Wrap Technologies, Inc. Q3 FY2020 Earnings Call

Good afternoon and welcome to Wrap Technologies Third Quarter 2020 Conference Call. My name is Paul Manley and I'm Vice President of Investor Relations for Wrap. Like we did last quarter, we will be incorporating video highlights into our multimedia presentation, which was overwhelmingly positive last quarter and we are happy to continue this format. We are looking to be cutting edge and forward thinking in everything we do at Wrap, and having an interactive earnings call is another example of this. Joining me on today's call are Tom Smith, our Interim Chief Executive Officer, and Jim Barnes, our Chief Financial Officer. Following our prepared remarks, we will have a Q&A session. Certain statements made during the call today constitute forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in our earnings press release issued earlier today and in our filings with the SEC. The forward-looking statements made today are as of the date of this call, and we do not undertake any obligation to update these forward-looking statements. With that, please let me turn the call to Tom Smith.

Thank you, Paul, and thank you, everyone, for joining us today. Before we go into our quarterly results, I'd like to address a couple of important items right away. First off, on behalf of the entire Wrap team, we wish health and safety to everyone connected with our company, in particular, our customer base comprised of police agencies across the globe. With COVID and the level of widespread demonstrations and rioting we have faced in 2020, this year has been remarkable. We have seen a significant uptick in the level of time and attention our customer prospects give us to learn how the BolaWrap can help them do their jobs more efficiently and safely. Regarding COVID, like all other companies, we continue to navigate the pandemic as well as possible. Our company has remained healthy and I am proud to note that due to all of the actions we have taken to date, we have had limited instances of exposure within any of our facilities. The most significant COVID related setback we have had is limitation in domestic and international travel. Technology is a helpful alternative and has kept us moving forward, but there is nothing like experiencing an in-person Wrap to understand how good our product is and to deliver product demonstrations and sales calls in person. We do expect these travel headwinds to continue for the foreseeable future, but hopefully dissipate through 2021. Next, as you know, I've been named Interim CEO. I want to thank our Executive Chairman, Scott Cohen, and the rest of the board for their trust in giving me the opportunity to lead our company. My excitement starts and finishes with Wrap. We are a special company that finds itself at a very pivotal time in law enforcement and history. The discussion around use of force is at an all-time high around the world. The level of discussion from all constituents regarding policing procedures is also at an all-time high. Many of you have heard me say this often: we are in the right place at the right time with the perfect product to fill a gap in how police handle many different situations. We must seize this moment. Police presence is absolutely needed in our communities. As discussions continue around police reform or even defunding police, we believe that Wrap is an integral part of the response. It is easy to point out problems, but Wrap is working on the solutions. These discussions will lead to better training and better tools like the BolaWrap. As it relates to our business, our strategy is sound and becomes more proven with each passing month. We had our first quarter with over $1 million in sales, a very exciting milestone. We also have an incredibly strong balance sheet with over $45 million in cash, cash equivalents, and short-term investments and minimal long-term debt. We are moving hard and fast to grow the market for our technology. That will not change. I will continue to devote a considerable amount of my time to driving our sales force in the U.S. as well as internationally. We will continue to invest in our sales engine. We have also recently invested in growing our research and development team. We want to drive constant improvement in the BolaWrap while discovering incremental ways to bolster our product suite. We have a great team in place and are doing a great job of keeping us ahead of the game as it relates to our product development. Accelerate and scale, our two initiatives we think about every day. Near-term, we are staying the course. We are working hard to accelerate growth and to scale our operations. This takes finesse and balance. We feel good about where we stand on both fronts. To ensure this continues, one of my near-term objectives is to bolster our operations team so we maintain our strong track record of execution. We are making these investments to further position our company for success against our mission. We want to see remote restraint become standard for every police officer in the world. We believe many daily incidents can be handled without force, especially when dealing with a person in crisis. The total addressable market is significant. As we did by sponsoring National Faith & Blue Weekend earlier this month, we can enhance conversations between community and law enforcement. This directly supports our mission. The National Faith & Blue Weekend was a very successful program between faith-based organizations and law enforcement coming together through various activities and planned events in communities across the country. I would like to share with you one of the videos we recently released from the St. Cloud Police Department in Florida. In this body cam video, a mother has called the police as her adult male son is suicidal and has indicated that he wants to be shot by the police. Watch as the officers de-escalate the situation using a BolaWrap, communicate, and take quick action to safely end this potentially deadly outcome. When we come back, Jim will provide you with some financial details from our third quarter.

Good afternoon, our detailed operating results can be found in the earnings press release issued today and on our Form 10-Q filed a short time ago. My thanks to our finance team for helping to complete our financial reporting process as timely as we do. Let me now highlight a few financial details. Our revenues for Q3 were a record $1.7 million. For the first nine months, revenues were $2.53 million representing a 467% increase from the same period of 2019. COVID-19 restrictions substantially curtailed sales in April and May, and we believe this negatively impacted our sales this year. Our gross margin in Q3 was in line with the immediately preceding quarter at 32%. As we are still growing our business and scaling production, historic margins should not be relied upon as an indicator of future margins. Like most companies, COVID has made it very challenging to accurately forecast many of our line items near term, especially gross margin. However, based on recent product changes and new manufacturing initiatives, we believe that our target of over 40% margins will soon be achievable. Our balance sheet remains exceptionally strong, with 91% of our total assets, $49 million, comprised of cash, cash equivalents, and short-term investments. Together, we will refer to these as cash during this webcast. We grew this cash balance from $35.4 million at the end of the second quarter to $45.1 million at the end of the third quarter. The increase is primarily due to $2.7 million of warrants exercised in the third quarter, providing gross proceeds of $14.2 million. So far in October, we have received $359,000 from more exercises. We have some warrants that expire tomorrow, so there is a possibility that we may generate additional cash yet this month. The new item on the balance sheet in the third quarter was our cash and short-term investments. We are taking a conservative approach with these securities and believe it is prudent to have our outstanding cash work for us, even though we are in a very low-interest rate environment. Near-term, we expect our available cash to support the two initiatives Tom mentioned earlier: accelerate and scale our growth. Specifically, we plan to grow our sales team to accelerate growth and best engineering resources and new products and scale manufacturing. At this stage, we have avoided debt. However, as a reminder, we did take out a $450,000 loan as part of the Payroll Protection Program back in May. We believe we used 100% of the proceeds for eligible purposes, as outlined by the SBA, mostly for payroll. Accordingly, in early October, without an application for forgiveness of this loan, there are no assurances this forgiveness will be granted. As a co-founder of Wrap, it has been very exciting to witness our progress since day one. I am especially proud to see that the BolaWrap product has shipped to over 35 countries worldwide to date and has been used in real-time by accepting online officers to de-escalate encounters. Tom has been instrumental in helping us attract an exceptional team of sales and engineering professionals that we believe will be key to our growth and continued success. In conclusion, we are pleased with our exceptionally strong balance sheet and our financial performance, especially in light of the COVID and civil unrest headwinds.

Thank you, Jim, and nice work to you and your team. At this point, I'd like to give you a business review of the third quarter as we had several noteworthy accomplishments. Again, our first quarter with over $1 million in revenue and over $45 million in cash and equivalents on the balance sheet. We have trained over 100 agencies just in the third quarter. We grew from over 100 agencies to now over 240 agencies with the BolaWrap and shipped to 35 countries, which is up from 29 in Q2. We now have 1,100 officers at over 300 agencies certified to train their departments. Trained officers within agencies are a top precursor to sales activities for us. This training time is a sign of investment from the agency, as well as now having a subject matter expert from the department as they implement our technology. During the quarter, the Los Angeles Police Department provided a publicly available update on their test and evaluation program. We have a very good relationship with the agency and continue to work closely with LAPD as their request to continue their program was unanimously approved and reported by the L.A. Times without change. As we have stated before, we do not expect to know the next steps until the trial ends in 2021. The use of the BolaWrap comes with several facets. First, there's a verbal warning from the officer that the BolaWrap could be used. Next is a green line laser compliance resulting from the subject seeing a line laser on them and no longer resisting. This is very similar to the red dot compliance from CEW being pointed but not fired. When the BolaWrap is discharged, along with a tether wrapping around the subject, the sound from the BolaWrap is distracting and startling, giving the officers a window of opportunity to detain the subject. This can include a complete or partial wrap of the subject. Use of force experts will tell you that if a situation is resolved without force or injury, that is a success. In the dozens of field uses we are aware of, we have seen each of these instances ending the situation. Proper training of the BolaWrap is critical to the success in the field, including before, during and after use. A short time ago, we played the video of the apprehension of the suicidal man in Florida for you. This is a great example of using our product effectively. Our thanks again to the St. Cloud Police Department for allowing us to use this body cam footage. Had the officer waited, myriad different outcomes could have occurred, all of which may have resulted in escalation, force, injury, or even death. The officer did not let him have the chance. Once in custody, the subject's attitude changed, allowing the officers to get him the needed help. Earlier, I provided some key metrics that show our progress with the various stages we are in with police agencies to become users of our products. I'd like to provide some more color on our overall market opportunity and why we are so excited. Again, there are 18,000 police agencies in the United States. As we have said, the larger the agency, the longer time it takes from introduction to order fulfillment. Law enforcement needs to balance budget availability, pilot programs, officer training, and other requisites. As I mentioned earlier this summer, many agencies were dealing with demonstrations and protests across the United States, including some of the cities we are active in, such as Los Angeles, Minneapolis, Cincinnati, and Houston. We are at various stages of discussion with each of these agencies and many more. We know there is a strong correlation between the size of the agency and how fast that initial order can be placed. The smaller the agency, the quicker the decision making. The majority of our initial orders fulfilled to date are from these smaller agencies where they have an easier time to place orders. We have had instances where a 10-officer agency will order BolaWrap cartridges at an initial demonstration. This is the exception, certainly not the rule, but it is a good example of how clear our value proposition is. Larger cities, for instance, those with over a million people protected, can take a year or longer. However, already in October, we are seeing an increase in new and repeat orders from the domestic market for BolaWrap products and accessories. Compared to the domestic market, the international market is 12 times larger. During the next 12 to 24 months, we expect the international market to continue to be the majority of our business. International is an important part of our growth plan, and we expect to continue to expand and scale our presence in the 35 countries as well as explore new opportunities. Before we move to the question and answer, I want to thank our stakeholders for your continued support. I also want to thank all of my fellow Wrap colleagues. Thank you for everything you do to help us serve police agencies around the world. With my comments related to our financial performance completed, I invite you now to watch our third-quarter highlight video. These highlights are more examples of the traction we are getting with the BolaWrap, and we are very proud of each and every instance of success that we have earned. After this short video, Paul will come back to moderate our question-and-answer session with Jim and me.

I really hope you enjoyed that video as we now move to the question and answer session with Tom and Jim. Thanks to everyone who has already submitted questions. We have lots of great questions and similar ones. Our first question will come from Jon Hickman, our analyst from Ladenburg Thalmann. Jon, go ahead.

I have this first question for Tom. Give us a little more detail about the CEO change.

Sure. So obviously, there's been a lot of attention for us in the Washington DC area. In conversations with Marc and the board, we felt it was time for Marc to move to the Chief Government Affairs Officer role and focus really in the DC area. And with my background, there's nobody better to resume and be the interim CEO as we work on focusing on manufacturing efficiencies and delivery. So it was done again where Marc's going to be working with us in the lobbying side, and I'm going to be focusing on the sales and operations side of the company.

I saw one of Marc's strengths was the manufacturing and engineering side. Are you still going to take make use of that?

Yes, we have done a lot of implementation on our manufacturing efficiencies, but again, right now we felt it was optimal with what's going on in this country, with the political environment, with the folks at the national level, pretty much at every level. I mean, look at what's going on in Philadelphia that it was with his wife, White House fellowship background, with his military connections. There are not many White House fellows running around out there. So, again, in consultation with them, the board, and myself, we felt that this was the right focus for the company to move Marc to that role and for me to focus on the manufacturing efficiency enhancements that he's doing and the team that he's building. I will continue to build on the engineering team that we brought in as well.

A couple of other quick questions. How many agencies did you say are using the device?

So right now, we're over 245 agencies that are using it. That's up from, I believe, around 180 last quarter. So that's a great jump. And we were up to 25 countries from 29 last quarter. And again, I want to emphasize that's with COVID and no international travel, so very excited about where we're continuing to see growth. And even in October, again, another uptick even in our domestic sales that we'll be talking about very soon.

And then I didn't quite catch this call, but you said that you were seeing increases in new and recurring and replacement shipments. What time period did you say that was?

Yes, so we saw that through the quarter. We're continuing to see that in October where we're seeing agencies come back with multiple orders. We're seeing it on the international front, the domestic front. So we're seeing growth and continued expansion with our current customers, as well as in adding new customers.

Okay. So is there a way for you guys to track the use? You just are kind of at the mercy of the agencies?

Well, we work very closely with our distributors and with the agencies, so there's a lot of communication that goes back and forth. It's a complex process, even for a small agency, but obviously a larger agency is even more complex between the mayor, city council, commissions, and all those facets that come through there. So, we get a lot of questions about the ratio of the cartridges to the devices. Our recommendation, minimum recommendation when they begin is for six cartridges per device. That comes from the officer giving at least two in their training, three in the field, meaning one in the device in a holster with two extras, and then they have an extra cartridge for their recurrent training. As we look ahead, obviously those will change because they'll get skewed with something like the Indonesian order. They came in with an extremely large order for cartridges right out of the gate. Next year, we'll be able to align those better to give more clarity. For now, that's kind of the minimum—around six to one as they get started, and we're seeing it higher than that as well.

One last question for me. There is a pretty significant jump in operating expenses from Q2 to Q3. Can you elaborate on that?

Sure. We will continue to invest in our sales operations, our manufacturing operations, our engineering, and just continue to invest in the company. We did some voluntary upgrades. That was an expense to enhance the product, even some that were in the field, which we took the money to do the right thing and get those upgraded. Again, we've got an incredibly strong balance sheet that affords us the ability to continue and invest well in the company so that we're making sure that we're taking the right steps. And again, very exciting for our first quarter to have over a million in revenue, and the response we're getting from the market, even already in October, has been extremely positive.

Should we expect similar expansion in OpEx for the next couple of quarters?

I think you will see that. We've continued to build our engineering team. We added a lot of engineers during this quarter. We're going to obviously, with Marc focusing on government affairs, bring in more operations personnel. I hope at some point it will allow us to really start traveling internationally again. We're looking at some international expansion with our personnel. We're very excited about where we're going, and I don't think we want to sit and hold back on those investments because now is the time to seize the moment, go after this market, and continue to see again our first quarter with a million in revenue. We're going to continue to use the war chest we have to make the right investments to grow the company.

Jon, thank you very much for those great questions and your support. Our next questions will be from Greg Gibbous from Northland Capital Markets. Greg, go ahead.

Previously shared, it sounds like a lot of your discussions with the LAPD continue to go very well. I guess the department recently extended that trial not too long ago. Do you think that there's a concern maybe that the LAPD would potentially extend that trial again, just given the limited uses during the pandemic? And I guess is there anything else you can share in terms of feedback from the LAPD?

Yes, great question. Obviously, it's garnered a lot of attention around that particular agency. But we really... the short answer is we don't know what LAPD is going to do. We were obviously very pleased and excited to see the unanimous vote by the commission to continue doing exactly what they're doing. They made the report public; that's their own data, their own interpretation of that data. We have people there just last week and are working very, very closely with them. But again, these are unprecedented times with police reform discussions, the rioting, and the protests occurring. The Dodgers just won the World Series, which caused a lot of protests and riots in the streets. Police departments have to respond to many out-of-the-norm things. I can't tell you one way or the other, but I can tell you we're very comfortable with the progress that we're making with LAPD. We're very comfortable with our relationship and our communications, and we'll continue to support them in any way that they decide. Right now, we know they're continuing that trial through early 2021, and they even put that out in a press release for us last month. We have a great relationship there, and we're obviously very hopeful.

Great. Good to hear. I know you don't have too much data surrounding the customer adoption yet, but you've made it clear that you've increased the number of department demonstrations in the quarter. So, I guess I was just wondering if anything changed, maybe the rate at which departments are making purchases or field trials just following demonstrations.

Yes, and we reference the uptick we’ve seen in October has been really exciting; it's even gone better than I thought. Again, with COVID, the police reform, and this election coming up next week, it's really garnering all kinds of attention. It's still really a tinderbox out there. I mean, look at what just happened in Philadelphia earlier this week; it's tragic incidents that lead to all kinds of rioting. The Dodgers win the series, causing protests. Once again, it’s unprecedented. But we're very, very pleased with the growth opportunities we're seeing, the department adoption rates, and our demonstrations. We trained 100 departments in this quarter alone. That means more officers are becoming subject matter experts. That means more reorders and new expansions of orders. More than one department was trained on a daily basis during the quarter despite things slowing down at the end of the summer as school resumed and travel remained uncertain. I'm very excited and pleased with the progress we're seeing and continue to see already in this short time within the fourth quarter.

Great. And it sounds like, once again, a lot of international sales is kind of what you saw, but how did that credit the best? I know it’s still a small percentage of sales. But roughly, like it is a tough question. But roughly what percentage of, I guess, domestic police departments do you think you've got to provide a demonstration for? Or maybe at least what meaning are we in terms of getting the BolaWrap awareness in front of those departments across the nation?

It's a real tough guess. Let me give you another way of looking at it. So, we've trained roughly 100 agencies during this quarter. I think we’re over 300 agencies trained now, and we're over 1,100 instructors trained. Just like LAPD is an example, they trained 1,100 officers, so we have a very rough estimate; we have roughly 10,000 officers who have been exposed to or seen the BolaWrap, and that's out of 900,000. So clearly, that leaves us with a big opportunity out there. We've done surveys that we're going to release data from because very few people still know about us. We're doing a lot of marketing and effort, but we still have a long way to go on making people aware of our product. However, once we do get people aware, the percentage of people who want to see the police using that product is high, and we'll be sharing that data soon. This reflects the feedback we've run across nationally.

And then just the last one for me, I think we talked about this last quarter, but just to check in here regarding any potential changes I've noticed from dialogues from customers in the quarter, maybe relative to the last couple of quarters. Has anything changed that you're relating to budget concerns from departments or anything else you picked up?

No, I haven't really seen anything on the budget, but I have seen an uptick where agencies that we were talking to a year ago or attended demonstrations a year ago are back out contacting us again. For me, that's a very positive sign. It’s back to the basics. There’s unprecedented pressure on police for reform from all the protests, from BLM, from all the riots, and defunding communications. Police have said this before: they don't change quickly. That's why I'm very excited about the trends I'm seeing; they continue with the adoption of this. They still need the equipment, and we need those police officers in our communities to have these tools. Again, it's the only tool out there that doesn't hurt. Someone had asked about competition; there is no other competition. Our intellectual property is well protected. So very happy with where we are and the trajectory we're on. I expect that trajectory to continue to the right.

Alright, thank you very much, Greg, for your questions and your support as well. We've had many questions coming in on the Q&A tab. I've tried to summarize a lot of them; many are very similar. I'm just going to start off. The first question says here: you have a lot of cash. You have $45 million in the bank. What are your plans on using that cash?

As I said before, I don't know if Jim has any comments on it, but I want to see us continue to invest. Not many companies have the balance sheet that we do, with very minimal long-term debt. We're going to invest and continue to invest in the business. We're investing in research and development, and that gives us the ability to go out there and take advantage of this unprecedented time to see them seize that moment and get involved in Washington, D.C. Luckily, this election will be behind us on Tuesday, so hopefully, we can make significant progress there with the military, federal agencies, and a lot of those grant funds required and necessary for law enforcement. We're going to use those dollars wisely to invest in the right things for the company. Again, that's going to be in the international market as well. So, that's a key opportunity for us. The majority of our business, as we've said, is expected to continue to be that for the next 12 to 24 months. That more just gives us the opportunity not to pull back right now, but to continue to march into investing into the market, into getting our demos and training—the things we know will grow and lead to adoption. Again, that's what we're seeing in October. We'll be putting information out there in the not-too-distant future.

Alright, thank you, Tom. Another good question; what are some of the biggest pushbacks we have received from police departments, both large and small, as well as some of the international countries?

Well, I think right now, obviously, the biggest issue internationally is that they can't travel. We're seeing spikes in Europe, and they're going through shutdowns again. But at the same time, just like during our highlight video, they received television coverage in Spain. We finally got down to Colombia recently. We've seen demonstrations in Estonia. We're continuing to see market progress in Asia, Europe, and the Middle East. The challenges are COVID-related keeping us from traveling. Domestically, they have their hands full with the riots and protests, thus needing to sort through pressures from community groups and the information they want to share. I've participated in panels recently discussing reimagining policing. In these discussions, I've noted that pointing out the problems is easy; Wrap is focused on finding solutions. We're providing tools that will make a difference, and that's what we'll continue to focus on.

Alright, thank you, Tom. It appears I may have a question for Jim here. Gross margins came in at low 32%. What are your near-term and long-term goals for gross margins?

In the near term, we think we can get above 40%. We have initiatives underway right now to both reduce our labor costs and improve our line efficiency while also reducing the cost of materials. These will drive margins going forward. Our margins are affected a bit by the product mix, with cartridges currently having lower gross margins than devices. We expect that to improve over the next several quarters as well.

Jim, I guess maybe in follow-up to this. Can you break down the sales between devices? Can you break down the sales between devices and cartridges? Also, can you break down the sales between domestic and international?

I think we've spoken about this several times. Our international business is currently the majority of our sales. We expect that to be consistent, as Tom said, in the next 12 to 24 months. We don’t really break that total down except at year-end, and we'll do that at the end of this fiscal year. Next year, we’ll consider breaking it out more frequently. The mix between cartridges and devices varies quite a bit right now due to our lower sales figures. Although we're growing every quarter, we'll see those numbers breakout probably next year as well. Generally, it’s a little bit higher on devices and cartridges overall, but Q3 was a higher cartridge mix because of the Indonesian order.

Maybe this one's for Tom. We've said that the international market is 12 times larger than the United States, or the domestic market is. What's the sales process like domestically versus internationally? Is the process the same?

No, they're very different processes. Again, here you have 18,000 chiefs to 18,000 decision makers—that's 18,000 agency city councils and everything else—while when you go overseas, it's typically one or two agencies for the entire country. Indonesia is an example we've discussed before; it has 30,000 to 40,000 officers in one agency covering the country. So, there's a consolidated decision process, and it does take longer because obviously, the dollars will be larger when discussing implementation for an agency that's one-third the size of the entire U.S. market. They do go through a similar process, though—they go through training, they go through demonstrations, and they do have to look at budgets. That's why I said before that in the next 12 months, I expect the international markets to continue being the majority of our business. Again, if you look internationally, a lot of those law enforcement officers aren't even armed, so they're looking for a tool like the BolaWrap to allow them to handle situations because they're facing similar problems though they might handle them differently. We're dealing with that at a national level rather than a state, local, or even municipal level as we have here in the United States.

Alright, thank you, Tom. We've had a lot of questions come in about the effects of delivery of orders and orders coming in due to the impact of COVID. I guess we've already discussed that a little bit. Is there anything else, Tom or Jim, that you would want to say about the impact of COVID on our business right now?

I think, again, the impact is just on the international front. We finally got someone down to Colombia, and it took quite an effort. You have to get the COVID test within 96 hours of the flight's departure; the airline changed at the last minute which tests they would accept, so the initial trip was scrubbed. We had to redo the tests to finally get someone down there. It's definitely a challenge and now you're seeing more lockdowns on international travel. There is more demand for the product internationally, but those travel headwinds are certainly impacting us. We're pivoting, using technology, Zoom, and even translating our materials into foreign languages. But to say that it's not impacting us— I just can't say that. And we are doing the best to ensure agencies continue to proceed. If I reflect on my significant travel schedule from last year to get to 20-plus countries in my first six months, that's paying dividends now. We have great distributors that are trained and able to handle this locally and conduct demos. You saw some of those videos in Colombia, Estonia, and Spain. The things we're doing, the techniques and tools we're implementing, are working and benefiting our distributors. Again, it's the relationships and processes we've built that will continue to drive our growth. I still feel optimistic about international sales and expect that despite COVID challenges, we will continue to move forward.

Alright, thanks, Tom. We have a few questions coming in about the class action litigation. Can you give us a brief update on the status of the class action lawsuit?

Sure. Obviously, everyone sees the press releases coming out daily. Everyone knows about them on television. If you've had a hernia surgery, or if you were affected by round-up, these folks are advertising all around. They have 60 days from when the original class action suit was filed to attract personnel to join their lawsuits against us. There’s a long way to go on this. We’ve had discussions with our counsel and this is something that will likely go on for months, if not years. I can say that we don't comment on ongoing litigation, but we find the merits baseless. We will defend ourselves vigorously, as, again, I simply find the merits baseless. Our attorneys are going to keep us from saying much more than that. You’ll continue to see these press releases until late November when that original time frame expires. After that, there will be procedural things in the courts. My focus is on running the business, growing it, and getting domestic and international sales moving forward. Our attorneys will deal with the lawsuits.

We’ve a few questions here for you both, Tom and Jim: Are there any additional hires? Obviously, there's a change in the C-suite here. Are there additional hires in executive management or upper management you need to fill in the upcoming months or quarters?

Good question. I would say not right now. We're obviously looking at areas where we want to continue to focus on and I feel very comfortable. Marc and I just talked today, and I'm very comfortable with his continued involvement while focusing on government affairs. The team we have in place, the number of engineers, and the operational efficiency enhancements we’re implementing, are all being met by our continued focus on growing margins. I think we’re continuing to focus on that. The blocking and tackling in our building is going on as we continue to make investments using our balance sheet, which gives us the opportunity to do this right and continue to focus on growing the business. Both domestic and international operations are ongoing. I’m very confident in our path as an organization.

Alright, thank you, Tom. In the interest of time, I'll do a couple more questions here. If I don't get to your questions today, please reach out to me—my information will be at the end of the call. The next question asks: are there any competitive products that exist, and what kind of patent protection do you have on the BolaWrap? I guess, Tom or Jim, go ahead.

I'll start. I mentioned before that we have no direct competition. There’s nothing else in the domestic market quite like us, and that’s one reason we see ourselves positioned uniquely. This is the only tool that doesn’t rely on pain compliance. Jim has done a great job working with counsel on our patent, so I'll let him comment on that.

We're continuing to file patents almost weekly. We work with the engineering team, document everything we discuss with counsel almost daily to continue adding to our patent portfolio. We're ensuring we cover all bases, and we're working hard to continue to upgrade our patent status on the BolaWrap and on all the improvements you're going to see over the next 12 months in the device, cartridges, and everything that we're doing with our engineering. I'm very excited about the engineers who've joined our team that Tom has been instrumental in attracting. We have some really talented people on board now.

Alright, great. I guess the last question for today: you clearly have a fantastic BolaWrap device. Are there any additional products that you’ll roll out in the future?

Yes, great question. We've discussed before the Wrap Armor, which will be launching on our website soon. We're also examining other opportunities to utilize our current distribution channels to bring technology to law enforcement. Our company is Wrap Technologies, and we're looking at other technologies to work on. As you've heard earlier, our engineering department is searching for new opportunities for our products and additional products as we move forward, exploring new technologies for law enforcement. I just want to reiterate how very excited I am to take the helm. The opportunity motivates me every day. I'm confident about the domestic and international landscape. I've seen progress from when I worked at Taser, and I believe we’ll achieve even greater success with BolaWrap in the future. The team we're building here is fantastic, and I'm genuinely excited about our prospects. I again appreciate and thank everyone for taking the time with us today. I’ll turn it back to Paul for our closing remarks.

Thank you both, Tom and Jim, and to all the Wrap employees that are making this happen. Thank you to everyone who joined the call today. We've had great attendance, and we look forward to finishing 2020 strongly and keeping this momentum going into 2021. Thank you all for your interest in Wrap Technologies and our solution. I hope that you and your family stay safe and healthy. Have a great evening.