Good afternoon. Welcome to the Wrap Technologies Third Quarter 2022 Earnings Conference Call. Joining me today is our CEO, TJ Kennedy; our CFO, Chris DeAlmeida; and our President, Kevin Mullins. Following the prepared remarks, we will open the call for your questions. I’d like to remind everyone that this call will be recorded and made available for replay via a link in the Investor Relations section of the company’s website at wrap.com/investors. As a reminder to listeners certain statements made during the call today constitute forward-looking statements and made pursuant to the safe harbor provisions of the Private Securities Litigation Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are described in our earnings press release and more fully in our filings with the SEC. The forward-looking statements today are made of the date of this call, and we do not undertake any obligation to update the forward-looking statements. Now, I’d like to turn the call over to our CEO, TJ Kennedy.

Good afternoon, everyone, and thank you for joining us today. After the market closed, we issued a press release announcing our results for the third quarter ended September 30, 2022. A copy of the press release is available in the Investor Relations section of our website. I encourage all listeners to view our release for additional information regarding the quarter. As an overview of today’s discussion, I’ll begin by providing a high level summary of the third quarter activities and results. Then, I will hand it over to our CFO, Chris DeAlmeida, to discuss the financial results. Our President, Kevin Mullins, will then come on to provide an update on the effectiveness of our updated go-to-market strategy within our strategic roadmap. I’ll then close out our discussion before we move into Q&A. With that, let’s begin. As I mentioned during our last update, in my first 90 days as CEO, I along with the other members of the board and the senior leadership team worked to develop a multiyear strategic roadmap, targeting growth, profitability, and immense value creation as top priorities. After another 90 days, we’ve now begun to implement programs, hire new leaders, and develop systems designed to execute on our plans. Not quite 6 months into it is not a long period of time. But in that window, I believe we set significant goals and put in place a process that will ultimately enable us to achieve them. During the third quarter, we released and started to execute against that new strategic roadmap, making meaningful strides towards re-accelerating growth, achieving sustainable profitability and ultimately enhancing value for shareholders. 2022 has thus far been a successful transition year for the company. And our third quarter results demonstrate that we are on track for our plan. This quarter, we improve…

Thank you, TJ, and good afternoon, everyone. Moving to our financial results for the third quarter. In Q3, we generated net revenues of $1.7 million compared to $1.8 million in the prior year period, representing a 6% decrease year-over-year, driven by the timing of certain international sales. However, we saw sequential sales growth from Q2 in both domestic and international markets, and Q3 2022 was a company record for quarterly domestic sales. Our third quarter 2022 revenue performance also includes $240,000 promotional discounts and incentives, primarily related to converting customers to the BolaWrap 150 from our legacy BolaWrap 150. During Q3, we started phasing out the promotional pricing, which is customary in our industry during a product transition. So those impacts the revenue should decline going forward. Gross revenues before such discounts and incentives were $1.9 million. Gross profit improved to record $900,000 or 54% of net revenue, a 28% year-over-year increase from $700,000 or 39% of net revenue in the prior year period. Our gross margin performance was a company record and reflects this year’s cost containment efforts as well as our shift to the higher margin product offering mix. To reiterate, we started phasing out promotional pricing in Q3 2022, and we expect our margins to benefit from this action in future periods. As a reminder, our goal has been to achieve a 50% blended quarterly gross margin and a quarter before the end of the year. Additionally, we are on track to be above 50% gross margin again next quarter as well. Continued focus on keeping expenses low, has allowed our Q3 SG&A expense to decrease $1.1 million, or 23% to $3.6 million from $4.7 million in the prior year period. Share-based compensation decreased to $700,000 from $1.1 million in the prior year period. We also expect…

Thanks, Chris. As TJ noted at the beginning of the call, we have already begun to see encouraging results from a revamped sales approach that we put in place last quarter. Building our go-to-market strategy is a fundamental component of our strategic roadmap. And we have given focus to maximizing processes for our future sales success. The goal for the BolaWrap 150 is to achieve repeatable and predictable sales across domestic and international markets. As a reminder, in the second quarter, we instituted several major changes to the way we approach our sales process. I’ll briefly illuminate those changes once more, as well as provide an update on our progress. First, we look inwardly at how we can drive more success with existing customers. In response, we created a new customer success team in mid-Q3, focused on retaining and expanding existing customer relationships. During our initial assessment, we determined only a marginal percentage of existing partner agencies, who were at full operational deployment. Expansion sales in the public safety vertical, especially within existing law enforcement agencies are more efficient, predictable, and occur faster than landing other new customers. We have now a dedicated team and a clear path to growing our existing customer base, while maintaining focus on expansion. During the third quarter, we saw success in this effort. As a result of the hard work and dedication of the customer success team, we were able to help drive additional sales to direct discussions with over 220 of our customers. Second, we look outwardly at our new customer sales process, and implemented a dedicated inside sales team function for new leads with a regionalized approach. By shifting to a regionalized approach, we have created a more regimented system to ensure leads are logged and tracked properly. This process has already…

Thanks, Kevin. In closing, I’m proud of the progress we have made thus far to execute against our new strategic roadmap. We remain focused on expanding sales in the United States, ramping internationally and expanding within existing agencies. I’m confident that we have the right plan and are building the right team to continue to grow revenue, drive stronger margins and support long run profitability. Looking ahead, we are in a strong position to meet our year-end goals to complete this transition and expect another meaningful step function improvement and sequential revenue growth, as we fully transition to our next generation product lines. We also remain committed to delivering on our cash flow and profitability outlook for 2023 and 2024, respectively. Law enforcement agencies across the globe are continuing to look for alternatives to pain compliance. BolaWrap is now considered by many departments as not elevating to the level of a higher level of use of force and usage is being rewarded as far as avoidance or prevention. As those departments deal with an increasing number of mental health calls, and also deal with expensive settlements, it is clear that the BolaWrap 150 is gaining more traction, and that our sales show that. There are also increasing opportunities for police departments in the U.S. to secure funding from government grants to acquire our product. We are now seeing agencies using multiple federal and state grants to purchase BolaWrap as well as Wrap Reality. We are also seeing agencies dedicated budget to these important investments and are convinced that it will reduce use of force payouts on a yearly basis. Wrap Reality with the new edition of Wrap Reality ADAPT is a powerful tool that we see as a successful step forward toward the future of law enforcement training. We saw an increased interest in Wrap Reality at IACP last month, and its enhanced capabilities, we believe it can become a dynamic tool in law enforcement and corrections departments training regimens. Our efforts are all part of a continuous push to improve the way law enforcement and corrections departments offer training to their staff. This also highlights Wrap’s own mission, to change the way law enforcement save lives. We want to empower public safety with innovative training and tools moving forward. We’re achieving this by working not just with the agencies, but also with the community and leadership as well. Kevin and I are almost at the 6-month mark since joining. And I can tell you, I continue to be more optimistic and excited about the enormous market opportunity for Wrap than I have been to date. With the team now executing on our strategic roadmap, I am determined to lead us through this transformative period and establish a foundation for Wrap’s long-term success. I will now turn over the call to Kelsey to facilitate the Q&A.

Thank you, TJ. [Operator Instructions] Our first question will come from Greg Gibas with Northland Capital Markets. Please proceed.

Hey, thanks for taking the questions, TJ, Chris, Kevin and Kelsey. Congrats on the record order as well.

Thank you.

I was just wondering, it sounds like pipeline is building. Are you seeing changing interest levels from departments either domestically or internationally? Or would you kind of attribute that more to your new go-to-market strategy?

I think, it’s a little bit of both. Greg, it’s TJ. I think, first off, we at IACP definitely had a shift and change in the way chiefs and decision makers were coming to the Wrap booth and talking to us. As an example, in the past that seemed to be more about – we haven’t seen it, show it to us, this particular IACP. It was very much about, we’ve seen it, we’d like to have it, someone on my staff actually said, we should come and check it out and learn more, and make sure that we get it into our department. So, a lot more awareness, a lot of people have seen our videos have talked to other agencies, who already use BolaWrap or Wrap Reality and that referral business is certainly growing. I do think our new approaches are definitely helping us close deals faster than we had before in some cases, and certainly having more follow-up and even outbound approaches to our sales approach, but definitely increasing interest and increasing desire to leverage BolaWrap and Wrap Reality.

Great. Good to hear. If I could follow-up on the LAPD, nice to see that trial extended, I think you said 500 people Wrap devices with them. I was just kind of wondering, when you expect and maybe get more definitive results, when that trial ends, or just anything more inclusively.

Yeah, the trial started in late August, and it was expected to last for 12 months in this phase part of that so that they can gather data over time. So, we’re a couple of months into that now, we are getting some positive feedback. I’ve been out there to listen to the officers in the field. And they expect to continue with throughout the next year. So, I think, we’ll have a lot more over time. They’re looking at a little more longitudinally, and we’ll share that as we get more data.

Okay. Sounds good. Regarding the new – so the record order of $1.5 million and then you also mentioned a pretty sizable order in South America. I’m wondering maybe the relative size, I guess, a bit that order, and then kind of would you expect both of those to be recognized in the Q4 timeframe?

Yeah, so the South America order came in actually late in Q3, but we were already in a blackout period, which is why we didn’t announce that sooner, and that’s a 6-figure order. And that’s included in Q3 results to $1.5 million that was a Q4 order was in October. And so that will be part of Q4 results.

Great. I guess just last one for me. Just regarding your liquidity position, do you think you have sufficient liquidity to bridge that gap to generating cash based on your outlook?

We do.

Yeah, based on our outlook right now, we do feel that given where we project sales growth to be in the current cash we have on hand that that would be sufficient for us going forward.

Okay, great. I’ll pass it on.

Thank you, Greg. Our next question comes from Allen Klee with Maxim Group. Please go ahead.

Okay, thank you. Just following up on the question on the 2 big orders, is it reasonable to assume that both of them you recognize all the revenue in the quarter that you’ve received in one quarter?

Yeah, that’s correct, Allen. So the South America order like TJ mentioned, actually happened in the third quarter. So that was fully recognized in the third quarter. The larger EMEA order happened, we received it, and it occurred in October. So that will be part of Q4 revenue and through recognized in the fourth quarter.

Okay, great. I think, I heard you say your goal is to keep the operating expenses below $5 million. Is that still a goal once we get into next year, where you kind of normally at the beginning of the year, expenses kind of go up and sales commission like just sales related costs tend to be a little more variable. So just trying to see how long of a goal is, is that? Thank you.

Yeah, absolutely. That is our stated goal. But we will keep OpEx costs below $5 million kind of in the foreseeable future. We – that will grow over time, as sales grow, but we’re going to be very conscious about how we do that. So at this point, we want to keep costs low. We do believe going into next year, we will be able to achieve that. I mean, there’s some seasonality, as we mentioned, just in cost structure overall, but at least on an average basis, we think will be below the 5 – at or below the $5 million mark in 2023. And then, look, I mean, we’ll see ourselves take off. I mean, clearly, we’re being very aggressive in our sales approach. We want to see sales grow and build. And so that could lead to some additional costs. But like I said, we’ll keep a very tight lid on that, and very conscious about how we expand our costs going forward.

Great. And my last question is, are you still dealing with travel restrictions for internationals to try to accelerate international sales? Or have you found that that’s gotten better or expect that to get better?

We have found that it has improved. There are some regions of the world where there’s still more restrictions, but they are much better here in Q4 of this year versus even 4 to 6 months ago. So we’ve seen a major improvement. And we expect that to stay fairly open based upon the knowledge we have right now.

Thank you very much.

Thank you, Allen. We now have two questions that we’ve received from investors. I will read those now. Question number one, when may professional security agencies be allowed to work with this technology?

Currently, right now, in the U.S., law enforcement agencies are able to leverage BolaWrap and those that have different departments that work for those law enforcement agencies, but not private or professional security today. We’re working on ways to improve that in the future and have engaged a number of avenues long-term to try to improve that and allow that to open up much broader. But as of right now, it’s still focused on law enforcement in the U.S.

And question number two, what factors is Wrap looking at to drive revenue growth?

On the main factors for us is really building that repeatable domestic and international sales. And we’re continuing to do that through our improvements in the strategic roadmap. Another element for us was building a customer success organization that is focused on our existing agencies today, and really making sure we’re supporting them as they grow to more full deployment across the agencies and help grow with them every step of that way. And so we believe that that support and actually implementing a customer success organization will help us grow more intrinsically from our existing base of customers, while we’re continuing to add built new domestic and international customers.

Thank you, TJ. At this time, that concludes our question-and-answer session. Thank you for joining us today for our third quarter 2022 earnings conference call. You may now disconnect.