Mace Security International, Inc.

John McCann – President and Chief Executive Officer Carl Smith – Chief Financial Officer Garnett Meador – Senior Vice President Operations, General Counsel

Furman Willis – Furman Willis Andrew Shapiro – Lawndale Capital Management Ken Fell – Fell Capital Management

Thank you very much, Chris. Before I begin, I want to direct everyone to our website, to www.mace.com website for our PowerPoint presentation that we will go through after Carl’s presentation.

So if you go to corp.mace.com investor relations transcripts and presentations 2015, you'll see a brief PowerPoint that hopefully will explain some questions that’s been asked to us prior to the conference call. Now I'll turn the call over to Carl Smith, our CFO to read the forward looking statement.

Thank you, John. Certain statements and information during this conference call will constitute forward looking statements and are based on management expectations and information currently in the possession of management.

When used during our conference call, the words or phrases will likely result or expected to, will continue its anticipated estimates, projected, and intended to. Our similar expressions are intended to identify forward looking statements.

Such statements are subjected to certain risk, known and unknown and uncertainties including but not limited to economic conditions, limited capital resources and the ability of management to effectively manage the business and integrate acquired businesses. Such factors could materially adversely affect Mace's financial performance.

It could cause Mace’s actual results for the future periods to differ materially for many opinions or statement's expressed during this call. I will now comment on the second quarter and financial results.

After I’m finished I’ll turn the call back over to John where we will go through the presentation he referred to. We will then open the lines for questions.

Second quarter net revenue was $2,241,000 compared to $1,817,000 for the second quarter of last year, an increase of $424,000 or 23.3%. This increase was mainly attributed to strong growth in our consumer and sporting goods distribution channels.

Net sales in consumer and sporting goods for the quarter totaled $1,454,000 compared to $887,000, an increase of $567,000 or 64%. Offsetting this increase was a decline in net sales through our Web, international surveillance and tactical distribution channels.

Net sales through the Web channel totaled $33,000 compared to $51,000, a decrease of $18,000 or 35%. Net sales through the international channel totaled $210,000 compared to $242,000, a decrease of $32,000 or 13.4%.

This decrease can be attributed to $94,000 decline in sales to a Taiwanese company, which experienced unusually high demand last year related to an active violence that took place at an airport. And then this decline was offset by increased sales to Chile for the quarter.

Net revenue through the tactical channel totaled $190,000 compared to a $193,000, a decrease of $3,000 or 1.5%, basically flat quarter-to-quarter. Net sales through the building security channel, which distributes our surveillance products, totaled $338,000 compared to $418,000, a decrease of $80,000 or 19%.

This decrease has mainly attributed to a change in the market and conditions. John, our President and CEO will discuss this later in the presentation, as we are working on several measures to correct sales in this channel.

Gross profit for the second quarter 2015 totaled $974,000 with a 43.5% gross margin compared to $598,000 and 32.9% gross margin for 2014, an increase of $376,000 or 63% and an increase of 10.6 percentage points in margin. The increase gross profit dollars can be attributed to $424,000 increase in sales and increase in gross profit margin.

Margin increase can be attributed to mix and favorable production efficiencies for the quarter. Selling, general and administrative expenses for the second quarter ended June 30, 2015 were $1,062,000 compared to $1,185,000 in 2014; 47.4% and 65.2% of net sales respectively, a decrease of $123,000 or 10.4%.

The decrease is mainly attributed to a continuation of the savings recognized in the first quarter, which included lower salaries derived from headcount reduction and salary realignments, reduced audit fees, lower business insurance expenses and reduced legal and IT consulting fees. These savings were offset by increased marketing and advertising and variable selling expenditures which exceeded prior year expenditures by approximately $69,000 for the quarter.

Overall G&A expenses were $588,000 compared to $783,000 in the second quarter of last year, a decrease of $195,000 or 24.8%. The savings like I mentioned was offset by increasing marketing and advertising expenses.

Interest expense for the quarter ended June 30, 2015 was zero compared to $55,000 in 2014. Prior year interest expense was interest on a $1.4 million note, which was paid off in January of 2015 and the details are included in the notes of the quarterly financial statements that we released.

Interest income for the quarter ended June 30, 2015 was $69,000 compared to $63,000 in interest income in 2014. Interest income for the quarter included interest on the two notes for the sale of the Central Station in December of 2013 to Security Partners.

Discontinued operations for the second quarter ended June 30, 2015 was a gain of $10,000 compared to a $411,000 gain in the prior year. The prior year gain of $111,000 was the result of an adjustment made to the selling price of the Central Station.

As a result, net loss for the quarter ended June 30, 2015 was $59,000 compared to a net loss of $192,000 or $133,000, 59% improvement over the second quarter of 2014. EBITDA for the quarter was minus $101,000 loss compared to a minus $567,000 loss, or $466,000 or 82% improvement.

At this time I'll make a few comments on our balance sheet. The company's net book value was $8.8 million compared to $10.3 million at December 31st.

The $1.5 million decline is mainly attributed using 2.3 in cash to pay off the $1.4 million Merlin loan. Mace had $10.3 million in total assets including $3.1 million of cash and short term investments at June 30, 2015.

Inventory I want to mention is up $679,000 or 38% from year end. This increase is primarily the result of increased surveillance inventory to correct the shortage of stock at year end and building inventory for our Q3 promotions that we have.

We expect inventory levels for surveillance and pepper spray to increase, but expect Nite Beams and Tactical inventories will increase in Q3 and Q4. We had positive working capital of approximately $6.6 million and a current ratio of 5.2.

The Company had no debt as of June 30, 2015. Total stockholders’ equity was $8.8 million at June 30 compared to $10.3 million at 12/31/14.

The $1.5 million decrease is mainly attributed to the $1.4 million charged to pay in capital on the early extinguishment of debt and the $242,000 year-to-date loss. NOLs at June 30, 2015 were approximately $58 million with $1.1 million expiring in 2018 and the last NOL expiring in the year 2034.

At this point, I'd like to thank you for joining us this afternoon, and now I’d like to turn the call over to John McCann, our President and CEO.

Thanks, Carl. So give everybody a minute if they want to go to corp.mace.com and look under investor relations for the PowerPoint presentation.

There was some questions that were pre-submitted that Carl and I will go through prior to taking additional questions because they might answer a lot of question people might have. So if everybody has the PowerPoint really I will start on Page 4 to PowerPoint presentation and there is couple of bullet points that I’ll go through quickly.

As we said in our press release from our Chairman and the Board, the management is striving towards profitability in the near term. We take this quarter as a stepping stone towards doing that as the first quarter was too, there is some work to be done and some of the questions came up about expenditures.

We are looking at overhead again, we are looking at everything because we need to position our self for sales and marketing, especially strategic marketing of all of our different products. So line two is we’re constantly looking at our overhead absorption, our people cost and to see where we can be more dynamic in our approach to the market.

The other – third point that I want to stress is that we have removed ourselves from all things that are not safety and security related, so the company has only evolved in safety and security. We’re only looking at products along the lines of safety and security and we define that as personal defense security for tactical for – also for consumer in the less than lethal range.

So we always look at things that are – can keep you safe whether you’re at home, in your car or just down the road and also that fall into that category of less than lethal. And lastly, the company – we’re reviewing many new products, we’re just trying to make sure that we launched the right products, as we’ve done in this quarter and really in the third quarter this year we have many new products that we’re launching, different strategic channels, different strategic partners that we’re launching these products with, but we’re confidently looking at the – especially in the world of smart technologies, variable technologies and also the advancement of our core business of our pepper spray.

Page 6, I just want to stress because this group of customers continues to grow and we’re hoping in the third and fourth quarter will add some more tactical customers to it, but as you can see we have a wide variety of distribution point from sporting goods to automotive to traditional big box retailers to specialized retailers. These are the customers that have helped us grow the quarter and also the year.

And Big 5, for example Cabela, the brand new customers Meijer’s we’ve advanced our relationship there. Lowes is another customer that just came up more at the end of the year.

Then also Auto Zone, Amazon and Big Sporting Goods and Sports Authority we’ve been able to increase our distribution within the parameters of their store. So we have products in different departments now than just the sporting goods section or the hunting and fishing section.

Page 8, this is just reiterating what we talked about prior; this is where the company was. Page 9, where we want to go.

One bullet point that I want to just stress a little bit, we’re a little bit behind in our search for an IR, PR organization. We’ve talked to many organizations, the goal is building a strategic marketing plan that will help us promote our brands and products both through public relations and through investor relations because we think both of those are strategic, but building that plan is where we really want to make sure that we have all the A, B, Cs and all of the roads covered, so we can make sure that we build it correctly.

Because we’re hitting that point where now we have to not only do what we do well, but promote it and get out in front of it. Second quarter results on Page 11, I think Carl spoke to it, I think one of the keys there is, if you look at SG&A expenses, it’s down 10%, it’s a positive movement.

If you look at the percentage, also very positive movement and then if you look at all of the different things from gross profit to sales it was a dynamic quarter and we just need to keep that going. Page 13, you could see a lot of where the growth has been in sales $424,000 increase in the quarter, which is a nice healthy increase and one that we want to continue throughout the rest of the year.

Page 14, you could see where it’s coming from and the different products, these are a lot of our core products that we had some growth in, which are our traditional products from home security products to pepper sprays. Sporting Goods and Consumers on Page 15, you can really see a lot of growth, a lot of dynamic growth.

We feel there is more growth to be had in these sectors, and it’s not just pepper spray, our stun guns are doing very well, we’re introducing our Mace 911 product, which we shipped out a little bit in the second quarter and we hope to do more in the third and fourth quarter. Page 16, I’ll just pause for a minute.

We’ve redone the website, we have not bought any Edward, so we had an expectation of being down versus prior years because we’re not advertising on the web. We are working with Google, Analytics directly; we’re also working with some other folks.

There is some new restrictions that Google has put on advertising less than lethal products or weapons as they like to call them that we’re fighting to see if we couldn’t educate them on, on the benefits of the empowerment of the products that we sell versus some of the other products on the marketplace. So that’s something that initiative that we have to work through, so we haven’t bought a lot of that because we want to make sure that we have a return on investment in that sector.

Tactical and International, in my opinion it’s just the timing issue. Tactical, we still have not launched fully or not – our less than lethal products that we have been promoting.

Production of those products because of the ATF and some other certification should be coming online shortly. But we’re not in production today, so we need to really wrap up the final certification and all of the registrations that we need with the ATF to make that happen.

International, as Carl alluded to was the timing issue. But we feel now that we have distributors in countries that we need to have and we have a team that’s focused on growing our international product line.

And I would note, in both Tactical and International, there is TG guard, which is our product that we make that can drop tear gas and pepper spray from the sea link. Those are bid basis we do have a lot of folks out there, we just haven’t gotten those orders, but we feel confidently that we’ll see both of those turnaround in the third and fourth quarter of the year.

Slide 17, which is Surveillance. So Surveillance is changing rapidly and we recognize this as we lap – the first quarter of the year, we have a Board meeting coming up in early September, where management is going to present to the Board a couple of dynamic idea that we think will help fix the issue that we have and sales here, expand the brand and also get it in the channels of distribution through some partnerships that we would not be able to get into today.

So, until we have the final sign off and we have the rest of our go-to-market strategy in place, we feel this will be one of the segments of our business that we have to watch and push as hard as we can, but realize that we think we have the solution that will return long-term value to the brand in this segment in the future. Gross profit as Carl mentioned on Page 18, nice healthy increase and that’s across the board.

We also feel there is somethings we can do internally, we’re looking at somethings, so it’s actually how we produce our product, how we package our product that we think over the next six, 12, 18 months, we’ll have another positive impact on our product and also get us into a greener state if you would with our products, so we use less plastic, maybe we use less packaging material. We’re testing somethings now; we think possibly in the fourth quarter of this year, we’ll be able to launch that, which will have a long term net value for the organization.

As Carl alluded to you on the next slide Page 19, as you can see the improvement, we’re constantly looking at SG&A, I will talk a little bit about advertising, we did some advertising, we do a lot of co-operating advertising, that was one of the questions that came up, we partner tremendously with our retailers with programs not only their advertising, but tagging them when we do some national advertising, so we spend a little bit of money in the first half of the year promoting the brand, we thought there was some return on investment, it’s very, very hard to measure return on investment, but combination of things that we feel went correctly in the quarter, Dicks Sporting Goods for example, if you go into Dicks Sporting Goods today we’re not on the lodge, which is the traditional place that we had part of placement. We’re at the front end or over by women’s running shoes or women’s apparel.

We tag Dicks on some regional advertising that we’ve done, we tagged Dicks on some advertising that we did with the National Basketball Association. And we constantly tag our retailers that will make sense in their regions, especially to drive the sales to those retailers and Dicks for example now, our sales are not only up at the in-store level, but also at dicks.com, which is a nice pick-up for us because we prefer to drive sales to our retailers.

So that obviously on the loss side of continuing operations, all the benefits of sales and then their cost cutting has led to a positive outcome. Page 20, I just do this to kind of look at it because we’re constantly looking at return on investment per employee to make sure that, what we’re doing has a value and this has been positive I believe every quarter since I’ve started with the company.

And then lastly Page 21, we constantly talk about the Mace brand, we don’t sell products, we sell the brand for empowering people by what we sell and what we do. So obviously a good quarter, we think it could even be better with some of the things that we’re going to implement.

We were little bit disappointed in our surveillance sales, but we have a path to improve that, and as I said, our timing was the issue with international and some of the tactical sales, but we just need to keep the momentum going and we also need to launch successfully our tactical solutions, which will be our ammunitions, our tear gas, our smoke and some of the other products that we’ve anticipated launching and we feel comfortable within the next couple of weeks, we will launch it. Couple of quick questions and I think most of were answered, but I’ll just jump into them and Carl and I will go both back and forth.

Question came in; we have the sizable jump in our day’s inventory to 145 days. We do source the pepper spray product, that’s been very popular.

And so we – fourth quarter of last year we were allocating the product out, we were tightening inventory, so we did bump up our quantities on hand to make sure that we were able to absorb any surprise orders or any surprising increases in sales. Big segment of it though was our surveillance, we were out of stock during the first quarter, we played catch up a little bit, but we feel comfortable in the third and fourth quarter we’ll be able to move through those products.

We will have an increase in our Nite Beams and our Tactical inventories as we build up orders. We’re looking at forecast, we drive our forecast directly from our customers through our sales managers to what they think they are going to sell and that’s how we do our production planning.

We try and keep more finished goods on hand, especially with regard to the pepper spray and defense spray, now with Nite Beams having anywhere from 45 to 90 day lead time, we need to make sure, we have those in stock, and the same thing with our Tactical inventory. When you go in production and all of our Tactical inventory is produced in the United States and Pennsylvania, so we have short lead time on freight and what not, but long lead time on some of the parts and making sure that they’re produced correctly, tested and then stored correctly.

The second question, this past quarter, basically breakeven with growing revenues, expanding gross margin, your SG&A dropping from prior quarter, do you see the current quarter SG&A growing from the past Q2 or flat or even dropping? I think, Carl commented about the SG&A, advertising was up in the quarter, if that had been down, I think we would have been lower number, but we feel advertising is going to be critical on the future because we started to educate our consumers, buyers, and investors on what we do and why we’re doing it.

Advertising; the third and fourth quarters will be flat to down because I think we have a lot of in-store and co-operative programs lined up with our key retailers to drive sales, but we are looking at it, as we talked about and again our PR/IR firm that can really help us develop a strategic product plan to ensure long-term success and sustainability of the company. Carl will talk about the 30k reduction; the question was there is $30,000 reduction in Security Partners payments on the loan, why was it adjusted, why just for the third quarter?

Well, Page 10 in the notes of the financials mix referenced to this and we revised the loan agreements that we had in place with Security Partners, basically reducing the loan payment for $10,000 per month from April 15 through September. And as a result, we’ve modified the loan agreement, increased interest rate and I guess basically that’s what we did.

Right. So I think it was in partnership where we have benefits of other ways, but we increased the length of the loan, spread it out a little bit further and then increased that interest payment to the company.

So on a net-net basis, we’re still going to reflect the same amount, plus a little more in interest, but it helped them and it opened up some doors for us for future business with Security Partners. One of the questions that came in, Co-Op advertising and sales allowance; Co-Op advertising and sales allowance are basically a percentage of sales, so it is up versus the year ago.

It’s about $170,000 all in with our different retailers. We get proof of performance from all of our different retailers, whether it would be an ad, an email blast or some other vehicle, in-store demos as an example.

This on a comparative basis is up versus year ago because of the increased sales especially with our key customers. And with our key customers we look at it less as a Co-Op more of a partnership to make sure the product is pulled through at the retail level.

So we tell everybody to give till it’s paid for, so consequently anyway we can help a retailer that makes sense for them physically and makes sense for us physically, we do because we want to make sure that customer then sells through all the inventory that they have purchase from us and through their retail doors. What was marketing advertising spend in Q2 versus last year versus Q1?

This was partially addressed in Carl’s commentary, but total selling for Q2 was about $497,000 compared to $432,000 in 2014, so about a $65,000, $66,000 increase. Advertising and marketing was about $112,000 compared to about $56,000 from a year ago, so we had roughly a $56,000 increase.

And most of that was, we took advantage of some MBA run-in advertising that we were able to get, so it’s cavaliers gains and through some of the other MBA networks we had, have a safe night from Mace, we had mace.com, plastered our bill boards. Luckily for us the venues we chose, especially we tested some with the Milwaukee Bucks, but they didn’t have a great year, but 90% of that went to Quicken Loans Arena, which Cav’s win through Game 6 or Game 7 of the playoffs, I can’t remember anymore and they had 20,000 people in the queue every night.

And we try to tag Dicks on events, Dicks Discount Drug Mart where we could within that, and all of those customers had positive POS sales. So we feel – there was a correlation, but once again, return on investment is hard.

And today I’d say we advertise, we buy [indiscernible] or we buy things that are cost effective. Our idea of hiring a firm in order to do our advertising for us will be more strategic in the fact that they will put together a plan that’s comprehensive that would cover everything we want to do and then relate it back to our customers and our partners.

And I think addressed one of the last questions was international revenues year-to-year for Q2 and as I said in the PowerPoint, I think Carl covered off within his presentation. So with that, because I think that was the lot of questions, maybe we’ll turn it over Chris to questions and answers because there is a couple of other one that we would – that I can address if they’re not asked during the call.

So Chris, we’ll turn it back to you if you want to open up the lines.

Good morning, gentlemen.

Good morning, Furman.

My first question is when does the window open for insiders to purchase stock and I would encourage all of the records and management to buy stock, doing a signal upstream that they believe in the company and it’s in the signal to street, that management believes our stock is undervalued? So when does the window burns out?

Furman, this is Carl. The window opens three days following the release of earnings.

We released earnings last Friday, so I believe that would make today, day the window opens.

Could you please be specific and tell me the marketing plan that will be developed to speed up these sales to the public? Your team did a good job in turning this company around and saving it from bankruptcy, but it took longer than all of us thought.

How can we shorten the process of marketing and get our bills much quicker. So looks like we’ve done the hard board, but fundamentally re-organizing our company, so I want to know how we’re going to put a much faster spin on our marketing plan, when you’re planning to cut advertising in Q3 and Q4?

Okay. So we’re not necessarily cutting advertising in Q2 and Q3 and Q4, Furman, just to be clear.

To your point, we’ve done a great job, there is Mace Alert 911, there is Nite Beams, and there is Tactical Solutions product. All of these, we feel now is the time to hire it through advertising firm, in order to help us clearly mark down the path that we want to go with all these different product.

At the same time, samples of all these products, I’ll go Tactical first, Tactical requires samples, which are training and valuation samples that get sent out to different departments. We are participating in three times as many shows this year, so the question I don’t think we’ve asked, but I think our show expenditures are probably doubled versus a year ago same period of time because we’re doing every Tactical show.

So our progression just for Tactical for example is, we created a catalogue, we actually won an award through the printing organizations for the catalogue we created. We did training – our training videos are online, we’ve made available to all of our key customers and we’ve trained every one of our sales reps and a couple of key customers that have verbally given us some commitments, but no orders yet for different products.

Next step is that we sent out Tactical, T&E as they call them, which is again, it’s training an evaluation samples to different rep groups and different department. Where we are with Tactical is we really need to finalize the ATF and some of the other registrations and certifications that we need to carry, especially with regard to storage of the products.

The ATF should be and are very conscious of the product is stored to make sure that they’re stored in a manner that a, is that disruptive to the organization meaning that they won’t blow up, b, that they cannot be stolen. So with that we’re right where we need to be with Tactical with a full array, I think in August and September, October and November alone I believe our sales team will be at between 15 and 30 shows, either directly or through representation, which we know will like to fire with what we need to do on Tactical.

On Nite Beams, it’s very, very similar. We’re making presentations as we speak.

We have commitments from several retailers as we speak from a drug chain to a catalogue chain to a Sporting Goods chain. We’re in the process of getting those orders, procuring the inventory, samples have been sent out to key reps and key customers, now it’s a matter of reeling that in.

We still need the four tier both on Tactical and on Nite Beams products to have a strategic marketing plan, by product that we can put into effect because we’re doing the blocking and tackling of getting everything lined up with our customers, and that Mace Alert, we’ve signed a deal with a strategic partner that’s going direct to market, so we’ve given them that direct channel, they have a lot of experience in that direct channel, CVSL is a company, [indiscernible] and we feel very comfortable. And that’s strategically because it’s an educated sell product, we’re working with several different accounts that are traditional retailer account to gain distribution, so I think with all of those and at the same time we’re launching two or three new pepper sprays we have a black pocket audit unit, which will fall under our exclusive line.

We’ve retooled the handle on our traditional line that we’re going to launch in this fourth quarter. As I mentioned earlier, we are redoing the packaging that we think will be a, cost saving, b, more dynamic for the consumer, and c, give us more advertising states on the package itself.

So all these are happening and to your point, by a fact they should double and triple of sales. When that will happen, my hope, my pray would be is that within the next six to 12 months all of these hit, through all successful and the company is looking at double digit increases and double revenues from where we are in the day.

But each one of these to reiterate, Mace 911, we’re rolling it out as we speak. Nite Beams are rolling it out as we speak.

Tactical, as soon as we have the final go, go, go, we can make the presentations to the key governmental agency, law enforcement agencies and et cetera for delivery because our fear there is we can’t find a contract with the governmental agencies that we can put a delivery date on. We can’t put a delivery date on until we make sure that the ATF has signed and we have all the things we need in order to make that happen.

So hopefully that answers your question Furman. Sorry it was so long.

No, no, no, that’s alright. I have a follow-up and then I will be off the line, and I’m back into the queue later.

You may had mentioned and I think all investors are excited about the new products, such as 911, Nite, Tactical, which now gives us fore lays [indiscernible], why should we not expect the double, triple or quadruple in sales, as you mentioned? And you put some sort of timetable on this and with a good marketing program it shouldn’t take us time that it has us to a company around?

Furman, we agree it. We should be in a position to double and triple the sales; I’d be remiss to say it’s going to happen on this date because if I knew that I’d be in Vegas.

But with that, the Company’s goal is to do it as fast as possible. To your point, we work very hard on getting these different deals done, finding these different products, betting these different products, making sure that we have all the certifications we need with these products.

Now we do want to talk with a professional advertising firm that both has IR and PR capabilities to make sure that story gets told, because telling this story to a retail buyer is different than telling this story to a savvy investor, like some of our investors. So we want to make sure we can somewhat dual passive, so we can take advantage of all of the good things the company has done and turn it into success story that we know it all can be.

To tie down exactly a date, I’ve set expectations for you, for the company, our goal is to do it as soon as possible.

Thank you for taking my questions. I have two, but I’ll drop off and wait on my turn if that happens.

Thank you.

Thank you, Furman.

So I’ve got a bunch of questions here, I’ll ask if you can back out in the queue. And don’t the tone of the questions wrong; I only wanted to focus on what could be done to improve our quarter’s fairly good performance to be even better because this is the first time you guys are showing pretty much the light at the end of tunnel on obtaining sustained profitability.

So with respect to that, what I want to, first start with some questions on is the Mace Tactical because you started attending shows, you rolled out the Mace Tactical offerings and expanded the products back in November. You’ve launched a chat show this year and you thought in the last call that we’d see cash flow streams from this in the back half of 2015, and here we are in August in the back half of 2015 based on same flat year-over-year numbers again, I'm wanting to get to what are the steps that have to happen, you mentioned this ATF issue, what is the approval or the approval, or the approval milestones that you're going through and the expected timing on those, so that you described you need to have approval, so you know you can ship and then you can have shipment dates.

And generally, if you got an order today, what generally would be the shipment date, is it month two months, a few weeks, when do you then book the revenues and profits from said sales?

Garnett is walking in and he could maybe address some of what you just asked. We are still bullish that the back half of this year that we will experience the Tactical sales we talked about.

We went in this all along lodging in November to make sure the market knew that we are coming, having the product available in January, knowing so well that we were going to, our timeline still was at June, July, August period. T he only hiccup, I would say because everything else has gone with ATF because potentially of our asking what we wanted to do, we evaluated how they wanted to look at this and somewhat changed the protocols, not because of us just because they said hey, this hasn’t really been looked at in quite a while, now we’re going to relook at it and here’s what we want.

On a target line, I’ll turn it over to Garnett because he can speak to it, but we are moments, days away from the final ATF. The ATF agents in the past few weeks have visited the facility, said what needs to happen.

We’re going to own the magazines as they call them, which will be the storage portion of the product. And then to your point if a customer today, we wouldn’t be able to quote exactly when we could deliver it.

A customer, since we have the final ATF and the storage approvals, I would tell you that we would anticipate delivering in October or November, but maybe Garnett, you can shed a little more light on it.

Yeah, so this is Garnett speaking and what I can tell you that internally the ATF has gone through some restructuring and to some extent we were caught up in that. And they’ve gone through and changed the entire industry as to what they’re classifying as explosives and what they’re not classifying as explosives.

Prior to this year, many of the less lethal ammunitions that are going to be our product line were not classified as explosives. So the process of manufacturing and ultimately storing was much simpler.

So with that said, we have received four variances from the ATF and we’ve also of course got our licensing, we’re both licensed as an explosives provider and a firearms manufacturer. In addition to that, we are down to, as John said, we’re literally days away, we’ve got over in the manufacturing facility right now we are moving [indiscernible] and magazines that have been essentially approved by the ATF, they just have to come on and give their final blessing.

And once that’s done, we will be in full production.

Okay. And when you say we’re going to own the magazines and we’re going to do this in our manufacturing facility, are you referring to Mace and an asset of Mace, are you referring to nonlethal technologies your joint venture partner?

Right, we contract a relationship with a party that is doing manufacturing exclusively for us, with distribution in all of the US. We will be leasing from them the magazines that will house all of our inventory located at the facility of the manufacturer.

Further on Mace Tactical, last quarter, you’ve given some of pepper spray and TG and other things, last quarter you said you’d have the law enforcement guys pull together a list of agencies that Mace was doing business with, and here we are three months later, we haven't seen Mace leverage those relationships publicly to obtain new business, you haven't made the list yet available on a regularized basis as promised such as your, I will call it law enforcement product supplier competitors such as Taser and Digital Ally and others, so if you have had tactical growth this quarter, I wouldn’t be so aggressive asking for this, but since another quarter flat sales has been recorded, you have these particular delays on the full line, I just kind of want to know where's the beef here and what's the plan regarding these, we’ll call it reference agencies that you've sold to help you get the agencies down the road in the next county?

So Andrew we have a list that’s small, so that’s why we’re kind of keeping it. Where we’re doing business, we’re doing good business, talking to some of the tactical guys it’s not always the best thing to advertise this, some agencies have told us, hey we can give you, but we don’t really want it advertised.

Part of this falls into the strategic plan with an advertising firm to make sure we get that information out in front of people. We can’t put the list out there, but it’s not as robust as we would like.

We’d like to put it in the context of conjunction of getting more orders from our tactical once we have all the ATF variances that we need as Garnett had indicated.

Obviously as I said I have questions in some of these other areas, I’ll back out please come back to me.

Sure.

Good morning gentlemen. Thank you for taking my call, really congratulating you guys on a a great Q2.

Thank you, Ken. Thanks for taking the time too to be on the call.

Oh sure, my pleasure. Also thanks for the update on some of the new Mace products, my first question really has to do with the Mace Nite Beams and maybe Mace 911, what percentage of the Q2 revenue was – would you relate to those two products?

Very small, like maybe 1% or 2%. Best right now, we shipped a couple of hundred units to CVSL of our Mace 911 product.

We feel, they feel based on their forecast that it’s a huge upside potential because it is a unique product in the marketplace, it’s not a recurring monthly revenue model. It’s a buy and you own it and it’s your model.

So on a total acquisition cost it’s very competitive in the marketplace. On Nite Beams we had maybe a couple of thousand dollars’ worth of orders through our website and through a couple of other companies, but those of these we feel have a very high upside back half of this year and in 2016.

Now, with Mace Nite Beams, your supplier is basically Chinese isn’t it correct?

Most of the products come from China, yes.

Okay. How are you finding the reliability of those products from your supplier?

Are they – you find a lot of defect of units?

There is a couple of things that Carl and I are both old consumer product guys. So we said if you make a product with a cord and you have a 6% to 8% return rate, you’re doing very well, some companies have a 12% return rate.

So you realize any time that you power a product, whether it would be battery operated or core plugged in operation that it has a higher default ratio because you have a lot of things that’s go wrong. Now on our traditional product, even our cameras, we have a very nominal return rate.

A lot of it is because of what we’ve done. So with regard and anticipation of bringing in a lot of inventory on Nite Beams there is a couple of stuff that we organizationally have taken.

Number one, we’ve hired an agent, I think pretty dynamically priced in China to inspect the factory and inspect the production, work with the different factories to make sure that the quality specs that we’ve given, so the lumen’s for example that it’s hitting the lumen and the batteries that works, which is – it’s a government certification to make sure that they’re properly sealed and they’re the proper batteries for the United States. Now when the product comes in, we are testing it, so we are putting a slip of paper into the product saying that we pull the safety tab to test your batteries to make sure that the product works.

With all of these parameters and then working with our partner Michael [indiscernible] Alexander, we’re ensuring that we have the highest quality product available on the marketplace because the LEDs in the arm vans, the dog leashes, the dog collars, the shoe laces are life time and then it takes two CR 2032r batteries, which is our typical camera batteries that power most of the products. So with regard to that we feel confident, as confident as you can feel and also we put in safety steps and measures to make sure that we use the old RegOnline Trust to verify.

Great. As I remember, the initial order was delayed for some reason, are we finding that those delays are gone and we’re getting our supply in the time and manner?

Yes. There was a little problem with the West Coast with the launch, so we had some container issues.

We’re always – we actually have one of our gentlemen, not only meeting our agent, but Burnie Granny one of our great employees is actually visiting China, I believe next week and he will be there for a week, just making sure supply, the face to face meeting and making sure they know who he is, he is a great representative for the organization, to ensure that we’re doing everything. His communication will be the key because the product is light and it’s small that if we have it, we can fly some product in especially to fulfill customer needs, but we did – early part of the year, there was a container issue on the West Coast and there was a Longshoremen strike, especially that was affecting California, so we did have some delays and some unanticipated issue at that time.

I can’t say there won’t be a typhoon or something else right, so – weather is the weather, which can’t be controlled and people going on the strike can’t be controlled either.

Sure, sure. And I guess just to summarize your finding that the product, I think your supplier is creating a very good product?

Yes, yes. We’re ensuring that by double chatting because like as we said, Carl actually worked with local company that actually had some of the highly recommended in China, that’s Chinese and Mandarin, and then also could speak English.

So for us it was a nice find, but it’s a third party supplier of ours that recommended our agent. So we thought that was just something that makes us feel better at night, that not only, the trust of people producing that, but then you can also verify that they produced it and that we get a report back from our agent.

Great, great. I just wanted to get back to the inventory level for a second.

What’s – I realize, you’ve had a rollout of some new products and the inventory is a little high right now, but what would you say John, would be the normalized level of inventory that we can kind of plug-in to our spreadsheets when we do our model?

I think if you looked at the model, Carl could speak to it a little bit. But roughly we are probably about $350,000 to $400,000 heavier on inventory today, in anticipation, rough numbers 100 or so thousand dollars’ worth of Mace 911.

You have about $300,000 worth of surveillance that we bulked up on to make sure that we didn’t have the issues that we had in the first quarter. And that we do have one, there is a Taiwanese company that owns a patent on one of our pepper spray products and we doubled or I believe possibly even tripled the size of the order because we couldn’t keep it in stock in the fourth quarter and the first quarter of a year ago.

So if you couple that altogether, remove the pipeline sales of Mace 911 and even a little bit of the Nite Beams, I would say roughly if you drop the inventory $350,000 on a normalized basis that would be about the number. We will have higher sales, so you’ll see, but at the percentage basis I think that’s pretty safe, Carl might comment a little bit further.

Well, net inventory at the end of June was basically $2.5 million, for Q3 I was forecasting inventory, I would keep it around the same amount and then based on the Tactical and Nite Beam situation going forward I think it would be safe to continue to use $2.5 million for the next couple of quarters, if I was forecasting inventory balance sheet.

Okay, great. Appreciate that.

Any chances Mace presenting at investor conferences that might be coming up?

I think September 8, we have a board meeting, and I think that will be one of the topics of conversation. We had a very successful Midwest Conference that we did here in Cleveland, and I think part of the overall marketing strategy that would fall into it because our board instructed me and we’ve talked about it, sustainable story that we tell, in the long-term I think some of the – our Chairman of the Board has been with the stock and the company a long time and we’re finally seeing the benefits of that all hard works.

So we want to make sure that continues, but it’s definitely on the radar, the exact dates and times that’s still be determined, but I think we’re rapidly getting their count.

Very good, very good. Yeah, I think you guys have got a story to tell and I’d really like to see you guys get out there and tell it.

Thank you, sir.

That’s all I have. So congratulations again on a great Q2.

Thank you. Okay, Chris.

I have two other questions, they both are along with same lines. I have hit on this on the last two conference calls and I remember being at Western Conference and our Chairman, Richard Barone in closing made a comment that – or about Mace that it was undervalued.

I want to speak to the sheets that trade on, now that we’re a viable company and trade on the pink sheets, which I consider the worse of the worst, what are our play-ins, what play-ins do we have to upgrade our listing through a more reputable change to get liquidity, more exposure, more creditability, less manipulation and a real market maker, which I think will allow our stock to trade at a real value, which is higher than $0.40. So John you said, the next board meeting was September 8, and I just want to make sure that we’re trying to hit off the pink sheets back to a – maybe over the counter QX, can you comment on that and give me some assurances about the board taking a look at it.

I’ll turn it over to Carl, I’ll assure you that it will be on the agenda with the board because a couple of board members have asked me to make sure that’s on it. And then I’ll turn it over to Carl because he has done some analysis on your other question.

Well, just to back up what John had said, I’ve been looking at it, few weeks ago I started looking at another tier, or higher tier in OTCQX, the one I’m actually looking at, and we’ll be making a presentation to the board with regards to cost benefit of going off the pink sheet.

Good. Thank you.

And on during this, you will on this General Board Meeting.

Yeah, it will be on the agenda for the Board meeting, yes sir.

The follow up to that is, considering the [indiscernible] stock, its market value and I think to call everyone in management and all the board members, failed to stock at $0.40 is highly undervalued. I would also possibly suggest, even though our cash level is maybe not adequate, it’s been $2 million to buy back converts to reduce 7 million potential outstanding figures, which I applaud and agree with, I wonder at the same board meeting can we talk about a stock just authorizing a stock repurchase program where we consider authorizing maybe 5% to 10%, which would not be overly expensive and of course a price we consider to be undervalued?

It would definitely on the board agenda. A board member has brought it up for some of your emails and we spoke at the appropriateness and the timing of it on our audit call prior to the release of the financials and it was suggest that we met this other full board meeting and comeback with an answer.

To your point is it the appropriate use of cash, is the timing right and et cetera, but that will definitely be on the board meeting agenda sir.

And I’d like to follow up along the same line of creating market value because I think now that we’re ready to see the stock are trading and providing some liquidity, so as the window opens on Wednesday, I know that you may can after specifically, but do you think there is some probability that insiders board members and I feel that all board members should own stock, but do you think there is some probability that board members and insiders might purchase stock what everyone considers and inappropriate value?

I would share your sentiment. I can’t speak for our board members, but I think our Chairman can and I can agree that it’s undervalued and that all insiders should look at it.

Okay. Thank you.

I would reiterate, now – the last caller indicated to tell our story as we begin to expect double, triple and quadruple sales, now that we have four products we’re doing instead of just the spray. So I look forward to going to better exchange considering the potential authorization of a stock buyback, insider buying, and as Richard stated, he feels the price is undervalued.

Is Richard on the call?

We don’t know that, but we’ll make sure that everything you said is reiterated Furman.

And you do agree with it?

The buyback part, I would stake advice from the board, insiders buying stock because it is undervalued and then going to conferences at the appropriate time with the right story, I think we’re building that message out there hiring the right firm to help us make sure that we spend the right story and the right message on a long-term sustainable profitably company, we’re a 100% agreement. I think as Carl will finish the announcements, we’ll make sure that’s presented to the full board, and I’m sure they’ll make the appropriate decision on that.

Thank you, sir.

No, thank you for taking my call, and congratulations.

Thank you.

Thank you. Several follow-ups here.

Again, you’re at the breakeven level, you answered I think Mr. Fell’s question that 911 and Nite Beams was 1% of your revenue, so these two new products with very broad incremental market opportunities have yet to be exploited.

You talked about how on the SG&A, there I think is a thought that you are holding things in check and I want to make sure that an appropriate amount of marketing resources are deployed, it’s not the time to be penny wise and sound foolish, but to become very strategic as you’ve mentioned and very efficient to get some national viral type of public relations going on with your products. So what kind of marketing resources are you planning to put behind the Nite Beams and your safety wearables product lines?

So Andrew, those are kind of works in progress, and today I’d be [indiscernible] to give away the marketing plan. On the overhead absorption, I can’t tell you what we’re looking at to make sure that everything we do has sales and marketing in its heart.

So anything we would do on overhead side would be enhancing what we’re doing on sales and marketing and looking can we be more efficient in operations or some of the other aspects of the business. To answer directly on the marketing plan, I just have to hold back.

Okay. So are you then that, where you are right now in the second quarter results announced and where your plan is in the current quarter.

While SG&A, maybe not SG&A, while marketing and advertising resources will necessarily increase you are saying that, what is it 43%, 40%, so whatever percent it is, is that percent of sales is something that you expect to continue to drop then?

Drop slightly with the goal of increasing the advertising and sales aspect of it. So you’re…

Well if it doesn’t drop slightly, John if it doesn’t drop, I mean if it only drop slightly that means you’re only getting the dollar for dollar bank for your $1, you’re not getting operating leverage.

I understood and maybe I just said it incorrectly. Our goal would be and I don’t have all the future numbers of the plant that we have in front of me on that side of it.

Our goal would be increasing our advertising on our sales and becoming more efficient, whether it’s 43%, 42%, 40%, those are numbers yet to be determined, but as we’ve seen doing some of the things at an co-operative level, now we have to do it on a national level with a strategic long term strategic marketing plan, month to five month allocation of resources in order to hit our objective and then adjust to our objectives because something can happen. So consequently, it’s not just saying hey that was my plan, it has to be that hey here is my adjustment to the plan because the weather changed, the wind shifted.

So kind of looking at all of that in conjunction, we’re in agreement that we should become more efficient with a greater focus now advertising and marketing. In the first couple of years, is the focused on becoming efficient, now it’s a focus on being more efficient, but then promoting the brand and promoting the products and promoting the story better.

John, you had a $1 million in sales, we’re hoping to see at least $400,000 to $500,000 of gross profit and to generate that $500,000 of gross profit you’re not spending $500,000 of SG&A to get it, and so that means you’re spending $250,000 to get $500,000 of gross profit that’s $4 of revenues for every $1 of SG&A incremental?

Correct.

So I’m just around the same page there. Now with the new website up for only two of the three months of the quarter, it sounds like I think from one of your slides Web sales did not surpass last year, is that right?

Correct. But that’s really in conjunction with – last year we were still buying from Edward, even on the old website, what I can tell you is that we have an increased conversion.

So the people that are visiting the website are buying. We need to drive more traffic to the website, which is the Edward and the SCOs and et cetera.

So there is an internal in house, there is an external team in house. The external team in house is coming in I believe on the 19th to kind of do a full review and to say okay, we’ve done all these great things, we’ve tweaked it, because obviously you pointed out some errors, somethings we do more efficiency, some clunkiness as Ken likes to call it, our IT Director.

Now we really need to maximize SCOs right, so that search engine optimization. We need to look at buying Edward and fortunately we were talking directly to Google and there was a corporate policy put in place that pepper spray would be deemed a weapon, we’re not going to directly sell Edward.

So now we have to work our way around it because we say and we do that we sell empowerment, that we sell safety, we sell security, we’re not selling a weapon. So it’s a little bit of a hiccup, but I think something that the team internally with the external team I think we can solve.

So we’re very bullish on the website because we think it’s a vast improvement from, since I’ve been here third integration, I inherited something that I didn’t adjust and we’re trying to do something, now we’ve spent some real dollars on not only fixing the back side of the website the optimization of order process, right, so now an order comes in, it gets dropped right into our system that can be uploaded and downloaded very easily, very efficiently, we authorized our nap to make sure that credit card information, that it’s stored properly and safely. The next thing now is to market that great website to a broader base of consumer.

So if Google has adopted this new policy and it’s caused an unexpected hurdle for you, it would seem to me that that new policy should be a disruptive?

It’s a hurdle for all.

Your competitors who had been marketing.

Correct. But then you have to be strategic to work around it, so there is Yahoo!

They’re an organization that buy Edward’s, they can work their way around it because they can position it differently, but our competitors would have the same hurdle as we do, and it’s an unfortunate hurdle because once again it speaks to the problem, sometimes with the segment that this miseducation that pepper spray is the product that people should be carrying instead of a gun or et cetera that it can’t keep you safe, that it does save lives and we’ve gone and we’re still working with the Google Analytics team to prove this point out and we have some sympathy amongst our team mate, but not at the higher levels where we need it.

So that’s fine, but what you’re talking about here are Edwards for pepper and your website, which we spent money on and we got all these things on also includes Nite Beams, that’s not blocked right?

That’s not. Well the problem is, this is the heart of the problem, like they want us to create a completely separate website for Nite Beams and drive traffic there.

That’s not what we want to do. I want to advertise Surveillance, Nite Beams, Mace 911, but I want it driven to Mace, well they said, well then you have to take out your pepper off your site, well I said but we’re not doing that.

That would be another $100,000 waste of money because at corporate thought that that’s what we should do. So here – in goes the problem, but now we’re working with Brandchaft who developed that website, they’re working on some creative solutions.

Said, wait a minute we can work around some of these things, give us some time, let us come in, let us present some ideas, at the same time can our IT guys working on some solutions. But to your point, that’s how we approached it, that’s where we ran into the issue that we ran into.

And is this the final decision or is there still a process.

It’s a flag waving in the wind in my opinion that the decision could change once they realize wait a minute, we have unintended consequences to something we thought was a good idea. But classifying pepper spray to have gone in my opinion is an Apple being compared to an orange, they both do different things.

So John, perhaps your PR agency might be able to help in providing Google the insight that pepper spray is saving lives?

Correct. And that’s why part of this strategic we talked about at the beginning and putting this all together under a strategic long-term method.

Now, are there other ways other than SCOs and Edward et cetera that can drive traffic to your website and instead of us being passive here with a really nice pretty website that could fulfill and sell products, but people aren’t being driven to the site, doesn’t that mean you need to potentially do more direct to consumer advertising that either sell the product or drive them to the site?

Yes. And we’re working on all of those.

We’re working very closely with, like for example the American Red Cross, the American Red Cross loves the Mace 911 product, loves the Nite Beams products. Can’t do anything with pepper spray, so now we’re working on – we have done some donating to the Red Cross, we’ve worked with their national team and their local teams to use their systems than to drive traffic back to our site or get our products listed on the American Red Cross store.

So those are in process. We’re hoping to close the loops on some of those, but then again CVSL, we’ve created a micro site for CVSL that drives business both to our site, to their site.

So we’re doing nothing, waiting for – if you would, we are working very feverishly on different ideas. We’re doing a better job on our own – cultivating our own list that we own, looking at buying list that potentially we can send out email blast that Google for example can’t do anything about, that gets our message out the way we want to get it out and also then working with a lot of our customers and tagging to their website, so they can get the benefit of the sale.

DGS.com I believe is up in double digits again on sales.

Is traffic to the website already up, I know that the Web sales….

Traffic has been pretty healthy, like we’ve seen more – we don’t see the levels of traffic we’d like, but the levels of traffic are increased and as we do some of these things.

Regarding 911, you mentioned CVSL, is that what it’s called?

CVSL is an organization – that we’re giving them the challenge direct to consumer. So one of their – they own [indiscernible], they own several very direct selling machine.

So we’ve trained them, we’ve done seminars with them. They are in the process of building a marketing and sales plan to go directly after consumers, like a house party for example or an email blast for example or other ways of contacting consumer directly because that’s how they’re built.

Organizationally, we’re not built 100% that way.

When are they expected to roll things out?

In the next couple of weeks. They are building up – they do a lot of education before they even give a product out because that sales person that goes out there is their key player, that’s their store front.

So we’ve trained them, we have products in the [indiscernible] store and now we’re working with them on next steps of the go to market strategy. And there is a little bit of a timing because as they’ve mentioned October and November is their best-selling months because there is a lot of travelling in this July, August, September period.

So they also have to look at that seasonality too to make sure people are at home and people aren’t distracted or they’re not on vacation et cetera.

Right. Now you mentioned about $100,000 of inventory potentially for them, is that revenue is booked?

Not for them, in total. Like Mace 911, not only them, selling it to traditional retailers, or selling it to CVSL, our website and traditional retailers.

And so revenues have not been booked on sales to CVSL yet then?

A couple of hundred units had been booked on sales in the quarter.

In the quarter, okay. Now they have the direct to consumer channel, what are the other distribution channels you’re already marketing this product through and what additional channels do have planned and when?

Well, it’s ongoing Andrew, but we’re making presentations to traditional retailers, Sporting Goods not as much, but mass consumer, clubs, electronic shopping, our own website, working with Kassel Marketing Campaigns. Like as I mentioned, the American Red Cross because it’s a great item if you lose your house, you lose your phone, this way you still can connect.

We’re working with professional organizations such as visiting nurses association and et cetera. And we’re also working through our relationship with Security Partners through the 1,700 dealers that they have on their books now.

So every channel of distribution we’re working at, we’re focusing first on the drug channel and some of the mass market channels as well as Kassel Marketing.

And so have you signed anyone up yet?

We have a couple customers that we’re just waiting for the orders that have given us a verbal yes. We want to put the product in.

I have some more questions, I’ll back out if you can please come back to me.

Sure.

I’ll carry this over the goal on here. On security surveillance and monitoring, I guess what I want to get a feel for here is last quarter the inventory build was described in surveillance sector and back orders.

So what I didn’t understand is if that’s the case and we build inventory, we didn’t have it, you have back orders. Why wouldn’t security and surveillance then be up this quarter, why was a decline and down again and I see the inventory up and I’m little concerned here?

Right. We’re less concerned because we think we can move the inventory, but we did lose some back orders to competitors.

I’d say there is three or four things happening in the field, there is some changes in technology, that’s happening in the field that we need to react to. There is also Chinese strategy I would call it, where they are being more aggressive in selling and marketing direct.

So companies that used to sell, the American distributors or put American brands on it, now they’re going to bolder statement and selling direct to end users, which really didn’t happen before and that’s newer. And then overall, there is some pricing pressure on the segment.

Once we saw that some of the back orders we weren’t going to be able to sustain or some customers said, yeah I know I ordered those cameras, but I want to push that order out a little bit because I’m not sure when I want to take them, that we’ve experienced a little bit of that. With the inventories a little higher than we’d like it to be, but we’re putting in some plans to move the inventory.

And we’re also putting some ideas that – and strategies that we feel will keep us in the segment and protect us, but maybe slightly change our go to market strategy.

So John, when I hear someone say move inventory that usually put some hair up on the back about reduced margins and moving inventory. And I’m just wondering has this management team been asked by the board, has the board been presented, are you guys evaluating the amount of profits and return on investment that this product line provides to the company?

I mean, I’ve been an investor as you know long before you’ve been here, and I have seen the security and surveillance monitoring business go through multiple iterations of having to revamp the product because of technological change, having to deal Chinese or other low margin competition inventory write-downs? I’ve experienced it so much now that when I’m hearing these comments and I’m seeing these things, I’m just wondering about the resource allocation, return on investment.

Are we – I would rather see more advertising moving more Nite Beams products and Mace 911 and other things than just breaking even and tying up all that capital in the surveillance business?

So Andrew, I can’t tell you what we’re planning on doing, but I would tell you two things that we agree on your last statement and b, I would suffice to say knowing you for the past three years that I have, you’d be very pleased and an agreement with what management wants to do with the segment and I’d leave it at that.

Okay. Fair enough.

Of which I can tell, Andrew just last thing. Of which, we have a signed LOI for a part of what we want to do.

We have to push across the goal line on what else we want to do, but suffice to say I think it’s a good plan and it allows us to do other things that you had mentioned, advertising the products that we’re launching. We still have a lot of advertising and lot of education, we can do just on a traditional pepper spray of which the whole time, in the back half of the year we’re going to change the packaging and do a couple of upgrades to it that I think are marvelous and well over – and we’ve done them on nickels and dimes, but I think we’ve been tremendous at doing it.

Well, again, I’ve seen inventory go up, up times or tying up a bunch of capital. If there was a way to free this up, I mean I would love for Mace to earn a 100% royalty stream through the use of our name and have someone else make the low margin, make a margin, but make a low margin in the process who might be able to compete more effectively, and stuff this distraction, if that’s what it’s become, and let’s start moving.

The Nite Beams product you represented and please reaffirm this, is that the margins on the Nite Beams products are as good as if not better than pepper spray.

They’re similar to pepper spray. I wouldn’t call them better, but similar to pepper spray.

Alright. And I think no one would dispute that the addressable potential market of the Nite Beams products to multiple different verticals, and of course Google doesn’t mind them.

You know what I mean, the point is that it’s a much, it’s frankly a much bigger addressable market than selling pepper spray. And I’m not saying get out of pepper spray, but it’s a big market, it’s got big opportunity as long as, Mr.

Fell asked the questions about inventory and quality, as long as we can get the inventory have the quality, you guys could move a bunch of these out.

Agree.

On the LED, you talked about in the last quarter that you were targeting corporations for the idea of selling, we’ll call it wholesale quantities to corporations, safety workers et cetera, vest were not available then, are they available now?

They are – we’ve moved through a lot of the vest that we brought in, inventor wise we’re bringing in more, but yes that is part of the total strategy and it’s in process, it’s a much longer lead time on that corporate side, much longer than I even thought. But I would say there is three, probably top 500 companies that we’re talking to about not only the vest and Nite Beams, pepper spray in a total corporate B2B plant.

Like one I can tell you, like Quicken Loans Arena it’s just a small order of 50 vest, but they’re starting to buy our vests. And we’re working with construction, energy companies, manufacturing companies about the same thing doing our corporate to corporate program where they’re buying at a wholesale price, which is still a very healthy margin to us instead of a retail price and then getting a brand and they’re getting an association.

Right. And it’s a big quantity.

It’s a big quantity, one, and it’s moved out right away to co-op, no over terms and some of the other things.

Right. So you mentioned 50 to Quicken, is that Q2 revenue recognition, is it Q3?

No, because the order came in just this past couple of weeks and then I believe we’re delivering in two weeks when the inventory comes in.

Okay. So the order has been taken, if this quarter is the order, the inventory is not here, the vest is somewhere on a boat off of LA then?

They are at the factory I believe. They are being brought in.

I don’t have the exact data in front of me, but within the next two weeks they’ll be delivered.

Okay. And that’s fine, but then where is the rest of the vest inventory right now?

In China on a boat, on the train, on a plane?

Vast majority of the inventory went out as I mentioned before, both to the rest and both the buyers and the groups and then we play pre-order of inventory that is being manufactured at the plant that would be here within the next 15 to 30 to 45 days.

So in other words, you will in a sense manufacture and ship inventory less on spec and more on order then with the corporations and wholesale blocks?

Well with the corporation side, we’re doing some specialized things like Quicken loans for example that’s going to have the Q listed on it, right.

Okay. They want printing, they want printing?

Right. With some of the other guys on a corporation side Andrew, it’s completely different like those will be made to order, those will be forecasted and purchased because we’ll put logos on there along with the Mace logo.

Our traditional inventory we will stock for Ranger for example or for some of the other accounts that we’re going after. If it’s as traditional retail account that will order and we’ll have, probably we’ll have in the system that will monitor our inventory sale.

So now when you make them to order, you’re getting the deposit. You’re getting money upfront then, and we’re not even putting the working capital or shouldn’t?

Depends on the accounts, some of these accounts are a lot bigger than us, so we can.

Yeah, but you can’t use a vest, that says Q on it and sell it to someone else?

Right. But we will have a binding agreement that they will buy.

So whether it cash up front, I don’t want to say that it might sum accounts, it might be like hey you know, we’ll get an email confirmation that we will buy that product.

Got it. Alright now, we’re not surprised with some new initiatives, with some of these start-up companies and joint ventures that you’ve announced may not live up to expectations.

But can you update us on which ones now you see actually generating cash flow and the timing of when there will be milestones on some of them?

Well, we talked about, Nite Beams and Mace 911, that will be in the back half of this year. [Indiscernible] will still be in the back half of this year, to that point Mace Wear, which was the deal we first signed, they’ve gone under first sign.

We didn’t lose any money, they just couldn’t generate the funding that they thought of. The Defender, which we have a deal with, our money we have the statement of accounts of the $100,000 that we’ve invested with them.

They are retooling their plan, I would say if we’re lucky it would be some time in 2016, unless corporately we decide that that’s too risky. There is – we have several marketing initiative, none of which have cost the company any money, like Beargate, where it is a percentage royalty back and forth.

You don’t have to go down John, you don’t have to go down all the ones you’ve announced, and explain them. I just want to know, which ones of the ones you’ve announced.

Definitely, Nite Beams, Mace 911, and Mace Tactical; those three are priorities. All equal priorities because they involve different people in the organization, but those three, we feel very confident that we will monetize in the back half of this year to a levels I don’t know.

And then are there any others of the ones you’ve announced that are – like they’re going to be a focus or this is the focus and there is nothing more right now?

Those three along with what we’re trying to do on our traditional pepper product, I would say is enough to ensure some levels of success. Mace Tactical again, reiterating that’s a game changer because it gets its back into that segment that we have not been in, probably for five or six years or longer.

Mace Nite Beams gets us in as you said in a higher cap position at retail and also can stretch the company beyond just traditional retail onto a B2B type atmosphere, and also gets us into the Pep segment. We’re working seriously with a known supplier in that segment to do a limited partnership that we think would be a game changer, not only for Nite Beams, but then bringing in Mace branded defense sprays into segments that we haven’t been in before.

So those two along with Mace 911 we’re very bullish on. And to your point, along with updating our pepper line and doing some dynamic things with our traditional line because in the house or in the building we always look at our core, our pepper is number one, than we look at all these other segments and say okay, do I lead with Mace 911 and then show pepper, do I lead with Nite Beans and show pepper, but all along we try and tie the two together and then we just lead with the segment that we think has greatest chance for success.

Okay. Great.

Thank you.

Okay. Chris, I think that’s it.

Alright. Thank you.

Thank you.