Good afternoon, ladies and gentlemen, and welcome to the Wrap Technologies First Quarter 2020 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] As a reminder, this call is being recorded. Before we get started, we will be referring to the press release filed today which details the company's first quarter 2020 results and can be downloaded from the company's Events and Presentation page at www.wraptechnologies.com. Finally, a recording of the call will be available on the same Events and Presentations section of the company's website later this evening. Please be aware that some of the comments made during this call may include forward-looking statements within the meaning of the Federal Securities Laws. Statements about the company's beliefs and expectations, containing 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 operations and future results that could cause Wrap Technologies results to differ materially from the management's current expectations. The company encourages you to review the Safe Harbor statements and risk factors contained in today's press release, and the company's filings with the Securities and Exchange Commission, including without limitation, the company's most recent annual report on Form 10-K and other periodic reports, which identify specific risk factors that may cause actual results or events to differ materially from those described and forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after the date of this conference call. The company also notes that on this call, they will be discussing certain non-GAAP operational metrics, such as backlog, number of trainers, agencies, and distributors. The company is providing that information as a supplement to information prepared in accordance with accounting principles generally accepted in the United States or GAAP. And now, I'll turn the call over to David Norris, the company's Chief Executive Officer. Sir, please proceed.

Thank you, Jimmy, and thank you everyone for joining us today. After the market closed today, we issued our first quarter results for the period ending March 31, 2020 and a copy of which is available on the investor page on our webpage, www.wraptechnologies.com. As discussed on our last call, 2019 marked the genesis of our company’s growth phase and as the financial results of the first quarter of 2020 indicate we’ve clearly been able to capitalize on the sales momentum we’ve generated in the back half of 2019 and accelerate growth right out of the gate in 2020. However, before we discuss specific to the first quarter and why we were able to generate such successful results at the start of this year, I like to take a few minutes to address a question that I’m sure is at the forefront of everybody’s mind. How is COVID-19 impacting Wrap Technologies and how are we responding to the new normal? The world has changed substantially since our last call on March 10. Since then stay-at-home orders have been implemented across the nation and many people have seen their daily routines uprooted the social distancing and remote working have become the norm. There is no doubt that COVID-19 has profoundly impacted people’s physical, mental health, and personal relationships and livelihood. And I would like to personally extend our sympathies to anyone within the Wrap community who has been adversely affected by the global pandemic. Wrap is a young and innovative company with a flexible culture and a customer base that is integral to the protection and preservation of everyone’s well being. For those reasons and for others that we’ll discuss throughout the call, I’m pleased to report that we are adapting to the dynamic working and social changes brought on by…

Thank you, David, and good afternoon everyone. Our detailed operating results are set forth in the press release filed today and our quarterly report on Form 10-Q also filed today. As a reminder, we are still in the early stage of addressing a large worldwide target market for our remote restraint products and accessories. First quarter revenues increased from a mix of agency, distributor, and international order fulfillment. Revenues were $689,000 for the first quarter 2020, compared to $118,000 in the first quarter 2019. At the end of Q1 2020, we had $222,000 of customer deposits and a backlog of orders of approximately 1.4 million, expected to be delivered over the next 12 months. As a reminder, distributor and customer orders for future deliveries are generally subject to modification, rescheduling or in some instances cancellation in the normal course of business. We do not have enough insight into the timing and nature of large international and domestic orders to determine exactly how periodic backlog will relate to future revenues. Gross profit margin was 41% for the first quarter 2020, compared to 48% in the first quarter of 2019. We rely on direct and distributor sales, both domestically and internationally, and changes in sales channel mix can impact product margins. Other factors impact margins including product updates, raw material and 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. Sales General and Administrative cost for the first quarter 2020 were $2.1 million, compared to $1.2 million for the year ago quarter. The increase in SG&A is predominantly due to an increase in headcount and planned expansion in sales, training, and other activities to support our growth, as well…

Thanks Jim and good afternoon everyone. The impact of the coronavirus didn’t really begin taking effect in the United States until March and up until that point we were really rocking. As you will remember, we started the year with $1.7 million backlog and we have been working to convert that into revenue. Right at the start of January, we received international purchase orders for 200 BolaWraps and 2,000 cartridges and accessories. This sales momentum continued in earnest right up until the second of March when stay-at-home orders were ubiquitously instituted and sales activity began to slow down. As David mentioned, we then transitioned to video conferencing, which has been relatively successful given the current state of things. There is obviously no perfect substitute for an in purpose demonstration of the BolaWrap as it is much more impressive to see live from the sound the Wrap and how fast in happens. And those of you that had an opportunity to see the product for yourselves will understand that it is one of those tools that people seem to immediately get when they can see it feel it and then hear it deployed and once they’ve even been wrapped themselves, but since our customers have had to adapt to the same changes we have everyone has been very understanding and extremely supportive of the new sales methods. In fact, we had the chance during the second half of March for Mike Rothans and the team to do a bunch of the video conferences with our distributors and really find out what they are doing and get coordinated for them for the second part of the year coming up. The substantial improvement in revenue year-over-year and substantially from Q4 to Q1 was in large part driven via distributor model. As a reminder,…

Thank you, Tom. As evidenced by our sales momentum and the overall improvement in our financial performance, we’re clearly making progress in the business and moving in the right direction. It’s apparent that the first quarter was a strong quarter for Wrap, but these are uncertain times and while past performance does not necessarily beget future success. However, if you consider the market we serve and the current state of the business, I believe there are many reasons to remain confident in our ability to weather the current environment and execute against our shorter and long-term goals. In recent weeks, we’ve seen an increase in protest around the world as people are becoming impatient and ready to return to work. Tensions are rising. Today, perhaps more than ever it’s in everyone's interest, first responder’s, civilians, the law enforcement officers have a tool that allows them to safely establish compliance without causing pain. We cannot say for certain whether current events will be a driver or inhibitor for our near term growth, but what we do know is BolaWrap fills a gap that exists regardless of what the world evolves over the coming months and years. As a result, we’ve been paying good customer momentum. We’ve generated substantial improvements in our top line, not only year-over-year, but sequentially as well. On top of that, we’ve maintained a robust backlog. Equally important, if not more, given the current state of the world is that we have fortified our balance sheet. As of March 31, 2020, we have 15.5 million in cash in very minimal debt. So to summarize, Wrap Technologies remains on solid financial footing, we have a dynamic team that has and will continue to adapt the changes in the workplace. We have a product that is highly effective and fills a unique void that exists independent of broader market trends. We serve a highly resilient customer base and we therefore stand well-positioned to execute our strategic initiatives for the betterment of our shareholders in the long run. With that, I’d like to open up the calls for questions. Jimmy?

Thank you. [Operator Instructions] And our first question comes from Jon Hickman with Ladenburg. Your line is now open.

Good afternoon. Congratulations on the revenue number.

Thank you, Jon.

Yes. So, I’m kind of trying to get a little bit more information, do you have any estimates like, do you get to see numbers as far as like how many used cases there have been versus kind of reported to you, kind of hitting this?

Yes. So, this is Tom. That’s a great question and I’ve got – I’m going to have Mike Rothans who’s joining us here answer that one directly.

Hi, Jon. For many departments across the United States they look at this total as one that’s not a reportable use of force. So, therefore they don't track it, and obviously they don’t report it to us. In other cases, I would say in most cases across the U.S., it’s considered a low-level use of force. So, it’s really the last thing on their mind to report to us every time they use this product. It’s almost like reporting every time you’d handcuff somebody. So, we don't get the feedback that oftentimes we want, but what we do find out is when we make contacts and follow-up contacts where it’s through our customer service people, our sales people who are trainers, that’s when we learned many of the uses in the success of the product.

Okay. And to follow-up on that, can you tell us what L.A. is looking for in this trial? Are they looking for a certain number of used cases, and then what kind of outcomes are they specifically, are there any key performance metrics that they’re looking at specifically?

Sure. I’d be happy to answer that too. Los Angeles Police Department originally looked at a 90 day window and their Chief in their press conference back in January had said that he was looking for about 30 or so users in order to evaluate the effectiveness of the product and [if it] achieved the outcomes that they wanted, meaning that they didn't have to use additional levels of force that nobody was injured and they were able to take people into custody or in many cases to treatment for mental health issue without injury. Now, with the pandemic that has slowed things down they were on progress to certainly meet those goals in the first 30 days, in the first 90 days of their tests. The Chief had also mentioned that if they didn't receive the results in the first 90 days that they would probably extend it for another additional 90 days and Tom alluded to that in his presentation earlier. And so we plan to work with them on that, but so far the progress has been very good. They’ve used it quite a bit. In fact, they’ve used it more than we anticipated they would be using it and the success rate has been really outstanding, and so the feedback we’ve received from LAPD from the line level, as well as from the executive level has been very positive.

Okay. And then one last question, I guess Tom or David, have you received any re-orders from any of your agencies yet?

Yes. We have. This is Tom. Yes, we have definitely received re-orders from some of our agencies that are using the device.

And obviously one of our – and this is Dave, and one of our objectives is full deployment in every department and we’ve had a few departments go full deployment, meaning they bought a few, liked them so much they actually opted their entire department with them.

Every options. And so, I think I, we, the last time we spoke you mentioned to me that there was – I mean I think you said something about money being able – being more available now for agencies to actually purchase this product. Where’s that coming from?

I’ll probably let Mike Rothans answer that since he’s [already two-year] law enforcement professional and how that works.

Well currently right now there are some several grants that are available and one in particular that came out as a result of the coronavirus emergencies, it was issued by the Department of Justice, Bureau of Justice Assistance, The Coronavirus Emergency Supplemental Funding program that allows law enforcements to apply for this grant for equipment. And in this case how our product obviously would meet that requirement as it provides time distance and space for officers to control somebody's movement, restrict the mobility, allowing them time to put on PPE equipment, and to protect themselves, as well as people around. And so, that grant, as well as several others we provided that information to all of our customers and all of our potential customers as a funding source for them, but we don’t see that as a problem with regards to budgets cutting as a result of the coronavirus.

Okay, and then…

Upon that, Jon I would say that that’s very much a U.S. answer. We’ve actually seen internationally, there’s been no pushback on budget or pricing because as you watch news you’ll see a number of countries will become much more restrictive and [indiscernible] the impact of people in their personal businesses and life of it has been heavily impacted. So, as those Police Departments look for tools to restrain and really give a second chance to somebody who may be out of line, non-compliant, but has no criminal background, he’s just basically hungry, in a difficult position. So, in many cases budgets aren't even coming into question, it’s the opportunity to apply a new tool.

So, one more question. I guess for Mike. So, is there a reluctance from the part of Law Enforcement right now to even like approach people? And there’s not that many people in the street. So, I guess that that would make it harder to get used cases?

Yes to answer that question. So, there is a reluctance. I think that generally speaking across the U.S. officers have been encouraged to not be proactive for fear of being contaminated and bringing that back to a station house or department and therefore limiting the ability to respond to emergent calls for service. Many agencies across the U.S. are only responding to a emergent calls and not routine calls, which means as supposedly being proactive and maybe encountering somebody self initiated activities for somebody that’s suffering from mental health crisis, somebody under the influence, now they’re encouraged to stay away from that individual. So, that does limit the use and we’ve actually seen that even in LAPD's trial, but this of course is a limited period of time. This is not going to go for ever.

Okay. Thank you. That’s it from me.

Thank you, John.

Thank you. And our next question comes from Brian Kinstlinger with Alliance Global Partners. Your line is now open.

Hi, this is Jacob in for Brian. Can you talk about how often officers in L.A. are using their Wrap devices compared to Taser devices?

Well, if you look at the report from 2018, I think with the 90,000 officers they reported like 313 uses and again ours is just in the trial. So, there’s 200 devices being shared between 1,100 officers. So, we’re not far enough along yet to be able to see anything strategically related, but Mike mentioned it, I mentioned it, we have seen them use it more than we anticipated in the trial period as we were first starting with them before the coronavirus.

Okay great. And then could you provide any additional color on how COVID-19 has impacted the sales cycle?

Yes. I mean clearly there is nobody travelling, there is no groups with the restricted stay-at-home orders, you know right now all of those activities of FC's, which David mentioned, it was going to see a short-term reduction in expenses related to the travels and the demos that we were doing. So, clearly right now the departments have been trying to adjust to what is going to be the new norm and now it being the end of April and all the states starting to come back online, we’re seeing more activity in calling to set-up trainings and things again starting in the next couple of months. So, in terms of purchasing activity I don’t think we have enough detail yet, but I think this is certainly, it was a pause for us for about 30 days that now we’re starting to see that activity pickup and as I mentioned even in some of the other markets, especially internationally, we are seeing pickup and as I mentioned even in some of the other markets, especially internationally we’re seeing – have seen it really accelerate the activity that they were working on previously, potentially even saving years on some of their analysis.

And we’ve definitely seen large department’s slowdown, but when you look at our leads request for quotes, smaller departments are generating significantly more leads than we’ve ever received in the past. So, our assumption is that while large departments are really big cities and they’re swamped and so they’re all busy doing their own thing and say keep everybody socially distanced. Small departments, somewhat no coronavirus in their neighborhood, yet people are still at stay-at-home orders because they’re statewide. Those departments have a lot of free time and they’re very, very interested in adding our product at this point.

Okay. And one more from me, and you talked a little bit about how L.A. has extended the trial? Have you, can you talk about how police training using the device has been impacted by COVID-19 in places other than L.A.?

Could you ask that question again?

Sorry. Can you talk about how police training using the device has been impacted in places other than L.A.?

I wouldn't say we’ve seen net where it’s been decreased. As Tom had mentioned, or come to a complete halt. As Tom had mentioned in West Palm Beach Florida just of few days ago it was used. It really just depends upon the circumstances whether this was used during this coronavirus or not, but in many cases in many large cities where officers are being discouraged from making routine stops or handling routine calls for service that’s what limits the use of any less lethal option, not just our product. I would say, it would be the same thing for other less lethal devices that they carry and their belt are on the trunk of their car, but it doesn't mean that our users have stopped completely.

And on a more specific - on our training side, we are not sending our specific on our training side we are not sending our trainers out to as many departments we have in the past because they are encouraging, I’m not to spend a lot of time with outside people from the department, but we are seeing training continue within departments. Yes, more social distancing, more outside just like the rest of the world they’ve really changed what they’re doing, but they haven't stopped what they’re doing.

Okay great. Thanks. That's all from me.

Thank you. And I'm showing no further questions in the queue at this time. I would like to turn the call back to David for any closing – correction. A few questions have come up in the queue. Our next question comes from Greg Gibas with Northland Securities. Your line is now open.

Good afternoon guys. Thanks for taking the questions and congrats on the record sales in the quarter. I think, I thought I was in the queue, but I guess not, sorry about that, but nice to see the new product orders from the eight states in the month of March, especially given the challenging climate. I was just wondering if you could provide some color on how order demand I guess that you’re seeing in April so far has compared, has that – you’ve been able to kind of maintain the momentum even with the difficult climate?

You know that’s a great question because this is a bit of a lumpy business because we’re selling to the government. If you look at our last couple of quarters, the majority of the actual sales come in the last month of the quarter, but I can tell you that from what we’re seeing from request for quotes and demonstrations primarily in the U.S. for smaller departments internationally from larger ones, so far things seem to be moving along in a good pace.

Got it. It’s good to hear. And then the 1.4 million in backlog right now, why would that take 12 months, I guess to fulfill those orders and when we think about the cadence of those orders being fulfilled, will the majority be more near-term focus?

It’s kind of – this is Tom again, it is kind of spread out because several of those orders have trials as part of the process. So, they placed a large order, but there are still steps as it goes along the way. So, I do believe it’s going to be spread out and then, you know it’s like some of it will probably be delayed because of the virus just due to the travel restrictions and not being able to get our [instructions] over internationally to some of these, but it’s really based on the timing of the departments having to make sure they get through the process of their training, their trial, their use to force policy implementation, and then getting the equipment issued. So it’s – that’s what that’s really around.

We’re still comfortable that the 1.4 million in backlog will ship within the next 12 months. We can’t seem to get more specific than that.

Sure. Okay. That’s helpful. And then last one from me, just the percentage – and sorry if I missed this, but the percent of sales that was direct versus distribution channels and then maybe the percent of sales that were domestic versus international?

So, this is Tom. We didn't give specific percentages although the majority, we did say the majority of sales in Q1 were international compared to domestic that’s for sure and then in terms of distributor versus direct, the majority are going through distribution.

Got it. Thanks guys.

Thanks, Greg.

Thank you. And I'm showing no further questions in the queue at this time. I like to turn the call back to David for any closing remarks.

Well, thank you. Thank everybody for joining us today, and I’d like to also specially thank our employees and partners who have dedicated – who are dedicated to our vision of helping law enforcement interact with the public. The last few months have required juggling additional responsibilities at home and in the community, and I appreciate the professionalism I see from our team each and every day. I know many of you on the call today maybe new shareholders and I would like to thank everyone for your continued support of Wrap Technologies. I would also like to remind shareholders that our virtual shareholder meeting will be on June 5, 2020 obviously and details are going to be posted on our website. Thank you all again today for joining us, and we look forward to speaking again soon. Thank you, operator.

Thank you for joining us today for Wrap Technologies first quarter 2020 conference call. You may now disconnect.