Byrna Technologies Inc.

Previous wording

On January 10, 2023, we created a new joint venture ("Byrna LATAM") with Fusady 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 and entered into an exclusive distribution, manufacturing and licensing agreement with Byrna LATAM. 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.

Current wording

On January 10, 2023, we created a new joint venture, Byrna LATAM, with Fusady 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 for $1 and entered into an exclusive distribution, manufacturing and licensing agreement with Byrna LATAM. 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

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.

Current wording

The Company presents revenue net of returns, allowances, and discounts. Net revenues were $28.5 million in the second fiscal quarter of 2025 which represents an increase of $8.2 million, or 40.6%, as compared to the prior year period revenues of $20.3 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 $1.8 million, or 12.2%, from $14.8 million in the second fiscal quarter of 2024 to $16.6 million in the same fiscal quarter of 2025. Sales to domestic dealers and retailers also improved, increasing by 121.1% to $8.4 million from $3.8 million in the three months ended May 31, 2024. Sales to international markets, including Canada, increased from $1.7 million in the three months ended May 31, 2024 to $2.8 million in the three months ended May 31, 2025. In addition, the Company recognized $0.8 million in royalty revenue related to the LATAM Licensing Agreement during the second fiscal quarter of 2025.

Previous 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.

Current wording

Cost of goods sold was $10.9 million in the second fiscal quarter of 2025 compared to $7.7 million in the prior year period. This increase of $3.2 million, or 41.9%, is primarily due to the increase in sales volumes.

Previous 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.

Current wording

Operating expenses were $14.2 million in the second fiscal quarter of 2025, an increase of $3.6 million, as compared to the prior year period expenses of $10.6 million. The increase is due to an increase of $1.3 million in marketing expenses, an increase of $0.7 million in variable expenses, which increase in proportion to sales volume, an increase of $1.0 million in employee compensation costs.

Previous 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.

Current wording

We recorded $0.1 million of foreign currency transaction loss during the three months ended May 31, 2025 compared to $0.2 million during the three months ended May 31, 2024. We recorded $0.1 million of interest income during the three months ended May 31, 2025 compared to $0.3 million in the three months ended May 31, 2024.

Previous 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.

Current wording

For the three months ended May 31, 2025 and May 31, 2024, we recorded $0.9 million anda nominal amountof income tax expense, respectively. For the three months ended May 31, 2025 and May 31, 2024, the effective tax rate was 23.3% and 0.1%, 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 $1.7 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.

Current wording

Net income was $2.4 million for the three months ended May 31, 2025, an improvement of $0.3 million compared to $2.1 million for the three months ended May 31, 2024.

Previous 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):

Current wording

Adjusted EBITDA is defined as net income as reported in our Condensed Consolidated Statements of Operations and Comprehensive 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 income, the most directly comparable GAAP measure, is as follows (in thousands):

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 $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.

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 $33.5 million in the first half of 2025, or 61.2%of net revenue, as compared to gross profit of approximately $22.2 million, or 60.1% 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

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.

Current wording

Cash and cash equivalents as of May 31, 2025 totaled $7.0 million, a decrease of $9.8 million from $16.8 million of cash and cash equivalents as of November 30, 2024.

Previous 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:

Current wording

Cash used in operating activities was $9.2 million for the six months ended May 31, 2025 compared to cash provided by operations of $5.9 million during the prior year period. Net income was $4.1 million compared to $2.1 million for the six months ended May 31, 2025 and May 31, 2024, respectively. Significant changes in noncash and working capital activity are as follows:

Previous 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.

Current wording

Non-cash activity includes stock-based compensation expenses of $1.6 million for the six months ended May 31, 2025, compared to $1.8 million for the six months ended May 31, 2024; depreciation and amortization expense of $1.0 million for the six months ended May 31, 2025 compared to $0.7 million for the six months ended May 31, 2024.

Previous 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.

Current wording

Inventory increased during the six months ended May 31, 2025 by $12.3 million compared to a increase of $1.6 million for the six months ended May 31, 2024. Accounts receivable increased by $3.9 million during the six months ended May 31, 2025 as compared to a decrease of $1.3 million for the six months ended May 31, 2024. Accounts payable and accrued liabilities increased during the six months ended May 31, 2025 by $1.3 million compared to a decrease of $3.0 million for the six months ended May 31, 2024. Prepaid expenses and other current assets increased by $0.6 million during the six months ended May 31, 2025 compared to an increase of $0.9 million during the six months ended May 31, 2024. Operating lease liabilities decreased by $0.2 million during the six months ended May 31, 2025 compared to a decrease of $0.4 million during the six months ended May 31, 2024. Deferred revenues decreased $1.5 million during the six months ended May 31, 2025 compared to a decrease of $0.5 million for the six months ended May 31, 2024.

Previous 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.

Current wording

Cash used in investing activities was $0.6 million for the six months ended May 31, 2025 compared to $0.7 million for the six months ended May 31, 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, acquisition of Federal Firearms Licenses, and proceeds from sale of marketable securities. Property and equipment increased during the six months ended May 31, 2025 by $3.6 million compared to a decrease of $0.7 million for the six months ended May 31, 2024. Marketable debt securities decreased during the six months ended May 31, 2025 by $2.9 million. There were no marketable debt securities held during the same period in the prior year. Capital expenditures were higher than typical in the first half of the fiscal year due to the build out of retail stores and new ammunition manufacturing facility. Capital expenditures are expected to decrease in the third and fourth quarters of the current fiscal year.

Previous wording

Cash provided by financing activities was less than $0.1 million for the three months ended February 28, 2025 compared to less than $0.1 million for the three months ended February 29, 2024. The current year amount was primarily composed of proceeds from stock option exercises and taxes paid on issuances of restricted stock units. The prior year amount was primarily composed of proceeds from stock option exercises. The Company requires significant capital to meet its obligations as they become due. Throughout the next twelve months, the Company intends to fund its operations primarily from the funds raised through its operations. The Company may pursue secondary equity offerings or debt financings to provide working capital and satisfy debt obligations. There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future. If the Company is unable to secure additional funding, it may be forced to curtail or suspend its business plans.

Current wording

We require significant capital to meet our obligations as they become due. Throughout the next twelve months, we intend to fund our operations primarily from the funds raised through our operations. We may pursue secondary equity offerings or debt financings to provide working capital and satisfy debt obligations. There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future. If we are required to raise capital to support our operations and are unable to secure additional funding, we may be forced to curtail or suspend our business plans.

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 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.

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 and six months ended May 31, 2025, there were no significant changes to our critical accounting policies from those described in our 2024 10-K.