Good afternoon and welcome to Wrap Technologies First Quarter 2023 Earnings Conference Call. Joining me today is our Chief Executive Officer, Kevin Mullins; and our Chief Financial Officer, Chris DeAlmeida. Following their prepared remarks, we will have a few questions submitted from shareholders. I would 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 ir.wrap.com. Additionally, the company ask that all interested parties register on the new investor relations website at ir.wrap.com to continue to receive alerts and stock information. As a reminder to listeners, certain statements made during the call today constitute forward-looking statements made pursuant to the Safe Harbor provision 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 release and more fully in our filings with the SEC. The forward-looking statements today are made as 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, Kevin Mullins. Kevin?

Good afternoon, everyone and thank you for joining us today. After the market close, we issued a press release announcing our results for the first quarter of 2023. A copy of the press release is available on our Investor Relations website at ir.wrap.com, which is also accessible through our corporate site, wrap.com. As an overview of today’s discussion, I’ll begin by providing a high level summary of the first quarter and recent developments before handing it over to our CFO, Chris DeAlmeida to discuss the financial results in more detail. I’ll then come back on to provide a larger update on our sales and operations before we move into Q&A. To start, it is a privilege to assume the position of CEO. Having been part of Wrap since early 2022, I have observed the vast market potential that lies ahead of us, and I’m certain that we are laying the foundation for a sustained growth. As you’re aware, in April, we implemented several organizational changes aimed at aligning our cost structure and prioritizing near-term and long-term sales. While challenging, we believe these changes will yield a positive impact on our profitability, and agility going forward. Our foremost objective is to enable customers in achieving success by providing innovative solution that can serve as valuable tools for law enforcement officers and save lives. I would like to express my gratitude to TJ Kennedy for his leadership and guidance during an important transitional year for the company. And we wish him all the best in his future endeavors. As part of the leadership changes, we have welcomed two new members to our Board of Directors, Bruce Bernstein, and Marc Savas. Bruce is a Senior Portfolio Manager for two alternative finance funds, and has over 35 years of experience in the securities industry.…

Thank you, Kevin and good afternoon, everyone. Moving to our financial results for the first quarter of 2023. In Q1, we generated revenue of $711,000 compared to $1.6 million in the prior year period. Decreased our Q1 2023 revenue was primarily due to a delay in timing of new orders primarily on the international side. Revenue in the Americas decreased 40% to $710,000 from $1.2 million in the prior year period, while international revenue decreased to $1,000 from $410,000 in the prior year period. Gross profit for the first quarter of 2023 decreased to $350,000 or 50% gross margin. This gross profit decline is a 48% decrease from $670,000 or a 42% gross margin in the prior year period. The decrease in gross profit was a result of the decrease in sales, while the increase in gross margin was primarily a result of the increased efficiencies and the costs associated with the production of the BolaWrap 150 as compared to the BolaWrap 100 and improved pricing on the BolaWrap 150 products. SG&A expense for the first quarter of 2023 decreased to $1 million or 23% to $3.5 million from $4.6 million in the prior year period. The decrease in SG&A was the result of continued cost containment efforts. Share-based compensation decreased to $628,000 in the first quarter from $1 million in the prior year period. R&D expense in Q1 decreased about $430,000 or 29% to $1.1 million from $1.5 million in the prior year period. The decrease in R&D expense for the quarter was primarily the result of cost management efforts, as well as improving development cost associated with the BolaWrap 150. Operating expenses for the first quarter decreased $1.5 million or 24% to $4.6 million from $6.1 million in the prior year period. The decrease in operating expense was…

Thanks, Chris. Although we encountered a subdued macroeconomic landscape in Q1 which led to the deferral numerous deals, particularly in the international market, we are making the headway with these opportunities in our strong sales pipeline. We are observing healthy demand in our domestic market. In Q1, we participated in several events and provided an equal number of quotes. Nevertheless, we do need to consider the regular budgeting process, which tends to shift orders to the latter part of the year, because of budgeting cycles. Nonetheless, we anticipate a significant increase in domestic orders as we move forward in the year. In the international market, while deals did not always progress as expected, and we persisted in expanding our global pipeline. This development is encouraging as we advance into Q2 in the remainder of the year, we recognize significant growth prospects in the international market, and it is still nascent stage regarding capturing market share there. Due to the public safety market and government budget cycle, sales tend to be back-end loaded. However, we are confident that our strategy is well suited to seize the near-term market opportunities. Before we close, I’d like to take a moment to get further context around leaderships updated operating priorities. As reminder, these are two: one, accelerate the rate at which we close deals, two, expand deployment with existing customers, and three, reduce our non-essential operating expenses. Beginning with accelerating new sales. As part of our ongoing efforts to enhance our sales strategy and drive growth, we made several organizational changes in April, including the realignment of our sales force, both domestically and internationally. The primary goal of this realignment is to create a more cohesive and unified team with a committed focus on customer success and driving sales results. By consolidating our sales…

Thank you, Kevin. The following questions were submitted from shareholders and interested parties. For the first question, how has the introduction of the reduction in force guarantee been received thus far? And are you seeing additional sales traction?

Thank you, Kelsey. That the short answer to that question is yes. We are, you know, a recap of the program for you know anyone on the call that might not you know fully understand, our reduction in force guarantee is that, if an agency implements BolaWrap, and they implement the program enterprise-wide, so to the majority of sworn officers, we guarantee that that agency will see a significant reduction in use of force over a 12-month period. There are caveats to this, but it’s a program where we put our money where our mouth is, that we feel strong in our technology, and then what we’re seeing and understanding that you know every agency domestically and internationally, you are looking to reduce use of the force. And that has been heightened by tragic events such as you know Tyre Nichols with what’s happened in Memphis. It’s heightened by you know the average cost to defend the use of force claim is $2.2 million. Interesting that over half the use of force incidents that happened in the United States result in bodily harm to individuals. One-fifth of those involve a firearm discharge. And so, we’re also seeing, you know, an officer injury rates from somewhere in the neighborhood of 15% based on each use of force. And when you break down what the cost is of a use of force, it’s over 150,000 workdays that we’re seeing that. So the total hours work lost, it’s 1.5 million. And the cost, you know for those hours lost is $31 million to replace that $47 million. So, again you know, every agencies looking to reduce those uses of the force. And we feel so strong in our BolaWrap technology, and we have the data to back it up, that again, you know we put our money where our mouth is and we are seeing attraction coming from the agencies that want to take us up on this program.

Thank you, Kevin. Chris, when do you plan to complete your reassessment and reissue guidance?

Great question. Given kind of some of the recent changes in management, we’re taking the time to kind of reassess and reevaluate our current guidance. While we don’t have a specific timeline right at this moment. I would like to emphasize that our outlook remains positive. We’re confident about our ability to navigate any potential challenges and capitalize on opportunities for the future. We will provide an update soon as we’ve completed our reassessment are in a better position to provide revised guidance. But with that, we appreciate kind of everybody’s understanding and patience during this time.

Thank you, Chris. Also, can you provide more details about how the just-in-time production model will work?

Yeah, certainly. I’d be happy to do that. You know what we’re trying to focus on with our just-in-time production model is really designing something that optimize the efficiency and minimize ways by producing goods, when they’re needed, when the demand is there, so to speak. This means, that going forward we’ll maintain a leaner inventory, and production will be triggered by customer demand. This approach will enable us to reduce our inventory holding cost, minimize the risk of excess or obsolete inventory, and improve our cash flow. However, all that being said, we have sufficient inventory today, we can meet the demands of our customers and we’re excited about doing that. And we’re comfortable that we can quickly fill orders, both today and into the future.

Thank you. Kevin, is the outsourcing of Wrap Reality a permanent plan? Or is it temporarily based on current business condition? We’d like to understand the updated long-term vision of this business.

Absolutely, it’s a good question, and the answer is yes, if this is a permanent plan. We believe that our VR training platform, Wrap Reality is one of the best solutions on the market. We received that same you know feedback from our customer base. You know, so we see this you know solution as the most productive and efficient way to be able to train law enforcement. It’s not only you know, our platform that we’re offering to law enforcement directly, but it’s to corrections, we also have our societal reentry platform. Outsourcing will allow us to expand with highly trained teams to pro content and grow content effectively and efficiently. And this is very important when we’re looking at expanding into the international market, where we need to localize scenarios for that particular market. Again, it’s about you know creating and building new content as quickly as we can. There’s a huge demand in the market right now for a more effective way to train. We’re also seeing grant dollars coming in for different training solutions, based on different events that have happened, you know, over the last several months. So our goal is to be able to take advantage of not only creating you know content for our law enforcement partners, but being able to, you know, really rationalize and understand you know, where the budget dollars are coming, and then direct our content toward what has been you know the highest priority there.

Thank you, Kevin. Also, can you provide more information on any new products or features that you plan to launch in the coming quarters? And how these will contribute to revenue growth and customer acquisition?

Yeah. We are looking – we’re always looking, you know, we’re looking to consider, you know, what new solutions are out there, and what other ancillary products that are out there, that would allow us for, to expand existing and are potentially new customer base. And so, there are opportunities for large scale bundled product sets and so being able to build on those economies of scale, being able to add potential products in that would be a nice bolt-on a nice add-on to our product sets that we have now. So we absolutely are looking for those new revenue sources, and how we build on efficiency. So that’s going to be a priority in the next couple of months.

Thank you. That concludes our Q&A portion of the call. Thank you for joining us today for Wrap Technologies first quarter 2023 earnings conference call. If you have any additional questions, please reach out to us via our website at ir.wrap.com. You may now disconnect.