Good afternoon and welcome to the Wrap Technologies First Quarter 2021 Webcast. My name is Paul Manley and I'm Vice President of Investor Relations for Wrap. I'm excited for you to hear the progress we've made this quarter, as well as discussion on Wrap platform for enhanced training and avoiding escalation. Joining me today are Tom Smith, our President and Chief Executive Officer, and Jim Barnes, our Chief Financial Officer. Following our prepared remarks, we'll have a question and answer session. You may ask a question at any time during the webcast. And to do so please use the Q&A tab on the bottom of your screen and not the chat button. As you can see, I'm outside our headquarters in Tempe, Arizona. Because of the pandemic, the number of visitors has been few and very limited. So I wanted to give you a brief glimpse inside before I go join Tom and Jim. So let's go inside. As we come through our entry and reception area, we will go directly into our sales, training, and client services area. And now, as you can see, behind me, this is our 11,000 square foot manufacturing facility. This is where every device and every cartridge in the world is assembled, packed, and shipped. Also behind me on your left is our engineers testing lab. And further down midway on your left is where our amazing team of engineers sit. Now, as we walk back to the conference room, I do have to remind you that certain statements made during the call today constitute forward-looking statements made pursuant to and within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. 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. Those risks and uncertainties are described in our earnings press release 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 our welcoming comments completed, let's go in and join Tom and Jim. Tom, I'm turning the call over to you now.

Thank you, Paul, and good afternoon everyone. We had a solid quarter of progress towards integrating our Wrap reality training system and BolaWrap remote restraint devices into a single cohesive technology platform. For those of you that have been following us for a while, you know that's ultimately our goal. To have a seamless platform that provides strong training for any situation an officer may experience and effective devices that help resolve situations without using pain, compliance, or escalation of force. Recent events in the national spotlight reinforce the need for our platform. Officers need training and practice on a regular and consistent basis using actual situations. Our Wrap reality training system does that today and we expect this will evolve since we believe this is the direction policing is headed. We expect officers will soon be required to have more immersive training and ongoing practice as part of their regular routine to ensure they're always prepared and proficient with current standard operating procedures. The value in our Wrap reality training systems is a fully immersive experience reduced costs and less time off the street by utilizing innovative virtual reality technology. There's a large untapped opportunity for us as we believe training and certification is a fragmented market. The demand for our platform is growing and there is a public call for change. We don't expect that to diminish anytime soon. The officers we serve have some of the toughest jobs on the planet. Let's keep in mind they put their lives on the line every day. It is a heavy responsibility, often with zero room for error. That is exactly why the training must be sophisticated and involve completely immersive real-world scenarios. Police officers across the world resolve thousands of situations safely and effectively every day. But we generally don't hear about most of those. The analogy I like to use is that media does not cover when airplanes land safely every day. Similarly, most BolaWrap uses are often not reported or covered by the media. We are amazed by what police agencies do. Over the past few decades, the forces have been asked to do more with less. Plus, many cities are considering decreasing the number of police officers while criminal activity has increased. And of course, the calls for defunding or reducing the number of officers is growing louder. This makes an officer's job more complex and difficult than ever before. And it's all happening today under an enormous spotlight. Now that the BolaWrap app is being used more and more in the field, and we are able to share the body cam videos, we are also having the agencies discuss the use. This is the best messaging for our BolaWrap products because it is the customer discussing its success, not us. Let's watch about a two-minute video of the Chief from Fruitland, Maryland discuss their recent use. Chief Swofford makes a lot of great points in his comments, especially as he refers to the BolaWrap as an apprehension tool and not a use of force. Since I mentioned previously that most BolaWrap uses aren't covered by the media, it is great to have Chiefs talking about our product positioning for other law enforcement executives to hear. As I have said previously, the bread and butter of our domestic growth comes from the small agencies that can move quickly through training, trials, purchasing, and ultimately to full deployment. Smaller agencies generally have the ability to be the most nimble and move the quickest, and are responsible for much of our early success, especially in releasing body cam videos. Specific to Wrap, we had several notable wins this quarter. Most importantly, we grew US agencies trained to 628, that's up 41% from the fourth quarter and nearly three times year-on-year. This is critical because it serves as a leading indicator for future growth and more agencies with trainers continue to build our pipeline for future sales opportunities as we scale our agency penetration. Generally, two to four officers are trained and certified at an agency to train other officers. After an agency is trained, they generally enter a trial phase, and we invest in training devices and cartridges to educate these agencies. As with anything new, it takes time to understand the new device and obtain meaningful use before purchasing or full deployment, which is our goal with an agency. Actual field use are critical decision-makers, understanding the many situations where BolaWrap can be used, and is critical and continuing to highlight the body cam videos as we receive them instead of just demo videos. This new messaging is a major focus for the company to law enforcement. Police officers can go months without using anything other than verbal commands. I think that's one of the myths about law enforcement. Officers simply don't use force every day to control the situation. Also, there are times when just the threat of using force can resolve a situation without deployment. This is classified as a success by many agencies since there was a safe outcome. I would now like to provide you with a brief update on each area of our growth strategy. The first is our BolaWrap family of apprehension devices. The foundation of our company is to provide the right level of education to officers worldwide on preventing escalation of force, deescalating a situation, and apprehending subjects safely using the BolaWrap. We invest considerable time on how to deal with subjects suffering from mental illness, or are in a state of crisis, or are under the influence. These are areas we believe existing tools may be excessive. That's an issue more and more incidents involve these types of subjects in crisis. The second is training, which is a Wrap reality platform. On the Virtual Reality training front, we currently have 47 different training modules today. We have several modules in development and have a long-term target of continuing to develop modules similar to major training platforms for other industries. Nearly every state in the United States is evaluating how to enhance training for officers. Our virtual reality platform allows officers to participate in immersive, realistic training scenarios, which we believe are most impactful. We expect access to Wrap Reality will be subscription-based to fuel regular use, which we believe is critical to officer acceptance and the ability to affect future outcomes. One of our Wrap Reality customers is Pennsylvania's Northern York County Regional Police Agency that recently signed a five-year subscription agreement. They were very impressed with the 360-degree immersive experience, especially when compared to the existing alternative training methods. This is the exact type of model we expect going forward, and our team looks forward to building on this success. Our third growth area is our innovative portfolio. Our primary product is the BolaWrap, which is an apprehension tool that does not rely on pain for compliance. We are committed to being a leader in escalation avoidance. Our research and development team continues to make advancements in the quarter on new product development, which will include expansion of our product portfolio in the future. Wrap will continue to invest in research and development of future generations of the BolaWrap technology to help solve these complex law enforcement problems, including other markets such as private security. Right now, I would like to share our latest body cam video and discussion with the Chief from Glenwood Springs, Colorado. This body cam video shows the successful resolution of a subject who did not follow simple verbal commands; rather than use a pain compliance tool, the BolaWrap was deployed and the subject was apprehended safely, and they were able to get him the help he needs. As a reminder, body cam videos are not often made available to the public since they are used as evidence in final resolution, and many agencies have policies prohibiting sharing this type of information due to consent complexities. The good news is that we are getting access to more and more of these videos, which we will continue to share so our customers and stakeholders can see for themselves how easy and effective our products are to use. When we come back, Jim will provide you with some financial details from our first quarter.

Good afternoon, we had another quarter of solid financial performance. We achieved $1.5 million of revenue for the first quarter, which is 123% growth year-on-year. International revenues represented 61% of Q1 2021 revenues compared to 64% for the 2020 year. We expect our international business to continue to be a major part of our growth going forward. Even though we grew our revenue in the first quarter, COVID continues to be a significant headwind for our company. And there is a lot of uncertainty going forward regarding increasing social unrest and defund the police movements. Travel is still challenged worldwide and hotspots continue to pop up. But we continue to adapt. This is evidenced by our top line growth and the growth in domestic agencies trained in Q1. We reiterate our expectation that our revenue will grow in 2021. However, until the environment becomes more stable, our revenue growth could fluctuate materially quarter to quarter, especially international revenues where our inability to travel, logistic challenges, and government shutdowns have delayed sales. Our gross margins were 39% in the first quarter, which is an improvement from Q4 2020 but comparable to the first quarter of the prior year. Product mix and domestic and international sales mix impact gross margins. We continue to implement manufacturing and purchasing efficiencies, and make product changes with the goal of increasing margins. But we cannot predict future margins, and past margins should not be relied on as an indicator of future margins. Selling, general, and administrative expenses were $5 million for Q1 and included $800,000 of shareholder activism related costs, which we consider as non-recurring costs. In Q1 we also experienced increased demand for domestic demonstrations and training and expended approximately $800,000 on these activities. We believe increased trained agencies, as Tom mentioned earlier, are an indicator of future sales. Research and Development expenses of $1.1 million are expected to increase somewhat throughout 2021 as we have important research initiatives that we believe will respond to significant market opportunities. Our balance sheet remains strong and gives us the flexibility to execute on our roadmap. We are pleased with our financial performance. My thanks to our entire finance team for their work in Q1. With that, I will turn the call back to Tom.

Thanks, Jim. Great insight as always. Now I would like to give you our business review for the first quarter. As I highlighted earlier, at March 31, we had 628 agencies trained, which is a strong metric. We now have over 1960 officers certified to train their departments, which is up over 40% from the fourth quarter and up nearly three times year-on-year. We have now shipped product to 49 individual states domestically and we have now shipped product to 41 countries. We recently launched a formal environmental, social and governance initiative also known as ESG. We believe that sustainability, diversity, inclusiveness, and strong governance are all important to our long-term success. Wrap is committed to doing business as a good corporate citizen. In the future, you will see more examples of our work to bolster our ESG efforts integrated into our strategy. We have conducted business the right way in an inclusive manner since day one, but we recognize it is important to formalize our efforts and to have constant improvement. Some accomplishments we are particularly proud of our product platform directly help solve these complex community issues. Our products are American made in Tempe, Arizona, we have very limited raw materials coming from overseas. Safety is always a major focus in our manufacturing facility. ESG is not only important internally, but also for our customers and investors in matters related to environmental protection, corporate responsibility, and employee and community health and safety. We are committed to environmental and social good and we look forward to sharing our progress as we move forward. We recently hosted an all-employee kickoff event here in Tempe, Arizona, and we'll take a collaborative approach to this effort with the entire organization as it becomes an even larger part of our culture and how we do business. Another corporate milestone for us is that our company recently became ISO 9001:2015 certified for our quality management system. The internationally recognized standard is based on several quality management principles, including strong customer focus, the motivation and implication of top management, the process approach and continual improvement. The scope of Wrap's certification includes design, manufacturing, assembly, training, sales, and service. So on behalf of our entire organization, we are pleased with our progress. We are moving fast and making calculated moves to drive the rapid adoption of our technology platform by police agencies across the globe. Despite the continued headwinds related to the COVID pandemic, we are honored to have the ability to make a difference and help police officers be more effective and safer. And we never take that for granted. I now invite you to watch our short first-quarter video highlight which will show more examples of the traction that we're getting. We are proud of each instance and its outcome. After the video, Paul will moderate our question-and-answer session with Jim and I.

That was great. I really hope you enjoyed that video. Now let's move to Q&A with Tom and Jim. Thank you for all the great questions already submitted. But we will start with our three research analysts who are currently publishing research on Wrap. Ladenburg Thalmann, Northland Capital Markets, and the Maxim Group. Thank you to each of you for your support. We're going to start with Alan Klee from Maxim, please go ahead, Alan.

Okay, can you hear me? Okay, great. I thought you guys put up very good top-line growth in a difficult economic environment. I wanted to touch on the International Space, which is such a big opportunity. Could you say a little more about how you expect to approach it in the first half of the year, given COVID challenges? And then after that, what you're planning to do and maybe talk a little about the opportunity?

Thank you. Sure. Thanks, Alan. So international, we've talked about it repeatedly. It's twelve times the size of the US market. And it's obviously, we're going to be a majority of our business for the next year to two years. And the area where it's really working well for us is we've got great distributors on the ground. We have an exclusive distributor network in these countries, we've now shipped to 41 different countries. So we're still able to effectively do these demonstrations you saw in our highlight video there. Turkey, I think, there was Thailand, it was India. So I am joining a lot of those guys overnights. So that I'm being able to be there virtually to answer questions and then our distributors on the ground that have been trained to use the device perform the actual in-person demo, and the Jags who's over in London is doing the same so we are getting a lot of progress. Obviously, it would be quicker if we did go in person you know there's a lot of the countries in Europe just went on full lockdown again. The fact that he's talking to Turkey earlier today they're on full lockdown again. So even despite these challenges, we're still getting orders, we're still getting progress, because we've gotten a great partnership with these distributors and because again, we're able to do this and join them virtually. So I think we've done nice pivots to continue our progress in our international space. And as long as it's continuing to grow, that's our goal, obviously. And then we expect that to pick up, hopefully, once we get through the restrictions; I've now gone through the vaccine because I believe that's going to be required for international travel. So I'm set with that Jags is in the same position. So as soon as those countries do open up, and we can travel, we will be doing that again. And again, I think with the distributors that we have on the ground, we are very excited about that. So very happy, very pleased. And I'm still very optimistic about what international is going to do for us, especially in the second half of this year. We got so many exciting things going on right now. And demonstrations we're very excited for the second half.

Thank you. For your virtual reality training, can you explain how you're doing your go-to-market? Is it with the same distributors? Just maybe give us a little understanding on that?

Sure. Great question. So we're actually still working through that our planes, our current distributors to help us there, especially on the hardware side. And then it is also working with a lot of agencies right now that we're getting a lot of feedback on areas for improvement because we're kind of changing your paradigm, right. The police departments used to go to their academies and then once they graduate, they may show up once or twice a year for recurrent training, where we're going to change the mind shift and talk about kind of cadet to retirement where they're going to be using this much more intensively on a much more regular basis for maybe 10 or 15 minutes a day. And really present the cost savings that you can do in virtual reality in 30 minutes, what would take me two hours in a classroom. So it's going to be much more immersive, you can do it just about anywhere. And so a lot of agencies were already reaching out to us that are current customers of both large and smaller filing systems that are giving us feedback. And then we're all talking with other partners about how we're going to be rolling it out across the cloud, storing that training information during these updates. So right now, we're really focused on the integration with the platform, getting our current demos to integrate the awareness of the Wrap reality, and then when the customers that are using it, both in law enforcement and some that are out of law enforcement that we'll be talking about soon, it's going to just continue to develop that market for us because it is such a focus. I mean, you look at the events going on right now in the United States and training is the top priority, we're going to do Wayne Gretzky, quote, we're skating to where the puck is going to be nationally in this training, using virtual reality is really going to make a difference for policing. And that's why we're so excited about it really focused on its use our distributor network, as well as our current relationships with existing customers to make sure we can get them the best training possible to make their jobs more safe and effective.

Thank you. My last question is, with the numbers, discuss a little what actions you plan to take to get your goals of higher gross margins. And then I thought I heard you say, which was important that there were around $500,000 of one-time costs in the quarter. So was the way to think of SG&A and R&D is kind of a run rate from where it was this quarter x that cost? And thank you so much. That's it.

Well, thank you Alan, I appreciate that. But when we talk about the margins first, obviously, we saw an uptick during this quarter, and that was really a result of running efficiently and running every day. So between that and some of the product changes that we're investing in from Research and Development will reduce our costs and help increase those margins. I talked about that before that we've got long-term goals of getting that margin over 50%. And between products, efficiency in the manufacturing space, as well as raw material cost focuses and changes, that's why we're starting to see some training on that. We have a lot of work still to do there, but very happy with where that's going. I'll let Jim jump in here and kind of talk about the second part.

Yes, I think you identified it correctly, that you look at that quarter excluding those non-recurring costs of about $800,000. And you look at that moving forward as more of a base. Right now we're pretty full, totally staffed. So we believe that we will not see huge increases in SG&A over the balance of 2021. That can change if we see opportunities internationally, but right now that's a good base to look at.

All right, thank you so much.

Thank you, Alan, those were great questions. Let's move on to Greg Gibbous from Northland Capital Markets.

Go ahead, Greg. Great. Hey, Tom, Jim, and Paul, thanks for taking the question and congrats on the sales. Now that we've seen Wrap get a lot of coverage in the media recently, are you noticing, I guess, an impact from the greater awareness being reflected on requests for quotes? Or demos? Maybe can you talk a little bit about how those inbound requests have trended this year?

Great question, Greg. And absolutely, we're seeing, you know, there's kind of two things. Number one is those body cams, I can't emphasize that enough, those body cams are so critically important for the command staff and the agencies to see how other agencies are using it. And so that's why we're putting them out on press releases and really putting them forward. Because, you know, every officer is afraid of being that next viral video, but they love being in these videos where they show the professionalism in these situations ending, you know, quickly and safely and nobody getting hurt. So those are really key aspects for us. And then with obviously what's gone on, over the last year, and especially the last few months, we have seen an uptick, we've seen a big increase in the number of trainings, that's why you see our training numbers; the number of instructors has grown, where I think it was three times year-on-year and 40% over last quarter. So our trainings, our demos, the inbound inquiries, all of those are trending up, which is fantastic, because that's making these subject matter experts available out there to talk to their agencies, talk to their city council, their elected officials about how this technology works, coming in with a platform between Wrap reality and more around how it's going to make a difference in their communities. And that's really what's giving us a solid, robust pipeline. We feel very, very good about the future, and continue to see the growth domestically. And that coupled with the international is something that we're really excited about. And those are trends to watch for sure. We talk about them regularly, the number of instructors trained and number of agencies trained, and that's a leading indicator for where our pipeline is going. In addition, all those inbound leads that we're getting from all of the news, that's kind of all over again, avoided, right? So it's really making a difference on the number of inquiries we're receiving.

Great, yeah, that's good to hear. I wanted to follow up on domestic versus international dynamics. I know you're seeing a lot of early traction within smaller departments here domestically, but when should we think about the growth here in the US? When would that catch up, I guess, with the success that you're seeing internationally?

Yeah, that's a great question. And it's one that we talk about. If you look at the body cam videos that we get, right, there are a bunch of agencies that are small names, you know, we come up on a map because they're not the known names like LAPD or NYPD. Everybody knows those names, but they're also the biggest agencies. They're also the slowest moving and saves them a long time for them to work through a process. I remember at my previous company, my previous life, it took almost four years for them to do the testing. And when they finally decided to go forward, and this was talking specifically about LAPD, it took them many years of follow-on orders to get that going forward. So the big agencies, we've measured months, and usually years, where the smaller agencies, as I mentioned, much quicker, much faster. They're the ones that get us these body cams that we can then go on and show people how these are working. So I think, as you see that momentum continue to build, you see the number of agencies that are acquiring this, and that are starting to use it, the larger agency will follow. But it's just going to take them a lot longer because they're also dealing. You know, that's where all the with the local opposition is coming for defunding the police and reducing their budgets. So while they're dealing with those issues and trying to figure out how many officers are going to have what their budgets are really going to be are they going to get increased or decreased? It just makes it that much harder for them to try and bring on a new technology. But you know, with LAPD, which I'm sure everybody's curious about, we're still talking to them, we expect an announcement from them here in the month of May, if not, you know, the next couple of weeks. And we can't say anything until they do, but they just take these very long time. They have a lot of committees, elected officials, City Council's command staff training, all of those people have to get on the same page. And that can take time, just due to the sheer size of an agency versus a smaller agency that has 20, 30, or 40 officers, they're much quicker, much easier to move. So hopefully that gives a little bit of a feel because it's really hard to kind of put a timeframe on it, other than the small ones are for the foreseeable future are going to be the ones moving and ordering is much quicker than the large. And then when the largest do come, they'll obviously it'll be a great trend for us to see those start to kick in. I can't nail down the exact timing, but I can tell you we're moving forward with a number of them.

Great. Good to hear. And that does make sense. I guess the last one for me, it was really nice to see that first five years of scripting agreement for a virtual reality training offering. I was just wondering, comments, I guess on the general demand, or seeing other departments for that particular subscription offering?

Yeah, great question. So one of the things that, when we look at this market is, they're still learning about that technology. So they're trying to understand it in the more progressive departments out there, I've already reached out and they're seeing demonstrations. And we've had large and small do it. And in this case, we've got Northern New York, you know, the adoptable wrap early on, we just got him for all the officers. And then in addition to that, with him coming in with Wrap reality and signing up for a five-year subscription, he's already seen the value of that. And for example, when our guys were up there doing the training, that he hadn't stick around after they trained that day, and change the programs and use it actually when they were bringing some recruits through and putting them into the technology and just kind of watching how they reacted to some of the different scenarios. So kind of an area we hadn't even really addressed initially. But when the Chiefs start to see this and understand it, and the difference it can make for them. We're getting a lot of interest in it. But it's really one of those, you have to see it to believe it because it's so immersive when you're looking around and you see things in every direction versus the training day thing that used to get it's not replacing their live fire exercises, but it's really immersing them in a lot of those scenarios that you could never duplicate in a live fire, but it's in the 360 space. So you might have somebody behind your bedside that would really be hard to duplicate without this training. And that's why I think there's such an interest in it. And looking at this five-year subscription, the chief obviously he's a believer, wants to make sure he's getting all the updates and keeping all his officers current weapons, the hardware is going to be supported. So, you know, there are a lot of benefits for him signing up this early to display, because we're just getting started. He's going to be a great reference point for us talking to other agencies.

Okay, great. Thank you.

Any other questions from? Right now.

All right. Thank you very much, Greg and now on to our third analyst Jon Hickman from Ladenburg Thalmann. Go ahead, John.

Hi, can you clarify, Jim, what was the 800,000 one-time expense?

That was a shareholder activism matter that you saw on the 13B's and the AKs that were involved during Q1, related to the board governance and shareholder activism related to the structure of the board going forward, we're seeing some changes in the board. And we're seeing some improvements there. And I think you'll continue to see changes in the governance and the growth of this company as we move forward.

Okay, Tom, could you give us some details about how you get paid for the Wrap Reality?

Yeah, so right, as we do a subscription model, it's going to be different for each agency. So a lot of times that they want to get the funding upfront, and then they pay us for a five-year in advance. Other times, they'll do it if incorporated in their annual budget. So it's really going to depend on the agency and what their preferences, whether they're going to, again, do it as an upfront payment, or they're going to pay it on a quarterly or annual basis. And that's going to be determined, obviously, by the city manager, the City Council's approval of those budgets. So there's not a one-size-fits-all answer there. But obviously, when they commit to the longer term and sign in for that, then that just gives us forward-looking revenue that will carry on the balance sheet as future revenue opportunities. And then those payments will be corresponding depending on the terms that the city council or the purchase order comes from that department.

So is the hardware purchase separate?

The hardware is included as part of the package. And so is the maintenance and the warranty of it, depending on there are different options that they can have. But this is like, you know, really high-end hardware that a lot of the gaming community uses that we're using for the virtual reality. But it is that they obviously have to have it. And it's relatively inexpensive. It's laptops that you would use at home, or even desktop stations that you would use at home, just really built for gaming. So it's not crazy expensive, you know, one of the hardware pieces may be around $10,000. But then they can run a whole number of officers to that compared to, you know, tens of thousands or if not hundreds of thousands, if you look at simulators or different scenarios. So the hardware is something that we build into it because they obviously need it, but it's not a huge expense. And then we do coverage from warranty from the hardware manufacturers, once they acquire those systems.

Can you give us some idea of what a yearly subscription costs?

So we're still working through some of those different numbers. But you know, on the low end, it's anywhere from $30 per officer per month, and then there's some high end from some of our other vendors that are out there selling could be, you know, a couple of hundred dollars per officer per month, it just depends on the options that they want. They want to include BolaWrap with their subscription agreements, you know, so there's a bundling opportunity for the two platforms, the BolaWrap family in addition to the Wrap Reality family, so there are a variety of different options. And as we get a little bit more clarity on that over the next six months, or even into next year with the platform, we'll be able to publish that a little bit more. But right now, we're still kind of working through some of those issues. And again, it's just working with the agencies on how they want to see it, presented to their city council for their budget approvals, and is it a lump sum number or monthly numbers or per officer number? You know, it's just different breakdowns. And when we get more clarity, we'll be able to share that.

Okay. I guess, last question. Can you give us an idea of what percentage of revenues came from existing customers versus new customers?

That's a great question. And we are breaking that out yet, because we're still so new, you know, we're only at four hundred and some agencies, four hundred and fifty agencies that have eighteen thousand. So it is still a lot of them that are coming through that are new orders. But we are getting reorders from agencies that are buying at a consistent basis as they roll out and then ultimately getting that full deployment. So for me, there's kind of three categories, which is the new the reorder and full deployment. And we're seeing cash purchases in each of those. And then also, as they come through from our distributors, we don't get that visibility, right. So if they buy in there, they're not huge orders. But as they buy and ship through their own warehouses, we don't have visibility of whether those are new or reorders. So right now it's really difficult to break that down and really have a meaningful first what we're seeing, including the distributors, versus just what's coming through for Wrap.

Can I ask one more?

Absolutely you can.

Can you talk about the kind of discrepancy between the number of officers trained from Q4 to Q1, and versus kind of the revenue, which were relatively flat?

Yeah, so as I mentioned, we're doing an incredible number of demos and trainings, which for me is that for an indicator of our sales pipeline, because these agencies want to have a subject matter expert in house as they start to move forward with these programs. So for me, it's really, as they're coming out of the COVID or coming out of the lockdowns, we're seeing those trainings increase, that means we're training, I think I mentioned, it's between two and four instructors per agency that are then the experts there. So we want to really drive those trainings, get those people to be experts because then they understand the technology, how it works, they can explain it, they're not that coupled with the body cam videos and what's being covered in the media daily is really going to help drive that pipeline and get those conversions from orders to acquisition. And as I mentioned, sometimes they can't buy all of the units right away, so they might buy two, three, or four, but then they'll do that multiple times going forward. So the revenue will absolutely trail the number of trainers because that's again getting that information out and those agencies aware of how this technology works, what it does for them. And I don't know that we'll catch it anytime soon, just because it's such a drive. But that's really showing the build of our pipeline and what's ahead of us, which is again, something that we're continuing to see that momentum build domestically and chase that international growth that we're seeing.

Okay, thanks.

All right. Hey, Jon, thank you very much. And thanks, again, to all three of our covering analysts. We have a lot of great submitted questions. I'll try to consolidate some of these here. And hopefully, we can get to the majority of them today. We'll start off with this good one. With the pandemic, have there been any supply chain issues at Wrap?

So, no, right now, there have not. We've had a few but we've addressed that by ordering ahead for what I call them long pole in the tent, making sure that we look at if there is going to be a delay that we've ordered ahead for that. So we haven't had any direct impact. But we have had to raise awareness to us that going forward as the world slowed down, there was a lot of change going from the shutdown to people coming back online, that lead times are longer. And so we're from a planning perspective, taking a look at what those items are. And then those ones that are really lengthy lead time we're buying it that as I mentioned before, because the majority of our raw materials are buying domestically, we're not really being affected by any international problems. But we are seeing a little trend in delivery times starting to go out there longer weeks, and we are addressing that through our planning to make sure we don't get caught and then that's why you saw our inventory bumped up a little bit. You know, we were making sure we had the raw materials in house that we needed, and then converting those into finished goods so that we can keep shipping and starting to build ahead which slows that manufacturing process helps the margin makes us more efficient.

Okay, here's another good one. Can you please talk about your sales force? And how the products are sold both domestically and internationally? Is there a difference?

So yes, there's a big difference. So we domestically we have 14 distributors that cover all the states. And then those distributors have about another hundred people out on the ground that are doing demonstrations, doing sales calls, talking to those agencies on a daily basis. So we're now developing our outside sales staff that are out traveling, supporting those distributors. And that's coupled with our insights services team that are really taking those orders, making sure we're processing and doing follow up on the phone. And so we would kind of multiple steps here domestically. And again, we have to serve as 18,000 agencies. So it's a broad coverage, a lot of different decision-makers, when you compare that internationally, with all these countries that we're in usually, it's an exclusive relationship, because the agencies all report up to the Minister of Interior or the Minister of Defense. So it's a much more consolidated approach to sales there. And then it also allows us more control with them on export compliance rules, uniform crop practice, act rules, all of those things that we want to make sure that we're governing, and be making our distributors aware of and those end customers aware of. And so it works very well for us. So 14 distributors domestically, 41 internationally, and then we have great relationships, because they're an extension of us in what they're doing and what they're demonstrating, you know, to the customers out there.

Okay, thank you, Tom. We got another one coming in here; with all the recent police shootings and killings, what is Wrap doing right now to take advantage of all the media talk and public talk about policing, police reform, and police training?

That's a great question. So what we are doing is talking on a very regular basis with our customers, we are seeing a huge increase, as I mentioned in the number of trainings, the number of demonstrations, inviting not only to media, but community leaders, City Councils, mayors to come and attend these trainings so that they can learn about this technology, we're working through not only Washington, DC but also other lobbying activities in different states to get laws passed or pushed forward that are going to talk about funding to help police from the training aspect using a tool like BolaWrap. That's an apprehension tool or remote restraint device. So there's a number of different activities that we're doing, we're also working with the local agencies to help them do publicity. For example, when these agencies get these body cam videos showing that officers' professionalism, and the successful outcome with nobody being hurt or getting that person help, contact that local media, get them to feel good story so that it really helps promote that. That relationship between law enforcement and their community. So I think that's a big driver for us is really to get those local agencies that it's not their top of mind, to go out there and do proactive media to make themselves look good within the community. So we're helping that we're working with different partnerships to get those body cams put out in their local media show how they're making a difference, the professionalism of those officers, and then not everything is ending badly, which humans tend to take from watching national media attention. So there are a lot of activities that we're doing to help drive that in each of these local communities and then supporting law enforcement in those efforts as well.

Okay, thank you, Tom. Here's probably one for Jim, how is your patent situation? Or is a product protected with patents? Or do you have any pending?

Yes, we have a strong patent portfolio; in our 10-K, we reported that we had 10 patents and we had nine US patents pending. We had another patent issued in the first quarter, another one allowed. And I work weekly with the engineering team. We have a terrific engineering team that is focused on patents; we meet weekly to discuss new filings. And we have a lot of exciting things we wish we could talk about that's going on in the lab that you'll see later this year, and next year, coming out of the lab, and we're filing patents on those almost every month. So it's an area that we work very diligently and we feel very strong about our patent portfolio and IP protection. And we follow those throughout the world to protect this technology.

All right, thank you, Jim. Another one maybe for Jim here. We have a lot of cash on your balance sheet. What are your plans for the cash and what is your cash burn?

Right now our cash burn is, you know, the $3 million to $4 million a quarter that we're seeing in the financial statements. We expect obviously that to go down as our revenues increase. But our plans for the cash are to keep rolling out the products that we have focus on virtual reality and the BolaWrap platform. And that's our focus for 2021 and 2022.

All right, great. Thank you, Jim. Here's another good one, you made an acquisition last year of incentive, the virtual reality, you think there's more M&A opportunity out there for you?

So obviously, you never say never. And we're always looking at opportunities to not have to reinvent the wheel, but bring technology forward. So as long as it's in line with what we're doing in terms of supporting, you know, tools that don't harm or training, it's really going to help these officers. We're always looking, but you know, that's one of the nice things with a strong balance sheet and access to capital is that if we do find one of those opportunities, we won't hesitate to pull the trigger. And that again, moves us forward very quickly. So nothing on the table right now, but always taking a look at what's out there.

All right, thank you, Tom. Here's another one that just came in great press releases with the body cameras, nice to see the device working in real-life situations. But why do you putting these out?

So as I mentioned before, that's really the best testimonial for us is we can talk all day long about how this works, show it and demonstrations, even do the training. But the rubber meets the road when these are out in the field. And they're allowing these officers to end these confrontations quickly and early. And the Chiefs that we showed earlier in this presentation today, talk about it being an apprehension tool, that it's not a device that's even really considered to use in force, unless they were to get scratched or something else were to happen there. But the intent of the device is an apprehension tool. So if you can use this early before it escalates before that subject maybe commits to the fight, before they pose a threat to themselves or someone else. That's really the niche that we're filling. And that's what's so exciting about this. So we're really pushing those body cam images forward because it not only helps other agencies understand the different scenarios in which it can be used. But it also again, I mentioned, helps educate the community on the proactive activities that law enforcement is taking in order to find tools, find different ways to end these confrontations, hopefully lower the amount of force that's being used, and really have an impact. Because there's obviously a huge divide right now between law enforcement and different communities of our country. And it's not just here, domestically, it's around the world. So being able to put these body cam videos forward show these uses, let those officers start really thinking about all those different scenarios where somebody was starting to resist, that they could have used this and before it escalated. That's really the purpose of that. And that's why it's so critical for us to really highlight that information and get it out there. Because, again, when these things end safely, the media is not going to put them forward. It's just not selling the news, so to speak. So we have to do that and work with the agencies to do that as well.

All right, great. Thanks, Tom. We have a lot of great questions still come in. We'll have time for a few. I know we're bumping up against the top of the hour. Here's a great one. How are things going with the collaboration in the UK? I know you're working on improving the product design in the UK. Can you elaborate on that?

So we've obviously been working there, we reported last quarter that we had received a funding grant through their Dasa program to look at different aspects that they felt were critical for their application of the BolaWrap going forward. So we're still continuing to work with them, we're still in the constant conversation, actually going to be getting some product over to them again here pretty soon for some testing and other things that they want to talk about. So we are continuing to drive that forward. Obviously, Jags being in London has great communications with the different agencies there within the home office. So we're very optimistic about where this is going to go. And it's helping drive some of our R&D efforts and helping us prioritize some over others that we'll be able to talk about in the future, especially with some of the next-gen products that we're working on and hope to roll out in the foreseeable future.

All right, thank you, Tom. I'm going to try to kind of combine a couple of here; it says how many employees do you currently have? And can you talk about your manufacturing facility? And as you, I'm going to combine it here, sorry. And as you await anticipated orders, are you building inventory of that finished product within your manufacturing? So I guess a number of employees, and then talk about our manufacturing and the finished products?

So right now we're roughly 50 employees of the company. That's growth over where we were last year. And yes, we're absolutely building finished goods. It's a focus that we wanted to be really efficient. That's why we saw an impact on our margins is the efficiency of keeping the material flow and keeping the production flowing. And also that helps us because those international orders tend to bubble because they're usually larger than our domestic orders. So we're not having to react to you know, surges in production. If we can keep that smooth, keep it efficient, and keep people working, that's really the goal. So we are continually driving and pushing finished goods inventory that we manage that what the finished goods inventory is against what we think past orders have been versus what features are going to be. And then we kind of rolled that out over 12 months to get a blended average of what we try to shoot for in terms of production numbers and personnel. So I think we're doing pretty decent. And it's obviously clicking through, we're seeing some improvement on our margins as we focus on that in addition to the material margins that we've been working on.

All right, thank you, Tom. You know, we're kind of running up against the hour here. I have one last question, what do you see as the biggest catalyst for Wrap going forward?

The biggest catalyst, I would say is just this continued acceleration of the number of trainings. I talked about them being the sort of subject matter experts, the number of body cams, you know, a year ago, we didn't have hardly any; now we're getting them weekly, sometimes two or three a week, as you can tell from the press releases that we're putting out there. And then again, just if we can get COVID to give us a little relaxation here on some of this travel, I think then we're going to see a lot of these activities, especially internationally really start to pick up because we have so many things that are just being delayed because the governments were having to prioritize obviously vaccines or PPP materials, or PPD materials, and those types of things. So the good news is, we've got a lot of things in the queue that I think will get released as we can come out at COVID. Here, you know, at least in terms of being able to travel, and then domestically just continuing the blocking and tackling and the execution that we're doing across the company, from our manufacturing to the front office, to our trainings and to our customers. Because more of these officers come back on duty and things in the budgets uncertainty goes away, then the technology can come into play to really help them from both the Wrap Reality training aspect with a BolaWrap. And that's that technology platform that we talked about that's going to really help address these problems because it's really easy for people to point out the problems. We're solving these problems with great solutions through BolaWrap, Wrap Reality, and that's what we're going to stay focused on.

Well, I think that's a great question to end on. Thank you for all that you did submit the questions. If you did not get your question answered, please email me at [email protected] and I will get back to you as soon as I can get you the answers. I know we still have a lot of you know, but we're running up a full hour now. So thank you for everyone who joined our call today. I'm going to now turn the call back over to Tom for his closing thoughts.

Thanks, Paul and thank you everyone for who has joined us this afternoon. We accomplished a lot this quarter. But in some sense, we're just getting started. Our vision is clear and the opportunities enormous. We're on the right path, and I've got the right team around me. So it's really an exciting time. And finally, we're going to show one last video. That's one of our international events that just occurred this week in the Dominican Republic. This is a training that's been going on and it was produced and released by the Minister of Defense, their own office in the Dominican Republic that they put out on social media actually meeting with the minister himself. So we're something very excited about, it's about a minute video we'll end with. So I would like to tell everyone thank you for tuning in today. Have a great evening. We look forward to talking to you in late July when we can talk about our Q2 results. Have a great time. Thank you.