Byrna Technologies Inc.

Previous wording

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” "may," “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important risk factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of our Annual Report on Form 10-K for the year ended November 30, 2023 filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 14, 2024, as amended on March 29, 2024 (the “2023 10-K”), and the Company’s subsequent filings with the SEC, all of which can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, including but not limited to our ability to design, introduce and sell new products, services and features, the impact of any regulatory proceedings or litigation, our ability to protect our intellectual property and compete with existing and new products, the impact of stock compensation expense, dividends, warrant exercises and related accounting, impairment expense and income tax expense on our financial results, our ability to manage our supply chain and avoid production delays, shortages or other factors, including product mix, cost of parts and materials and cost of labor that may impact our gross margins, our ability to retain and incentivize key management personnel, product defects, the success of our entry to new markets, customer purchase behavior and negative media publicity or public perception of our brand or products, restrictions or prohibitions imposed by advertising platforms, loss of cust…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” "may," “estimate,” "opportunity," "could," “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important risk factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of our Annual Report on Form 10-K for the year ended November 30, 2024 filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 7, 2025, as amended on March 31, 2025 (the “2024 10-K”), and the Company’s subsequent filings with the SEC, all of which can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, including but not limited to our ability to design, introduce and sell new products, services and features, the impact of any regulatory proceedings or litigation, our ability to protect our intellectual property and compete with existing and new products, the impact of stock compensation expense, dividends, warrant exercises and related accounting, impairment expense and income tax expense on our financial results, our ability to manage our supply chain and avoid production delays, shortages or other factors, including product mix, cost of parts and materials and cost of labor that may impact our gross margins, our ability to retain and incentivize key management personnel, product defects, the success of our entry to new markets, customer purchase behavior and negative media publicity or public perception of our brand or products, restrictions or prohibitions imposed by advertising …

Excerpt shortened here; the source contains the full paragraph.

Previous wording

Revenues were $20.9 million in the third fiscal quarter of 2024 which represents an increase of $13.8 million, or 194%, as compared to the prior year period revenues of $7.1 million. Most of the increase in revenue can be attributed to a new marketing strategy, implemented in September of 2023, shifting advertising efforts away from social media platforms and towards celebrity endorsers. Direct to customer sales, via Amazon and our website, increased by $11.0 million, or 216%, from $5.1 million in the fiscal quarter of 2023 to $16.1 million in the fiscal quarter of 2024. Sales to domestic dealers and retailers also improved, increasing by 107% to $3.4 million from $1.7 million in the three months ended August 31, 2023. Sales to Canadian customers increased by $0.2 million or 100% to $0.4 million for the three months ended August 31, 2024, as compared to $0.2 million in the three months ended August 31, 2023. Sales to all other international markets increased from $0.2 million in the three months ended August 31, 2023 to $0.9 million in the three months ended August 31, 2024.

Current wording

Revenues were $26.2 million in the first fiscal quarter of 2025 which represents an increase of $9.5 million, or 57%, as compared to the prior year period revenues of $16.7 million. Most of the increase in revenue can be attributed to a new marketing strategy, implemented in September of 2023, shifting advertising efforts away from social media platforms and towards celebrity endorsers. Direct to customer sales, via Amazon and our website, which increased by $6.7 million, or 52%, from $12.8 million in the first fiscal quarter of 2024 to $19.5 million in the fiscal quarter of 2025. Sales to domestic dealers and retailers also improved, increasing by 80% to $4.7 million from $2.6 million in the three months ended February 29, 2024. Sales to international markets increased from $1.3 million in the three months ended February 29, 2024 to $2.0 million in the three months ended February 28, 2025.

Previous wording

Cost of goods sold was $7.8 million in the fiscal quarter of 2024 compared to $3.9 million in the prior year period. This increase of $3.9 million, or 100%, is primarily due to the increase in sales volumes.

Current wording

Cost of goods sold was $10.3 million in the first fiscal quarter of 2025 compared to $7.0 million in the prior year period. This increase of $3.3 million, or 47%, is primarily due to the increase in sales volumes.

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 labor and overhead, inbound freight costs, manufacturing depreciation, purchasing and receiving costs, and inspection costs. Gross profit was $13.0 million in the third fiscal quarter of 2024, or 62.4% of net revenue, as compared to gross profit of approximately $3.2 million, or 44.6% of net revenue, in the prior year period. The improvement in gross profit as a percentage of sales is primarily due to the increase in the proportion of high margin direct to customer sales, from 67% of total sales in the prior year period to 77% of sales in the third fiscal quarter of 2024. The improvement was also due to higher absorption of fixed costs by increased production volume and due to reduced reliance on price discounts for sales promotions.

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 labor and overhead, inbound freight costs, manufacturing depreciation, purchasing and receiving costs, and inspection costs. Gross profit was $15.9 million in the first fiscal quarter of 2025, or 60.8% of net revenue, as compared to gross profit of approximately $9.6 million, or 57.9% of net revenue, in the prior year period. The majority of the increase was driven by volume, resulting from heightened demand linked to marketing initiatives and channel growth. This was further supported by higher absorption of fixed costs due to increased production volume and a reduced reliance on price discounts for sales promotions.

Previous wording

Operating expenses were $12.2 million in the third fiscal quarter of 2024, an increase of $4.9 million, as compared to the prior year period expenses of $7.3 million. The increase is due to an increase of $2.6 million in marketing expenses, an increase of $1.2 million in variable expenses, which increase in proportion to sales volume, an increase of $1.2 million in accrued employee compensation costs. These cost increases were offset by a decrease of $0.9 million in stock compensation expense.

Current wording

Operating expenses were $14.2 million in the first fiscal quarter of 2025, an increase of $4.4 million, as compared to the prior year period expenses of $9.8 million. The increase is due to an increase of $1.3 million in marketing expenses, an increase of $1.2 million in variable expenses, which increase in proportion to sales volume, an increase of $1.1 million in employee compensation costs.

Previous wording

We recorded $0.1 million of foreign currency translation loss during the three months ended August 31, 2024 compared to $0.05 million of foreign currency translation loss during the three months ended August 31, 2023. We recorded $0.3 million of interest income during the three months ended August 31, 2024 compared to $0.2 million in the three months ended August 31, 2023. We recorded a loss of $0.06 million from our South American joint venture investment as compared to a loss of $0.2 million in the three months ended August 31, 2023.

Current wording

We recorded $0.1 million of foreign currency transaction loss during the three months ended February 28, 2025 and February 29, 2024. We recorded $0.2 million of interest income during the three months ended February 28, 2025 compared to $0.3 million in the three months ended February 29, 2024.

Previous wording

For the three months ended August 31, 2024 and 2023, we recorded a nominal amount and $0.1 million of income tax benefit, respectively. For the three months ended August 31, 2024 and 2023, the effective tax rate was 0.1% and 2.8%, respectively. Our tax rate differs from the statutory rate of 21.0% due to the effects of state taxes net of federal benefit, the foreign tax rate differential as a result of Byrna South Africa, effects of permanent non-deductible expenses, the recording of a valuation allowance against the deferred tax assets generated in the current period, and other effects.

Current wording

For the three months ended February 28, 2025 and February 29, 2024, we recorded less than $0.1 million of income tax expense. For the three months ended February 28, 2025 and February 29, 2024, the effective tax rate was 6.4% and 0.0%, respectively. Our tax rate differs from the statutory rate of 21.0% due to the effects of state taxes net of federal benefit, the foreign tax rate differential as a result of Byrna South Africa, effects of permanent non-deductible expenses, and other effects.

Previous wording

Net income was $1.0 million for the three months ended August 31, 2024, an improvement of $5.1 million compared to the net loss of $4.1 million for the three months ended August 31, 2023.

Current wording

Net income was $1.7 million for the three months ended February 28, 2025, an improvement of $1.7 million compared to less than $0.1 million for the three months ended February 29, 2024.

Previous wording

Adjusted EBITDA is defined as net (loss) income as reported in our condensed consolidated statements of operations and comprehensive (loss) income excluding the impact of (i) depreciation and amortization; (ii) income tax provision (benefit); (iii) interest income (expense); (iv) stock-based compensation expense, (v) impairment loss and (vi) one-time, non-recurring other expenses or income. Our 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 Adjusted EBITDA to net (loss) income, the most directly comparable GAAP measure, is as follows (in thousands):

Current wording

Adjusted EBITDA is defined as net (loss) income as reported in our Condensed 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) impairment loss and (vi) one-time, non-recurring other expenses or income. Our 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 Adjusted EBITDA to net (loss) income, the most directly comparable GAAP measure, is as follows (in thousands):

Previous wording

Cash and cash equivalents as of August 31, 2024 totaled $20.1 million, a decrease of $0.4 million from $20.5 million of cash and cash equivalents as of November 30, 2023.

Current wording

Cash and cash equivalents as of February 28, 2025 totaled $7.7 million, a decrease of $9.1 million from $16.8 million of cash and cash equivalents as of November 30, 2024.

Previous wording

Cash provided by operating activities was $4.5 million for the nine months ended August 31, 2024 compared to cash used in operations of $3.6 million during the prior year period. Net income was $3.1 million compared to net loss of $7.4 million for the nine months ended August 31, 2024 and 2023, respectively. Significant changes in noncash and working capital activity are as follows:

Current wording

Cash used in operating activities was $3.8 million for the three months ended February 28, 2025 compared to cash provided by operations of $3.9 million during the prior year period. Net income was $1.7 million compared to less than $0.1 million for the three months ended February 28, 2025 and February 29, 2024, respectively. Cash outlays for operating activities are typically higher in the first quarter of the year. The Company expects to generate cash in subsequent quarters of the fiscal year. Significant changes in noncash and working capital activity are as follows:

Previous wording

Non-cash activity includes stock-based compensation expenses of $2.6 million for the nine months ended August 31, 2024 compared to $4.7 million for the nine months ended August 31, 2023; depreciation and amortization expense of $1.1 million for the nine months ended August 31, 2024 compared to $0.9 million for the nine months ended August 31, 2023, and less than a $0.1 million of joint venture investment loss in the nine months ended August 31, 2024 compared to $0.6 million during the nine months ended August 31, 2023.

Current wording

Non-cash activity includes stock-based compensation expenses of $0.8 million for the three months ended February 28, 2025 compared to $0.9 million for the three months ended February 29, 2024; depreciation and amortization expense of $0.4 million for the three months ended February 28, 2025 compared to $0.3 million for the three months ended February 29, 2024.

Previous wording

Inventory increased during the nine months ended August 31, 2024 by $5.9 million compared to an increase of $2.3 million for the nine months ended August 31, 2023. Accounts receivable decreased by $0.8 million during the nine months ended August 31, 2024 as compared to a decrease of $2.0 million for the nine months ended August 31, 2023. Accounts payable and accrued liabilities increased during the nine months ended August 31, 2024 by $5.0 million compared to a decrease of $3.0 million for the nine months ended August 31, 2023. Prepaid expenses and other current assets increased by $1.2 million during the nine months ended August 31, 2024 compared to a decrease of $0.2 million during the nine months ended August 31, 2023. Operating lease liabilities decreased by $0.5 million during the nine months ended August 31, 2024 compared to a decrease of $0.5 million during the nine months ended August 31, 2023. Deferred revenues decreased $1.1 million during the nine months ended August 31, 2024 compared to a decrease of less than $0.1 million for the nine months ended August 31, 2023, respectively.

Current wording

Inventory increased during the three months ended February 28, 2025 by $3.2 million compared to a decrease of $1.8 million for the three months ended February 29, 2024. Accounts receivable increased by $0.3 million during the three months ended February 28, 2025 as compared to a decrease of $1.4 million for the three months ended February 29, 2024. Accounts payable and accrued liabilities decreased during the three months ended February 28, 2025 by $1.9 million compared to a decrease of $1.0 million for the three months ended February 29, 2024. Prepaid expenses and other current assets increased by $0.5 million during the three months ended February 28, 2025 compared to an increase of $0.3 million during the three months ended February 29, 2024. Operating lease liabilities decreased by $0.1 million during the three months ended February 28, 2025 compared to a decrease of $0.1 million during the three months ended February 29, 2024. Deferred revenues decreased $1.3 million during the three months ended February 28, 2025 compared to an increase of $0.7 million for the three months ended February 29, 2024. Inventory is expected to increase in preparation for the commercial release of the Company's new compact launcher product.

Previous wording

Cash used in investing activities was $1.4 million for the nine months ended August 31, 2024 compared to $2.4 million for the nine months ended August 31, 2023. The prior year period investing activities primarily relates to the investment in the joint venture and the corresponding loan while the current period relates to purchases of property and equipment.

Current wording

Cash used in investing activities was $5.3 million for the three months ended February 28, 2025 compared to $0.1 million for the three months ended February 29, 2024. The prior year period investing activities primarily relates to the purchases of property and equipment while the current period relates to purchases of property and equipment and marketable securities. Capital expenditures were higher than typical in the first quarter of the fiscal year due to the build out of retail stores and new ammunition manufacturing facility. Capital expenditures may continue to be elevated in the second quarter of the fiscal year but are expected to decrease in the third and fourth quarters of the current fiscal year.

Previous wording

We do not have any off-balance sheet arrangements that have, or have reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Current wording

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Previous wording

Our unaudited condensed consolidated financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. Our significant accounting policies are outlined in Note 4, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in Item 8 of the 2023 10-K. During the three and nine months ended August 31, 2024, there were no significant changes to our critical accounting policies from those described in our 2023 10-K.

Current wording

Our unaudited condensed consolidated financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. Our significant accounting policies are outlined in Note 4, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included in Item 8 of the 2024 10-K. During the three months ended February 28, 2025, there were no significant changes to our critical accounting policies from those described in our 2024 10-K.