Byrna Technologies, Inc.

Greetings, and welcome to the Berna Technologies Fiscal Third Quarter 2021 Earnings Conference Call and Webcast. As a reminder, this conference call is being recorded and all participants are in a listen-only mode. Before turning the call over to Brian Gans, Berna Technologies' Chief Executive Officer, I will read the Safe Harbor Statement. Some discussions made today may include forward-looking statements. Actual results could differ materially from the statements made today. Please refer to Berna's most recent 10-K and 10-Q filings, for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligations to update forward-looking statements as a result of new information, future events, or otherwise. As this call will include references to non-GAAP results, please see the press release in the Investor section of our website, ir.berna.com, for further information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results. I'll now turn the call over to Mr. Brian Ganz. Sir, please go ahead.

Thank you. Good morning. Thank you for joining us for Burna's 2021 third quarter earnings call. Just as a clarification, at the end of the call, we will be taking questions from analysts and investors as time permits. During this quarter, we have continued to execute on our strategy to grow Burna through increased visibility and brand awareness new product introductions, and the opening of new markets and new sales channels. Our performance in the third quarter was marked by success, I think, in all of these areas. Perhaps most importantly, we completed a successful public offering, as all of you know, raising $56.8 million after fees. And now, with $60 million of the bank and no debt, we really have the resources to fully implement our growth strategy. Compared with Q3 2020, we have more than doubled our net revenues to $8.7 million, with a strong contribution from our international dealer network, although admittedly we were down from the prior quarter, which benefited from a $5 million surge in sales attributed to Sean Hannity mentioning the Burna HD on his nightly show. Growth profit more than doubled to $4.9 million, and our gross margin improved to 56%. This margin was higher than we had projected our last earnings call as the introduction of a number of our new higher margin products offset pressure from growth in our lower margin international sales. We introduced a slate of new game-changing products this quarter that are helping us transform our business, scale our brand, improve our margins, and open new markets. So we took an important step this quarter to expand from essentially a one-product, one-sales channel company to a multi-product, multi-channel company with the launch of Berna's Amazon e-commerce platform, the introduction of the Berna SD personal security device, and the Mission 4 long barrel launcher. At the same time, we expanded our retail footprint with the addition of 82 Buy Mart locations throughout the Pacific Northwest. We acquired the assets of Ballista Packs and introduced the Burn a Shield product line. We conducted our first Learn Safe School training program for a public school district in Texas. And we strengthened our management team. with the addition of Mike Gillespie as Chief Operating Officer. Many of you may have had a chance to see Mike on our analyst day a few weeks ago. And Michael Wager as Chief Strategy Officer, who is going to be tasked with finding strategic opportunities for us. Although I personally have the privilege each quarter of addressing our investors and discussing our operations and successes, None of it would be possible without the continued hard work and dedication of everyone at Berna. As I noted during our analyst day presentation, the Berna teammates are a unique breed. They prioritize our mission of saving lives. They sacrifice to achieve our objectives and they, they live our ideals. These are truly special people and I cannot thank them enough for what they do every day. You know, this is a, a script that I wrote last night, but I just want to add something on a personal note. Last night, I left the office at 8 p.m., and there were still a half dozen Berna team members working away. And when I arrived this morning, a little past 7, once again, the office was already bustling with activity. You cannot buy this type of dedication or loyalty. It is only possible when people truly believe in the mission, as is the case with the Berna team. Now, I'm going to hand this call over to David North, our CFO, to discuss our third quarter financial performance, and then I'll come back on to discuss some recent developments and take questions.

David? Thanks, Brian, and thanks, everyone, for joining us today. Today, I'll review the financial results for the fiscal third quarter ended August 31, 2021, provide an update on the company's liquidity position, and discuss the company's full year 2021 outlook. Revenues for the third quarter of 2021 were $8.7 million compared to $4.2 million in the third quarter of 2020. The increase was driven by higher e-commerce and international sales, new product launches, and growing market awareness of the Burna product portfolio. Third quarter gross profit rose at a faster rate than net revenues, up 130% to $4.9 million from $2.1 million in last year's third quarter. Gross profit margin was 56.2% of net revenue compared to 50.7% of net revenues in last year's third quarter and 56.4% last quarter. These improvements were driven by higher sales volumes, greater manufacturing efficiencies following investments in the company's U.S. production facility, and the introduction of new high-margin products. Gross margins were essentially flat compared to the immediately preceding prior quarter as higher margins, new product sales were offset by an increase in lower margin international sales. Operating expenses for the third quarter were $6.7 million compared to $2.7 million in the prior year period and $5.5 million for the previous quarter. The year-over-year increase was driven largely by investments in corporate infrastructure necessary to support Berna's continuing growth. This included expanding and retaining our management team and administrative staff, which resulted in a payroll increase of $1.5 million and a $1 million increase in long-term stock-based compensation expense from last year's third quarter. The increase also reflected higher variable expenses such as freight, which rose by $3.3 million and insurance, which also increased by $0.3 million from last year's third quarter, and also incremental costs, including public company costs, legal expenses, and increased R&D expenditures. Third quarter operating expenses were $1.1 million higher than operating expenses of $5.5 million reported for the second quarter. This increase is primarily due to further expansion of and incentives to retain our management team in support of continued growth, including $0.3 million due to increases in headcount, $0.4 million increase in the approval for annual bonuses, and $0.1 million increase in stock compensation expense. In order to promote continuing growth, we also increased marketing expenses by $0.2 million over the prior quarter. Legal expenses were $0.3 million higher primarily due to the one-time cost of an investment in protection of our intellectual property. Finally, insurance expense increased by $0.1 million. Net loss for the third quarter of 2021 was $1.8 million, or 8 cents per share, compared with the net loss of $0.6 million, or 4 cents per share, in the third quarter of 2020, adjusted for approximately $1 million of non-cash stock-based compensation costs. Non-GAAP adjusted net loss was approximately $0.9 million, or 4 cents per share, compared to a loss of $0.5 million for 4 cents per share in last year's third quarter. Non-GAAP-adjusted EBITDA was a loss of $0.9 million, compared with a loss of $0.5 million for the third quarter of fiscal year 2020. For 2021 year to date, the company is reporting a modest profit of $48,000, adjusted for non-cash items including depreciation, amortization, and approximately $2.5 million of non- cash stock-based compensation costs, non-GAAP adjusted net income is approximately $2.4 million, or 7 cents per share. As of August 31st, we had an open order backlog of approximately $400,000, with e-commerce orders being fulfilled in an average of two to three days. Now, turning to the balance sheet, we ended the third quarter with the strongest balance sheet in our history following the completion of a public offering in July 2021. At that time, the company issued and sold an aggregate of 2,875,000 registered shares of its common stock at a price of $21 per share. The net proceeds to the company after deducting $4.4 million in underwriting discounts and commissions and offering expenses were approximately $56 million. We ended the quarter with $58.4 million of available cash and no current or long-term debt on our balance sheet. We intend to use the proceeds from the offering to fund the working capital needs of the company's continued growth and to take advantage of strategic acquisition opportunities. Following the public offering, our total share count at quarter end was 23,603,996 shares. We've continued to focus on inventory management and sourcing initiatives in anticipation of growth. We currently have approximately 9,300 finished SD and HD launchers in stock and enough raw materials and componentry on hand to build another 5,000. With the opening of Erna's Amazon store in August and our desire to be able to handle a surge in sales, we believe that this has been a prudent approach, particularly considering fulfillment issues we faced due to surges while we were building capacity over the past two years. We are reiterating our fiscal year 2021 revenue guidance of $40 to $42 million, reflecting year-over-year growth of approximately 146% at the midpoint of the range. The guidance is based on the company's current order flow and the growth expected from, one, the recent and planned introduction of new products, two, e-commerce sales via our dedicated Amazon store that kicked off at the end of August this year, three, anticipated increases in domestic and international dealer sales, and four, broader brand awareness among customers. With respect to gross margin, our fiscal year 2021 expectations call for a range of 53 to 56 percent as compared to a gross margin of 45.3 percent in fiscal year 2020. The anticipated improvement in gross margin is expected to be driven by the planned introduction of new higher margin products and the benefits of our investments in the Fort Wayne production facility. Now I'll turn the call back over to Brian.