Business context and reporting period
This is Security Devices International, Inc. (SDI), a development-stage less-lethal defense technology company—not a filing identified as Byrna Technologies Inc. The unaudited Form 10-Q covers the quarter and nine months ended August 31, 2011; the fiscal year ends November 30. SDI was developing its BIP40 blunt-impact and WEP40 wireless-electric 40mm rounds. It reported no revenue since inception.
Financial performance and condition
| Metric | Nine months ended August 31, 2011 | Comparable 2010 period |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $659,735 | $1,631,279 |
| Net loss | $697,811 | $1,631,279 |
| Net loss per share, basic and diluted | $0.03 | $0.10 |
| Cash used in operating activities | $1,016,257 | $1,063,376 |
| Cash provided by financing activities | $838,328 | $1,253,300 |
For the three months ended August 31, 2011, net loss was $205,180, versus $763,167 in 2010; loss per share was $0.01 versus $0.04. With no revenue, gross margin and operating margin are not meaningful.
At August 31, 2011, cash was $69,399, total assets were $208,957, and current liabilities exceeded current assets by $470,488. Accounts payable and accrued liabilities were $529,715. Convertible debentures had a reported carrying value of $660,447, including $128,619 classified as current; stockholders’ deficit was $981,205. The filing reports no taxes paid or interest paid during the nine-month period.
Material changes versus the prior comparable period
Nine-month operating expenses and net loss declined substantially from 2010. Cash used in operations was slightly lower, while financing inflows were lower; cash fell by $177,929 during the period, from $247,328 to $69,399. The company raised $678,328 through convertible debentures and received $160,000 in share subscriptions pending issuance; it issued no common shares during the nine-month period.
Outlook, commentary, and risks
Management said a BIP40 demonstration was held in August 2011 and expected production rounds in the first calendar quarter of 2012. The company estimated capital needs of $495,000 for the twelve months ending August 31, 2012: $110,000 for development and production and $385,000 for general and administrative expenses. It stated that it had no arrangement for the additional capital needed and could not fund those requirements without further financing.
The filing raises substantial going-concern uncertainty: SDI had accumulated losses of $17,072,461, had not achieved profitable operations, anticipated further losses, and depended on obtaining additional capital. Management gave no assurance that future financing would be available. Subsequent to August 31, SDI raised another $100,000 through convertible debentures.
Debentures include 8% or 10% interest, conversion rights, and, for certain notes, an additional stock payment tied to principal repayment. The company also disclosed commitments for consulting, office rent, and BIP40 injection molds; it had advanced $61,837 toward the molds. Its MOU with its research and development contractor was terminated during the quarter, with future services under negotiation. Management stated disclosure controls were effective and reported no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Confirm the issuer identity: the supplied metadata names Byrna Technologies Inc., but this filing names Security Devices International, Inc.
- Review the going-concern disclosures, cash balance, working-capital deficit, and availability and terms of future financing.
- Verify the convertible-debt balances, maturities, conversion provisions, and dilution implications, including the post-period $100,000 financing.
- Track whether BIP40 production began as expected and whether the company generated commercial sales; the filing reports no revenue since inception.
- Check the status and remaining cost of the injection molds, contractor arrangements, and other disclosed commitments.