Wrap Technologies, Inc. Q3 FY2021 Earnings Call

Good afternoon, and welcome to the Wrap Technologies Third Quarter 2021 Webcast. My name is Paul Manley and I'm Vice President of Investor Relations. Today, we'll provide a report on our progress and performance during the third quarter and an update on our future strategy which stems from our mission to deliver law enforcement technology and training for the de-escalation of potentially dangerous situations. As I walk through our headquarters here in Tempe, Arizona with our new enhanced device, the Bola 150, I'd like to thank our amazing team of engineers who have worked so diligently to bring this next-generation device to market. For the apprehension of non-compliance suspects. Joining me on the call today are Tom Smith, our President and CEO; and Jim Barnes, our CFO. Following our prepared remarks, we will conduct a question-and-answer session with Tom and Jim. I'd like to take a moment now to remind you that certain statements made during the call today constitute forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities and Litigation Act of 1995, as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are described in our earnings press release and 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 the forward-looking statements. With that, I'd like to turn the call over to you, Tom.

Thank you, Paul. Good afternoon, everyone. Our company prides itself on tackling challenges directly, so I want to discuss our revenue performance this quarter as I know it will be a key focus for investors. We achieved 79% revenue growth compared to Q3 2020, demonstrating strong performance. Our sales team is making significant progress with various police agencies globally, and we are seeing that reflected in our orders and sales. This nearly doubles our revenue from last year. We've increased our trained agencies by 18% to 940 and trained officers by 15% to 3,250 since June 30th. We also launched a substantial upgrade to our flagship product and are continuing to establish Wrap as a recognized leader in law enforcement. Do I believe we can improve? Absolutely. Our team is still coming together, and we will harmonize more effectively. We are continuously learning and growing, with a focus on long-term success. On that note, we just finalized the largest order in our company's history and will share more details soon. The feedback from officers and agencies after the release of BolaWrap 150 has been excellent. We are well-positioned to execute our plan. Nothing we do is easy, especially in the beginning. We take great pride in our mission and obligation to deliver our product for societal improvement. We are just getting started. I will now share more details on our recent advancements. In the third quarter, we continued to lay the groundwork for the future of law enforcement. Two weeks ago, we introduced the next generation BolaWrap 150, which upgrades our original BolaWrap 100 device. We conducted over 12 months of research and development for this significant milestone. Although the original model was effective, we enhanced many features based on direct feedback from officers who use our product in the field. We have increased real-life field deployments, which has significantly contributed to our development process. Consequently, we view the 150 as designed by police for police. This ongoing feedback loop is vital for our research and development and will lead to more innovative products in the future. Key updates for the BolaWrap 150 include a switch from mechanical to electronic development and deployment, reducing the discharge steps for an officer from three to two. There is also an LED indicator that shows an officer when the device is ready. Importantly, once activated, it performs an internal diagnostic check before it becomes operational. However, during critical moments, it is beneficial to have a visible readiness signal. The cassettes use microgas generators, similar to those in the automotive industry for airbags, ensuring reliability. We also improved battery life significantly and added an automatic shutoff feature for further battery conservation. For aiming, the BolaWrap 150 projects a multi-dot green laser to indicate the target area, unlike the single-line laser in the BolaWrap 100. New dual LED lights turn on when the device is activated, freeing up an officer's hands for other tools needed for visibility. This feature can be disabled if preferred. Additionally, we included safety caps on the anchors to protect both the subject and officer from minor injuries when removing the tether. The BolaWrap 150 is about 20% smaller and lighter, with enhanced grips, making it more functional and easier to handle, even in wet conditions. I am pleased with these significant enhancements thanks to our research and development, operations, and manufacturing teams, which have allowed us to deliver this upgraded product cost-effectively. Our company is dedicated to serving global communities and the police officers who protect them. Incorporating their needs and feedback is essential to our research and development process. We see our customer-focused approach as a key competitive advantage. So far, the initial feedback on the BolaWrap 150 from officers has been highly positive. It has been especially rewarding to return to agencies that previously hesitated to place orders due to limitations in the BolaWrap 100. Now that we've implemented many enhancements based on their suggestions, we are successfully converting these agencies. The benefits of our updated products are expected to yield financial advantages over time. We were able to integrate all upgrades while maintaining current pricing for end users. Although price was not a primary reason for delays in purchases, it was crucial to keep prices stable to protect our product's value proposition. Based on customer feedback and activity, we believe we have achieved that. More importantly, the BolaWrap 150 puts us in a strong position to reach our long-term gross margin targets due to several factors. First, we improved the efficiency of producing the BolaWrap 150, enabling us to manufacture more units more quickly and at a lower cost. Second, raw materials, supplies, and components for the BolaWrap 150 are more cost-effective. We plan to keep investing in research and development, as adequate R&D is essential for maintaining our uniqueness. The Wrap culture is grounded in a commitment to excellence and leadership in the market, which includes future advancements of next-generation BolaWraps and our WRAP Reality platform or any other new police technology aligned with our mission. Regarding our BolaWrap 100 model, we have managed our inventory levels in anticipation of the BolaWrap 150 launch. We stopped manufacturing the BolaWrap 100 over the summer and expect to sell through the remaining inventory in the coming months. We will continue to support the 100 into 2022 and have initiated a trade-in program for customers with the BolaWrap 100, similar to models used by other companies when releasing technology upgrades. We see this as a valuable benefit and strong customer service for the police agencies we partner with. Another key product is WRAP Reality, for which we saw significant progress in increasing awareness during the quarter. As we pursue sales outreach, we are receiving numerous referrals and inquiries about this product from a global market. Our WRAP Reality training platform is robust, and our goal is to become a global leader in virtual reality training for law enforcement. We are adopting a game-based learning model for our approach, making it intuitive for the new generation of recruits entering police academies, while also engaging seasoned officers. Our virtual reality models are immersive and interactive, making training accessible for officers at all experience levels. We allow training officers direct control over various elements in scenarios, enabling them to guide trainees through different variations and outcomes. This method promotes better retention of learning objectives. Like a video game with multiple scenario outcomes, our training models function similarly, allowing for diverse situational variables, such as time of day and the number of characters involved. We provide training models for the BolaWrap and also for various tools and verbal commands. Different situations require different tools, and we aim to ensure our virtual training is comprehensive and versatile. This approach is a departure from traditional police training platforms, which tend to be static and predictable. Our objective is to encourage officers to train regularly, which will enhance the application of learned behaviors. WRAP Reality’s mission is to offer training for any potential situation a police officer might face during their career. I’d like to share a real-life example. One of our training models prepares officers for a scenario involving a suspect who seems nonviolent yet disregards verbal commands. Each scenario offers multiple pathways based on the officer's choices, such as opting for de-escalation through communication, using a BolaWrap, chemical spray, or any appropriate tool defined by the instructor's training objective. We firmly believe that safer policing begins with effective training. It's remarkable that some professions, like hairdressing, have more training opportunities each year than police officers. We observe continuing education in other professions has defined annual training requirements, which we envision extending to police training since lives are at stake. Moreover, we recognize this shift leads to a more effective training model than traditional classroom formats. The combination of WRAP Reality and the BolaWrap device creates a platform that provides our sales team and distribution network with a complementary product suite for agencies. This synergy enhances both training and field operations capabilities. Returning to the BolaWrap business, in the United States, we maintain our focus on agencies of all sizes. However, we observe that smaller agencies with 100 officers or fewer tend to generate a larger share of sales orders, as they typically have quicker approval processes. We continue to engage new agencies adopting BolaWrap devices; in the third quarter, we added nearly 18% more new agencies, bringing the total to over 940. Our expanding agency base is already familiar with our company and the BolaWrap 100. The newly released BolaWrap 150 presents an excellent opportunity for follow-up calls and introductions to our WRAP Reality systems. Our investment in international business is also yielding positive results, despite COVID-19 challenges and government-imposed shutdowns affecting various countries due to rising cases and fluctuating travel restrictions. The ability to hold virtual meetings and demonstrations has helped initiate discussions, but on-site demonstrations remain essential for securing orders. We plan to travel as safely as possible, adhering to local and international guidelines. The international market holds significance for WRAP because of its size and centralized decision-making processes compared to the numerous decision-makers in the U.S. market. As I mentioned earlier, the international total addressable market is twelve times larger than the U.S. market. In fact, we just received our largest single purchase order ever from an international customer. Finally, I would like to highlight that my senior leadership team is now fully established. Over the past few months, we have brought in several key executives to drive the business in areas like operations, training, and international sales. Our team possesses a wealth of experience from both within and outside the industry. Additionally, we have strengthened our engineering team with new talent. We are well-positioned and eagerly anticipate our collective performance in the coming months. Now, I'll hand the call over to Jim Barnes to review our financial results.

Thanks, Tom. I'll move straight into discussing the financial highlights for the quarter. First, we generated $1.8 million in revenue for the third quarter. That represented 79% growth over Q3 2020. International revenues represented 42% of third quarter 2021 revenues compared to 70% for the third quarter of 2020. Revenue for the first 9 months of '21 increased to $5.3 million, a 109% increase over the $2.5 million for the same period of 2020. International revenues represented 48% of our '21 year-to-date revenue compared to 72% for year-to-date 2020. Domestic revenues grew by 296% over the prior year, driven in part by BolaWrap success stories documented on body camera footage. These results also show that our 2021 international business has faced significant COVID headwinds. Over the past 4 quarters, we have consistently found that our revenue growth could be lumpy as we balance COVID-related travel restrictions and limitations. This is particularly true with our international business that tends to involve large, national law enforcement agencies as the end-users. But overall, we are focused on managing our business for continued growth, especially with our launch of the BolaWrap 150. Our gross margin for the third quarter was 39% compared to 32% for Q3 of 2020. As a reminder, in the second quarter, we incurred a planned line exit expense of $747,000, preparing for the 150 launch. This affected year-to-date margin, which was 38% without the one-time charge. This compares to 34% for the same prior year period. We expect the model 150 will have higher margins that will be realized in 2022 after a start-up period and after phase-out of the model 100. But near term, margins are difficult to predict and could be lower due to the product transition and effects of sales channel and product mix. In addition, I'd like to make a few comments about our global supply chain challenges facing us. While we assemble products in Tempe, we rely on global suppliers. While most of our components are small and can be airfreighted without undue cost impact, we do face availability risk since the model 150 includes electronic components, laser, and battery materials. We proactively plan our materials inventory and work to diversify our suppliers. This may result in higher levels of raw material and parts inventory from time to time, intended to ensure we meet planned production needs, but we are at risk for shortages and unexpected delays of key components that could impact future results. R&D expense was $2.1 million for the quarter compared to $927,000 last year. The increase related primarily to increased staffing and outside consultancy costs, along with the cost of BolaWrap 150 development and other research initiatives. Future R&D costs will fluctuate primarily due to the timing of outside costs on important research initiatives. SG&A expense was $4.7 million for Q3 and included $1.1 million of noncash share-based compensation costs. Our main SG&A investments are focused on sales, demonstrations, training, and product awareness efforts, targeting our worldwide customer base. We have been able to decrease our expenditures on promotional costs as BolaWrap awareness continues to grow, and law enforcement use demonstrates the utility of our early intervention solution. Our balance sheet remains strong with approximately $40 million of cash and short-term investments to support our growth needs. With that, I will turn the call back over to Tom.

Thanks, Jim. As mentioned earlier, we grew U.S. agencies with trained instructors to just over 940. That's up nearly 18% from the second quarter and over 3 times our number from a year ago. This is a leading indicator for our sales team. We have now certified 3,250 officers to train their departments, which is up 16% from the second quarter and a 194% increase year-over-year. As of September 30, 2021, we have products in 49 and 50 countries. We believe that 50 countries is an important milestone for our young company. We are already seeing early repeat orders, and this will accelerate. As always, my final comments are directed to our team here at Wrap. Thank you for your time and energy to help drive our mission. What we do is bigger than any individual. We are helping create renewed faith in one of the most needed and noble professions in the world. It has never been harder to be a police officer than in today's world, and that needs to change. The men and women who devote, risk, and sometimes sacrifice their lives to protect our communities need to be supported. At Wrap, we are making a difference one agency at a time. It is always easy to point out problems. Wrap is focused on providing a platform of solutions to help law enforcement and their communities solve these problems. Right now, I invite you to watch a short video highlighting our activities during the third quarter. After the video, Paul will moderate our question-and-answer session.

That is such a great video. Thank you to our marketing team for putting that together. So now let's move to the Q&A session with Tom and Jim. As we've done in the past, we will start our questions from our 3 analysts who are currently writing research on us. Then, after they have finished, we will answer the questions that have come in from those on the call. If after the Q&A session, your question has not been addressed, please send me an email or give me a call, and I'd be happy to answer it. My contact information will be available on the last slide of this call. With that being said, our first question will come from Greg Gibas from Northland Capital Markets.

First, in terms of the amount of demos or quotes that you guys are giving on a quarterly basis, is that still trending higher sequentially? Just trying to understand if metrics are still ramping there? And if so, what do you attribute the sequential decline in sales to?

Yes, we did experience a slowdown between July and August with the arrival of the delta variant. There were vacations and a general slowdown, particularly in Europe, which often shuts down in August. However, domestically, we are performing very well, and I'm pleased with the progress in that market. We are seeing an uptick in inquiries for quotes, and the discussions have shifted to the body cameras we have deployed. Internationally, we're receiving more insights on how our products are utilized here compared to other regions, which is driving interest. The summer slowdown did affect us, but we have been focused on transitioning to the BolaWrap 150, dedicating significant effort to that change. Training efforts are underway, with over 940 agencies and more than 3,250 officers trained. These trends indicate positive future performance, and we anticipate continued growth.

Okay. Great. It's nice to hear that you received the largest purchase order to date. Do you expect that to be recognized in Q4? How should we gauge the size of that order?

Yes. Great question. It was actually really nice because our single previous biggest order was back at the beginning of August that we announced, and then this one exceeded that order. We expect it to go in Q4 and Q1. It's just going to come down to the timing of the production and all of those types of things. So that's why we're taking a conservative approach with it to, say, Q4 and Q1. And it is for the Bola 100. So it's something that we've been working on for an extended period of time. And it was really nice to get that over the goal line. There have been some delays, obviously, with that, that we are hoping it would come in sooner, but we do think it's going to be a Q4, Q1 split, just like the one we announced earlier this year was kind of a Q2, Q3 split.

Okay. Got it. Great. And you mentioned margins being higher for the new 150 device versus the 100 model, but probably not until 2022. Do you expect there to be any other impacts on financials, just on the cost side of the equation? And then how, I guess, how should we think about kind of the difference in margins between the 2 devices?

Yes. So I have been talking about margins and our goal of getting above 50% in 2022, and it's because we knew that the 150 was coming. That's really what's been setting us up for that. I don't think it's going to really impact much in Q4, especially with this large international order being the Bola 100, the Gen 1, but in 2022, we're very excited about the margins that we're seeing even better than the expectations I originally had. We do expect that to start rolling in next year, but I think it's going to be a blend and a crossover as to how many people stay with the first generation versus move up to the second generation. And I think, again, from my history, I've seen this before because what the first generation really did for us was establish the market that this works, that people want it. And now we came out with Gen 2, which incorporates a lot of the feedback that people were asking for, meeting customers. It's getting the margins where they need to be. It was designed for manufacturing. It was designed by the officers, and Gen 2 being 20% smaller and lighter really answered a lot of those questions. And again, I lived this before; I saw what it did for us. And that's what I'm really excited about for '22, and them really having an impact on those margins.

Our next question will come from Jon Hickman from Ladenburg Thalmann.

So the new 150 is powered by electronics, airbag technology. So in my mind, it shouldn't be regulated by the ATF anymore. Can you guys comment on that?

Yes, that's a great question, and it was the intention during the design phase to address this because it's categorized differently. We had to check with the ATF during our development process to ensure it wouldn't fall under the National Firearm Act. However, due to their backlog, they indicated a decision would take 12 to 18 months. We reached out in the spring, suggesting we might receive news between spring '22 and a year from then. I inquired if the new technology would exempt us from the National Firearm Act, but the response was no, indicating that it would be up to us to decide. Legal counsel advised that our best conservative strategy would be to continue selling it as we currently do. If we receive the favorable ruling we expect, the ATF restrictions would be lifted, allowing us to explore private security and other markets. For now, without a clear answer from the ATF, we are sticking to the same sales approach as with the first generation.

So you're saying there's a chance that it'll still be a firearm?

There is a possibility that, since we fall under the ATF's explosives division with our current technology and are also subject to the National Firearm Act, we could be classified under both. It seems illogical to me that this would be the case since the explosives aspect is clearly the priority. However, because our previous device was classified under the Firearms division, they could potentially include both classifications. While I don't dismiss any possibilities when it comes to government decisions, we are hopeful that they will classify it solely as an explosive.

So if they regulate you as a firearm with this new technology, that means automobiles are firearms too?

You're exactly right about the logic I discussed with them, as there are millions involved, and they are used by NAS and others. This is the same point we've argued. That's why they can't provide us with a clear answer. We had to submit a formal application, which we did in the spring, and they are taking 12 to 18 months to respond. We continue to ask, but until we receive a formal answer, we aren't going to change our approach.

What happens if you sell it anyway?

So, great question, because I had the same question. And what happens is if I sell it without going through the ATF process and they do come back with a ruling that they are going to continue to regulate it there, then we would have to recall every device that's out there. Every one of them would have to physically come back to us. We can face all kinds of really bad stuff from ATF, from fines and other things. And then, we would have to do all the ATF transfers anyway. And since we're already in that process, that's why counsel suggested we continue doing it the way we're doing it and not risk having to go through a recall, fines, and all the other things that they could do because at that point, they would say we were selling a firearm improperly or illegally.

Okay. So let's assume the regulation is changed. How will you sell it then?

Once the regulation is changed, then there's no restrictions, then we don't have a.

I know, but you're not set up for that.

We would make changes at that point. However, until we receive further clarity, we want to avoid the risks and costs of preparation. We've had discussions about implementing those changes, but for now, we aim to stay focused on our current execution plan in the law enforcement markets. We've observed progress abroad, particularly in Canada, where they have decided not to classify it as a firearm, allowing sales outside of law enforcement. We are seeing advancements in other countries that we are optimistic will have an impact. However, even in Canada, the new Bola 150 will need to undergo a new regulatory review, which could prolong the decision-making process since it is a different device. Once we receive confirmation on that, we'll mobilize to adapt, but I prefer not to divert the team's attention towards an unknown and potentially unnecessary effort until we have clarity.

Okay. One last question. You intimated in your prepared materials that there might have been some people who delayed purchase for the 150. Can you elaborate on that or quantify that?

Yes. I'll refer to LAPD since it's a widely recognized agency. Approval was granted back in May to begin trials, and they specified clear requirements for those trials, including improved battery life and lights on the device. We have been in discussions with them, but the trial has not commenced because they do not have the devices ready yet. We've experienced delays as they start this process. Other agencies have also assessed the situation, and while I'm not certain about their dialogue with LAPD, we have received requests from customers in our voice of the customer program that have been integrated into the BolaWrap 150. This has allowed us to reconnect with those agencies that are eager for the new device, and it has reignited some of those discussions.

Our third analyst is Allen Klee from the Maxim Group.

Can you talk about the steps you're taking to overcome international headwinds, perhaps a little bit maybe how you're using dealers and partners? And then also kind of a best guess on the timing to get the international markets to improve to levels that you expect them to be at in more normal times?

Thank you, Alan. Recently, we faced challenges attending the Milipol trade show in Paris due to various requirements. In response, we're strengthening our London team, including Jags Gill and new member Becky Newman, allowing European team members to travel and attend such events. No one from the U.S. attended the show; our European team represented us. During the quarter, we tapped into our London team to serve markets in Italy, Denmark, and Belgium, where travel restrictions are less stringent. The situation in Asia and the Middle East remains uncertain. While it’s difficult to predict when conditions will improve, we're working with local team members to facilitate travel. Additionally, we leveraged virtual tools for collaboration; for example, a recent order resulted from a year of groundwork by our distributor, despite not visiting the country during that time. The distributor navigated the tendering process with the government, which helps us make headway despite the ongoing challenges of COVID and other factors. We're thrilled to secure a major order in August and another this week, as these accomplishments indicate progress toward our goals.

That's great. Can you help us understand how the inventory reduction process for the BolaWrap 100 works? How long do you anticipate that taking, and what might the potential impact be? I believe you mentioned trade-ins; how do those affect the financials?

Yes. As we were preparing for the Bola 150, we encountered several restrictions on components for the Bola 100 earlier this year. Consequently, we had to stop purchasing many of those components. However, we built up our inventory to ensure we could support the rollout of the new Bola 150 and assist agencies that have the existing device but are not ready to switch immediately. A large international order linked to the first generation Bola 100 altered the dynamic significantly, as they purchased a substantial amount of inventory, including 500 devices and 50,000 cartridges that we had prepared in advance while transitioning our production over the summer. It was a collective effort across supply chain, operations, sales, and manufacturing to keep everything coordinated, especially since we didn't officially inform the sales team about the Bola 150 launch until it happened and many learned about it by watching the official video on October 12th due to timing uncertainties. We anticipate that our finished goods inventory will change with the incoming orders and declining inventory levels. To address some of the supply chain challenges, we are proactively purchasing materials for the Bola 150, which will lead to a shift between finished goods and raw materials as we transition from the 100 to the 150.

Okay. Last question. I mean, if we're looking over the next 3 to 6 months, what would you say would be the key things that we should be focused on as potential data points and catalysts for your company?

I focus on the increasing number of instructors, who are the subject matter experts and will engage with both the command staff and their communities about our efforts. We are seeing significant media attention, more demos and training sessions, and an increase in the number of trained departments that are already outpacing those agencies that have made purchases. Recently, we held a master instructor school with over 50 master instructors trained on the new device, enabling us to quickly commence demos and training for our second-generation technology. The international order we received is a great indication of this market's growth. It's all about managing growth and the ongoing expansion of trainers and agencies utilizing our body cameras. This shift represents WRAP 2.0, the next phase of our company as we introduce new technology. The feedback from those who have experienced the device has been overwhelmingly positive, addressing many previously perceived 'nice to have' features that are now essential. I'm optimistic that we will witness similar advancements in the law enforcement community as we did two decades ago when we transitioned from Generation 1 to Generation 2. Last week's participants expressed that they had never seen anything like the device and provided fantastic feedback on the training. These elements will be crucial to monitor moving forward, especially as we anticipate an increase in margins, in alignment with our goal of achieving those margins. While Q4 will be influenced by a substantial first-generation order, as we progress into 2022 and launch the new generation, we expect to see significant margin improvements.

Okay. My last question, and I know you don't give guidance, but it sounded like some of the headwinds that were in this quarter, such as the peak in the delta variant and the summer slowdown in Europe and transitioning your product. It sounds like some of them should lessen in the fourth quarter, all else being equal, so that there's a potential of a stronger quarter. Is that a reasonable way to think about this?

Yes, I certainly hope so. One factor that impacted us in the third quarter was the cancellation of the International Association of Chiefs of Police conference in New Orleans due to a hurricane. There have been several dynamics affecting the market. From looking at headlines from other companies, supply chain issues are something we're monitoring closely. I agree that if we can get COVID under better control in these states, it will allow us to continue traveling. Internationally, with our team and distributors, I do expect continued growth. However, I'm uncertain about the future given the ongoing challenges from the pandemic and potential travel restrictions that may arise.

Thanks again, Alan. And thank you, again, to all 3 of our analysts that are covering us right now at this time. We really appreciate your support. We do have a lot of questions that have come in. I'm going to try to get to some. A lot of them have been overlapped with some of the analysts as well. Tom or Jim, do you want to give any further update on kind of the LAPD trial, where it is now, what devices and when it's going to start and when do you expect it to end?

Yes. So as I mentioned, the approval came back in May. Obviously, LAPD has been working with us on the Bola 150. They have the devices; their planning, I believe, is going to be to start rolling that out in late November and December. And then, the original trial was given for a year. So we do talk to them on a very regular basis. They're very involved in what's going on. But we do expect that trial to start before the end of the year as they're getting that program up and running. And then it would take, hopefully, less than a year, but the plan would be for 12 months from that point once they actually get the 2 precincts and all the officers trained and out on the streets with the BolaWrap.

All right. Great. A few questions are coming in about our monthly burn. Maybe that's a question for Jim. What is your monthly burn? And do you expect that to stay the same, go up, or go down over the next few quarters?

Our cash operating expenses in Q3 were actually down from Q2. And we expect for the near term, we'll be adding a few people, but our cash operating expenses should. We're running at about $1.5 million per month cash burn at this point in time, and we don't see huge increases in that, in a foreseeable quarter or 2. Next year, we can expand further. We do expect our sales to ramp up and continue on our growth curve.

All right. Thank you, Jim. Here's a good one. How do you typically get the body cam videos from police agencies?

Yes. So what we are conversing with the police departments through training and continual conversation and sending them new materials, we do have a request that they send us in-field use reports and field use data. So we don't always get body cams with them, or if there is a body cam, we'll ask if they can share that with us so that we can use it for training purposes. So it's just through a continual conversation. Sometimes we've offered to give them some equipment to help get the body cams. But it's really been around a training tool that we can share with other agencies so they can see how that works and then be able to share that with everybody when it gets released publicly. So each agency is different. The smaller ones move quicker, which is what we talked about, and that's how we've received so many so far.

All right. Perfect. With all the recent hires, what is your employee headcount currently? And do you see this changing? Do you have any holes to fill either in management or in other positions within the company?

So right now, we're about 50 people, plus or minus. As I said in the prepared remarks, we're confident where we're at in the command staff. So as we grow, we'll address it there. But right now, we feel really good. There might be a couple of people here and there, and we are going to add to our team in WRAP Reality now, with Clark on board, especially on the development side to address some of the rollout there that we've been doing with Amazon web services. But right now, we're right around 50 employees here at the company.

A lot of questions have come in about COVID and how it's still affecting us internationally. Have we seen glimpses of it opening up? Or is it still pretty locked down internationally? How are your international salespeople traveling or doing the demonstrations or predication to the different agencies or distributors overseas?

So within Europe, we've seen, obviously, a lot of the European community; they've been able to travel over there. That's one of the reasons we added with Becky Newman coming on with Jags, with Alex, that they've been able to go to Italy, they've been able to go to France, they've been able to go to Denmark, Finland, and other different countries. So within the European area, we've seen it. Other parts, as I mentioned, Asia and the Middle East, have still been a lot more restrictive in terms of travel. So we haven't been able to really make it to those parts of the world yet. And hopefully, if this variant settles down and the countries will open up, then we can start really hitting those areas as well.

All right. Thank you, Tom. Maybe one for Jim. It says this one just came in last quarter; you had some cash come in from the exercise of the warrants. Do you have any other warrant's outlook there that can still be exercised?

Yes, we have about $1.3 million in warrants that become due in the middle of next year that can provide about $8 million worth of additional proceeds. So we're going to start to see how that goes. But we have sufficient cash to manage and finance our growth and our continued operations for approximately 2 years or more. So we're in pretty good shape as a company to manage our growth.

Great. Thank you, Jim. A few more coming in, one on civilian purchases. I know we've kind of talked about that with Jon Hickman with the ATF, but when will civilians be able to purchase our device?

We do get a lot of increases from the civilian market as well as private security. But until we get a ruling back from ATF from the Firearms branch regarding whether they're going to continue to regulate us in that capacity or not, we have to wait for that ruling to come in. So in the foreseeable future, there are no plans outside of what we're doing today with law enforcement, but in addition to the waiting for that ruling from ATF at some point, obviously, taking a look at the R&D area as they continue to look at next-generation technologies in the future.

Okay. Thank you. With the interest of time, I think we have a couple more questions, I'll get you right now. Here's a great one. What is your next device coming? How often do you plan to upgrade?

Great question; we get it all the time. And as you can tell, we're very quiet about it. Just like Apple doesn't tell anybody ahead of time, we're not going to be saying anything in terms of when the next technology is coming out. But obviously, with this one just hitting the market, the previous device hit production a little over two and a half, almost two and a half years ago. So there is a cycle between them. But we don't give any real advancements on when the next tech is coming. And we're super excited with the Bola 150. It answers so many questions, so many requests. This is, for me previously, what really took off for us and really set us on the map, and at the previous company, and I believe this will help do the same here. So right now, we're just focused on getting the 150 out, getting it into production, and getting it out to our customers.

That was going to actually lead me to the last question, Tom. A couple of people actually asked what makes you most excited about the 150 products?

Well, it was a long time coming. I'm not going to lie; that was a little bit painful. But now that it's out there, it's so exciting because it reminds me of the days of old, of what happened to us last time. We established at the markets, there we're seeing the body cams. With a lot of the questions, as I said before, they've gone from how does this thing really work to now saying, hey, I saw a body cam that was really similar, how do I get it? And now they get this device in their hands that really feels good and operates super simply. It incorporates a flashlight, incorporates all the changes that they wanted to see that even with a cassette now being made of plastic. The biggest impact is that we were able to keep the price constant; we didn't have to increase the price. Just because we incorporated all this manufacturing technology and all this technology into the device itself to make it super simple for the officer in the street. That was really, really important. That was one of our biggest design goals was to make sure we didn't have to increase the price on it. And then allow us to see the margin increases that we want and expect of ourselves. So those are the things I'm really excited about. Now that the market has the Bola 150 here, it was just announced 2 weeks ago. And the response has been tremendous with our instructors last week. You've seen that on social media as the agencies start to see and get it into their hands in the field. And give us that same feedback that I'm expecting and hoping for.

Thank you. And thank you everybody for sending in such great questions. I know I didn't get to all of them. Again, please reach out to me via email, or my phone number will be on the last slide as well. Thanks again for all the questions that came in. They're great questions, we appreciate it. So with that, I'll turn the call back over to Tom for his closing comments.

Well, thanks, Paul. And thank you all for joining us today to review another quarter of continued innovation and community policing solutions. We look forward to the launch of the Bola 150 as the next step in ensuring our officers have the best tools to protect and serve our communities. I hope you felt our excitement for our enhanced updated device or WRAP Reality in the future of Wrap Technologies. We have the privilege and honor to be at the forefront of an incredible opportunity to radically change the world of law enforcement for the better. And we will continue our steadfast progress towards achieving our goal of setting a new standard in first-level response tools with the BolaWrap family of products and industry training with WRAP Reality. Every employee from our great production line workers to senior management continues to be deeply passionate and driven to achieve our goals. I hope you and your families have an enjoyable and safe holiday season and New Year. I look forward to our next webcast in early March, when we will provide you with our Q4 and 2021 year-end results and updates. Thank you again and have a great evening.