UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from _________ to _________
Commission File No.
| Byrna Technologies Inc. | ||
| (Exact name of registrant as specified in its charter) | ||
| | | |
| (State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.) | |
| organization) | ||
| | ||
| | ||
| (Address of Principal Executive Offices, including zip code) | ||
| ( | ||
| (Registrant’s telephone number, including area code) | ||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| | | The |
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
☐ Large accelerated filer ☐ Accelerated filer ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes
As of September 30, 2022, the Company had 24,016,560 issued and
| Page |
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| Condensed Consolidated Balance Sheets as of August 31, 2022 (unaudited) and November 30, 2021 |
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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References in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” or “our” refer to Byrna Technologies Inc.
PART 1 – FINANCIAL INFORMATION
| ITEM 1. |
Condensed Consolidated Financial Statements |
BYRNA TECHNOLOGIES INC.
Condensed Consolidated Balance Sheets
(Amounts in thousands, except share and per share data)
| August 31, | November 30, | |||||||
| 2022 | 2021 | |||||||
| Unaudited | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| LONG TERM ASSETS | ||||||||
| Intangible assets, net | ||||||||
| Deposits for equipment | ||||||||
| Right-of-use asset, net | ||||||||
| Property and equipment, net | ||||||||
| Goodwill | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Operating lease liabilities, current | ||||||||
| Deferred revenue, current | ||||||||
| Total current liabilities | ||||||||
| LONG TERM LIABILITIES | ||||||||
| Deferred revenue - non-current | ||||||||
| Operating lease liabilities, non-current | ||||||||
| Total liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES (NOTE 21) | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, $ par value, shares authorized, shares issued | ||||||||
| Common stock, $ par value, shares authorized. 24,016,612 shares issued and outstanding as of August 31, 2022 and, shares issued and outstanding as of November 30, 2021 | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock ( and shares purchased as of August 31, 2022 and November 30, 2021, respectively) | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Amounts in thousands except share and per share data)
(Unaudited)
| For the Three Months Ended |
For the Nine Months Ended |
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| August 31, |
August 31, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Net revenue |
$ | $ | $ | $ | ||||||||||||
| Cost of goods sold |
||||||||||||||||
| Gross profit |
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| Operating expenses |
||||||||||||||||
| LOSS FROM OPERATIONS |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| OTHER INCOME (EXPENSE) |
||||||||||||||||
| Foreign currency transaction gain (loss) |
( |
) | ( |
) | ||||||||||||
| Interest income (expense) |
( |
) | ( |
) | ||||||||||||
| Other income - forgiveness of Paycheck Protection Program loan |
||||||||||||||||
| Other expenses |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| LOSS BEFORE INCOME TAXES |
( |
) | ( |
) | ( |
) | ||||||||||
| Income tax benefit (provision) |
( |
) | ( |
) | ( |
) | ||||||||||
| NET LOSS |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Dividends on preferred stock |
( |
) | ||||||||||||||
| NET LOSS AVAILABLE TO COMMON SHAREHOLDERS |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Foreign currency translation adjustment for the period |
( |
) | ( |
) | ( |
) | ||||||||||
| COMPREHENSIVE INCOME (LOSS) |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||
| Net loss per share – basic and diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted-average number of common shares outstanding - basic and diluted |
||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
| For the Nine Months Ended | ||||||||
| August 31, | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss for the period | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation expense | ||||||||
| Forgiveness of Paycheck Protection Program loan | ( | ) | ||||||
| Depreciation and amortization | ||||||||
| Operating lease costs | ||||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Other assets | ||||||||
| Accounts payable and accrued liabilities | ( | ) | ( | ) | ||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Purchases of patent rights | ( | ) | ( | ) | ||||
| Cash paid for asset acquisition, net of cash acquired | ( | ) | ( | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from warrant exercises | ||||||||
| Proceeds from stock option exercises | ||||||||
| Proceeds from sale of common stock, net of underwriting discounts | ||||||||
| Payment of offering costs | ( | ) | ||||||
| Payment of debt issuance costs | ( | ) | ||||||
| Proceeds from line of credit | ||||||||
| Payment to line of credit | ( | ) | ||||||
| Repurchase of common stock | ( | ) | ||||||
| NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | ( | ) | ||||||
| Effects of foreign currency exchange rate changes | ( | ) | ( | ) | ||||
| NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH FOR THE PERIOD | ( | ) | ||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD | ||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD | $ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
For the Three and Nine Months Ended August 31, 2022 and 2021
(Amounts in thousands except share numbers)
(Unaudited)
| Series A | Treasury | Additional | Accumulated Other | |||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Stock | Paid-in | Accumulated | Comprehensive | |||||||||||||||||||||||||||||||||||
| Shares | $ | Shares | $ | Shares | $ | Capital | Deficit | (Loss) Income | Total | |||||||||||||||||||||||||||||||
| Balance, May 31, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Stock-based compensation | — | — | — | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to vesting of restricted stock units | ||||||||||||||||||||||||||||||||||||||||
| Settlement of obligation to grant stock options | — | — | — | |||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Foreign currency translation | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, August 31, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Balance, May 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to exercise of stock options | ||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | |||||||||||||||||||||||||||||||||||||
| Cancellation of shares | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Warrant exercises | ||||||||||||||||||||||||||||||||||||||||
| Sale of common stock, net of underwriting discount and offering costs | ||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Foreign currency translation | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, August 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||||||
| Series A | Treasury | Additional | Accumulated Other | |||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Stock | Paid-in | Accumulated | Comprehensive | |||||||||||||||||||||||||||||||||||
| Shares | $ | Shares | $ | Shares | $ | Capital | Deficit | (Loss) Income | Total | |||||||||||||||||||||||||||||||
| Balance, November 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to exercise of stock options | ||||||||||||||||||||||||||||||||||||||||
| Reclassification of stock-based compensation due to modification | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Settlement of obligation to grant stock options | — | — | — | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to vesting of restricted stock units | ||||||||||||||||||||||||||||||||||||||||
| Repurchase of common shares under Stock Buyback Plan | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Foreign currency translation | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, August 31, 2022 | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Balance, November 30, 2020 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to exercise of stock options | ||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred shares and accrued dividends on preferred shares | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | |||||||||||||||||||||||||||||||||||||
| Cancellation of shares | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Warrant exercises | ||||||||||||||||||||||||||||||||||||||||
| Dividends declared on preferred shares | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Sale of common stock, net of underwriting discount and offering costs | ||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Foreign currency translation | — | — | — | |||||||||||||||||||||||||||||||||||||
| Balance, August 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
Notes to Condensed Consolidated Financial Statements (Unaudited)
For the three and nine months ended August 31, 2022 and 2021
| 1. |
NATURE OF OPERATIONS |
Byrna Technologies Inc. (the “Company” or “Byrna”) is a non-lethal defense technology company, specializing in next generation solutions for security situations that do not require the use of lethal force. Byrna personal security devices are non-lethal self-defense devices that are powered by CO2 and fire .68 caliber spherical kinetic and chemical irritant projectiles. The Company recently added pepper sprays to their non-lethal defense product line due to an acquisition. See Notes 6, "Acquisitions" for additional information. These products are sold in both the consumer and security professional markets. The Company operates
The Company was incorporated under the laws of the state of Delaware on March 1, 2005.
| 2. |
OPERATIONS AND MANAGEMENT PLANS |
From inception to August 31, 2022, the Company had incurred an accumulated deficit of $
In July 2021, the Company issued and sold an aggregate of
| 3. |
BASIS OF PRESENTATION |
These condensed consolidated financial statements for the three and nine months ended August 31, 2022 and 2021 include the accounts of the Company and its subsidiaries. These condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity generally accepted accounting principles in the United States of America (“GAAP”); however, such information reflects all adjustments consisting solely of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. All significant intercompany accounts and transactions have been eliminated in consolidation.
The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto together with management’s discussion and analysis of financial condition and results of operations contained in the Company's annual report on Form 10-K for the year ended November 30, 2021. In the opinion of management, the accompanying unaudited condensed consolidated financial statements, the results of its operations for the three and nine months ended August 31, 2022 and 2021, and its cash flows for the nine months ended August 31, 2022 and 2021 are not necessarily indicative of results to be expected for the full year.
| 4. |
USE OF ESTIMATES |
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Future events and their effects cannot be determined with certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and any such differences may be material to our condensed consolidated financial statements. Significant estimates include assumptions about stock-based compensation expense, valuation for deferred tax assets, incremental borrowing rate on leases, valuation and carrying value of goodwill and other identifiable intangible assets, useful life of long-lived assets, and allowance for sales returns.
| 5. |
RECENT ACCOUNTING GUIDANCE |
Recently Adopted Accounting Guidance
In 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The guidance simplifies the accounting for income taxes by primarily addressing the following: recognition of a deferred tax liability after transition to/from the equity method, evaluation when a step-up in the tax basis of goodwill should be related to a business combination or when it should be considered a separate transaction, inclusion of the amount of tax based on income in the income tax provision and any incremental amount as a tax not based on income, and recognition of the effect of an enacted change in tax laws or annual effective tax rates in the period the change was enacted. The guidance is effective for the Company in the first quarter of 2022. Several of the amendments in the update are required to be adopted using a prospective approach, while other amendments are required to be adopted using a modified-retrospective approach or retrospective approach. The adoption of ASU 2019-12 did not have a material impact on the Company’s condensed consolidated financial statements.
Accounting Guidance Issued But Not Adopted
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). The FASB issued the update to simplify the measurement of goodwill by eliminating step 2 from the goodwill impairment test. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. ASU 2017-04 will be effective for the Company so long as it remains a smaller reporting company in the first quarter of 2024. Early adoption is permitted. The Company is currently evaluating the impact of adopting this update on the condensed consolidated financial statements.
In 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The guidance changes the impairment model used to measure credit losses for most financial assets. A new forward-looking expected credit loss model will replace the existing incurred credit loss model and will impact the Company’s accounts and other receivables. This is expected to generally result in earlier recognition of allowances for credit losses. ASU 2016-13 will be effective for the Company in December 2023 as long as it remains a smaller reporting company. Early adoption is permitted. The Company is currently evaluating the impact of adopting this update on the condensed consolidated financial statements.
| 6. |
ACQUISITIONS |
Asset Acquisition
On May 12, 2021, the Company entered into an asset purchase agreement to purchase certain assets used in the business of designing, developing, manufacturing, licensing, and selling of products and services for the Mission Less Lethal brand from Kore Outdoor (U.S.) Inc., (“Kore”) a wholly owned subsidiary of Kore Outdoor, Inc. The transaction was accounted for as an asset acquisition, with estimated $
Business Combination
Fox Labs International
On May 25, 2022, the Company acquired Fox Labs International, a producer of defensive pepper sprays, catering primarily to law enforcement and other security professionals (domestically and internationally). The cash consideration was $
The estimated fair values of assets acquired and liabilities assumed on May 25, 2022 are as follows (in thousands):
| Cash |
$ | |||
| Accounts receivable |
||||
| Inventory |
||||
| Trademarks |
||||
| Customer list intangible |
||||
| Accounts payable |
) | |||
| Deferred revenue |
) | |||
| Goodwill |
||||
| Total acquired assets |
$ |
Adjustments were made to the acquired assets and liabilities subsequent to the acquisition date.
Ballistipax®
On August 18, 2021, the Company acquired Ballistipax®, a developer of single-handed rapidly deployable bulletproof backpacks. The purchase price of $
| 7. |
RESTRICTED CASH |
The Company’s restricted cash - current was $
| 8. | REVENUE, DEFERRED REVENUE AND ACCOUNTS RECEIVABLE |
The Company generates revenue through the wholesale distribution of its products and accessories to dealers/distributors, and sales to large end-users such as retail stores, security companies and law enforcement agencies, and through e-commerce portals to consumers. Revenue is recognized upon transfer of control of goods to the customer, which generally occurs when title to goods is passed and risk of loss transfers to the customer. Depending on the contract terms, transfer of control is upon shipment of goods to or upon the customer’s pick-up of the goods. Payment terms to customers other than e-commerce customers are generally 30-60 days for established customers, whereas new wholesale and large end-user customers have prepaid terms for their first order. The amount of revenue recognized is net of returns and discounts that the Company offers to its customers. Products purchased include a standard warranty that cannot be purchased separately. This allows customers to return defective products for repair or replacement within year of sale. The Company also sells an extended warranty for the same terms over years. The extended -year warranty can be purchased separately from the product and are classified as a service warranty. Since a warranty for the first year after sale is included and non-separable from all launcher purchases, the Company considers this extended warranty to represent a service obligation during the second and third years after sale. Therefore, the Company accumulates billings of these transactions on the balance sheet as deferred revenue, to be recognized on a straight-line basis during the second and third year after sale. The Company recognizes an estimated reserve based on its analysis of historical experience, and an evaluation of current market conditions.
The Company also has a 14-day money back guarantee, which allows for a full refund of the purchase price, excluding shipping charges, within 14 days from the date of delivery. The right of return creates a variable component to the transaction price and needs to be considered for any possible constraints. The Company estimates returns using the expected value method, as there will likely be a range of potential return amounts. The Company’s reserve for returns under the 14-day money back guarantee for the three and nine months ended August 31, 2022 and 2021 were immaterial.
The Company sells to dealers and retailers for whom there is no money back guarantee but who may request a return or credit for unforeseen reasons or who may have agreed discounts or allowances to be netted from amounts invoiced. The company reserves for returns, discounts and allowances based on past performance and on agreement terms and reports revenue net of the estimated reserve. The Company's reserve for returns, discounts, and allowances for the three and nine months ended August 31, 2022 and 2021 were immaterial.
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 Condensed Consolidated Statements of Operations and Comprehensive Loss and are recognized when the product is shipped to the customer.
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.
Allowance for Doubtful Accounts
The Company provides an allowance for its accounts receivable for estimated losses that may result from its customers’ inability to pay. The Company determines the amount of the allowance by analyzing known uncollectible accounts, aged receivables, economic conditions, historical losses, and changes in customer payment cycles and its customers’ creditworthiness. Amounts later determined and specifically identified to be uncollectible are charged or written off against this allowance. To minimize the likelihood of uncollectible debt, the Company reviews its customers’ creditworthiness periodically. Material differences may result in the amount and timing of expense for any period if the Company were to make different judgments or utilize different estimates. The allowance for doubtful accounts was approximately $
Deferred Revenue
Changes in deferred revenue, which relate to unfulfilled e-commerce orders and amounts to be recognized under extended 3-year service warranty, for the nine months ended August 31, 2022 and the year ended November 30, 2021, are summarized below (in thousands):
| August 31, | November 30, | |||||||
| 2022 | 2021 | |||||||
| Deferred revenue balance, beginning of period | $ | $ | ||||||
| Net additions to deferred revenue during the period | ||||||||
| Reductions in deferred revenue for revenue recognized during the period | ( | ) | ( | ) | ||||
| Deferred revenue balance, end of period | ||||||||
| Less current portion | ||||||||
| Deferred revenue, non-current | $ | $ | ||||||
Revenue Disaggregation
The following table presents disaggregation of the Company’s revenue by distribution channel (in thousands):
| Three Months Ended | Nine Months Ended | |||||||||||||||
| August 31, | August 31, | |||||||||||||||
| Distribution channel | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Wholesale (dealer/distributors) | $ | $ | $ | $ | ||||||||||||
| E-commerce | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| 9. | PROPERTY AND EQUIPMENT |
The following table summarizes cost and accumulated depreciation (in thousands):
| August 31, | November 30, | |||||||
| 2022 | 2021 | |||||||
| Computer equipment and software | $ | $ | ||||||
| Furniture and fixtures | ||||||||
| Leasehold improvements | ||||||||
| Machinery and equipment | ||||||||
| Less: accumulated depreciation | ||||||||
| Total | $ | $ | ||||||
The Company recognized approximately $
At August 31, 2022 and November 30, 2021, the Company had deposits of $
| 10. |
INVENTORY |
The following table summarizes inventory (in thousands):
| August 31, |
November 30, |
|||||||
| 2022 |
2021 |
|||||||
| Raw materials |
$ | $ | ||||||
| Work in process |
||||||||
| Finished goods |
||||||||
| Total |
$ | $ | ||||||
| 11. |
INTANGIBLE ASSETS |
The components of intangible assets were as follows:
| Balance at August 31, 2022 |
Balance at November 30, 2021 |
|||||||||||||||||||||||
| Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
Gross Carrying Amount |
Accumulated Amortization |
Net Carrying Amount |
|||||||||||||||||||
| Patents |
$ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Trademarks |
— | — | ||||||||||||||||||||||
| Customer List |
( |
) | ||||||||||||||||||||||
| Total |
$ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ||||||||||||||
The trademarks have an indefinite life and will be assessed annually for impairment. All other intangible assets are finite-lived.
Intangible assets amortization expenses are recorded within operating expenses in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Loss. Total intangible assets amortization expense for the nine months ended August 31, 2022 and 2021 were $
Estimated future amortization expense related to intangible assets as of August 31, 2022 are as follows (in thousands):
| Fiscal Year Ending November 30, |
||||
| 2022 (three months) |
$ | |||
| 2023 |
||||
| 2024 |
||||
| 2025 |
||||
| 2026 |
||||
| Thereafter |
||||
| Total |
$ |
| 12. |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
The Company’s accounts payable and accrued liabilities consist of the following (in thousands):
| August 31, |
November 30, |
|||||||
| 2022 |
2021 |
|||||||
| Trade payables |
$ | $ | ||||||
| Accrued sales and use tax |
||||||||
| Accrued people costs |
||||||||
| Accrued marketing |
||||||||
| Accrued professional fees |
||||||||
| Other accrued liabilities |
||||||||
| Total |
$ | $ | ||||||
| 13. |
NOTES PAYABLE |
Paycheck Protection Program (“PPP”) Loan
The Company received $
The SBA reserves the right to audit any PPP loan, regardless of size. These audits may occur after forgiveness has been granted. In accordance with the CARES Act, all borrowers are required to maintain the PPP loan documentation for six years after the PPP loan was forgiven or repaid in full and to provide that documentation to the SBA upon request.
| 14. | LINES OF CREDIT |
On January 19, 2021, the Company entered into a $
Also on January 19, 2021, the Company entered into a $
As of August 31, 2022, there was
| STOCKHOLDERS’ EQUITY |
Authorized Shares and Increase in Stock Compensation Plan
At the Company's 2022 annual meeting of stockholders held on June 17, 2022 (the "Annual Meeting"), the Company's stockholders approved a decrease in the amount of authorized common stock from
Stock Buyback Plan
On February 15, 2022, the Company's Board of Directors approved a plan to buy back up to $
On April 28, 2022, the Company's Board of Directors approved a plan to buy back up to an additional $
The following table summarizes the treasury stock activity during the nine months ended August 31, 2022:
| Number of |
Average Cost |
|||||||||||
| Shares |
Cost of Shares |
per Share |
||||||||||
| Shares purchased - February 2022 |
$ | $ | ||||||||||
| Shares purchased - March 2022 |
$ | |||||||||||
| Shares purchased - May 2022 |
$ | |||||||||||
| Total |
$ | $ | ||||||||||
| 16. | STOCK-BASED COMPENSATION |
2017 Plan
The Company has granted stock options and other stock-based awards under its 2017 Stock Option Plan (the “2017 Plan”). The maximum number of shares of common stock which could have been reserved for issuance under the 2017 plan was
2020 Plan
On October 23, 2020, the Board approved and on November 19, 2020 the stockholders approved the Byrna Technologies Inc. 2020 Equity Incentive Plan (the “2020 Plan”). The aggregate number of shares of common stock available for issuance in connection with options and other awards granted under the 2020 Plan was
On February 24, 2021, following the termination of the 2017 Plan, the Company replaced outstanding options under the 2017 Plan with options under the 2020 Plan. In connection with the adoption of the 2020 Plan, the Company cancelled outstanding option awards granted under the 2017 plan. There were no substantive changes to the rights of any holder of options granted under the 2017 plan other than replacing their award certificates with award agreements under the 2020 plan. The grant dates, exercise prices, expiration dates, and vesting provisions of any of the new award agreements under the 2020 plan that replace the certificates issued under the 2017 plan are identical for each grant and no change in valuation or accounting was required. The Board also amended the definition of Disability in the 2020 Plan to provide that “Disability” has the meaning assigned to such term in any individual employment agreement or award agreement with a plan participant and that if no such definition is provided in an award or employment agreement “Disability” is defined as in the 2020 Plan.
Stock-Based Compensation Expense
Total stock-based compensation expense was $
During the first half of 2022, the Board of Directors authorized granting of restricted stock unit awards (" RSUs") in excess of the limit stipulated under the 2020 Plan. Additionally, the Company agreed to grant
Additionally, on March 23, 2022, the Board of Directors approved the issuance of RSU Amendment Agreements to each grantee of the double trigger RSUs in which
On June 17, 2022, the stockholders approved to increase the stock compensation plan by
Restricted Stock Units
During the nine months ended August 31, 2022 and 2021, the Company granted
During the nine months ended August 31, 2022, the Company accelerated the vesting of
As of August 31, 2022, there was $
The following table summarizes the RSU activity during the nine months ended August 31, 2022:
| RSUs | ||||
| Unvested and outstanding as of November 30, 2021 | ||||
| Granted | ||||
| Settled | ( | ) | ||
| Cancelled | ( | ) | ||
| Forfeited | ( | ) | ||
| Unvested and outstanding at August 31, 2022 | ||||
Stock Options
During the nine months ended August 31, 2022 and 2021, the Company granted options to employees and directors to purchase
As of August 31, 2022, there was $
Stock Option Valuation
The fair value of stock options at the date of grant was estimated using the Black Scholes option pricing model. The expected volatility is based upon historical volatility of the Company's stock. The expected term for the options is based upon observation of actual time elapsed between employees. The assumption that the Company used to determine the grant-date fair value of stock options granted for the nine months ended nine months ended August 31, 2022 were as follows:
| Risk free rate | % | |||
| Expected dividends | ||||
| Expected volatility | % | |||
| Expected life (in years) | ||||
| Market price of the Company’s common stock on date of grant | ||||
| Exercise price |
The following table summarizes option activity under the 2020 Plan during the nine months ended August 31, 2022:
| Weighted-Average | ||||||||
| Stock | Exercise Price Per Stock | |||||||
| Options | Option | |||||||
| Outstanding, November 30, 2021 | $ | |||||||
| Granted | ||||||||
| Exercised | ( | ) | ( | ) | ||||
| Forfeited | ( | ) | ( | ) | ||||
| Outstanding, August 31, 2022 | $ | |||||||
| Exercisable, August 31, 2022 | $ | |||||||
| 17. |
EARNINGS PER SHARE |
For the three and nine months ended August 31, 2022 and 2021, the Company recorded net loss available to common shareholders. As such, because the dilution from potential common shares was antidilutive, the Company used basic weighted-average common shares outstanding, rather than diluted weighted-average common shares outstanding when calculating diluted loss per share for the three and nine months ended August 31, 2022.
The following table sets forth the allocation of net loss for the three and nine months ended August 31, 2022 and 2021, respectively:
| For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
| August 31, |
August 31, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Preferred stock dividends |
( |
) | ||||||||||||||
| Net loss available to common shareholders |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted-average number of shares used in computing net loss per share, basic and diluted |
||||||||||||||||
| Net loss per share -- basic |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
The Company’s potential dilutive securities, which may include stock options, unvested restricted stock units, convertible preferred stock, and outstanding warrants to purchase shares of common stock, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.
The following potential common shares, presented based on amounts outstanding at each period end, were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
| For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
| August 31, |
August 31, |
|||||||||||||||
| 2022 |
2021 |
2022 |
2021 |
|||||||||||||
| Warrants |
||||||||||||||||
| Options |
||||||||||||||||
| RSUs |
||||||||||||||||
| Total |
||||||||||||||||
| 18. |
RELATED PARTY TRANSACTIONS |
The following transactions are in the normal course of operations and are measured at the amount of consideration established and agreed to by related parties. Amounts due to related parties are unsecured, non-interest bearing and due on demand.
The Company expensed $
The Company subleases office premises at its Massachusetts headquarters to a corporation owned and controlled by the Chief Executive Officer ("CEO") of the Company beginning July 1, 2020, with no stated termination date. Sublease payments received were $
| 19. | LEASES |
Operating Leases
The Company has operating leases for real estate in the United States and South Africa and does not have any finance leases.
In 2019, the Company had entered into a real estate lease for office space in Andover, Massachusetts. In August 2021, the lease was amended to include additional space and extend the term of the existing space by one year. The new lease expiration date is . The base rent is approximately $
The Company leases office and warehouse space in South Africa that expires in . The base rent during the nine months ended August 31, 2022 is approximately $
The Company leases warehouse and manufacturing space in Fort Wayne, Indiana. The lease expires on . The base rent is approximately $
The Company also leases office space in Las Vegas, Nevada, which expires on January 31, 2027. The base rent is less than $
Certain of the Company’s leases contain options to renew and extend lease terms and options to terminate leases early. Reflected in the right-of-use asset and lease liability on the Company’s balance sheets are the periods provided by renewal and extension options that the Company is reasonably certain to exercise, as well as the periods provided by termination options that the Company is reasonably certain to not exercise.
As of August 31, 2022 and 2021 the elements of lease expense were as follows (in thousands):
| Three Months Ended | Nine Months Ended | |||||||
| August 31, 2022 | August 31, 2022 | |||||||
| Lease Cost: | ||||||||
| Operating lease cost | $ | $ | ||||||
| Short-term lease cost | ||||||||
| Total lease cost | $ | $ | ||||||
| Other Information: | ||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | $ | ||||||
| Operating lease liabilities arising from obtaining right-of-use assets | $ | $ | ||||||
| Operating Leases: | ||||||||
| Weighted-average remaining lease term (in years) | & | |||||||