Mace Security International, Inc. (OTCQX:MACE) Q2 2022 Earnings Conference Call August 2, 2022 11:00 AM ET
Company Participants
Mark O’Conner – Corporate Controller
Sanjay Singh – Chairman & CEO
Conference Call Participants
Andrew Shapiro – Lawndale Capital Management
Howard Rosencrans – Value Advisory
Ken Fell – Fell Capital Management
Operator
Ladies and gentlemen, thank you for standing by, and welcome to the Mace Security International Second Quarter 2022 Earnings Call. Currently, all participants are in listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded. Mace has provided instructions to access this recording in their press release.
I would now like to hand the conference over to your first speaker for today, Mark O’Conner. Thank you. Please go ahead, Mr. Conner. Thank you.
Mark O’Conner
Thank you, Caroline, and good morning, everyone. Joining me on the call today is Sanjay Singh, the Chairman and Chief Executive Officer of Mace.
Please visit corp.mace.com under Newsroom where you can find additional materials, including the financial statements and OTC QX report for the second quarter ended June 30, 2022, as well as our Q2 financial overview presentation.
Before proceeding, I would like to point out that certain statements and information during the conference call will constitute forward-looking statements and based on management’s expectations and information currently in the possession of management. When used during our conference call, the words or phrases such as, will likely result, are expected to, will continue, is anticipated, estimated, projected, and intended to or similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, known or unknown, and uncertainties, including, but not limited to, economic conditions, limited capital resources and disruptions in domestic and international supply chains, such factors could materially adversely affect Mace’s financial performance. It could cause Mace additional results for future periods to differ materially from any opinions or statements expressed during this call.
I will now turn the call over to Sanjay for some comments about the quarter.
Sanjay Singh
Thanks Mark. Good morning, everyone.
The second quarter continued to be very challenging as expected. Our top-line revenues continue to trend lower than prior year, although the orders are starting to trend upwards when compared to the prior months. An inflationary environment, along with a slowing economy, has a direct impact on the spending habits of our customer base.
When more discretionary income is needed to pay for basic necessities, it reduces the spend available for impulse purchases, such as Mace products at retail locations. The orders from our larger price-sensitive customers have been slower to-date, but we are beginning to see an uptick in current orders from our other retailers compared to the last two quarters.
We initiated a restructuring in Q2 of this year, this involved cost reductions and a targeted working capital reduction. Those plans and actions have been completed as of June 30. This resulted in a breakeven adjusted EBITDA in the month of June 2022. While this by itself is not an accomplishment, we are now moving in the right direction.
We also landed two new retailers that has worked an incremental annual revenues of $1.8 million to $2.3 million. We will begin to see orders from these retailers in the back half of this year.
Our international sales continue to be higher than last year, mitigating some of the decreases from the retail segment.
Our Q2 order performance on mace.com is encouraging as we were up 27% versus last year and 23% when compared to Q1 of 2022.
We launched an insight sales effort last quarter. This enabled the company to identify significant opportunities within our base business segment and increase conversions into orders. New B2B opportunities are also identified and are being pursued by our sales team.
Last quarter, we mentioned a new line of business that we were targeting to launch at the end of Q2. That launch is slightly delayed because of transitions in our leadership team, but we are targeting a launch in the third quarter. We are also working on several co-branding opportunities and expect to formalize agreements in Q3 and Q4.
The company’s focus continues to be on the following items: operating to a positive adjusted EBITDA; conversion of new business including, retailers; promoting both our new products to the base business, while delivering on our operating efficiencies.
I will now turn the call over to Mark to comment on the second quarter 2022 financial results.
Mark O’Conner
Thank you, Sanjay.
Our second quarter net sales were $2 million, a 42% decrease from $3.4 million for our second quarter sales of 2021. Retail sales were off 60%. They were down across all sectors of our retail customers as point-of-sale traffic remains slow. Our e-commerce sales were down 33% in the second quarter.
We knew that the first quarter of this year was going to be challenging with the inflammatory — inflationary headwinds last year, we came into the second quarter still with a second significant order backlog coming out of 2020 resolving in similar sales in quarter two 2001 as in quarter two 2020. We do not have the same level of backlog heading into the second quarter of 2022.
Gross profit for the second quarter decreased $539,000 or 41% from our second quarter 2021 results.
Our margin rate however was 40% up 1 point from 39% rate we achieved in the same quarter of 2021. We see this margin rate increase despite a 42% lower sales volume. We have strongly curtailed our costs and driven up margins through pricing and cost controls.
We continue to deal with increases in transportation costs which negatively impacted us 1.4% in margin. We are seeing component cost increases as well.
SG&A expenses for the second quarter decreased by $23,000 to $1.2 million or 55 — 59% of net sales.
We have increased our online advertising spend and have generating over 3 times return on advertising spend. Additionally our legal fees were up nearly four full quarterly over quarter as we have been addressing the unsolicited interests of potential buyer and commenced a process to explore and evaluate potential strategies, strategic alternatives for the company.
We continue to invest in new product development. Our second new product The Pocket Hero was launched by the end of the second quarter. We had a reduction in outside sales commissions, but that was directly correlated to the reduction in sales.
Salaries and related benefit costs were down in the second quarter of 2022, compared with the same period in 2021, due to the company optimizing its headcount.
Our lower sales volume and higher legal costs resulted in a net loss for the quarter of $452,000, which was down from our net income of $702,000 in the second quarter of 2021. Last year’s second quarter net income benefited by a $625,000 gain on forgiveness for our PPP loan.
Second quarter adjusted EBITDA was a loss of $116,000, down $350,000 from $234,000 we had generated in the second quarter of 2021. Adversely the lower sales volume dropped right to the EBITDA line along with the incremental legal costs. But likewise, as sales climb, it will translate into a quick rise in EBITDA.
We experience an increase in our borrowing position in the second quarter. That the slight change in the rates, we have — we had inventories — we have inventory orders that were in process and could not be holded without a financial cost or inclusion of future inventory or fulfillment. As such, we currently have a lot of our cash tied up in convertible and sellable inventory. 40% of our inventory is finished goods.
We have manufactured and assembled products for our typically high volume movers and have been utilizing targeted promotions for our slower movers and higher inventory positions. In an unusual manner, the supply chain challenges lead to our higher inventory levels has better positioned us for a timely or a fulfillment and as the selling season ramps up. We have successfully scaled back future purchase orders and fully expect to begin monetizing our inventory position.
I’ll now turn the call back to Sanjay for additional comments before we take your questions.
Sanjay Singh
Thank you, Mark.
Again, none of us at Mace are happy with the financial results this quarter. Although, we are encouraged by the fact that the business has been restructured and we are now operating to an adjusted positive EBITDA.
We launched The Pocket Hero at the end of Q2, and have received strong orders from retailer and mace.com.
We are excited to bring our former Chairman Richard Barone back to Mace’s Board. His advice on our strategic alternatives project will be very useful.
A quick reminder, we will not address or respond to any questions pertaining to the strategic alternative process. The company has retained financial and legal advisors to assist with this process.
At this time, I will stop and open the lines for questions. I would ask each caller to limit themselves to one question with one follow-up to allow everyone a chance to participate. If we have additional time, we’ll try to get you back into the queue.
Caroline, please open the line for questions.
Question-and-Answer Session
Operator
Sure. Thank you. [Operator Instructions].
We will take our first question from the line Andrew Shapiro from Lawndale Capital Management. The line is open now. Please go ahead.
Andrew Shapiro
Hi, thank you. I have to leave this call early. So if you wouldn’t mind and give me the flexibility to get three in here. I appreciate it. First, if these questions are regarding the revenues. You mentioned anticipated orders from the new retailer who last quarter you had said had maybe three — 6,000 locations. And this release has the potential to add increment. And in your release, you said had the potential to add incremental annual gross revenues of $1.5 million to $2 million. Have any orders been received to-date? And what leads you to believe in thus shareholders to believe the orders are going to arrive?
Sanjay Singh
Andrew, I’ll answer that. We have not received any orders yet. The orders are supposed to start this month. And we — I was on a call with a Senior Vice President for the last six weeks, as is typical with a lot of retailers we’ve been doing testing on the EDI that testing is almost done. I think there’s just a one final test. We had a call on Friday. So we should be squared away this week and we should start seeing orders from them this month.
Andrew Shapiro
Which would result in a timing of fulfillment and booking as revenues by when I mean the initial booking of revenues?
Sanjay Singh
Typically these retailers ask for about a 30-day lead time, anywhere from three to four weeks depending on the retailer. So we expect it this quarter. We already know of specific requirements from an ordering perspective for the fourth quarter, but this would see orders in the third quarter as well.
Andrew Shapiro
Okay. In June, you announced a new partnership with Mid-States Distributing and its very large network of farm retailers. Did Q2 contain any orders and sales to any of these retailers yet and here we are halfway through or a third through current quarter. Have you seen such in the first half of this current Q3 yet and what is the momentum?
Sanjay Singh
We saw — yes, they’ve been placing orders. It started in the — in late Q2, and we anticipate seeing more orders in the back half from them.
Andrew Shapiro
Okay. In your slides and your press release you referred to several revenue-generating co-branding initiatives which will be rolled out in the current Q3. With this quarter again almost half completed, can you give a little more color and detail on some of these initiatives that you can share with us?
Sanjay Singh
What I can share is that we have received inquiries from several folks who’ve come up with product, personal safety design products, and they — we vet them out. We get a lot of inquiries. So we’ve been vetting these out. And as they’re being vetted out, we have come up with economic model. Because of our financial situation, it became very clear to us that, there’s — we couldn’t really invest a significant amount of funds in R&D and given the lead times and coming out with new products, we elected to go down this strategy.
And — so there are three at the moment that we have a — an internal pro forma P&L, and a marketing plan and we just need to work through the agreement to get it all signed out. There are a couple more that are in the pipeline.
Andrew Shapiro
Great. Thanks. I’ll back out in the queue and hopefully I’ll still be around here to be able to come back in.
Operator
Thank you. We will take our next question from the line Howard Rosencrans from Value Advisory. The line is open. Please go ahead. Thank you.
Howard Rosencrans
Hi guys. Thank you. I’ll remind you that one, two years ago; you came out with a slew of announcements regarding your retail presence, the national retailers where you had signed up one or two new national retailers. I’m going to say it was 2021 or 2020, they were going to really contribute in the second half, and you were going to get more hooks, and you had bear spray, and this and that, and the other things. And all the sales do go south, which one would suggest really just speaks to the fact that it’s — I won’t say the fact, but one could speculate that the hope that there was — that the only time people buy the product is when there is social unrest. And now we’ve saturated that. And who knows, if I’m a retailer, I can’t imagine possibly doing — I mean, they’re not your only retailer with 6,000 stores. I can’t imagine possibly doing a $2 million in sales. It just sounds — but they’re going to have to do $3 million or $4 million in sales for you to do $1 million or $2 million — for you to do $2 million sales, they do $4 million at retail. So it just doesn’t sound remotely possible given the track record.
Sanjay Singh
Howard, you’ve made a good point about what we have said in the past. I’ll just go point by point. Those additional hooks in 2021 that we were highlighting, those didn’t happen. Those didn’t happen in 2021. It didn’t happen in Q1. Two happened in Q2. This statement is other big retailer. We are — we have a target list of $14 million that our new sales manager has come up with. He’s a retail expert and so we’re targeting those. That’s in our pipeline.
In terms of pepper spray being saturated during social unrest, yes, it did. It went an impulse purchase to a definitive, event-driven demand, but just given the number of shootings and the concerns around personal safety, based on the retailers and the reps that we have been talking to, there is a vigorous enquiry around personal safety, non-lethal options. We are hearing about it from schools, retailers, hospitals, hotels. So this idea around personal safety has sort of moved up in people’s cognitive thinking, it may have been relatively speaking much less so maybe three years ago.
Howard Rosencrans
Forgetting the couple of hooks, didn’t you add a major retailer or two in, that was supposed to be a major contributor in 2021?
Sanjay Singh
It was this very retailer that we added in Q2, the one with 6,000 locations that is the one that we had highlighted. But then there was a change in their — in the buyers. And so we had to see it through again this year.
Howard Rosencrans
So this is the same, so you haven’t added a major retailer — so that you never did add a major retailer. So this is the same retailer that you’ve been alluding to — that you alluded to, it must have been 18 months ago?
Sanjay Singh
We did allude to that. We added Cornwall Tools as well in the first quarter of 2022. So now we’ve added three in 2022.
Howard Rosencrans
Okay. I got — I have no idea who Cornwell is. So if we could just put it in context how big are these — I — well, I guess, I can’t ask for more defined question, that’s okay. All right. Well, hats off for improving the — for the solid gross margin, despite the horrid sales and for being able to reduce your internal costs. And I guess, we’ll have to hope for the best. And it’s — I don’t know, one way or another if you haven’t — this is the only question, I’ll ask you about the third-party sort of stuff, it — is it fair to say that one way or another, by the end of the calendar year, will either get something done or will — or will move on or will try to make a goal of it ourselves. I mean, the reality is that nobody else can really — Andrew Shapiro gave me an education on this, nobody else can really utilize your NOL meaningfully. That’s about the only assets you got. I mean, in the core business we can talk about the global bland until we’re blue in the face, this is a business that started in 1990. 32 years later, you’re doing, $8 million run rate. So we can talk about what a powerful brand you have all day. But the reality is the most alluring thing we have now is all the money you’ve lost. So to sell to somebody else who can capitalize on our NOL, if you guys are going to actually turn it around just doesn’t seem so prudent, because I know the business itself can’t be worth very much money. We’ve demonstrated that over the years from wherever the stock was trading a 100 years ago to, you know, it’s been one straight line down and nobody ever showed any interest. So the core business can’t be worth very much. I mean, so I don’t know, are we going to — if the next four or five months, we can’t do something, are we going to call it a day and try to capitalize on what I see as your only legit asset. I mean you guys seem to want to talk about more optimism sales going up and does it, does it, does. You’re going to be able to do this and make this a meaningfully profitable business. Why would we look to — why are we going to sell out at $0.40, which makes this — which would give you ostensibly a market value of I don’t know, $30 million or something. Whereas, you could — if you’re going to turn it around and start making money, then it’s going to be worth more than $30 million, $40 million?
Sanjay Singh
So Howard, we — the strategic review process continues and the idea was the beginning of Q2 was to turn the company around. And that’s — so that is somewhat of an internal focus that has been to play again our Q2 results were not the best, although we were at breakeven and for June and again, that is also not a major accomplishment. But the trend has been reversed and we’re focusing on the business that’s why we brought in a retail expert to cure our sales problem. We are — as you rightfully said, we are very small. And we’re meaningfully looking at landing a few more retailers. I mean the strategy is to land three to four new retailers every year at a minimum. And then continue to grow the direct-to-consumer business, which is growing at a double-digit rate and get the company back to profitability. If a buyer comes along and is interested and it’s a very good play, of course, we’ll look at it. So I hope that answers your question.
Howard Rosencrans
I appreciate the color. Thank you and good luck.
Sanjay Singh
Yes. Thank you.
Operator
Thank you. We will take our next question from the line Andrew Shapiro from Lawndale Capital Management. The line is open now. Please go ahead. Thank you.
Andrew Shapiro
Hi, while inventory levels came down slightly from last quarter end, they remain more than elevated. With further substantial conversion of raw materials into finished goods this quarter, how much of the quarter end inventory is against known existing orders and has some of that already shipped in this quarter so far? And we can expect the inventory level by the end of the quarter to be down.
Sanjay Singh
Andrew, it’ll take a few quarters for the inventory to come down because, we really — our inventory went up significantly in 2021 planning for a very robust year. And then we started seeing a slowdown midway through that. We — so you’re not going to see that in Q3 in a very meaningful fashion, although our incoming inventory is highly targeted and through a working capital forecast. So we are very focused on reducing our overall working capital.
Operator
Thank you. We will take our next question from line Ken Fell from Fell Capital Management. Thank you.
Ken Fell
Hey Sanjay. Hey Mark. How are you guys doing today?
Mark O’Conner
Fine. Thank you for asking.
Sanjay Singh
Thanks, Ken.
Ken Fell
Sanjay, last — last quarter, I asked a question about you guys highlighting a new product line of business to be evaluated by the end of Q2. Can you elaborate any further on that project now that Q2 is over?
Sanjay Singh
Yes. That’s what I had mentioned in the script in case you missed it. So our intention was to launch that in Q2 that didn’t happen. We are in the pros of negotiating the agreement and coming up with the content that is going to drive that business. So we expect to launch in Q3.
Ken Fell
It’s going to launch in Q3. Okay. Wonderful, wonderful.
Sanjay Singh
Yes.
Ken Fell
Some of the new products let’s — can you talk about Chameleon with now a full quarter of Chameleon, can you comment on the experience with this product in your e-commerce channel? It doesn’t seem to be so prominent on the Amazon. Are you getting much sales traction on it and where else is Chameleon being offered in the e-commerce channel?
Sanjay Singh
So Chameleon is being offered on Seller Central, which is our store on Amazon, and the — is also offered to our base business and also on mace.com. It has received some traction. It’s decent, it’s not great and primarily the primary reason why you’re not seeing it in — on Amazon Seller Central is because we’ve had to curtail some of our advertising to only those SKUs that drive a significant return on advertising spend.
So we are promoting it through mace.com and to our base business, it has also been presented to some of the new retailers that you’re looking at. The Pocket Hero though, that has generated a lot of demand both online and a lot of interest from other retailers as well.
Ken Fell
Great, great. What’s — I guess I’ll hop back into the queue and give somebody else a chance.
Operator
Thank you. We will take over next question from line Howard Rosencrans from Value Advisory.
Howard Rosencrans
Hi guys, quick follow-up. I guess I was discouraged by the — it’s not a point of purchase if somebody’s going online to buy. So the precipitous fall off in e-commerce is — was — this was the great part of your business and your — it was going to work and it was doing so well and da, da, da. And now in the quarter was off 33% on the e-comm?
Sanjay Singh
Yes. So that, that is the majority of that is Amazon, which is a proxy for a price sensitive customers. So we started seeing a falloff in glance views and this — the ranking of the term pepper spray in Q4, late Q3, Q4. It has since started bouncing back, but it wasn’t reflected in our shipment number, in our revenue number in Q2. It has — it is still not back to where it was at its peak, which was in the July timeframe. That’s when it peaked. And if you look at our deck, what you’ll find is that our Amazon sales went from — sales to Amazon went from about $1 million to a $5 million run rate by July 2021 and then it dipped back down again slightly I mean like you said 33%.
Howard Rosencrans
Okay. And direct sales, I guess are not sort of Mace direct sales are not particularly meaningful. E-comm is really an Amazon thing.
Sanjay Singh
E-comm is mainly an Amazon thing. Mace.com is meaningful because of its contribution to EBITDA is significantly higher than from other channels like 2x higher. So but that is also very much driven by ad spend, which we’ve had to curtail it. We are still — there’s a balance between what you — between your ad spend and your return on advertising spend. And it’s a constant battle to balance the two. But the short answer to your question is mace.com is not like it’s the major driver in the e-commerce. It is Amazon.
Operator
Thank you. We will take the next question from the line Ken Fell from Fell Capital Management. The line is open now. Please go ahead.
Ken Fell
Thanks, Sanjay. You just — you were saying that the package here is doing really well, so it must have done pretty darn good on your site, the test site of mace.com. You also talked about an initial retailer, actually last quarter that was going to give you substantial orders. Can you now reveal who that substantial retailer is?
Sanjay Singh
Yes, it’s AutoZone. Yes, they’ve placed an order — yes, it was AutoZone. They’ve placed an order before we had released the product.
Ken Fell
Great, great. So are some of those revenues maybe in Q2 or is it more a Q3 thing going forward?
Sanjay Singh
Q3.
Ken Fell
Okay. Wonderful, wonderful. Back to the Chameleon. Have you made any replacement in canister sales yet? Are you interested in that?
Sanjay Singh
No.
Ken Fell
No. Okay.
Sanjay Singh
We have not.
Ken Fell
I think one of the bright spots of this Q2 is international sales really nice numbers there. What drove some of those numbers? Was it more the civil unrest that they seemed to be having there or was it may be greater penetration in some of your dealers. What was the driver?
Sanjay Singh
Yes. So a couple of things. One was international sales that kind of dried up, if you remember in 2021 and during COVID in 2020. So relatively speaking, just a lot of limitations around freight and those kinds of challenges, so some of it was that. But the other part of what is driving the growth is that we purposefully drove in a lot more calling and contacting some of our international prospects. We made it a lot more focused, just given where, what we were seeing with, on the retail slowdown, so some of it was that.
And there is, generally you look at certain countries where we’ve never done business, like Trinidad, they have expressed interest in our pepper sprays because pepper spray has become legal there. The same in Europe and other countries. In fact, some of the foreign countries want their flag in the Chameleon. They’ve inquired about it.
Ken Fell
Great. Great. So do you think that the Q2 run rate we can kind of, count on it going forward or even better?
Sanjay Singh
We are counting on the run rate. So based on what we are seeing, yes, international revenues are a big part of our overall strategy. We’ve seen a lot of interest in non-lethal, great.
Ken Fell
Great. I will get back at the end of the queue. And let’s give somebody else a chance.
Operator
Thank you. We will take the next question from line of Robert Cain from Advanced Chemtec [ph]. The line is open now. Please go ahead.
Unidentified Analyst
Hello. Glad to see that you’re doing well in the international market. I’ve been a long time stockholder of Mace. And where do you feel your costs are with respect to your competition? Hello?
Sanjay Singh
Yes. Yes, our manufacturing costs are probably in line with our competitors, the ones who actually make it in their — make the sprays in their facilities. I think our costs on the SG&A side are probably higher, mostly because of the public company expense. I mean, in the last quarter, we have restructured, our SG&A cost quite a bit, but I think there’s still some room to, just being a public company expenses are a lot higher, our insurance is a lot higher.
Unidentified Analyst
Well, one of your competitors is also a public company, SABRE, right?
Sanjay Singh
SABRE’s not public. No.
Unidentified Analyst
Yes, they are. They — you could, you can buy their stock and they are a public company. And the reason I mention is I have watched how the products are on Amazon, okay, and there are many products on Amazon. You have continued to go downhill regarding Amazon, many competitors, and that was why I was asking the question about your cost, and also maybe it goes back to inventory. Many of the prices on Amazon such as the SABRE products, their costs have been cut because they also have some inventory problems.
Sanjay Singh
On Amazon, we are mostly a vendor, which is a vendor central platform. We do have a seller central platform as well, which is our store, but most of our revenues come from being a supplier to Amazon and they control the price and so are the other. So folks, like SABRE and some of our other competitors.
Unidentified Analyst
Right. And I think there was a comment earlier about, once again, Mace has had a good brand for a long time. Many of the newer products have little or no brand. And I’m not sure you’re taking total advantage of your brand.
Sanjay Singh
I agree. That’s been a problem in the past. I think we have, the last four, five years; the company has certainly spent a lot of money promoting the brand, the content, the block content, the educational content videos. I think, historically, the company has been a bit undercapitalized, to spend a lot of money on marketing. So it’s been a little constrained, but I agree with your overall comment that that that’s where we need to continue to have that focus of promoting the brand.
Unidentified Analyst
And maybe you can do that more effectively now in your international market where you’re beginning to have some growth.
Sanjay Singh
I agree.
Unidentified Analyst
Okay. Well, thank you. And I am looking forward to some progress. Once again, I’ve been a long time stockholder and all I’ve seen as it was mentioned before, is a very big downward slide. I will allow someone else to ask a question. Thank you.
Sanjay Singh
Thank you.
Operator
We will take our next question from line Howard Rosencrans from Value Advisory. The line is open now. Please go ahead.
Howard Rosencrans
Thank you. You mentioned something about, I guess, I’m confused on international. I was pretty sure you guys were ostensibly pulling out of international a year ago. Did you flip the switch on something there?
Sanjay Singh
We did. We did. So at that time, it was, I think this goes back probably about 18 months ago, being a small company in terms of allocating focus and resources, our main focus was in North America. When it started slowing down and we started seeing renewed interest, we went after it.
Howard Rosencrans
Okay. I’m not sure if you said this in the call. Can you size the international business for us?
Sanjay Singh
I’m sorry, could you repeat that question, Howard.
Howard Rosencrans
I apologize if you said this on the call, or if you broke it out in your press release. Could you tell us the size of your international business, please?
Sanjay Singh
Then, do you have the numbers in front of you?
Howard Rosencrans
As I said, I apologize — I — third time. I apologize if you have it in the press release or if you said it in the conference call. Could you tell me what the international sales were in the quarter, please?
Mark O’Conner
International sales in Q2 were 73,000. International sales in for the year-to-date, June 30, were 437,000.
Howard Rosencrans
So there was a precipitous fall off between Q1 and Q2 in international sales, if I heard the gentleman, correctly?
Sanjay Singh
You heard him correctly. But we have — we have several orders still sitting on our dark that have not gone out because we’re waiting on their freight forwarders. There is a major freight issue with international shipments. So what he explained was what we actually shipped and we have probably a — I forget the exact number, probably $100 grand or so that still needs to go out. And they usually pay upfront. They pay in advance. Then could you also share the 2021 numbers for the first half?
Mark O’Conner
144,000 for the first half.
Howard Rosencrans
Okay. So it’s certainly a good comparison. Great. Okay. Thank you very much.
Sanjay Singh
Thank you.
Operator
Thank you. We will take our next question from line of Ken Fell from Fell Capital Management. Your line is open now. Please go ahead.
Ken Fell
A couple of follow-ups, Sanjay with the Pocket Hero and AutoZone, do you have any visibility on the sell-through yet for Q3?
Sanjay Singh
We don’t, I mean, those shipments just took place in the last week — last two weeks, actually. So they just went out.
Ken Fell
Okay.
Sanjay Singh
But we get weekly reports, we’ll be looking for.
Ken Fell
Yes. That seems to be a pretty exciting product so looking forward to that for sure.
Sanjay Singh
I agree.
Ken Fell
So that second new product that moves to Q3. Do you have any other color on what this product is or maybe what it is — what vertical it addresses?
Sanjay Singh
The — you’re talking about the Chameleon or the Twist Lock?
Ken Fell
No. There was a product that was moved — a new product that was moved from Q2 to Q3.
Sanjay Singh
Oh, yes, yes. Yes. I can’t really talk about it, but it is in the — it does solve a significant problem in our segment. So I’ll just leave it at that. If I went any further, I think you would — I’d be providing more details than I probably shouldn’t be at the moment.
Ken Fell
Okay. Great. On [indiscernible] I’ve asked questions about price increases and I believe the response was mostly price increases come in Q1. So were all these price increase — new price increases implemented in Q1? Or did you implement additional increases in Q2? And what was the timing of these increases during Q2?
Sanjay Singh
It was all in Q1, Ken, and only international was increased in Q2. And those just — those were just released. So the — it’s not even baked in our Q2 numbers yet.
Ken Fell
Okay. So any price increases it basically happened in Q1?
Sanjay Singh
Right.
Ken Fell
Okay.
Operator
So, thank you. We’ll take our —
Ken Fell
So, you can still hear me? Hello?
Sanjay Singh
We can still hear you.
Ken Fell
Yes. I’ll fall back into the queue in case there’s somebody else in here.
Sanjay Singh
Okay.
Operator
Thank you. We will take our next question from Mark Greenberg [ph]. The line is now open now. Please go ahead.
Unidentified Analyst
Thank you very much. I believe it was Howard who inquired about the horizon line for the strategic alternative review process, how long that may be undergoing review. And I was curious about reference earlier to an escalation in legal fees. How much of that may be related to the strategic alternative review process and how much longer do you think that will continue to be a drain on the company? Thank you.
Sanjay Singh
Thank you, Mark. The majority of legal fees that that Mark O’Connor reported was related to the project. We don’t expect to have that kind of a spend. Certainly, at that level, we don’t anticipate that. We are still working the strategic review process. And realistically, I would think that we should have some kind of a resolution by year-end. I mean we’re not working through a formal timeline though.
Operator
Thank you. We will take our next question from Howard Rosencrans from Value Advisory. The line is open now. Please go ahead.
Howard Rosencrans
Hi guys, a couple quick question. Well, first of all, one, there’s a on the press release the gentleman’s name — Mark’s name, I guess or Max name, I don’t have it in front of me. That looks like there’s an apostrophe in the — in his e-mail. I assume in his e-mail address, I assume that’s just a typo. That was —
Mark O’Conner
No, sir. We created name correctly. Then we code — we designed two ghosts with just O’Conner with ER, and M. O’Connor with OR because sometimes people misspell it. And we just tried to build an option in case they needed to reach me.
Howard Rosencrans
Yes. Okay. I just thought there was an apostrophe in the — there’s an apostrophe in the e-mail address. Okay. All right.
Mark O’Conner
That’s correct. Yes.
Howard Rosencrans
Let me ask two more subs — okay. Let me just ask a couple more substantive questions. The NOL utilization that I alluded to before, could you achieve 100% util — if you put it out as a royalty, do you have any thoughts in that regard to licensing — of to licensing of your brands? Would that allow you to utilize the NOL? Do you have any ideas along that front?
Sanjay Singh
No, no, Howard, that’s a great question. And actually it was raised by one of our Board members. I’ll have to look into that.
Howard Rosencrans
Okay. Follow-up a different question. Sanjay mentioned in May on the Q1 call, the part of an inside sales team was calling all the historical base business and then effect cleaning up the Mace customer database was a big project. And would be able to be scaled back or redirected. Have you finished the inside — the I guess the scaling of the inside sales team or redirected this team in any other direction and have you seen efficiencies kick in as a function of that?
Sanjay Singh
So the project is complete. We probably touched those customers on average of 5 times to 6 times. We got very, very valuable insight, whether it was folks in our database that were not doing business anymore or were — they were out of the non-retail space, or they were very interested in our business and wanted our catalogs and placed orders. We also were able to clean up the contact info and get that input as well. And those folks now have been redirected to a different initiative to, so that we can enable conversions.
Howard Rosencrans
Okay. The allowance for doubtful accounts, is the increased quarterly receivable reserving primarily to a single customer, are — so are the reserves, is that at a single customer or a whole class of customers? It looks like the reserve has gone from about 20% in the September quarter to what looks like about 30% in this June quarter.
Sanjay Singh
[indiscernible] can you take that?
Unidentified Company Representative
Sure. The reserve applies to a whole number of customers. We calculate a reserve based on the aging of receivables. Just to be conservative. We are pursuing these receivables with those customers. Everyone has their hurdles and hoops that one has to meet the shipments or proof of shipment. And again, it applies to a many customers.
Howard Rosencrans
Okay, great. And just one question that I really should know the answer to my apologies. Are you booking sales based on sell-through? Or do you adjust yourselves in the corner based on if the products are not selling through and you’re anticipating getting them kicked back or if the — or if you anticipate the retail are asking for a discount so they can dump the product at retail or how are you recognizing sales?
Sanjay Singh
We recognize sales based on shipments in the transfer.
Howard Rosencrans
Okay. So it’s just on sell in.
Sanjay Singh
Right.
Howard Rosencrans
It’s just on sell in. And at this juncture, you feel like it — at this juncture, you already indicated a marked uptick in, I believe in orders. Did you say they were up — did you say 28 or something percent was that year-to-year or Q-to-Q or –?
Sanjay Singh
We are seeing an uptick in a — no, that statement is not correct. What I said is our e-commerce is up, mace.com is up, specifically mace.com. And Amazon is up quarter-over- quarter. The overall orders are up slightly quarter-over-quarter.
Mark O’Conner
Thank you. Caroline, I think we are at a bit over the noon mark. So we should conclude the Q&A now.
Operator
Sure. We will conclude the Q&A now. Thank you very much. This concludes today’s call. Thank you for your participation. You may now disconnect.
Mark O’Conner
Thank you very much.
Sanjay Singh
Thank you.
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