Byrna Technologies Inc

Previous wording

Byrna Technologies is a designer, manufacturer, retailer and distributor of innovative technological solutions for security situations that do not require the use of lethal force. Our mantra isLive Safe, and our core mission is to empower individuals to safely and fully engage in life and adventure. Our design team’s directive is to build easy-to-use self-defense tools to enhance the safety of our customers and their loved ones at home and outdoors. We are also focused on developing tools that can be used instead of firearms by professional law enforcement and private security customers to reduce shootings and facilitate trust between police and the communities they seek to serve. Our strategy is to establish Byrna® as a consumer lifestyle brand associated with the confidence people can achieve by knowing they can protect themselves, their loved ones and those around them. We believe we have a significant opportunity to leverage the Byrna brand to expand our product line, broaden our user base and generate increasing sales from new and existing customers.

Current wording

Byrna Technologies Inc. is a designer, manufacturer, retailer and distributor of innovative technological solutions for security situations that do not require the use of lethal force. Our mantra isLive Safe, and our core mission is to empower individuals to safely and fully engage in life and adventure. Our design team’s directive is to build easy-to-use self-defense tools to enhance the safety of our customers and their loved ones at home and outdoors. We are also focused on developing tools that can be used instead of firearms by professional law enforcement and private security customers to reduce shootings and facilitate trust between police and the communities they seek to serve. Our strategy is to establish Byrna® as a consumer lifestyle brand associated with the confidence people can achieve by knowing they can protect themselves, their loved ones and those around them. We believe we have a significant opportunity to leverage the Byrna brand to expand our product line, broaden our user base and generate increasing sales from new and existing customers.

Previous wording

On January 10, 2023, we created a new joint venture with Fusady S.A. ("Fusady") located in Uruguay, to expand our operations and presence in South American markets. We hold 51% of the stock in the joint venture entity, Byrna LATAM, and the remaining 49% of stock in Byrna LATAM is held by Fusady. Refer to Note 6, "Investment in Joint Venture" for additional information.

Current wording

On January 10, 2023, we created a new joint venture ("Byrna LATAM") with Fusady S.A., an affiliate of Bersa S.A. (“Fusady”) located in Uruguay, to expand our operations and presence in South American markets. We held 51% of the stock in Byrna LATAM, and the remaining 49% of stock in Byrna LATAM was held by Fusady. Under the terms of the joint venture, we did not control the Byrna LATAM. On August 19, 2024 we sold our 51% ownership interest to Fusady S.A. for $1 (the “LATAM Share Purchase Agreement”), and entered into an exclusive distribution, manufacturing and licensing agreement with Byrna LATAM (the “LATAM Licensing Agreement”). The LATAM Licensing Agreement allows Byrna LATAM to exclusively manufacture the Byrna SD launcher and ammunition in certain South American countries and requires Byrna LATAM to pay us a royalty on Byrna products manufactured. The LATAM Share Purchase Agreement also includes put and call rights based on defined triggers that expire August 19, 2029.

Previous wording

Revenue of $42.6 million during the fiscal year ended November 30, 2023 was $5.4 million lower than prior year revenue of $48.0 mainly due to a decrease in international sales of $6.7 million. The majority of revenue continues to be in high margin direct online sales via Amazon and the Company's website, as these e-commerce sales accounted for 70.1% of total net revenue in the current fiscal year and 63.6% of total revenue in the prior fiscal year. In addition, the Company had experienced growth in its dealer sales channel as well as sales into Canada. Sales of Fox Labs branded products, which the Company acquired at the end of the second quarter of 2022, continued to increase during the fiscal year ended November 30, 2023.

Current wording

Revenue of $85.8 million during the fiscal year ended November 30, 2024 was $43.2 million higher than prior year revenue of $42.6 mainly due to an increase in e-commerce sales of $34.9 million. The majority of revenue continues to be in high margin direct online sales via Amazon and our own website, as these e-commerce sales accounted for 76.8% of total net revenue in the current fiscal year and 72.6% of total revenue in the prior fiscal year. In addition, we experienced growth in our dealer sales channel as well as sales into Canada. Sales of Fox Labs branded products, which the Company acquired at the end of the second quarter of 2022, continued to increase during the fiscal year ended November 30, 2024.

Previous wording

The Company maintained gross margin profitability consistent with the prior year. To offset the decline in revenues, the Company has reduced marketing spend, personnel costs, and professional fees. This decrease in operating expenses offset most of the decrease in gross profit due to the decline in revenue during the fiscal year, so that loss from operations was $7.8 million for the fiscal year November 30, 2023 as compared to $7.7 million for the fiscal year ended November 30, 2022.

Current wording

We increased gross margin profitability by 6.1% as compared with the prior year. With the increase in revenues, we have increased marketing spend, personnel costs, and professional fees. Due to the increase in revenue during the fiscal year, the increase in operating expenses offset with the increase in gross profit led to a profit from operations of $6.7 million for the fiscal year November 30, 2024 as compared to a loss from operations of $7.8 million for the fiscal year ended November 30, 2023.

Previous wording

Revenues were $42.6 million for the year ended November 30, 2023 which represents a decrease of $5.4 million or 11.2% compared to the prior year period revenues of $48.0 million. The decrease was primarily due to international sales that decreased by 73.2% or $6.7 million from $9.2 million during the fiscal year ended November 30, 2022 to $2.5 million for the fiscal year ended November 30, 2023. The decrease was driven by sales in South Africa, South America, and Asia, which are characterized by infrequent but very large orders. Direct sales via the Company's website decreased by $1.5 million from $25.1 million for the fiscal year ended November 30, 2022 to $23.5 million for the fiscal year ended November 30, 2023. However, sales via Amazon increased from $5.4 million during the fiscal year ended November 30, 2022 to $6.4 million for the fiscal year ended November 30, 2023. Sales to domestic dealers/distributors, in combination with sales to security companies and law enforcement agencies increased by 20.7% from $7.6 million during November 30, 2022 to $9.1 million for the fiscal year ended November 30, 2023. In addition, sales of pepper spray from Fox Labs, which the Company acquired on May 25, 2022, increased to $1.1 million for the fiscal year ended November 30, 2023 compared to $0.8 million during the fiscal year ended November 30, 2022.

Current wording

Revenues were $85.8 million for the year ended November 30, 2024 which represents an increase of $43.2 million or 101.1% compared to the prior year period revenues of $42.6 million. The increase was primarily due to e-commerce sales that increased by 112.8% or $34.9 million from $30.9 million during the fiscal year ended November 30, 2023 to $65.9 million for the fiscal year ended November 30, 2024. Direct sales via our website increased by $26.7 million from $24.6 million for the fiscal year ended November 30, 2023 to $51.3 million for the fiscal year ended November 30, 2024. Sales via Amazon increased from $6.4 million during the fiscal year ended November 30, 2023 to $14.5 million for the fiscal year ended November 30, 2024. Sales to domestic dealers/distributors, in combination with sales to security companies and law enforcement agencies increased by 48.3% from $8.7 million during November 30, 2023 to $12.9 million for the fiscal year ended November 30, 2024. In addition, sales of pepper spray from Fox Labs, which we acquired on May 25, 2022, increased to $1.7 million for the fiscal year ended November 30, 2024 compared to $1.1 million during the fiscal year ended November 30, 2023.

Previous wording

Cost of goods sold was $19.0 million in the fiscal year ended November 30, 2023 compared to $21.8 million in the fiscal year ended November 30, 2022. This $2.8 million decrease is primarily due to the decrease in sales volume.

Current wording

Cost of goods sold was $33.0 million in the fiscal year ended November 30, 2024 compared to $19.0 million in the fiscal year ended November 30, 2023. This $14.0 million increase is primarily due to the increase in sales volume.

Previous wording

Gross profit is calculated as total revenue less cost of goods sold, and gross margin is calculated as gross profit divided by total revenue. Included as cost of goods sold are costs associated with the production and procurement of products, such as inbound freight costs, manufacturing depreciation, purchasing and receiving costs, and inspection costs. Gross profit was $23.6 million for the fiscal year ended November 30, 2023, or 55.5% of net revenue, as compared to gross profit of $26.3 million, or 54.7% of net revenue, in the prior year. Gross margin profitability remained consistent in the proportion of lower margin dealer/distributor sales, which were off-set by lower freight costs due to improvements in supply chain management.

Current wording

Gross profit is calculated as total revenue less cost of goods sold, and gross margin is calculated as gross profit divided by total revenue. Included as cost of goods sold are costs associated with the production and procurement of products, such as inbound freight costs, manufacturing depreciation, purchasing and receiving costs, and inspection costs. Gross profit was $52.8 million for the fiscal year ended November 30, 2024, or 61.5% of net revenue, as compared to gross profit of $23.6 million, or 55.5% of net revenue, in the prior year. Gross margin profitability increased primarily due to the increase in the proportion of high margin direct to customer sales (Web/Amazon) from 72.6% of total sales for the fiscal year ended November 30, 2023 to 76.8% of sales for the fiscal year ended November 30, 2024.

Previous wording

Operating expenses were $31.4 million for the fiscal year ended November 30, 2023, as compared to operating expenses in the prior fiscal year of $34.0 million. This $2.6 million decrease is primarily due to two factors. First, in 2023, management made the strategic decision to reduce marketing expenditures as it evaluated more impactful marketing platforms, resulting in a decrease in marketing expenditure of $0.9 million from $5.5 million for fiscal year 2022 to $4.6 million in fiscal year 2023. Also, the decline in revenues required cost deductions in personnel costs, professional fees, and other operating costs. Total employee compensation costs decreased $0.3 million from $16.2 million for fiscal year 2022 to $15.9 million in fiscal year 2023. Professional fees decreased by $0.7 million from $1.8 million in fiscal year 2022 to $1.1 million for fiscal year 2023. Other operating costs, including administrative expenses, decreased by $0.5 million from $6.1 million for fiscal year 2022 to $5.6 million for fiscal year 2023.

Current wording

Operating expenses were $46.1 million for the fiscal year ended November 30, 2024, as compared to operating expenses in the prior fiscal year of $31.4 million. This $14.7 million increase is primarily due to an increase in marketing expenditures, personnel costs, and variable selling expenses. Marketing expenditures increased $7.8 million from $4.6 million for fiscal year 2023 to $12.4 million in fiscal year 2024 Total employee compensation costs increased $1.9 million from $15.9 million for fiscal year 2023 to $17.8 million in fiscal year 2024. Total variable selling expenses increased by $3.7 million from $4.1 million in fiscal year 2023 to $7.8 million for fiscal year 2024. Professional fees increased by $0.9 million from $1.1 million in fiscal year 2023 to $2.0 million for fiscal year 2024. Other operating costs, including administrative expenses, increased by $0.5 million from $5.6 million for fiscal year 2023 to $6.1 million for fiscal year 2024.

Previous wording

The decrease in revenue, off-set by the decrease in operating expenses resulted in a slight increase of $0.1 million in loss from operations of $7.8 million in the fiscal year ended November 30, 2023 as compared to a loss from operations of $7.7 million in the fiscal year ended November 30, 2022.

Current wording

The increase in revenue, off-set by the increase in operating expenses resulted in an increase of $14.5 million in profit from operations of $6.7 million in the fiscal year ended November 30, 2024 as compared to a loss from operations of $7.8 million in the fiscal year ended November 30, 2023.

Previous wording

Interest income for the fiscal year ended November 30, 2023 was $0.7 million compared to $0.2 million for the fiscal year ended November 30, 2022. The increase in interest income is primarily due to higher interest rates on the Company's cash and cash equivalents.

Current wording

Interest income for the fiscal year ended November 30, 2024 was $1.0 million compared to $0.7 million for the fiscal year ended November 30, 2023. The increase in interest income is primarily due to higher interest rates on the Company's cash and cash equivalents and marketable securities. The increase in interest income is primarily due to an increase in the amount of interest-earning funds held in cash and cash equivalents, marketable securities, and accrued interest receivable on loan receivable.

Previous wording

Since the inception of the Byrna LATAM joint venture in January 2023, the Company's proportionate share of Byrna LATAM's losses is 51%. The Company's share of the joint venture’s loss for the fiscal year ended November 30, 2023 is $0.6 million.

Current wording

Since the inception of the Byrna LATAM joint venture in January 2023, the Company's proportionate share of Byrna LATAM's losses were 51%. On August 19, 2024, we sold our 51% ownership interest to Fusady S.A. for $1 pursuant to the LATAM Share Purchase Agreement. Our share of the joint venture’s loss for the fiscal year ended November 30, 2024 was less than $0.1 million. The carrying value of our investment in the joint venture at November 30, 2024 and November 30, 2023 was $0 in the Consolidated Balance Sheets.

Previous wording

Other expenses in the year ended November 30, 2023 includes $0.05 million investment losses. Other expenses in the year ended November 30, 2022 included investment losses of $0.06 million.

Current wording

Other income (expenses) in the year ended November 30, 2024 includes $0.01 million investment gains. Other income (expenses) in the year ended November 30, 2023 included ($0.05) million investment losses.

Previous wording

Our effective income tax rate was 2.06% for the year ended November 30, 2023 compared to an effective income tax rate of 3.1% for the year ended November 30, 2022. Our income tax provision was $0.2 million for the fiscal year ended November 30, 2023 compared to an income tax provision of $0.2 million for the fiscal year ended November 30, 2022. Our tax rate differs from the statutory rate of 21.0% primarily due to the recording of a valuation allowance against deferred tax assets generated by net operating losses, and also due to the foreign tax rate differential for Byrna South Africa, as well as effects of permanent non-deductible expenses and other effects.

Current wording

Our effective income tax rate was (80.31)% for the year ended November 30, 2024 compared to an effective income tax rate of 2.06% for the year ended November 30, 2023. Our income tax benefit was $5.7 million for the fiscal year ended November 30, 2024 compared to an income tax provision of $0.2 million for the fiscal year ended November 30, 2023. Our tax rate differs from the statutory rate of 21.0% primarily due to the release of the valuation allowance, the impact of stock compensation, as well as state income taxes, tax credits, the foreign tax rate differential for Byrna South Africa, and effects of permanent non-deductible expenses and other effects.

Previous wording

In addition to providing financial measurements based on generally accepted accounting principles in the United States (GAAP), we provide the following additional financial metrics that are not prepared in accordance with GAAP (non-GAAP): non-GAAP adjusted EBITDA, non-GAAP net loss, and non-GAAP net loss per share. Management uses these non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes and to evaluate our financial performance. We believe that these non-GAAP financial measures help us to identify underlying trends in our business that could otherwise be masked by the effect of certain expenses that we exclude in the calculations of the non-GAAP financial measures.

Current wording

In addition to providing financial measurements based on generally accepted accounting principles in the United States (GAAP), we provide the following additional financial metrics that are not prepared in accordance with GAAP (non-GAAP): non-GAAP adjusted EBITDA. Management uses these non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes and to evaluate our financial performance. We believe that these non-GAAP financial measures help us to identify underlying trends in our business that could otherwise be masked by the effect of certain expenses that we exclude in the calculations of the non-GAAP financial measures.

Previous wording

Non-GAAP Adjusted EBITDA is defined as net loss as reported in our consolidated statements of operations and comprehensive loss excluding the impact of (i) depreciation and amortization; (ii) income tax provision; (iii) interest (income) expense; (iv) stock-based compensation expense; (v) severance/separation expense; (vi) other income; and (vii) other financing expenses. Our non-GAAP adjusted EBITDA measure eliminates potential differences in performance caused by variations in capital structures (affecting finance costs), tax positions, the cost and age of tangible assets (affecting relative depreciation expense) and the extent to which intangible assets are identifiable (affecting relative amortization expense). We also exclude certain one-time and non-cash costs. Reconciliation of non-GAAP Adjusted EBITDA to net loss, the most directly comparable GAAP measure, is as follows (in thousands):

Current wording

Non-GAAP Adjusted EBITDA is defined as net income (loss) as reported in our consolidated statements of operations and comprehensive income (loss) excluding the impact of (i) depreciation and amortization; (ii) income tax provision (benefit); (iii) interest (income) expense; (iv) stock-based compensation expense; (v) severance/separation expense; (vi) other income; and (vii) other financing expenses. Our non-GAAP adjusted EBITDA measure eliminates potential differences in performance caused by variations in capital structures (affecting finance costs), tax positions, the cost and age of tangible assets (affecting relative depreciation expense) and the extent to which intangible assets are identifiable (affecting relative amortization expense). We also exclude certain one-time and non-cash costs. Reconciliation of non-GAAP Adjusted EBITDA to net loss, the most directly comparable GAAP measure, is as follows (in thousands):

Previous wording

Cash and cash equivalents as of November 30, 2023 totaled $20.5 million, an increase of approximately $0.4 million from $20.1 million of cash as of November 30, 2022.

Current wording

Cash and cash equivalents as of November 30, 2024 totaled $16.8 million, a decrease of approximately $3.7 million from $20.5 million of cash as of November 30, 2023.

Previous wording

Cash provided by operating activities was $3.9 million for the fiscal year ended November 30, 2023, compared to $13.8 million cash used in operating activities for the fiscal year ended November 30, 2022. Net loss was $8.2 million for the fiscal year ended November 30, 2023 compared to $7.9 million for the fiscal year ended November 30, 2022. Significant changes in noncash and working capital activity are as follows:

Current wording

Cash provided by operating activities was $11.7 million for the fiscal year ended November 30, 2024, compared to $3.9 million cash provided by operating activities for the fiscal year ended November 30, 2023. Net income was $12.8 million for the fiscal year ended November 30, 2024 compared to a net loss of $8.2 million for the fiscal year ended November 30, 2023. Significant changes in noncash and working capital activity are as follows:

Previous wording

Our non-cash activity adds back several non-cash items to net loss to calculate cash provided by operations during the fiscal year ended November 30, 2023. These include stock-based compensation expense of $5.4 million during the fiscal year ended November 30, 2023 compared to $5.4 million for the fiscal year ended November 30, 2022; operating lease costs of $0.7 million during the fiscal year ended November 30, 2023 compared to $0.4 million for the fiscal year ended November 30, 2022; depreciation and amortization of $1.3 million during the fiscal year ended November 30, 2023 compared to $0.9 million during the fiscal year ended November 30, 2022; allowance for bad debt of $0.5 million during the fiscal year ended November 30, 2023 compared to $0.0 million for the fiscal year ended November 30, 2022; provision for inventory of $0.5 million during the fiscal year ended November 30, 2023 compared to $0.2 million for the fiscal year ended November 30, 2022; and loss from joint venture of $0.6 million during the fiscal year ended November 30, 2023 compared to $0.0 million for the fiscal year ended November 30, 2022.

Current wording

Our non-cash activity adds back several non-cash items to net loss to calculate cash provided by operations during the fiscal year ended November 30, 2024. These include stock-based compensation expense of $3.4 million during the fiscal year ended November 30, 2024 compared to $5.4 million for the fiscal year ended November 30, 2023; operating lease costs of $0.8 million during the fiscal year ended November 30, 2024 compared to $0.7 million for the fiscal year ended November 30, 2023; depreciation and amortization of $1.5 million during the fiscal year ended November 30, 2024 compared to $1.3 million during the fiscal year ended November 30, 2023; recovery of allowance for credit losses of $0.2 million during the fiscal year ended November 30, 2024 compared to provision for allowance for credit losses of $0.5 million for the fiscal year ended November 30, 2023; recovery of provision for inventory of $0.2 million during the fiscal year ended November 30, 2024 compared to provision for allowance for inventory of $0.5 million for the fiscal year ended November 30, 2023; and loss from joint venture of less than $0.1 million during the fiscal year ended November 30, 2024 compared to $0.6 million for the fiscal year ended November 30, 2023.

Previous wording

During the fiscal year ended November 30, 2023, the cost and liquidity management of the Company was reflected in the generation of cash for working capital needs. Inventory decreased $0.5 million during the fiscal year ended November 30, 2023 compared to an increase of $9.2 million during the fiscal year ended November 30, 2022. The decrease in inventory was a planned measure to return inventory stock to adequate levels to meet demand needs. Accounts receivable decreased by $2.2 million during the fiscal year ended November 30, 2023 compared to an increase of $4.3 million during the fiscal year ended November 30, 2022 due to a significant decrease in international sales to international distributors and related accounts receivable. Accounts payable and accrued liabilities increased $0.6 million for the fiscal year ended November 30, 2023 compared to an increase of $0.7 million for the fiscal year ended November 30, 2022. Deferred revenue decreased $0.4 million during the fiscal year ended November 30, 2023 compared to a decrease of $0.3 million during the fiscal year ended November 30, 2022.

Current wording

During the fiscal year ended November 30, 2024, our cost and liquidity management was reflected in the generation of cash for working capital needs. Inventory increased $5.9 million during the fiscal year ended November 30, 2024 compared to a decrease of $0.5 million during the fiscal year ended November 30, 2023. The increase in inventory was a planned measure to support anticipated growth in demand and to ensure the availability of key products during peak sales periods. Accounts receivable increased by $0.2 million during the fiscal year ended November 30, 2024 compared to a decrease of $2.2 million during the fiscal year ended November 30, 2023 due to a significant increase in overall sales. Accounts payable and accrued liabilities increased $7.0 million for the fiscal year ended November 30, 2024 compared to an increase of $0.6 million for the fiscal year ended November 30, 2023. Deferred revenue decreased $0.1 million during the fiscal year ended November 30, 2024 compared to a decrease of $0.4 million during the fiscal year ended November 30, 2023. Prepaid expenses and other current assets increased by $1.1 million for the fiscal year ended November 30, 2024 compared to a decrease of $0.2 million for the fiscal year ended November 30, 2023.

Previous wording

During the fiscal year ended November 30, 2023, $3.0 million was used for investing activities, including a $1.6 million loan to Byrna LATAM, $0.5 million investment in the joint venture, and $0.9 million to purchase property and equipment. In comparison, $5.1 million was used for investing activities during the fiscal year ended November 30, 2022, including $1.9 million paid for the Fox Labs International acquisition and $3.3 million to purchase property and equipment.

Current wording

During the fiscal year ended November 30, 2024, $11.2 million was used for investing activities. This included $8.9 million for the acquisition of marketable securities and $2.3 million for the purchase of property and equipment. In comparison, $3.0 million was used for investing activities during the fiscal year ended November 30, 2023, including $1.6 million loan to Byrna LATAM, $0.5 million investment in the joint venture, and $0.9 million to purchase property and equipment.

Previous wording

Cash flows used in financing activities was $0.4 million during the fiscal year ended November 30, 2023 compared to $17.0 million during the fiscal year ended November 30, 2022. The fiscal year ended November 30, 2023 amount was primarily due to tax payments of $0.5 million related to payroll taxes withheld on the vesting of restricted stock units and $0.03 million received from proceeds associated with the sale of common stock compared to $17.5 million of repurchases of the Company's common stock and $0.5 million from proceeds from the sale of common stock during the fiscal year ended November 30, 2022.

Current wording

Cash flows used in financing activities was $4.6 million during the fiscal year ended November 30, 2024 compared to $0.4 million during the fiscal year ended November 30, 2023. The fiscal year ended November 30, 2024 amount was primarily due to tax payments of $0.9 million related to payroll taxes withheld on the vesting of restricted stock units, $0.1 million received in proceeds from stock option exercises and payments of $3.8 million for repurchases of common stock, compared to tax payments of $0.5 million related to payroll taxes withheld on the vesting of restricted stock units and $0.1 million received from proceeds associated with the sale of common stock during the fiscal year ended November 30, 2023.

Previous wording

As of November 30, 2023, we reported current and long-term operating lease liabilities of $0.6 million and $1.3 million, respectively. These balances represent our contractual obligation to make future payments on our leases, discounted to reflect our cost of borrowing. All leases are for real estate. In the event that we vacate a location, we may be obliged to continue making lease payments. Where possible, we mitigate this risk by including clauses allowing for the termination of lease agreements. See Note 17, “Leases”, in the Notes to Consolidated Financial Statements included in Item 8 of this Report for further discussion.

Current wording

As of November 30, 2024, we reported current and long-term operating lease liabilities of $0.5 million and $2.1 million, respectively. These balances represent our contractual obligation to make future payments on our leases, discounted to reflect our cost of borrowing. All leases are for real estate. In the event that we vacate a location, we may be obliged to continue making lease payments. Where possible, we mitigate this risk by including clauses allowing for the termination of lease agreements. See Note 17, “Leases”, in the Notes to Consolidated Financial Statements included in Item 8 of this Report for further discussion.

Previous wording

The Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products. Shipping and handling costs associated with the distribution of finished products to customers, are recorded in operating expenses in the accompanying Consolidated Statements of Operations and Comprehensive Loss and are recognized when the product is shipped to the customer.

Current wording

The Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products. Shipping and handling costs associated with the distribution of finished products to customers, are recorded in operating expenses in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss) and are recognized when the product is shipped to the customer.

Previous wording

Inventories, which are principally comprised of raw materials and finished goods, are stated at the lower of cost or market. Cost is determined on a standard cost basis that approximates the first-in, first-out (FIFO) method. Inventory costs include labor, overhead, subcontracted manufacturing costs and inbound freight costs. The Company reviews inventories for obsolete items to determine adjustments that it estimates will be needed to record inventory at lower of cost or net realizable value.

Current wording

Inventories, which are principally comprised of raw materials and finished goods, are stated at the lower of cost or net realizable value. Cost is determined on a standard cost basis that approximates the first-in, first-out (FIFO) method. Inventory costs include labor, overhead, subcontracted manufacturing costs and inbound freight costs. The Company reviews inventories for obsolete items to determine adjustments that it estimates will be needed to record inventory at lower of cost or net realizable value.

Previous wording

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

Current wording

The Company accounts for income taxes under the asset and liability method, recognizing deferred tax assets and liabilities for the expected future tax consequences of events included in the financial statements. Deferred tax assets and liabilities are determined based on differences between the financial statement and tax bases of assets and liabilities, using enacted tax rates for the years in which the differences are expected to reverse. Changes in tax rates affect deferred tax assets and liabilities and are recognized in income in the period of enactment.

Previous wording

The Company recognizes interest and penalties related to income taxes on the income tax expense line in the accompanying Consolidated Statement of Operations and Comprehensive Loss. As of November 30, 2023 and 2022, no accrued interest or penalties related to income taxes are included in the Consolidated Balance Sheets.

Current wording

The Company recognizes interest and penalties related to income taxes on the income tax expense line in the accompanying Consolidated Statement of Operations and Comprehensive Income (Loss). As of November 30, 2024 and 2023, no accrued interest or penalties related to income taxes are included in the Consolidated Balance Sheets.

Previous wording

The Company performs its review for impairment during the third quarter of each year. The Company assesses goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. The Company’s operations constitute a single reporting unit and goodwill is assessed for impairment at the Company as a whole. At August 31, 2023, the Company determined that there was no impairment of goodwill.

Current wording

The Company performs its review for impairment during the fourth quarter of each year. The Company assesses goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. The Company’s operations constitute a single reporting unit and goodwill is assessed for impairment at the Company as a whole. At November 30, 2024, the Company determined that there was no impairment of goodwill.

Previous wording

The Company accounts for all stock-based payment awards granted to employees and non-employees as stock-based compensation expense at their grant date fair value. The Company’s stock-based payments include stock options and restricted stock units. The Company values simple restricted stock units (RSUs) at the quoted price on date of grant and RSUs with certain market triggers using the Monte Carlo model for valuation. The Company values stock options using the Black Scholes model. The measurement date for employee awards is the date of grant, and stock-based compensation costs are recognized as expense over the employees’ requisite service period, on a straight-line basis. The measurement date for non-employee awards is the date of grant and stock-based compensation costs for non-employees are recognized as expense over the vesting period on a straight-line basis. Stock-based compensation is classified in the accompanying Consolidated Statements of Operations and Comprehensive Loss based on the function to which the related services are provided, which is included in operating expenses in the accompanying Consolidated Statements of Operations and Comprehensive Loss. Forfeitures are accounted for as they occur.

Current wording

The Company accounts for all stock-based payment awards granted to employees and non-employees as stock-based compensation expense at their grant date fair value. The Company’s stock-based payments include stock options and restricted stock units. The Company values simple restricted stock units (RSUs) at the quoted price on date of grant and RSUs with certain market triggers using the Monte Carlo model for valuation. The Company values stock options using the Black Scholes model. The measurement date for employee awards is the date of grant, and stock-based compensation costs are recognized as expense over the employees’ requisite service period, on a straight-line basis. The measurement date for non-employee awards is the date of grant and stock-based compensation costs for non-employees are recognized as expense over the vesting period on a straight-line basis. Stock-based compensation is classified in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss) based on the function to which the related services are provided, which is included in operating expenses in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss). Forfeitures are accounted for as they occur.