Byrna Technologies (NASDAQ:BYRN) Q1 2021 Earnings Call

0:00 Greetings and welcome to the Berna Technologies fiscal first quarter 2021 earnings conference call and webcast. As a reminder, this conference call is being recorded and all participants are in a listen-only mode. Before turning the call over to Bryan Ganz, Berna Technologies Chief Executive Officer, I will read the safe harbor statement. Some discussions made today may include forward-looking statements. Actual results could differ materially from the statements made today. Please refer to Berner's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligations to update forward-looking statements as a result of new information, future events, or otherwise.

0:47 As this call will include references to non-GAAP results, please see the press release in the investor section of our website, ir.berner.com. for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results. I will now turn the call over to Mr. Bryan Ganz. Sir, please go ahead. Thank you so much, Kevin. Good morning, everyone, and welcome to Berna's fiscal Q1 earnings call, and in fact, the first quarterly earnings call in company history. Last night, I left the office thinking that the earnings script I had for today's call was final. and then, as is often the case, something unexpected occurs. A little after 9 p.m. last night, Sean Hannity mentioned the Burna on his nightly television show on Fox. For those people that have been following Burna, you know that this is not the first time Sean Hannity has featured the Burna HD personal security device. Sean has always been passionate about providing police with more and better, less lethal training and weapon systems.

1:54 It is not surprising then that in the wake of renewed civil unrest that erupted in Minnesota last night, stemming from the fatal police shooting of an unarmed motorist, Chong would once again bring up the need for the police to adopt additional less lethal tools and training like the tools and training provided by Berna. As a result of this unanticipated but very much appreciated feature of the Berna HD, web traffic and sales surged. Over the 12 hours from 9 p.m. Eastern time last night through the start of this call at 9 a.m., Berna logged approximately 100,000 e-commerce web sessions and took over 1,800 orders, totaling more than $850,000 in sales.

2:39 To put that in perspective, for the first 11 days of April prior to yesterday, we had just about the same 100,000 web sessions and we booked 667,000 in e-commerce orders or approximately 60,000 a day. Unlike the first time orders surged in the wake of a Sean Hannity mention, this time we are completely prepared as we have dramatically increased our production capacity and we have built up our finished goods inventory so that we would be prepared for just this type of event. We currently have adequate laundry inventory on hand to ship these additional orders in a timely manner consistent with the seven-day shipping times posted on our website.

3:26 Perhaps the most important thing about Sean's mention last night, however, is that it highlights the need for law enforcement agencies and the communities they serve to embrace more and better, less lethal weapons and training. When Sean first mentioned the burnout 10 months ago, we were not prepared to address this market. Today, BRNA has a robust law enforcement training program run by highly experienced former law enforcement officers. This training program is centered not only on how to use the BRNA, but where the BRNA falls on the continuum of force, when to use the BRNA, and how to use it to defuse and deescalate a potentially violent situation. Now that I have covered the publicity from last night, I would like to return to the material that I intended to cover on today's call.

4:18 First, I'd like to recognize all the hardworking and dedicated Burna team members and partners that have gone above and beyond the call of duty over the last year to ensure that we successfully navigated our way through the challenges of hypergrowth. As you know, last year sales grew by 1,700% and our workforce also grew by approximately 1,700%. I also want to thank the investors that have supported the company over the last few years. Their confidence in the Burna team and belief in our mission is greatly appreciated. And finally, I'd like to recognize the more than 60,000 members of Burna Nation for their enthusiastic support of the Burna brand, our products and our mission.

5:08 Only through their embrace of everything Burna have we been able to, in just two short years, establish Burna as a lifestyle brand and a leader in the non-lethal personal self-defense space. Speaking of lifestyle, at Burna, our tagline is Live Safe. You will see this on the signature line in every email. Live Safe is very different than the much overused homily Stay Safe. Stay safe is passive, implying the avoidance of risk. Live safe, by contrast, is strong and assertive, implying the taking of proactive measures to protect oneself and one's family. Burna's range of non-lethal personal security devices gives people that confidence and sense of security that can only come from taking responsibility for one's own safety. With Burna, anyone can live life unafraid, can live life to the fullest, can, as we say, live safe.

6:09 At the same time, our products give consumers and law enforcement professionals a safe and effective alternative to firearms. In this sense, we see Burna as part of the solution to addressing the challenges of gun violence in America today. Joining me today is our CFO, David North. Before David gets into a discussion of our first quarter results, For the benefit of those who are less familiar with the Berna story, I'd like to give the group a brief history of our company and provide some background on what we do at Berna and what we believe are the opportunities that lie ahead of us. The company, now known as Berna Technologies, was incorporated in 2005 as Security Devices International, or SDI.

6:59 SDI produced and sold 40-millimeter blunt impact projectiles used primarily by law enforcement. I was brought into the company as a consultant in 2016 to help turn the business around. The time that I was brought in, SDI had only a few hundred thousand dollars in annual sales and was losing millions of dollars each year as it struggled to develop the market for its 40-millimeter impact rounds. I quickly concluded that to succeed, the company needed to move beyond the highly fragmented and very difficult to crack law enforcement market. To do this, the company had to develop products that were not regulated by the ATF or State Department so it could access the consumer and private security markets.

7:47 After presenting my conclusions to the board, I was asked to take the helm in 2017 to implement this corporate restructuring. After I accepted the position, my first job was to dramatically downsize the legacy SDI business and move the headquarters to a family office outside of Boston. With a small team of highly talented professionals, we began formulating a strategy for tapping into the consumer market by developing an unregulated, non-lethal personal security device that we could sell to consumers and private security companies alike. In our quest to develop a consumer product, we came across an inventor from South Africa by the name of Andre Baez. Andre had come up with some very interesting and innovative concepts in the non-lethal self-defense space. After a discussion in Boston, we agreed to purchase Andre's intellectual property portfolio, acquire his design studio, and hire him as our chief technology officer. This was in April of 2018, and it kicked off the development of our flagship product, the Burna HD.

8:55 The resulting Burna HD is a personal security device that uses CO2 to fire both kinetic and chemical irritant projectiles at speeds up to 300 feet per second. The rounds are capable of deterring, disarming and disabling an assailant at standoff distances as great as 60 feet. Given the ability to safely and effectively neutralize a threat at a significant standout distance, we felt that the Burna HD would be ideal for both consumers and security professionals and would appeal to a large cross-section of the American public. We shipped our first Burna HD in the U.S. on May 31, 2019, the last day of our second quarter. Selling exclusively through Burna's own e-commerce website, Sales ramped from 250,000 in 2018 to 924,000 in 2019.

9:50 As we entered the fiscal year 2020, web sessions and sales began to climb in tandem, starting with 500 web sessions a day in December and eclipsing 6,000 web sessions a day in early June of last year as the combination of the global pandemic and the civil unrest were sweeping across the United States, creating a collective unease that gripped the country. This in turn drove a surge in demand for all manner of self-defense products, including non-lethal solutions like the Burna HD. As I alluded to at the beginning of this earnings call, on June 10th of last year, Sean Hannity first featured the Burna HD during his nightly television show. With this unexpected endorsement from Sean Hannity, orders exploded.

10:38 Despite putting a banner on our website saying 12 plus weeks for delivery, By the end of June, the company was backordered more than 20,000 launchers, far exceeding the pace at which we could produce the Burna HD launcher. To work through this backlog, we ramped up production at our existing manufacturing facility in South Africa, and we opened a second new manufacturing facility in Fort Wayne, Indiana, increasing production from 100 units a day last June to combined production of more than 850 units a day by year end. With the Hannity endorsement, Burna was rocketed onto the national stage as millions of consumers instantly became aware of our product. This sudden brand recognition drove interest both domestically and internationally from consumers, dealers, and law enforcement agencies.

11:30 Currently, we sell our Burna HD launchers, ammo, and merchandise direct to consumer via our website and in over 300 brick and mortar locations, including gun shops, Outdoor Stores, and Sporting Goods Stores across the United States. Law enforcement agencies have also identified Berta as an effective option for dealing with the challenges law enforcement officers face every day when attempting to disable suspects at a distance in a non-lethal manner. Included in the law enforcement package is Berta's proprietary T3, that is Train the Trainer training program, which was developed by highly experienced former law enforcement officers. These specialized training seminars educate officers not only on how to operate the device, but also where it falls in the continuum of force and how to most effectively utilize it to deescalate dangerous situations in a variety of real world scenarios. To date, we have trained over 65 police departments and private security firms. Outside of the U.S., we have already delivered the Burna security device to law enforcement agencies in over 10 countries, including more than 1,100 Verna HD launchers to the Hong Kong police.

12:51 We also received a slew of inquiries from companies across the globe that want to distribute our product in their home markets. To date, we have sold Verna's into more than a dozen international markets and have received serious inquiries from distributors in at least 20 additional countries. Based on the demand we have seen to date for the Burna HD and its related ammunition and accessories, it is clear that the addressable market is enormous. To put it in perspective, there are roughly 90 million gun owners in the United States. I myself have a concealed carry permit and own several handguns. To be completely honest, however, I was never sure how quick I would be to pull the trigger.

13:36 Even if one is acting in self-defense, Pulling that trigger will change your life forever, legally, financially, and perhaps most importantly, psychologically. That said, if I hesitate, am I making a fatal mistake? And if I don't hesitate, am I making a fatal mistake? With the brna, there is no such thing as a fatal mistake, and as a result, no reason to ever hesitate. As a result, today, I rarely carry a lethal firearm but I don't go anywhere without my burnout. What portion of gun owners think like me? Is it 1%, 5%, 10%? Even at 5%, it represents 4.5 million potential customers just in the U.S. alone. To put that in perspective, to date we have sold just 63,000 burnout personal security devices in the United States.

14:34 While our original target market was gun owners that, like myself, wanted a non-lethal option for their arsenal, we soon discovered that the Burna HD also has widespread appeal to people that are averse to gun ownership. While not ready to own a gun, these consumers also want a safe and effective way to protect themselves and their families. There are approximately 70 million households in the U.S. that do not own a firearm. What percentage of these can we capture? Again, if we penetrate just 5% of that market, we are looking at another 3.5 million potential customers in the U.S. alone. In addition to the 90 million U.S. gun owners and the 70 million U.S. households that do not own a firearm, there is enormous opportunity in law enforcement, private security, and school safety markets.

15:27 In terms of law enforcement, there are more than 900,000 police officers in the U.S., and another 10 million police officers in the 30 largest countries in the world. Add to that more than 20 million private security officers worldwide, and the opportunity for BRDA is virtually boundless. In fiscal 2020, we generated revenues of more than $16.5 million, 17 times the $924,000 we reported in fiscal 2019. In the first quarter of this year, 2021, we reported revenues of $8.9 million. With demand for the Burna HD remaining robust, the new products we plan to introduce in the coming months, the new sales channels we plan to open, our increased manufacturing capabilities, and the intensification of our sales and marketing efforts, we believe we are well positioned for growth in 2021 and for the years to come. I will discuss some of these growth initiatives in more detail later in the call as we touch on new products, new markets and new sales channels.

16:40 However, right now I'd like to turn the call over to David North to discuss our first quarter financials. David? Thanks, Bryan, and thanks everyone for joining us today. Now I'd like to review the financial results for the first fiscal quarter of 2021, which concluded February 28th. I'll provide an update on the company's liquidity position, and then I'd like to discuss the company's 2021 full-year outlook. Revenues for the first quarter were $8.9 million compared to $149,000 in the first quarter of 2020. The year-over-year increase was driven by strong demand for our Verna HD personal security device, enhanced by market awareness of our product, and improved production volume following the opening of our new manufacturing facility in Fort Wayne, Indiana.

17:27 First quarter gross profit was $4.7 million, representing a 53.3% gross margin, a significant increase over the 29,000 gross loss that we incurred in the comparable period a year earlier. The increase in gross profit dollars and margins were driven by the substantially higher production volumes referred to earlier. Operating expenses for the first quarter totaled $5.2 million or roughly 58% of revenues compared to $1.6 million in the prior period. That year-over-year increase was driven largely by investments in corporate infrastructure necessary to support earnest growth in sales and production. This includes building out the management team, the administrative staff, as well as operating expenses necessary to effectively and professionally manage a growing public company with sales and manufacturing operations in multiple countries.

18:23 GAAP net loss for the first quarter of 2021 was $272,000 compared to a GAAP net loss of $2.3 million in the first quarter of 2020. Excluding non-cash stock compensation expense in the first quarter of 2021, non-GAAP adjusted net income was $339,000, representing our second consecutive quarter of non-GAAP profitability. Moving on to our backlog, as of November 30th, 2020, Brna had an order backlog including e-commerce and dealer orders of approximately $7 million. As of February 28th, 2021, Brna had worked that backlog down to approximately $3 million. Before last night, our order backlog stood at $800,000.

19:11 With the surge in orders resulting from the mention on the Hannity Show, our backlog stands this morning at approximately $1.7 million. However, we expect to work through this in short order. Currently, we're committing to shipping all orders for new launcher kits within seven days. With improvements in shipping times, we've also seen an increase in our conversion rates, that is, sales as a percentage of web sessions. Now, turning to the balance sheet, As of February 28, 2021, we had approximately $2 million of available cash and a further $2.2 million of restricted cash from orders that had been placed but not yet fulfilled. We ended the quarter with no current or long-term debt on our balance sheet. Total cash plus available cash under our revolving credit facility was approximately $10.6 million as of the end of the first quarter, and we believe that our current liquidity provides us with ample flexibility to execute on our strategic plan, quickly ramp up our marketing campaigns, and continue to invest in the research and development of new products.

20:16 We've intentionally drawn down cash to build up inventory. We currently have more than 10,000 finished units in stock, and enough raw materials and componentry on hand to build another 25,000 launchers. With our plan of opening an Amazon e-commerce store this summer, and our desire to be able to handle any large dealer order or surge in sales like the one we saw last night. We believe that this has been the prudent approach, particularly considering the criticism we suffered on social media when we struggled to ship orders in the wake of the first Kennedy surge in sales. For the full fiscal year of 2021, which ends November 30th, we reaffirm our guidance of revenues between 33 and $38 million. With respect to our expectation for operating expenses, we believe that the level we just reported for the first fiscal quarter of 2021 is representative of the run rate we expect to see for the balance of fiscal 21 with the understanding that certain expense categories such as advertising, marketing, customer freight, and sales commissions are revenue related and an increase in sales beyond our current projections would result in a corresponding increase in operating expenses in those areas. I'll turn it back over to Bryan, who will discuss some of our new product and sales channel development initiatives.

21:38 Thanks, David. As I indicated earlier, we have a number of exciting new product developments that we will be bringing to market over the balance of 2021 and into 2022. The first new launcher that we will be bringing to market is the Burna HD XL, which will retail for $459. The Burna XL boasts a 19 foot per second greater muzzle velocity than the standard Burna HD and uses the more commonly available 12 gram CO2 as opposed to the 8 gram CO2 used in the standard Burna HD. With the 12 gram CO2, the Burna HD XL can fire at least two additional magazines on a single CO2, both increasing the capability of the launcher and bringing down the cost per round by at least 40%.

22:30 Additionally, by using the more readily available 12-gram CO2, it will be easier to travel with the Burna HD XL as users can purchase the 12-gram CO2 in any Walmart or similar type store at their destination. We will also be offering the 12-gram adapter, which we are calling the Burna Boost, as an aftermarket option. The Burna Boost retrofit kit will allow current owners of the Burna HD to upgrade their launcher so they can use the 12-gram CO2. Externally, it will look exactly like the Burna HD XL, although it will not have the internal modifications of the XL. That said, the Burna Boost will provide many of the same benefits of the Burna HD XL, including more shots per CO2, a lower cost per shot fired, ease of travel, and an increase in muzzle velocity, in this case, six feet per second.

23:29 The Burna Boost, which will retail for $49.99, can be easily installed on any existing Burna HD using two small wrenches provided in the Burna Boost retrofit kit. Last Thursday, we sent out an email to our more than 60,000 members of Burna Nation taking pre-orders for the Burna Boost retrofit kit. Despite a promised delivery date eight weeks out, the initial response has been very encouraging. In the four days that we have offered the Verna Boost retrofit kit, customers have ordered more than 2,000 Verna Boost kits. The next new launcher we plan to roll out is the Verna SD, or self-defense, scheduled for a June 1 release date. The SD is an upgraded version of the current Verna HD and will be sold alongside the HD for the next several quarters.

24:22 The FD Ready Kit, which will retail for $399 versus an MSRP of $359 for the HD Ready Kit, features new Burna branded receivers, an improved trigger, an enhanced sighting system, and new honeycomb grips. And perhaps most importantly, it will also be entirely assembled in the USA. This summer, we're planning to introduce the Burna LE for law enforcement. The LE is designed for law enforcement officers and those firearm enthusiasts that want to carry what the professionals carry. The Burna LE will provide users with an even greater muzzle velocity than the Burna XL, an enhanced sighting system employing fiber optic sights for improved nighttime operations, a seven-round magazine, and extreme cold weather capabilities.

25:13 We believe that the LE version of the Burna will allow the company to go after the law enforcement market in earnest. While this market is not as large as the consumer market, as we can see with the recent mention by Sean Hannity, it is an extremely important market in as much as it will provide tremendous visibility for Brna. Also, as you all know, Axon, formerly Taser, has built a company worth more than $10 billion serving the law enforcement market almost exclusively. In early 2022, we plan to launch the Burna CP for compact pistol. This is a more compact version of the Burna HD. This launcher, which will fire 49 caliber projectiles and will have a 12 round capacity magazine, is designed to provide the same payload capacity and the same stopping power as the Burna HD, but in a much smaller form factor.

26:10 We believe that the smaller size will appear to A number of consumers, including women and those that would like to carry a burna in a more discreet manner. In addition to these new launchers, burna also plans to introduce a new, lower-cost, biodegradable projectile for training and backyard fun. This new environmentally friendly eco-round will be the centerpiece of our new recreational marketing campaign, which we plan to kick off this summer. By focusing on recreational use of the burna, The company seeks to increase consumer engagement, emphasizing the fun side of practicing shooting skills with a burner. This will help ensure that owners of the burner personal security device remain proficient so that in the event they need to deploy it in a real-world situation, they are prepared and confident. At the same time, by reducing the cost and eliminating any environmental impact of the practice rounds, burner can enhance its razor razor blade model while also furthering our commitment to environmental sustainability.

27:17 With respect to new sales channels, as David mentioned, we plan to launch an Amazon digital storefront in the next few months. We believe that this could be a game changer, frankly, in terms of visibility for our products given the enormous user base that Amazon serves. Most e-commerce companies that sell through their own website and through Amazon tend to find that sales are evenly split between the two. We are also in the process of reengaging with brick-and-mortar dealers after a forced hiatus while we worked through the Hannity-induced backlog from last summer. We have been extremely encouraged by our dealers' willingness to buy and stock our products despite the long delays they were forced to endure. Lastly, and perhaps what I'm most excited to speak to you about, is the launch of our LearnSafe school safety program. Coincidentally, today we are kicking off our LearnSafe pilot program in Brazosport College in Texas with approximately two dozen attendees from multiple school districts in Texas.

28:21 We hired RJ Boatman to spearhead this effort. In addition to his tenure as Chief of Police in Houston, Texas, RJ spent more than 20 years in school safety at both the federal and state levels. The LearnSafe program developed by RJ and his team of former law enforcement officers including a former SWAT commander is designed to enable school personnel such as school resource officers and security guards to handle an active shooter situation and other serious threats that will unfortunately but inevitably arise in educational facilities throughout the country. This program provides the tools including the Burna Personal Security Device and the training needed to deal with these life-threatening scenarios should the need materialize.

29:08 The safety and security of our students and our next generation leaders is something that both RJ and I have been passionate about our entire lives. Since Columbine, there have been more than 240 school shootings in the United States. And although we are proud of what we've accomplished at Berna so far when it comes to making people and their communities safer, nothing would be more gratifying than for Berna to be part of the solution when it comes to making our schools safe for our children and educators. In conclusion, I hope that we have been able to convey to you a sense for how we think about the market and how we see the opportunity for Berna to capitalize on the rapidly growing demand for a safe, effective, non-lethal self-defense solution.

29:54 We believe that so far we have just scratched the surface. 2021 will be a critical year as we demonstrate both the tremendous demand for Berna's products and our ability to scale up operations to meet the demands and capitalize on the significant opportunity ahead of us. Now I'd like to turn it back to the operator and we'll be happy to take your questions. Thank you, and I'll be conducting a question and answer session. If you'd like to be placed in the question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing star one. One moment, please, while we poll for questions.

30:44 Our first question today is coming from Bryan Giswale from Raymond James. Your line is now live. Hey, good morning and congratulations on the really good results. Really do appreciate kind of the live safe mantra and appreciate the non-lethal firearm alternative here. If you could just, I have a few questions I wanted to kind of run through with you. Could you help us understand perhaps the rhythm of your revenue cadence this year? If I look at it, you've named a bunch of catalysts out there from joining up, getting on Amazon to a bunch of new products that seem very promising. Can you just maybe help us understand how that progression might transfer to revenue? Okay, so when we reported sales of 8.9 million for the first quarter, that included working through $4 million of backlog.

31:37 So during the first quarter, we took in $5 million of additional orders. As we go into this quarter, we intend to work through the remaining $3 million of backlog, although given our sales flow, there's probably always going to be several hundred thousand, maybe a half a million dollars of backlog at the end of any reporting period. We are seeing sales continue to grow. As we mentioned for the first 11 days of April before the Hannity mention, we were running at about $60,000 a day in new e-commerce orders. In addition, we've seen a significant pickup in dealer orders. We expect whatever seasonal factors there are, and there is some seasonality to this with Christmas time, Black Friday, and the Christmas holidays being very strong for us, But we expect whatever seasonality there is to be overwhelmed by the continued growth in demand. So we see growth, you know, as I said, it was $5 million in new orders in Q1. It will be substantially higher than that as we go into Q2. And we'll continue to grow as we introduce these new products and new sales channels.

32:57 Great, thank you. And then I guess if I could just follow up, again, sticking with the revenue line. It's my understanding you create a lot of recurring revenue with each launch or sale in the form of ammunition. Can you maybe talk about how that ammunition waterfall is beginning to build and how that kind of fits into your overall forecast? If we look at the firearms industry, generally, Most people will spend over the first 18 months that they own a firearm as much in ammo and accessories as they spend on the firearm itself in the initial purchase. And we see no reason to think that we're going to be very different from that.

33:42 Now that said, ammo and accessories has been a relatively small part of our revenues to date because so many people are just getting their burner launcher to start. But what we saw with this Burda Boost program was that we were able to go back to our existing user base and generate several hundred thousand dollars in sales over a couple of days just by reaching out to them with an email. We do believe that over time as we have a larger and larger installed user base that we will start to look more like our competitors. specifically Mission Less Lethal and Pepperball. If you look at their sales mix, it's pretty close to 50-50.

34:30 In other words, 50% is on launchers and 50% is on ammo and accessories. But based on our projections, we're still several years away from reaching that milestone. Okay, terrific. And then if I could just maybe ask one last one and then I'll jump back into the queue. I wanted to focus now on gross margins. Can you help us understand maybe the impact of mix between launcher versus ammunition, your new products that are coming out, and overall volumes and how that impacts gross margin and what we're thinking as we move through the next several quarters here? Thank you. Sure. I like talking about gross margin because we like making money here at Verna.

35:16 But we've been seeing an improvement in gross margin every quarter, and we are continuing to see an improvement in gross margin. Now, that said, there's a couple of drivers of gross margin. One, of course, is product mix. And as we bring out these new products, they'll be at higher prices and higher gross profit margins. The ammo has a higher gross profit margin than the launcher has. That is going to be offset to a certain extent as we grow the dealer business. Nonetheless, we are looking at margins continually expanding throughout this year and throughout 2022.

36:01 And we're looking at a terminal gross margin in the mid-60s. That's great. One last one, if I could just sneak it in. Sorry. Thank you for joining us. who really did heroic work to get the production up from 100 a day to today we can produce over 1,000 a day.

36:52 The biggest obstacle to growing production is not the manufacturing facilities themselves. We can currently produce more than 500 a day in each facility per shift. So we have the ability to produce 3,000 launchers a day which frankly is far in excess of our projections over the next several years. The biggest obstacle to scaling up production is simply the componentry. We have 114 parts in a Burna HD, 93 unique parts, 65 of those are custom made. Among the custom made parts there are MIM parts, metal injection molded parts.

37:39 There are plastic injection molded parts. But there are a lot of machined parts. And these machined parts, there's very little economies of scale. If it takes 10 minutes to make a valve body, and it does, frankly, it takes 100 minutes to make 10 valve bodies and 1,000 minutes to make 100 valve bodies, and you really don't get any economies of scale. And as you grow, you can quickly overwhelm The machine capacity of the machine shops that you're working with. So what our supply chain team has been doing is to create both redundancy and additional capacity by bringing on new vendors. Now, this has been particularly hard during the pandemic because we haven't been able to travel to the vendors. But as things are starting to free up, the supply chain team is getting their visas in order ready to go all over the world to start expanding our production base. We are also in the process of developing what I refer to as an all-truck strategy. And frankly, that just means that we want to be able to supply Fort Wayne completely by truck.

38:44 So in the event of another pandemic, in the event that the skies are shut down again, that we are not strapped, that we can get things from either the U.S., Canada, or Mexico into our Fort Wayne factory. And we are very far along that path. That will certainly be accomplished during this fiscal year. That's great. Thanks so much for fielding my questions. Appreciate it. Thank you, guys. You're welcome. Thank you. Our next question is coming from Jeff Van Sinderen from B. Reilly & Company. Your line is now live. Hi, good morning and congratulations. I know you touched on this topic, but in light of the latest police incident in Minnesota and Sean Hannity's mention last night of Berna, Just wondering if you can speak more about what sort of trajectory in orders we might expect going forward based on Sean's previous mentions, just kind of what you saw there, maybe a reminder. And then it sounds like you have plenty of capacity to fulfill those orders.

39:48 Maybe just confirm that. And then I think you mentioned that you've maintained prior guidance. And then any update on the company's relationship with Sean? Okay. Well, first off, thanks, Jeff. I appreciate the question. Sean is a big supporter of the company. I wouldn't go as far as to say that Sean and I are close personal friends, but we've developed a friendship over the last year that he's been supporting Berna. He is honestly very, very passionate about getting law enforcement better tools and training, and he strongly believes that Berna is part of the solution. We have invited Sean to come to one of our law enforcement and or school safety training programs. We hope he'll take us up on that.

40:39 But the relationship between Sean and the company is just a, frankly, just a personal relationship. We don't pay Sean anything. We don't advertise on his show. We don't provide him with free product. It's just something that he believes in strongly. As I said last night, we had 775,000 Thank you for joining us. and we are able to fill all of these Hannity orders.

41:35 We're saying within the seven day lead time that we have on our website, but we're gonna work very hard to try to get them all out this week. And I think the reason we want to push so hard to get them out this week is we did get a lot of negative feedback on social media with the long lead times and shipping times after the first Sean Hannity mention. and we think that if we can demonstrate to people that they put their order in last night or today, that they're getting their launcher by the end of the week, that we will get a lot of friends and family of these people. Friends and family referrals is our second largest means of getting new customers. So it's really important for us to be able to fill these orders quickly and I believe we will.

42:27 Okay, great. And then any other comments just in helping us understand approaching growing the dealer business? So the dealer business, my whole career has been in B2B. So, you know, I'm a big proponent of dealer business. That said, now that we're in the B2C business, there's nothing more gratifying than waking up in the morning and seeing that you sold $775,000 the night before. But that said, we recognize that there are three legs to our stool. One is the D2C business that we will do through our own e-commerce website, through the Amazon site, and perhaps other third-party sites. The other is the brick-and-mortar Business, and then finally is the large institutional business. In other words, law enforcement agencies, private security companies.

43:28 We think that the dealer business is a very important part of that model because it is a very consistent business. We know, and this was from the experience early in 2020, we know that each store that carries the burner is going to sell X number of burners a month on average and it gives us a lot of ability to project what our sales are going to be, which is critical from a manufacturing standpoint. Right now, we have a little over 300 dealers, in other words, stores. Some are part of chains that we are selling that have anywhere from a half a dozen to more than 100 locations.

44:18 Some are just single mom-and-pop stores. We're also selling through some large distributors, both Davidson's and Lipsy's, because it's difficult for us to just manage logistically shipping a store two more launchers to fill the launchers they sold the prior week. But we see this as an important part of our go-to-market strategy. Okay, great. Thanks for taking my questions and best of luck. Thanks, Jeff. Thank you. Our next question today is coming from Jim McHillary from Dawson James. Your line is now live. Yeah, great. Great, thank you. Good morning. I think in your commentary when you were talking about OpEx, you used, you might have said something like Q1's OpEx is representative of what it's going to be the rest of the year. I'm just trying to understand what that means.

45:14 Does that mean that it's flat on a dollar basis? That means it's flat as a percentage of sales? It's going to grow the same rate of sales? Can you help me understand what that means? We're projecting, given the sales growth that will take us to the $33 to $38 million annual number, that the dollar value that we spent in Q1 is will be consistent for the remaining quarters of 2021. So even though sales will grow, the dollar value will remain consistent because we basically have put into place the infrastructure that we're going to carry going forward. Most of our positions are filled.

46:03 David did mention, though, that where it could go up, is if we go beyond the top end of that range, if we do more than $38 million, we'll likely see more in sales commissions, for example, more in customer freight out. But yeah, we see the $5.2 million as being a very good number for you guys to use. Yeah, well, what we're really saying is that if you look at the past 12 months, the company obviously has exploded in growth. And so the... The growth in the OpEx number has gone along with it. What we're really saying is that structurally, we've got the infrastructure in place now. The number's not going to stay exactly where it is, but for the most part, we've got a stable structure now that's not going to continue growing at that rate.

46:54 Understood. Thanks. And then on the law enforcement market, it's historically been a very difficult, time-consuming, expensive market to go after, and I'm Just wondering what your thoughts are on how you're going to approach the law enforcement market. Yeah, look, the irony is that when I came on board, SDI, security devices, the market was exclusively law enforcement. And we wanted to pivot away from it for exactly the reasons that you state, Jim, which is a very fragmented market. It's a difficult market to break into. That said, we think it is an important market in terms of making us part of the conversation.

47:40 We don't expect law enforcement to be anywhere near as large as our consumer market, or frankly, even as large as our private security market. But we do expect it to be a substantial part of our business. We created a law enforcement training program and basically our goal is to bring in law enforcement agencies through our training program. So I think our projections for law enforcement for the year are in the million dollar range. But that said, I think that it does give us the bona fides we need to go after the consumer market. When I was a kid, I used to go to these NASCAR races in Loudoun, New Hampshire and they had a saying, win on Sunday, sell on Monday, because whatever brand won the race, you'd have everybody flocking to the dealership to buy that car.

48:40 We think there's a certain analogy with law enforcement in the consumer market where if we can cite law enforcement agencies carrying our products, it will help us with our consumer market. OK, great. Thank you. And my last one on Amazon and the e-commerce site that you're that you're working towards. I'm wondering if that has to get approval from Amazon corporate or Amazon kind of odd sometimes or a lot of companies are odd sometimes with what they allow and what they don't allow. I'm just wondering. How the conversations are going regarding your particular product and carrying it on Amazon?

49:28 Yeah, the reason we're not live on Amazon today is that we're going through this approval process. That said, we don't see any issue as our competitors, our direct competitors like Mission Less Lethal is selling on Amazon currently. So we think it's just a process that we have to go through, but we don't see any reason why we wouldn't be approved to be on Amazon. All right, great. Thanks a lot. Good luck with everything. Thanks, Jim. Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to management for any further or closing comments. Thanks, Kevin. I appreciate everybody's attendance today. This is a very exciting time.

50:16 We have our plates filled with trying to execute this year, but we're extremely encouraged about the prospects for 2021 and beyond. I'm happy to speak with analysts offline if you'd like to, and you can reach us through our investor relations firm, the Equity Group. Thank you very much. Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.