them that are coming through that are new orders, but we are getting reorders from agencies that are buying on consistent basis as they rollout and then ultimately getting that full deployment.

From either kind of three categories, which is the new the reorder in full deployment and we're seeing have purchased from each of those and then also on as they come through from our distributors, we don't get that visibility right. So they if they buy it and they're they're not huge orders, but as they buy and ship through there on warehouses, we don't have the visibility on whether those are on.

Fewer reorders so right now, it's really difficult to break that down and really have a meaningful first what we're seeing improving the distributors versus just what's coming through for wrap.

Can I ask one more you absolutely can.

Can you talk about.

And then kind of discrepancy between the number of officers are trained.

From Q4 to Q1 and versus kind of the revenue.

Which were relatively flat.

Yeah, So as I mentioned, the we're doing an incredible number of demos and trainings.

Which for me is that forward indicator of our sales pipeline because these agencies want to have a subject matter expert in house.

They start to move forward with these programs so it.

For me, it's really you know as they are coming out of the COVID-19 or coming out of the lockdown, we're seeing those training to increase that means we're training I think I mentioned this between two and four instructors per agency that are then the experts there. So we want to really drive those training to get those people to be experts because then they understand the technology how it works they can explain it in on that.

Coupled with a body cam videos and what's being covered in the media daily is really going to help drive that pipeline and get those conversion from orders to acquisition and as I mentioned, sometimes they can buy all of the units right away from they might have on two three or four but then they'll do that multiple times going forward. So it will the revenue roll out.

Moving to trail the number of trainers, because that's again getting that information out in those agencies aware of how the technology works what it does for them.

I don't I don't know that we'll catch it and anytime soon just because it's such a drive.

But that's really showing the sales of our pipeline on what's ahead of US which is again something that we're continuing to see that momentum build domestically and.

On international growth that we're seeing.

Okay. Thanks.

Alright, Hey, John Thank you very much and thanks again to all three of our covering analysts.

A lot of great submitted questions I'll try to consolidate some of these here and hopefully we can get to the majority of them today, let's.

Let's start off with this good one with the pandemic have there been any supply chain issues at wrap.

So no right now there have not we've had a few but we've addressed that by ordering ahead from what I call them from long pole on the tent, making sure that we look at if there is gonna be Delaney. Although we've ordered ahead for that so we haven't had any direct impact, but we have had to raise the awareness to us going forward.

As the world slows down and there was a lot of change going from.

The shutdown from people coming back online that lead times are longer and so were from a planning perspective, taking a look on what those items are and then those ones that are really.

Lengthy lead time, we're buying it is as I mentioned before because the majority of our raw materials are bought domestically, we're not really being affected by entering any international problems, but we are seeing a little trend in delivery times.

To go out there a longer lease and we are addressing that through.

We're planning to make sure we don't get caught and then that's why you saw on inventory bump up a little bit.

We're making sure we have the raw materials in house that we needed and then converting those into finished goods. So that we can keep shipping and starting to build ahead with smoothed that manufacturing process helps the margin it makes us more efficient.

Okay. Here's another good one can you. Please talk about your sales force and how the products are sold both domestically and internationally is there a difference.

Oh, yes, there's a big difference so we domestically we have 14 distributors on the covers on all the states and then those distributors have about another 100 people out on the ground and are doing demonstrations doing sales calls talking to those.

The agencies on a daily basis. So we're now developing our outside sales staff that are out traveling on supporting those distributors and that coupled with our insight client services team had a really healthy tasty.

Taking those orders, making sure we're getting on process doing follow up on the phone.

So he was kind of multiple stops here domestically and again, we have to serve is 18000 agencies. So its a broad coverage a lot of these different decision makers when you compare that internationally and all of these countries that we're in usually from exclusive relationship because the agencies all reported up to use the minister of interior or the Ministry of defense.

So it's much more consolidated approach the sales there.

And then it also allows us more control with them on export compliance rules on Pro practice Act rules all of those things that we want to make sure that we're governing and making our distributors a winner on the momentum customers aware of.

And so it works very well for us So 14 distributors domestically 41 internationally and then we have great relationships to bear an extension of us and what they're doing and what they're demonstrating.

Too soon to be on customers out there.

Okay. Thank you Tom.

We've got another one coming in here with all the recent police shootings and killings what is wrap doing right now to take advantage of all the media talk in public talk about policing police reform and police training.

That's a great question. So what we are doing is talking on a very regular basis with our customers. We are seeing a huge increase as I mentioned in the number of training the number of demonstration inviting not only the media by community leaders City Council's mirrors to come and attend these training so that they can learn about this technology, we are working through not only one.

<unk> D C, but also on other montney.

Activities in different states.

Again long path or pushed forward that are going to talk about funding to help lead from the training aspect from using a tool like Volvo Rapids.

Apprehension tool or remote restraint device. So there's a number of different activities that we're doing we're also working with the local agencies to help them do publicity for example, when these agencies get these body cam videos, showing that officers professionalism and a successful outcome with nobody being hurt is getting that person health contact on local media and get them on.

We feel good story, so that it really helps promote that.

That relationship between law enforcement and their communities. So.

I think that's a big driver for us is really to get those local agencies, but it's not been top of mind throughout their new proactive media to make themselves looked at within the community. So we're helping that we're working with different partnerships to get those body can't put out in their local media show how they are making a difference the professionalism of those officers and then not everything is ending badly.

Either you intend to take from Washington National Media attention. So theres a lot of activities that we're doing to help drive that.

In each of these local communities and then supporting law enforcement and those efforts as well.

Okay. Thank you, Tom Here's probably one for Jim.

Is your patent situation or is it a product protected with patents or do you have any pending.

Yes, we have a strong patent portfolio.

In our 10-K, we reported that we had 10 patents and we had non U S patents pending we had another patent issued in the first quarter on another one around.

I worked quickly with the engineering team we have.

On a terrific engineering team that is focused on patents, we meet weekly to discuss new filings and we have a lot of exciting things. We wish we could talk about what's going on in the labs that Youll see later this year and next year coming out of the lab and we're filing patents on those almost every month.

An area that we work very diligently and we feel very strong about our patent portfolio.

Protection and we follow those throughout the world to protect this technology.

Alright, Thank you Jim another one maybe for Jim here.

A lot of cash on on your balance sheet. What are your plans for the cash and what is your cash burn.

Right now on a cash burn of $3 million to $4 million.

<unk> that we're seeing in the <unk>.

In the financial statements, we expect obviously that to go down as we are on revenues increase.

On our plans for the cash or to keep rolling out the products that we have focus on virtual reality and the Golar wrap platform and that's our focus.

2021 and 2022.

Alright, great. Thank you Jim.

Here's another good one you made an acquisition last year of incentive the virtual reality do you think theres more M&A opportunity out there for you.

So obviously you never say never and we're always working on opportunities to not have to reinvent the wheel with Brean technology forward. So as long as it's in line with what we're doing in terms of supporting.

Tools that don't harm or training is really going to help these officers.

We're always looking but.

That's one of the nice things with a strong balance sheet and access to capital is that if we do find one of those opportunities.

On hesitate to pull the trigger and packing and.

Moving forward very quickly so nothing on a day.

Equal right now, but always taking a look at what's out there.

Alright, Thank you Tom Here's another one that just came in great press releases with the body cameras are nice to see the device working in real life situations, but why do you put on what are you putting these out.

So as I mentioned before that's really the best testimonial for US is we can talk all day long about how this works show it and demonstrations even do the training, but the rubber meets the road. When these are out in the field and they are allowing these officers and the compensation as quickly and early.

And the change that we showed earlier in this presentation today talk about operating in apprehension tool. There is not a device that even really consider to use some force unless they were to get trapped or something else were to happen there, but the intent of the device is an apprehension tool. So if you can use this early before escalate before that subject maybe commit to the.

Fight before they pose a threat to themselves or someone else that's really the niche that we're selling and that's what's so exciting about this so we're really pushing on body camera imagers for because it not only helps other agencies understand the different scenarios in which it can be used but it also again I mentioned help educate the community on the proactive activities of law enforcement.

Is making in order to find to find different ways to and these compensations hopefully lower the amount of force is being used and it really have an impact because there is obviously a huge divide right now between law enforcement and different communities of our of our country and it's not just here domestically and around the world So being able to put in.

On the body camera goes forward show. These uses muscles officers start really thinking about all those different scenarios, where somebody was starting to resist that they could have used this from before it escalated that's really the purpose of that and that's why it's so critical for us to really highlight that information and get it out there.

Again, when these things on safely the media is not going to put on forward. It's just not selling the new so to speak so we have to do that and work with the agencies to do that as well.

Alright, great. Thanks, Tom we have a lot of great questions still come in we'll have a time for a few I know, we're bumping up against the top of the hour.

Here's a great one how are things going with the collaboration in the U K I know you were working on improving the product design in the UK can you elaborate on that.

So we've obviously been working there we reported last quarter that we have received the funding grants through their data program to look at the different aspects that they felt was critical.

Or is there any application on the whole wrap going forward. So we're still continuing to work with them. We are still in the quarter on a constant conversation.

This is going to be getting some product over to them again here pretty soon for some passing on other areas that they want to talk about so we are continuing to drive that forward, obviously jags being in London.

Has great communications with the different agencies there it would've been the home office.

I'm very optimistic about where this is going to go on is helping drive some of our R&D efforts and helping us prioritize on them over others, but we will be able to talk about in the future, especially with some of the next gen product that we're working on and hope to rollout in the next.

The foreseeable future.

Alright, Thank you Tom.

Kind of combine a couple of here. It says how many employees do you currently have and can you talk about your manufacturing facility.

And.

As you combined it here sorry, and as you await anticipated orders are you building inventory of that finished product within your manufacturing. So I guess a number of employees and then talk about on manufacturing in the finished products.

So right now we're roughly 50 employees of the company that's on.

Growth over where we were last year, yes, we're absolutely building finished goods. It's a focus that we wanted to be really efficient. That's why we saw on impact on our margins is the efficiency of keeping.

Material flow and keeping the production flowing and also that helps us because those international orders tend to follow because they are usually larger than our domestic orders. So we're not having to react to surges in production. If we can keep that smooth and efficient keep people working and that's really the goal. So we are continually driving and pushing finished goods in the inventory.

And then we manage that what the finished goods inventory as against what we think past orders have been heard from what features are going to be and then we kind of roll that out over 12 months to get a blended average of what we're trying to shoot for in terms of production numbers in personnel. So.

We're doing a pretty decent and it's obviously, putting because we're seeing some improvement on our on margins as we focus on that in addition to the material margins that we've been working on.

Alright. Thank you, Tom we're kind of running up against the hour here with what I have one last question what do you see as the biggest catalyst for wrap going forward.

The biggest catalysts I would say, it's just a continued acceleration of the number of training I talked about them being subject matter experts the number of <unk>.

Year ago, we didn't have hardly any now we're getting them weekly sometimes two and three a week as you can tell us.

On the press releases that were putting out there and then again just if we could get COVID-19 does give us a little relaxation here on some of these travel I think then we're going to see a lot of these activities, especially internationally really start to pick up because we have so many things that are just being delayed because the governments.

On the prioritized, obviously vaccines on PB teen materials, or PPE materials and those types of things. So the good news is we've got a lot of things in the Q I think it will get released as we can come out of COVID-19 here.

In terms of being able to travel and then domestically just continuing the blocking and tackling and the execution that we're doing across the company from a manufacturing to the front office to our training into our customers because it was more of these officers come back on beauty and things in the budget uncertainty goes away and the technology can come into play.

Really help them from both a rapidly on the training aspect with the ball wrap and that's that technology platform that we talk about that's been really help address these problems because it's really easy for people to point out the problems. We're solving these problems were great solution through full wrap rap reality and that's what we're going to stay focused on.

Well I think that's a great question to end on.

Thank you for all debt did did submit the questions. If you did not get your question answered. Please email me at P. Mainly at wrap dot com and I will get back to you as soon as they can and get you. The answers I know, we still have a lot of you know, but we're running up a full hour now so thank you for everyone, who joined our call today I'm going to now turn the call back over to Tom for his closing thoughts.

Thanks, Paul and thank you everyone for who joined US. This afternoon, we accomplished a lot this quarter, but aside from saying, we're just getting started our vision is clear on the opportunities are enormous. So we're on the right path and I got the right team around me. So it's really an exciting time.

Finally, we're going to show one last video. This is one of our international event that just occurred this week and the Dominican Republic.

This is on the training that's been going on and it was produced and released by the Minister of defense narrow on office in the Dominican Republic that they put out on social media actually meeting with the Minister himself.

So we're something very excited about it on a minute video will end with <unk>.

So I would like to tell everyone. Thank you for tuning in today have a great evening and we look forward to talking to you in late July we can talk about our Q2 results have a great time. Thank you.

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