Wrap Technologies, Inc. (NASDAQ:WRAP) Q4 2022 Earnings Call Transcript

Wrap Technologies, Inc. (NASDAQ:WRAP) Q4 2022 Earnings Call Transcript March 1, 2023

Christopher DeAlmeida: Good afternoon, and welcome to Wrap Technologies Fourth Quarter and Full Year 2022 earnings conference call. Joining me today are Wrap Technologies Chief Executive Officer; T.J. Kennedy; and our President, Kevin Mullins. . I would like to remind everyone that this call will be recorded and made available for replay via a link in the Investor Relations section of our website at ir.wrap.com. Additionally, we ask all interested parties to register on our new website at ir.wrap.com to continue to receive alerts and stock information. As a reminder to listeners, certain statements made during the call today constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Act of 1995 as amended.

Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. These risks and uncertainties are described in our earnings release and more fully in our filings with the SEC. The forward-looking statements today are made as of the date of this call, and we undertake no obligation to update the forward-looking statements. Now I would like to turn the call over to our CEO, T.J. Kennedy. TJ?

TJ Kennedy: Good afternoon, everyone. Thank you for joining us today. After the market closed, we issued a press release announcing our results for the fourth quarter and full year ending December 31, 2022. A copy of the press release is available on our Investor Relations website at ir.wrap.com, which is also accessible through our corporate site, wrap.com. We recently made a major overhaul to our IR website, which will allow us to more effectively house all news, filings and information that may be relevant to our investors. As an example, we recently hosted the first 2 episodes in our ongoing series of Investor Insight Webcast which are available for video replay on the new IR site. In these videos, I and the senior management team members showcase successful deployment of BolaWrap, provide further insight on current policing topics such as use of force.

We plan to hold these investor sessions on a semi-regular basis. So for everyone interested in following our progress more closely, I encourage you to sign up to receive our e-mail alerts through a new IR site so that you can stay up to date on our most recent moves. With these housekeeping items covered, let’s begin. As an overview of today’s discussion, I’ll begin by providing a high-level summary of the fourth quarter and full year 2022 before I hand it over to our CFO, Chris DeAlmeida, to discuss our financial results in more detail. Our President, Kevin Mullins, will then provide a progress update on our go-to-market strategy. I’ll then close out our discussion before we move on into Q&A. Q4 2022 highlights. 2022 was a milestone year for Wrap, one in which we transformed our company, including our senior leadership team, transitioned to the next generation of our safer policing technologies, conducted a cloud VR acquisition to merge with our world-class Wrap Reality 360 VR platform and also made significant progress with the implementation of our first, multiyear strategic road map.

Our strategic road map now guides our company and changes the way we work with law enforcement agencies around the world. In 2022, we produced more BolaWrap devices than ever before, and all of them were BolaWrap 150s. We sold more BolaWrap devices in 2022 with an increase of 179% in total device sales as compared to 2021. Our gross profit was up 133% in Q4 2022 as compared to Q4 of 2021 due to product mix being mostly our higher-margin BolaWrap 150. Gross profit was up 88% for the full year 2022 as compared to 2021. We believe this demonstrates the strength of our underlying business model and the effects of implementing our strategic road map. In 2022, we reduced operating expenses 19% or $5 million as compared to 2021 and improved our full year net loss by 28% or $6.9 million comparatively as well.

We finished the year on a high note, building on the momentum generated throughout 2022 to produce record revenues both in Q4 and for ’22. Our new go-to-market strategy implemented in the second half of 2022 is also continuing to gain traction, highlighted by improved margins, a record domestic order and a very large international order. With our existing customer base, we are tracking meaningful increases in the number of cassettes sold per device, demonstrating that our technology is being used more often in the field and in training, a great forerunner for increased adoption and eventual expansion. In our new go-to-market motion, we started discussing agency-wide full deployment right from the beginning in order to see the largest impact, and we have pulled back on pilots and smaller implementations.

As we begin 2023, our mission to deliver a safe and effective policing solutions that save lives and save careers is more important than ever. Amidst growing societal challenges, Wrap’s non pain compliance tools and innovative training technologies are well positioned to answer this call, and we are responding . Underscoring our belief in the efficacy of our training and technology, we’ve launched a guarantee of a minimum 10% reduction in use of force after the first 12 months of using BolaWrap for new fully deployed agencies who meet certain criteria. Over the next year, we plan to attend over 60 industry events, and we are exploring new ways to help us get more devices in more departments. Our recent large agency win in Montgomery County, Texas, is one prime example.

While we’ve made great progress to date, we have most of our work ahead, and we remain as committed as ever to our mission of ensuring safer outcomes for our law enforcement officers and the communities they serve. I’d now like to turn the call over to Chris to go over our financials.

Christopher DeAlmeida: Thank you, TJ, and good afternoon, everyone. Moving to our financial results for the fourth quarter. In Q4, we generated net revenues of $3.6 million compared to $2.4 million in the prior year period. Our Q4 2022 revenue was a company record and a 50% increase year-over-year. This was highlighted by the record deals in the Americas and the large deal in the EMEA region that T.J. referenced earlier. Q4 domestic sales grew 250% to $1.8 million from $500,000 in the prior year period, while international sales fell 6% to $1.8 million from $1.9 million in the prior year period. The small reduction in international sales is a result of the timing of one lower-margin award in the fourth quarter of 2021. Looking at our performance for the full year.

Net revenues increased 5% to $8.1 million from $7.7 million in the prior year period, marking the fourth consecutive year of sequential sales growth. Increase for sales in the year was driven by strong performances in both the domestic and international markets, promotional pricing associated with converting customers to the BolaWrap 150, which is customary in our industry, is largely phased out at this time. However, we may continue to see some effects on the top line through the first half of 2023 due to some agencies with long procurement cycles. Gross profit for the fourth quarter of 2022 improved significantly to a record $1.7 million or 46% of net revenue and over 140% year-over-year increase from $700,000 or 30% of net revenue in the prior year period.

Looking at the full year results, gross profit increased 88% to a record $3.7 million or 46% of net revenue from $2 million or 26% of net revenue in the prior year period. This achievement reflects our shift to a higher-margin product offering mix as well as pricing changes implemented in late 2022. SG&A expense for the fourth quarter of 2022 increased $379,000 or 9% to $4.4 million from $4.1 million in the prior year period. The increase in SG&A was primarily the result of higher legal fees and bonus expense accruals for 2022. For the full year, SG&A decreased $3.9 million or 19% to $16.4 million from $20.3 million in the prior year period. The decrease in SG&A expense was a result of significant cost controls that were implemented during the second quarter of 2022, coupled with further realignment of overhead costs and staffing during the third quarter of 2022.

Share-based compensation for the full year 2022 decreased to $3.2 million from $5.4 million in the prior year period. R&D expenses in Q4 decreased $1 million or 54% to $870,000 from $1.9 million in the prior year period. Full year R&D expenses decreased $1.1 million or 18% to $5.1 million from $6.2 million in the prior year period. The decrease in R&D expense for the quarter and the year was primarily the result of higher development costs associated with the BolaWrap 150 in the prior year period. Operating expenses for the fourth quarter of 2022 decreased $661,000 or 11% to $5.3 million from $6 million in the prior year period. The decrease in operating expense was a result of an increase in SG&A costs that was offset by the decrease in R&D expense.

For the full year, operating expenses decreased $5 million or 19% to $21.5 million from $26.5 million in the prior year period. The decrease in operating expense was a result of the decreases in both SG&A and R&D expense previously noted. Going forward, our goal is to manage total expenses to around $5 million per quarter for the foreseeable future, with changes as needed. Net loss for the fourth quarter of 2022 improved 33% to a loss of $3.5 million or an $0.08 loss per diluted share from a loss of $5.2 million or a $0.13 loss per diluted share in the prior year period. For the full year of 2022, net loss improved 28% to a loss of $17.5 million or a $0.42 loss per diluted share from a loss of $24.5 million or $0.62 loss per diluted share in the prior year period.

The improvement in net loss for the quarter and the year was a result of an increased sales focus and cost containment efforts implemented in the beginning of the second quarter of 2022. Our balance sheet remains strong with approximately $19.3 million of cash and short-term investments to support the growth plan we have in place. During the fourth quarter, we burned approximately $4.4 million of net cash. We believe we have ample working capital to support our operations for at least the next 12 months. Moving to a review of our key performance indicators. In Q4, total trained law enforcement agencies grew to more than 1,360 or a 32% increase from the prior year period. In Q4, total certified officer instructors also grew to more than 5,580 or a 30% increase from the prior year period.

In 2022, we had a 179% increase in device sales as compared to 2021. Now I’ll spend a minute discussing our current outlook. Based on the company’s financial performance to date, as well as information available as of today’s call, we are providing the following updated revenue guidelines for 2023. As evidenced in the prior year periods, Wrap’s revenue has seasonal impacts and typically mirrors the budget cycles for our law enforcement agency customers, which translates into the majority of purchases occurring later in the year. As a result, we expect revenue in the first quarter of 2023 to sequentially decline from the fourth quarter of 2022. Going forward, we anticipate top line improvements on both a sequential and a year-over-year basis in each quarter after Q1 of 2023, resulting in a high, double-digit growth rate on an annualized basis.

New sales are expected to come from domestic and international expansion with existing customers and new contract signings in both regions. Additionally, based on current projections, we are reiterating our expectation to achieve an adjusted breakeven cash flow positive position by the end of 2023 and profitability by the end of 2024. We believe we can achieve this level of results by continuing to execute against our strategy of equipping more law enforcement personnel with the tools to stabilize and save careers while also providing new training opportunities with our Wrap Reality platform. In summary, the fourth quarter was defined by substantial improvement across our key profitability metrics and continued slowing of cash burn. The strong sales performance in the quarter and the cost-effective transition from the BolaWrap 100 to BolaWrap 150 led to a record quarterly revenue and record quarterly gross profit.

We met our goal of achieving a quarterly gross margin of 50% in Q3, and we’re slightly below that in Q4 due to inventory adjustments. In 2023, we are expecting gross margin to remain around 50% with improvement by the end of 2023 to 60% in the fourth quarter. While we invest for new sales growth and greater brand awareness heading into 2023, we remain focused on diligent cost management to minimize cash burn and reach a cash flow breakeven point by the end of the year. With that, I’ll turn the call over to Kevin to discuss the success we have seen from our new go-to-market strategy implemented last year.

Kevin Mullins: Thanks, Chris. As TJ noted at the beginning of the call, we have continued to see encouraging results from our revamped sales approach that we put in place last year. Building our go-to-market strategy is a fundamental component of our strategic road map as we aim to build achievable and predictable sales in the U.S., ramp up our international sales and continue to expand within current departments through our customer success function. Driving new sales growth is a top priority for 2023. We continue to implement new processes and add members to our dedicated sales team with plans to continue building our sales infrastructure this year and going forward. We have also continued to evolve the way we sell the BolaWrap 150 accessories, including improving our monetization efforts at a holistic level.

As an example, we now begin charging for training services. That was a decision we made during our strategic road map process that was consistent with industry standards and has continued to be well received with given the value of our programs, which we provide. Separately, as TJ noted, in the fourth quarter, we began to record increases in the number of cassettes we sell per device, which we believe is a great sign for both increased adoption with existing agencies and buy-in from new customers as well. In the past, a typical sales contract would include approximately 6 cassettes per device per officer. As of today, that number now stands at 12 per device per officer. This increased capacity gives law enforcement officers the flexibility to deploy BolaWrap for effective training, practice and ensuring they’re prepared to use our products properly in the field and driving safer outcomes in real-life situations.

We also strongly believe that officers should be using the BolaWrap more often than all the other less lethal tools on their belt combined. We believe that when departments trained to use BolaWrap early and often to deescalate situations, their use of BolaWrap cassettes should continue to grow. Field officers that are using the BolaWrap are more likely to use the device when they are comfortable handling it. We realize that similar to a firearm at a gun range, you just can’t fire the BolaWrap a few times and be expected to have muscle memory and rely on that in the field. You must use it multiple times to gain familiarity and to have it become second nature. So far, this has been something departments are seeing as well and ordering more cassettes within their initial deployment.

Montgomery County, Texas, one of our recently announced new departments activated the BolaWrap to full deployment across the Sheriff’s office, all 5 county offices and the County Fire Marshal’s office. Each device was ordered with as well so that personnel using them can gain better familiarity with our product than they ever did before and using that out in the field. This customer win was not only a success because of the size but also because of the way it was funded. Montgomery County was able to use a grant to purchase our product because of the role BolaWrap plays in the mental health sphere. From the federal government officials down everyone is recognizing the value that BolaWrap has in creating safer communities, while also saving careers for law enforcement officials.

As a result, they are awarding grants to purchase BolaWrap. We also now have internal resources dedicated to funding and finding alternative sources of funding for these agencies looking to deploy the BolaWrap. As safer policing outcomes come to the forefront of discussions, we expect more cost sharing grants to become common across all levels of government. For some time and even more so now due to recent tragic events, we are seeing an increased demand for police training and we see this in police reform nationwide. Throughout our communities, discussions within leaders of law enforcement, it is clear they are looking for different ways to train their agencies. Our VR training platform Wrap Reality has continued to gain interest for this reason.

Over the last few months, we’ve invested even more time, energy and financial resources to improve our capabilities in supporting what we believe will become the future of all police training. On November 30, we entered in an agreement with Lumeto, an immersive training and assessment platform for the health care and public safety sectors. So through this professional services technology acquisition agreement, we expect to soon begin offering upgraded cloud-based training for our customers. This new platform will offer our existing and new customers an additional turnkey cloud VR training solution with the critical high-end type scenarios that Wrap Reality has become known for delivering. By partnering with Lumeto and acquiring their existing technology, we can greatly accelerate our development, saving considerable time and cost versus building an entire dedicated cloud solution internally.

We believe this enhanced platform, coupled with our existing Wrap Reality solutions will offer law enforcement more flexible, immersive training solutions for both on-premise and in the cloud, further improving the way law enforcement training is done into the future. Wrap Reality also allows us to penetrate new markets. College and university police departments operate and train in the exact same manner as other law enforcement agencies. Recently, the police department at Sam Houston State University in Texas implemented Wrap Reality for immersive training to improve decision-making skills for events such as duty to intervene, active shooters, de-escalation of situation, bias training and avoiding uses of force, among others. Unique to Wrap Reality is a platform’s focus on increasing proficiency of verbal skills, which are often more imperative in a university setting.

As we continue to expand the market reach for Wrap Reality, exciting and high-growth verticals will be a focus. Overall sales have grown sequentially from Q2 onward, including record domestic sales in Q4, which is a positive indicator that our go-to-market motion is improving. The public safety sector sales cycle remains slow as we are relying on budget cycles, but the recent grants and direct funding from agencies focused on de-escalation and safer outcomes has been successful in 2022. And we expect to grow sales significantly over the course of the year once the impacts of events from early 2023 result in changes later in the year. We have also continued to work to expand the market for BolaWrap. Right now, our product is only available to law enforcement agencies in the U.S. but we are working hard to change the classification so that groups like private security and health institutions can purchase the product given the direct need.

We can serve these adjacent markets as well. we will continue to share updates on our efforts in these areas as we are able. In summary, we continue to deliver our go-to-market strategy that is helping drive more consistent long-term sales. As we look to the year ahead, we are excited about the opportunity to deploy our products in new agencies and expect to start seeing more demand for expansion in the ones that we are not fully deployed. I’ll now turn it back to TJ.

TJ Kennedy: Thank you, Kevin. I am proud of the progress we have made thus far to execute against our strategic road map and transform the company. We are now nearing deployment in 1,000 agencies around the globe. And I’m confident that we have the right plan and are building the right team to continue to grow our recurring revenue, drive stronger margins that support long-run profitability. Looking ahead, we remain committed to delivering on our adjusted EBITDA and profitability outlook for 2023 and 2024, respectively, while continuing to invest for top line growth. Recent events have amplified discussions around de-escalation. Law enforcement agencies are looking for alternatives to paying compliance, and that is where BolaWrap is playing a key role.

Many departments are deploying BolaWrap early and often as an alternative to higher-level use, of course, which not only creates safer outcomes, but also avoids expensive settlements. Wrap Reality is also gaining interest as the public puts a renewed focus on how law enforcement officials are trained and equipped. We believe with our recent addition of the ADAPT module, and new cloud technology through our acquisition agreement with Lumeto that Wrap Reality can become a crucial tool of law enforcement and corrections department training regimens around the country. Our efforts are all part of a continuous push to improve the way the law enforcement and correction departments train. This is at the core of Wrap’s mission to deliver effective solutions and contribute to the movement of safer outcomes.

We want to create positive change moving forward. Now as we look to the year ahead, I can confidently say that we are making strides as a company and also making a difference in the communities that are using our products. I will now turn the call back over to Chris to facilitate the question-and-answer session.

Q&A Session

A – Christopher DeAlmeida: Thank you, TJ. We now want to open up the line for questions from our analysts as well as preselected questions submitted from our investors. Our first question will come from Greg Gibas of Northland Capital Markets. Greg, thanks for joining us today, and you can go ahead.

Gregory Gibas: Congrats on the strong results. I think first, just regarding your outlook for the year, could you maybe discuss what gives you confidence in those expectations? And maybe speak to the level of visibility you have on future orders?

TJ Kennedy: Sure. I’ll go ahead and cover this. Just like Chris talked about, we know that seasonality exists in the public safety market, and we expect Q1 to be lower than Q4 was, but we do expect throughout the year to have a fairly similar approach to what we had last year and that growth in Q2, Q3 and Q4. We definitely have a much better insight today into our pipeline than we did 9 months ago. We spent a lot of time with our sales team working through real opportunities. One of the things we started to do in the end of Q3 with our customer success team was reach out proactively to many of our existing customers and have discussions about them, not just converting from a BolaWrap 100 to BolaWrap 150 but also to expand in those existing agencies.

There was not a huge focus on internal expansion before. Now we’re hitting that internal expansion and full deployment of patrol officers, both with existing customers and new customers. Kevin mentioned one of our large customers had started a full deployment. We had another customer this week come in at full deployment to start off. So one, we’re doing a much better job of talking through agencies about the value and benefits of going full deployment from day 1, where there are policies and every officer is wearing a BolaWrap on their gun belt or on their vest each and every day at work and the value that comes from that. We’re also going back to the previous agencies to be able to have that same discussion and discuss where we fit into the use of force continuum for them and from a policy perspective and what are the outcomes they can expect from having every officer deployed.

So our confidence this year is kind of a twofold perspective. One is continuing to expand the existing customers we have over 900 agencies in the U.S. plus our 58 international countries where we are deployed today and expanding those out. That expansion sale is a bit more predictable and better for us to have ongoing conversations with those agencies. The new sales we also have is we’re getting more insight into them. We came off the IACP conference in October, with a crazy amount of influx of chiefs and departments wanting to engage with us and move forward with a BolaWrap program. So we’ve been able to move those into long-term pursuits. They do take some time, but we have some great insight into where those are going. We’re also spending more time with major county sheriffs and major city chiefs across the country.

The Major City Chiefs Association, for instance, is the 79 largest police departments in the U.S. and Canada. That association, we’ve won more contracts with those larger agencies, not necessarily just the top couple, but throughout that 79. And also, we have more of those in our pipeline for this year, in general, they are larger, much larger than the typical 25- to 50-person department we work with. So we’re seeing more opportunity, more visibility in that pipeline, which drives more confidence.

Gregory Gibas: Great. Good to hear. And if I could, sorry if I missed this in your release, but could you break out maybe device or launcher sales versus cartridge sales in the quarter? And then similarly, repeat purchases from departments, but I do imagine the vast majority of sales are new department sales. If you could break that out, that would be helpful.

TJ Kennedy: Today, we don’t have that breakout published. Chris, anything else to add to that?

Christopher DeAlmeida: No, we don’t. I mean, Greg, we saw a significant increase in device sales throughout the year. And as CJ mentioned in his prepared comments, that includes all 150 devices. We did have cassette and cartridge sales this year with the 150 and 100. We’re very pleased with the progress we made this year and really planted a lot of seeds in 2022 that should bear fruit into 2023 and beyond as far as seeing that increase. we’ll look at giving out that metric potentially in the future, but at this point, we haven’t broken that out.

Gregory Gibas: Okay. Sounds good. And I guess lastly, any updates on the LAPD trial that you can provide?

TJ Kennedy: Sure. We continue to engage with the LAPD on their large trial in the Hollywood and Central divisions. It’s continuing to be successful, and they have an expectation, at least that we do from them at this point that it’s going to continue for approximately another 6 months. That will be a 1-year trial deployment with the BolaWrap 150. They’ll give an update in the not-too-distant future, kind of a midyear update internally on that. And when we get that, we’re happy to share that update as well. But right now, we expect that they will continue to work that pilot for the remaining 6 months of the pilot trial period and then at that point, make their decision on next steps.

Gregory Gibas: Got it. Yes, I look forward to an update there.

Christopher DeAlmeida: All right. Appreciate it, Greg. Thank you. We also have a couple of inquiries from investors that we’d like to address as well. Starting off, Kevin, how have the efforts to increase recurring revenue been progressing?

Kevin Mullins: It’s good question because there are a number of reasons why reoccurring is so important really to sustaining revenue, especially when you’re selling into a cyclical vertical with an extended sales cycle, as TJ mentioned earlier, such as public safety. But building on recurring, we can build predictability, we build scalability, it helps with visibility, also flexibility and expense management. But most importantly, it’s retention. So those are focuses that we’re working on. So we’re building in what is a recurring model from the BolaWrap standpoint, it’s because that’s per device, whereas before, we were recommending 6 cassettes per device, now it’s 12. And so we’ve doubled on that. And it’s not just a revenue generating, but it’s getting really the officers familiar with the technology and being able to repeat that motion with what they’re doing.

We’re also adding extended warranties. We’re growing our training opportunities. As we discussed earlier, we’ve created a leasing model. Now we have bundling of service packages. And so we’re also building on our early and often message, and that builds a recurring cassette sales as well. On the Wrap Reality side, we’ve changed our model. We’ve changed our model from a onetime enterprise purchase, now moving to a SaaS subscription model. We also can see recurring on module creation. We have support plans that are built into Wrap Reality, but it also allows for bundling opportunities. We recognize the value that recurring builds for our shareholder base and will continue to grow on that.

Christopher DeAlmeida: Thank you, Kevin. Additionally, TJ, can you remind us about the upgrades from the BolaWrap 100 to the BolaWrap 150 and speak to our R&D priorities going forward?

TJ Kennedy: Yes. So from a BolaWrap 100 to BolaWrap 150 perspective, there were so many different changes, about 11 major changes between those 2 devices. First off, at the high level, it’s about 20% lighter and smaller. So it takes up less space on the gun belt. And now that we have an expectation that every officer will carry it, certainly, that is critically important. It’s also rated IP63, which is geared towards the industrial build out and the rigor rating like you would see a going to different levels. And so that allows us to sell it into the typical environment that police officers operate where it rains, it snows, dust, those things as well. The anchor system is now metal injection molded. So that’s also improved. The laser system went from a much more basic green line laser to a laser array with 7 different lasers that makes it quite obvious, and we’re actually seeing more times that the device is pulled out and the laser is put on somebody and they give up right away kind of we call that laser compliance because that laser is so obvious.

In addition to the laser, we were asked during the usage of the early BolaWrap 100, could we have a flashlight built into the device. So it now has 2 LEDs — 2 flashlights built into it as well, and they can be turned on or off, but most officers really like to leverage that. Different types of parameters and how we build the device, which also now is much more predictable, had less total parts and it has much higher margins as well. Battery life is probably one of the most important. The battery life is almost 4x longer. It’s a 2-year battery that is in there. It allows it not to have to be charged every day before people go out to work. On the indicator status. It also has an indicator of whether a cassette is in the device, whether the electronic check of both the cassette and the device shows that it’s green and ready to fire and it does an automatic self-check as part of that.

To deploy the device in a pretty big change, we went from a 3-step process to a 2-step. Now it’s just turning off of safety, the device is then ready to go ahead and deploy and there’s a deployment button. So it’s a very small 2-step process which can also be used with one hand. It doesn’t require 2 hands to use it anymore. How it’s powered; very different from the previous 380 blank cartridge to now it’s a micro gas generator, which is very similar to what you have to ignite your airbag in your car. And then overall, just the fact it’s fully electronic deployment versus a mechanical deployment. Those are the major changes between the BolaWrap 100 and BolaWrap 150, significantly upgraded device, and we’ve been getting terrific feedback, that is why we want to make this our baseline device for the next 5 to 10 years so that departments that are doing very large deployments, especially some of our international departments and very large U.S. cities that they can count on continuing to deploy the 150 even as we come out with new R&D products in the future.

Today, we’re working on a number of things with our R&D team. We have been a little more restrained in the total amount of spending we’re doing on R&D, but we have not ended and we expect new devices and new technologies to come out in the future that support our safer outcomes for law enforcement and the citizens that they serve. So we’re continuing to invest. We continue to file new patents and continue to be awarded patents that we’ve already filed in the past to continue to drive new intellectual property for us as a company, and you’ll see some updates in our 10-K on the additional IP that we’ve done in the past year.

Christopher DeAlmeida: Perfect. And finally, TJ, in light of the recent national tragedies, have you seen any shift in discussions with law enforcement officials about BolaWrap as you continue to speak with customers around the nation?

TJ Kennedy: Yes, especially just in the past few months, we’ve seen a significant shift to a couple of things that I think are really important to all of our shareholders. One, more often than not, when I go to demo or present to an agency, to chiefs, to key decision-makers, we’re seeing that they already know about BolaWrap that they already have a desire to have it and that they know it works and it’s effective. We have enough agencies now that most are talking to an agency that is successfully using the device today. And because of that knowledge, it gives them the ability to come in and really talk more about how do we move into a full deployment of that agency. And when we look at the kinds of issues that have come up around use of force and duty to intervene, we’re getting requests both for Wrap Reality and some of the duty to intervene technology we have in our VR training system as well as the need to have BolaWrap fit into their force continuum.

One of the most important things we determined during the strategic road map and it changed our training curriculum was the fact that we know where BolaWrap fits into an agency’s use of force policy, it’s a bit different than where I think we started. We now know that when verbal commands fail for an officer that is engaging with a subject who need to either be taken into custody for a criminal event or taken into protective custody and mental health or other situation that when those verbal commands fail is where BolaWrap should be used. It’s very early in those altercations. And as Kevin mentioned earlier, it’s something that’s happening much more often. We see this as a tool that should be utilized more than all the other less lethal tools that are out there.

And from the BolaWrap perspective, we believe that, that early interaction actually de-escalates situations from growing into something worse and it also ends up saving lives and saving careers of the officers and those subjects that they interact with. So when we look at some of the deaths that have happened in custody, some of the chases that happened, we showed at the beginning of this earnings call on the high-speed Chase that then turned into a foot chase that was ended with a suspect who was running away being wrapped up by BolaWrap 150 by the officer in Alpine, Texas. That’s a great example where that situation was de-escalated and the call was over after that individual was apprehended into handcuffs after being wrapped and something that would have turned into a much more dangerous situation and could have had a much more tragic outcome.

Christopher DeAlmeida: Great. At this time, this concludes our question-and-answer session. As a final reminder, we encourage you to visit our new website at ir.wrap.com. And even if you’ve previously signed up for our e-mail alert system, we’ve launched a new one. It’s got a lot more functionality to it. So we ask that you please re-sign up again and again, just go to ir.wrap.com or you can visit from our main page at wrap.com. Thank you for joining us today, and thank you for joining the Wrap Technologies Fourth Quarter and Full Year 2022 Earnings Conference Call. You may now disconnect.