Wrap Technologies, Inc.

WREP.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 two episodes in our ongoing series of Investor Insight webcasts, which are available for video replay on the new IR site. In these videos, I and the senior management team members showcase successful deployments of BOLORAP, 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 email alerts through our new IR site so that you can stay up to date on our most recent news. 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 D'Almeida, 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 RAP, 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 RAP Reality 360 VR platform, and also made significant progress with the implementation of our first multi-year strategic roadmap. Our strategic roadmap 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 BOLA RAP 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 roadmap. 2022 we reduced operating expenses 19 or 5 million dollars 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 2022. 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 start 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 safe and effective policing solutions that save lives and save careers is more important than ever. Amidst growing societal challenges, RAP's non-paying compliance tools and innovative training technologies are well positioned to answer this call, and we are responding in kind. 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 BOLORAP 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.

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 TJ 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 large cartridge 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. The 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 Bullwrap 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 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 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 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 realignments 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 BOLORAP 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 cost 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 the 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. Nat loss for the fourth quarter of 2022 improved 33% to a loss of 3.5 million or an 8 cent loss per diluted share from a loss of 5.2 million or a 13 cent 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 a $0.62 loss per diluted share in the prior year period. The improvement in net loss for the quarter and the year was the 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 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 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, RAP'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, break-even, cash flow positive position by the end of 2023 and profitability by the end of 2024. We believe we can achieve this level of result by continuing to execute against our strategy of equipping more law enforcement personnel with the tools to save lives and save careers, while also providing new training opportunities with our RAP 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 bull wrap 100 to the bull wrap 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're 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.

Thanks, Chris.