Byrna Technologies Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of November 30, 2023 pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date in ensuring that information required to be filed in this annual report was recorded, processed, summarized and reported within the time period required by the rules and regulations of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management ’ s Report on Internal Controls over Financial Reporting Our management is responsible for establishing and maintaining adequate internal controls over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Management assessed the effectiveness of the Company’s internal control over financial reporting as of November 30, 2023. Management based this assessment on criteria established in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting. Based on this evaluation management concluded that as of November 30, 2023 our internal control over financial reporting was effective based on those criteria. Changes in Internal Controls Over Financial Reporting Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated whether any change in our internal control over financial reporting occurred during the fiscal year ended November 30, 2023. Based on that evaluation, management concluded that there were no changes to our internal control over financial accounting and reporting that occurred during the fiscal year ended November 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial accounting and reporting. ITEM 9B. OTHER INFORMATION None . ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. 19 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by this Item relating to our directors and corporate governance is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2024 Annual Meeting of Stockholders. The information required by this Item relating to our executive officers is included in Item 1, “Business — Executive Officers” of this report. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item relating to our directors and corporate governance is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2024 Annual Meeting of Stockholders. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this Item relating to our directors and corporate governance is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2024 Annual Meeting of Stockholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this Item relating to our directors and corporate governance is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2024 Annual Meeting of Stockholders. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this Item relating to our directors and corporate governance is incorporated herein by reference to the definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2024 Annual Meeting of Stockholders. 20 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this Report: (1) Financial Statements F-1 to F-28 (2) Financial Statements Schedules None. 21 BYRNA TECHNOLOGIES INC. CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED November 30, 2023 and 2022 Together with Report of Independent Registered Public Accounting Firm (Amounts expressed in US Dollars) TABLE OF CONTENTS Page No Report of Independent Registered Public Accounting Firm (PCAOB ID 274 ) F-2 Consolidated Balance Sheets as of November 30, 2023 and 2022 F-3 Consolidated Statements of Operations and Comprehensive Loss for the years ended November 30, 2023 and 2022 F-4 Consolidated Statements of Cash Flows for the years ended November 30, 2023 and 2022 F-5 Consolidated Statements of Changes in Stockholders’ Equity for the years ended November 30, 2023 and 2022 F-6 Notes to Consolidated Financial Statements F-7 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Byrna Technologies Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Byrna Technologies Inc. and Subsidiaries (the “Company”) as of November 30, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of November 30, 2023 and 2022, and the results of their consolidated operations and their consolidated cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Investment in Joint Venture As discussed in Note 6 to the financial statements, on January 10, 2023, the Company acquired a 51% ownership interest in Byrna LATAM, a corporate joint venture formed to expand the Company’s operations and presence in South American markets, for $0.5 million. In addition, the Company loaned the joint venture approximately $1.6 million. The Company evaluated whether or not the entity should be consolidated under the variable interest and voting rights models and concluded that Byrna LATAM should not be consolidated. The Company concluded that it has joint control of Byrna LATAM in that it does not have voting control of Byrna LATAM and does not have substantive participating rights that would result in the Company having control of Byrna LATAM. We identified the consolidation analysis as a critical audit matter because the consolidation analysis, and specifically the determination of joint control, involved an interpretation of especially complex accounting principles generally accepted in the United States of America. The evaluation of management’s determination of joint control required an increased extent of effort. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. We obtained an understanding, evaluated the design and implementation of the Company’s process and controls, and assessed whether the process and controls enable the Company to properly account for the transaction in accordance with generally accepted in the United States of America. We read transaction agreements, traced and agreed the facts included in the Company’s accounting position memo to the agreements, evaluated the assumptions used to arrive at the determined conclusion. We consulted with our consolidation subject matter experts to assess the reasonableness of the Company’s accounting conclusions. We evaluated whether the assumptions were consistent with evidence obtained in other areas of the audit. /s/ EisnerAmper LLP We have served as the Company’s auditor since 2020. EISNERAMPER LLP Iselin, New Jersey February 14, 2024 F-2 BYRNA TECHNOLOGIES INC. Consolidated Balance Sheets (Amounts in thousands, except share and per share data) November 30, 2023 2022 ASSETS CURRENT ASSETS Cash and cash equivalents $ 20,498 $ 20,068 Accounts receivable, net 2,945 5,915 Inventory, net 13,890 15,462 Prepaid expenses and other current assets 868 1,200 Total current assets 38,201 42,645 Deposits for equipment 1,163 2,269 Right-of-use-asset, net 1,805 2,424 Property and equipment, net 3,803 3,309 Intangible assets, net 3,583 3,872 Goodwill 2,258 2,258 Investment in joint venture — — Loan to joint venture 1,473 — Other assets 28 272 TOTAL ASSETS $ 52,314 $ 57,049 LIABILITIES CURRENT LIABILITIES Accounts payable and accrued liabilities $ 6,158 $ 7,708 Operating lease liabilities, current 644 757 Deferred revenue 1,844 458 Total current liabilities 8,646 8,923 LONG TERM LIABILITIES Deferred revenue, non-current 91 340 Operating lease liabilities, non-current 1,258 1,792 Total Liabilities 9,995 11,055 COMMITMENTS AND CONTINGENCIES (NOTE 19) STOCKHOLDERS’ EQUITY Preferred stock, $ 0.001 par value, 5,000,000 shares authorized, no shares issued — — Common stock, $ 0.001 par value, 50,000,000 shares authorized. 24,168,014 shares issued and 22,002,027 outstanding as of November 30, 2023 and, 24,018,612 shares issued and 21,852,625 outstanding as of November 30, 2022 24 23 Additional paid-in capital 130,426 125,474 Treasury stock ( 2,165,987 shares purchased as of November 30, 2023 and 2022) ( 17,500 ) ( 17,500 ) Accumulated deficit ( 69,575 ) ( 61,383 ) Accumulated other comprehensive loss ( 1,056 ) ( 620 ) Total Stockholders’ Equity 42,319 45,994 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 52,314 $ 57,049 See accompanying notes to consolidated financial statements. F-3 BYRNA TECHNOLOGIES INC. Consolidated Statements of Operations and Comprehensive Loss (Amounts in thousands, except share and per share data) Years Ended November 30, 2023 2022 Net revenue $ 42,644 $ 48,036 Cost of goods sold ( 18,997 ) ( 21,758 ) Gross profit 23,647 26,278 Operating expenses 31,437 34,009 LOSS FROM OPERATIONS ( 7,790 ) ( 7,731 ) OTHER INCOME (EXPENSE) Foreign currency transaction loss ( 270 ) ( 87 ) Interest income, net 693 201 Loss from joint venture ( 603 ) — Other expenses ( 57 ) ( 34 ) LOSS BEFORE INCOME TAXES ( 8,027 ) ( 7,651 ) Income tax provision ( 165 ) ( 234 ) NET LOSS ( 8,192 ) ( 7,885 ) Foreign exchange translation adjustment ( 436 ) ( 604 ) COMPREHENSIVE LOSS $ ( 8,628 ) $ ( 8,489 ) Net loss per share – basic and diluted $ ( 0.37 ) $ ( 0.35 ) Weighted-average number of common shares outstanding during the year – basic and diluted 21,919,624 22,364,201 See accompanying notes to consolidated financial statements. F-4 BYRNA TECHNOLOGIES INC. Consolidated Statements of Cash Flows (Amounts in thousands) Years Ended November 30, 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 8,192 ) $ ( 7,885 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Stock-based compensation expense 5,375 5,424 Amortization of debt issuance costs 28 28 Operating lease costs 666 362 Depreciation and amortization 1,262 855 Allowance for bad debt 474 — Provision for inventory 514 178 Loss on disposal of property, plant, and equipment 466 246 Loss from joint venture 603 — Changes in assets and liabilities, net of acquisition: Accounts receivable 2,189 ( 4,254 ) Deferred revenue ( 414 ) ( 342 ) Inventory 542 ( 9,170 ) Prepaid expenses and other current asserts 216 228 Other assets 250 27 Accounts payable and accrued liabilities 602 721 Operating lease liabilities ( 689 ) ( 244 ) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 3,892 ( 13,826 ) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment ( 903 ) ( 3,253 ) Equity method investment in joint venture ( 520 ) — Loan to joint venture ( 1,556 ) — Cash paid for acquisitions, net of cash acquired — ( 1,883 ) NET CASH USED IN INVESTING ACTIVITIES ( 2,979 ) ( 5,136 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from stock option exercises 34 456 Payment of taxes withheld on issuance of restricted stock units ( 456 ) ( 17,500 ) NET CASH USED IN FINANCING ACTIVITIES ( 422 ) ( 17,044 ) Effects of foreign currency exchange rate changes ( 61 ) ( 326 ) NET CHANGE IN CASH AND CASH EQUIVALENTS FOR THE YEAR 430 ( 36,332 ) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 20,068 56,400 CASH AND CASH EQUIVALENTS, END OF YEAR $ 20,498 $ 20,068 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: INCOME TAXES PAID 48 106 INTEREST PAID — — See accompanying notes to consolidated financial statements. F-5 BYRNA TECHNOLOGIES INC. Consolidated Statement of Changes in Stockholders ’ Equity (Amounts in thousands, except share numbers) Accumulated Additional Other Paid- Treasury Accumulated Comprehensive Common Stock in Capital Stock Deficit Loss Total Shares (Issued) $ $ Shares $ $ $ $ Balance, November 30, 2021 23,754,096 $ 23 $ 119,589 — $ — $ ( 53,498 ) $ ( 16 ) $ 66,098 Issuance of common stock pursuant to exercise of stock options 252,250 — 461 — — — — 461 Issuance of common stock pursuant to vesting of restricted stock units 12,266 — — — — — — — Reclassification of stock-based compensation due to modification — — ( 1,043 ) — — — — ( 1,043 ) Settlement of obligation to grant stock options — — 1,043 — — — — 1,043 Stock-based compensation — — 5,424 — — — — 5,424 Repurchase of common shares under Stock Buyback Plan — — — ( 2,165,987 ) ( 17,500 ) — — ( 17,500 ) Net loss — — — — — ( 7,885 ) — ( 7,885 ) Foreign currency translation — — — — — — ( 604 ) ( 604 ) Balance, November 30, 2022 24,018,612 $ 23 $ 125,474 ( 2,165,987 ) $ ( 17,500 ) $ ( 61,383 ) $ ( 620 ) $ 45,994 Issuance of common stock pursuant to exercise of stock options 25,000 — 34 — — — — 34 Issuance of common stock pursuant to vesting of restricted stock units 124,402 1 ( 1 ) — — — — — Payment of taxes withheld on issuance of restricted stock units — — ( 456 ) — — — — ( 456 ) Stock-based compensation — — 5,375 — — — — 5,375 Net loss — — — — — ( 8,192 ) — ( 8,192 ) Foreign currency translation — — — — — — ( 436 ) ( 436 ) Balance, November 30, 2023 24,168,014 $ 24 $ 130,426 ( 2,165,987 ) $ ( 17,500 ) $ ( 69,575 ) $ ( 1,056 ) $ 42,319 See accompanying notes to consolidated financial statements. F-6 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) 1. NATURE OF OPERATIONS Byrna Technologies Inc. (the “Company” or “Byrna”) is a less-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 less-lethal self-defense devices that are powered by CO2 and fire .68 caliber spherical kinetic and chemical irritant projectiles. The Company added pepper spray aerosols to their less-lethal defense product line due to an acquisition in 2022. See Note 5, “Business Combinations” for additional information. These products are sold in both the consumer and security professional markets. The Company operates two manufacturing facilities, a 30,000 square foot facility in located in Fort Wayne, Indiana and a 20,000 square foot manufacturing facility located in Pretoria, South Africa. On January 10, 2023 , the Company created a new joint venture with Fusady S.A. ("Fusady") located in Uruguay, to expand the Company's operations and presence in South American markets. The Company holds 51 % of the stock in the joint venture entity, Byrna LATAM (formerly known as Uldawer S.A. prior to its legal entity re-naming in October 2023), and the remaining 49 % of stock in Byrna LATAM is held by Fusady. See Note 6 , "Investment in Joint Venture" for additional information. The Company was incorporated under the laws of the state of Delaware on March 1, 2005. 2. OPERATIONS AND MANAGEMENT PLANS From inception to November 30, 2023 , the Company had incurred a cumulative loss of $ 69.6 million. The Company has funded operations through the issuance of common stock. The Company generated $ 42.6 million in revenue and net loss of a $ 8.2 million for the year ended November 30, 2023 . It is expected that the Company will incur significant losses before the Company’s revenues sustain its operations. The Company’s future success is dependent upon its ability to raise sufficient capital or generate adequate revenue, to cover its ongoing operating expenses, and also to continue to develop and be able to profitably market its products. The Company believes that existing cash and cash expected to be provided by future operating activities are adequate to satisfy its working capital, capital expenditure requirements, and other contractual obligations for at least the next 18 months. Management projects that all cash needs will be met beyond one year from the time these financial statements are issued. 3. BASIS OF PRESENTATION These consolidated financial statements for the years ended November 30, 2023 and 2022 include the accounts of the Company and its subsidiaries. These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). All significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year presentation. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a) 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 the Company's 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, allowance for doubtful accounts, inventory reserves, and allowance for sales returns. F- 7 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) b) Business Combinations Assets and liabilities acquired in a business combination are accounted for at fair value. The Company records the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values at the acquisition dates. The excess, if any, of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. If the fair value of the assets and liabilities acquired exceed the fair value of the purchase consideration, negative goodwill is recognized in the statement of operations. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from the utilization of trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Goodwill resulting from a business combination is not amortized but is reviewed for impairment annually or more frequently when events or changes in circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company has the option to perform a qualitative assessment over goodwill when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit. If the Company concludes, based on the qualitative assessment, that the carrying value of a reporting unit would more likely than not exceed its fair value, a quantitative assessment is performed which is based upon a comparison of the reporting unit’s fair value to its carrying value. The fair values used in this evaluation are estimated by the Company based upon future discounted cash flow projections for the reporting unit. An impairment charge is recognized for any amount by which the carrying amount of goodwill exceeds its fair value. The Company performs its review for impairment during the third quarter of each year. The Company assesses goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. The Company’s operations constitute a single reporting unit and goodwill is assessed for impairment at the Company as a whole. At August 31, 2023 , the Company determined that there was no impairment of goodwill. c) Investment in Joint Venture Investments in equity method investees are those for which the Company has the ability to exercise significant influence or exercise joint control with other investors but does not control and is not the primary beneficiary. Under this method of accounting, the Company’s investment is recorded initially at cost and subsequently adjusted for its proportionate share of the net earnings or losses. The Company's share of net income or net loss in Byrna LATAM can have a significant impact on the reported equity method investment activity and the carrying value on the investment. In the event that net losses of Byrna LATAM reduce the equity method investment carrying amount to zero, additional net losses may be recorded if other investments, which are not accounted for under the equity method, are at-risk even if the Company has not committed to provide financial support to Byrna LATAM. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable. In January 2023, the Company acquired a 51 % ownership interest in Byrna LATAM, a corporate joint venture formed to expand our operations and presence in South American markets, for $ 0.5 million. The Company accounts for the investment in the joint venture using the equity method because the Company does not have voting control of Byrna LATAM. Additionally, the Company does not have substantive participating rights that would result in us having control of Byrna LATAM. d) Cash and Cash Equivalents Cash and cash equivalents include bank deposits and short-term, highly liquid investments. Investments acquired with maturity dates of three months or less are considered cash equivalents. e) Allowance for Doubtful Accounts Receivable 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 uncollectability, 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. F- 8 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) f) Inventories Inventories, which are principally comprised of raw materials and finished goods, are stated at the lower of cost or net realizable value. Cost is determined on a standard cost basis that approximates the first -in, first -out (FIFO) method. Inventory costs include labor, overhead, subcontracted manufacturing costs and inbound freight costs. The Company reviews inventories for obsolete items to determine adjustments that it estimates will be needed to record inventory at lower of cost or net realizable value. g) Property and Equipment Property and equipment are recorded at cost and reflected net of accumulated depreciation and amortization. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, primarily three to seven years for computer equipment and software, furniture and fixtures, and machinery and equipment. Leasehold improvements are amortized over the lesser of the useful lives of three to seven years or lease terms. Expenditures for major renewals and betterments to property and equipment are capitalized, while expenditures for maintenance and repairs are charged as an expense as incurred. Upon retirement or disposition, the applicable property amounts are deducted from the accounts and any gain or loss is recorded in the Consolidated Statements of Operations and Comprehensive Loss. Useful lives are determined based upon an estimate of either physical or economic obsolescence or both. h) Intangible Assets The perpetual, irrevocable, exclusive and non-exclusive permit to use technology with respect to the cost of patent rights is capitalized and amortized over the estimated useful life, currently estimated to be 10 to 17 years. Customer list acquired is amortized over the estimated useful life of two years. Trademarks have an indefinite life as the Company intends to renew the trademarks indefinitely. These assets are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. Finite-lived and indefinite-lived intangible assets are tested for impairment annually during the third quarter of each fiscal year, or more frequently if events or changes in circumstances indicate that it is more likely than not that an intangible asset is impaired. If the carrying amount of a finite-lived intangible asset or an indefinite-lived intangible asset exceeds its fair value, an impairment expense is recognized in an amount equal to that excess. If an impairment expense is recognized, the adjusted carrying amount becomes the asset's new accounting basis. i) Impairment of Long-Lived Assets Long-lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment. If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset group over the remaining life in measuring whether the assets are recoverable. In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value. There were no impairments of long-lived assets during the years ended November 30, 2023 and 2022 , respectively. j) Fair Value of Financial Instruments The Company determines fair value based on its accounting policy for fair value measurement (i.e. exit price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date). See note 4 (u). The Company has not used derivative financial instruments such as forwards to hedge foreign currency exposures. The Company measures equity investments, including investments in marketable equity securities, at fair value and recognizes unrealized gains (losses) through net income (loss). The Company uses quoted prices in active markets for identical assets (consistent with the Level 1 definition in the fair value hierarchy) to measure the fair value of its marketable equity securities on a recurring basis. F- 9 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) k) Leases The Company determines if an arrangement is a lease at inception by assessing whether the arrangement contains an identified asset and whether it has the right to control the identified asset. Right-of-use (ROU) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease liabilities are recognized at the lease commencement date based on the present value of future lease payments over the lease term. ROU assets are based on the measurement of the lease liability and also include any lease payments made prior to or on lease commencement and exclude lease incentives and initial direct costs incurred, as applicable. As the implicit rate in the Company’s leases is generally unknown, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The lease terms may include options to extend or terminate the lease when the Company is reasonably certain it will exercise such options. Lease costs for the Company’s operating leases are recognized on a straight-line basis over the reasonably assured lease term. Variable lease payments include lease operating expenses. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense is included in operating expenses on the consolidated statements of operations. The Company has elected to not separate lease and non-lease components for any leases within its existing classes of assets and, as a result, accounts for any lease and non-lease components as a single lease component. The Company has also elected to not apply the recognition requirement to any leases within its existing classes of assets with a term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. l) Revenue Recognition Product Sales The Company generates revenue through the wholesale distribution of its products and accessories to dealers/distributors, 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 one year of sale. The Company also sells an extended warranty for the same terms over three years. The extended 3 -year warranty can be purchased separately from the product and therefore, must be 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 returns and discounts allowances based on its analysis of historical experience, and an evaluation of current market conditions. The Company also provides to its e-commerce consumers 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 returns under the 14 -day money back guarantee for the years ended November 30, 2023 and 2022 was $ 0.07 million and $ 0.05 million, respectively. 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 years ended November 30, 2023 and 2022 was $ 0.1 million and $ 0.02 million, respectively. 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 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. Contract Liabilities Current deferred revenue relates to unfulfilled e-commerce orders and sales of extended warranties for the years ended November 30, 2023 and 2022 . Deferred revenue long-term primarily relates to sales of extended warranties. m) Marketing and Advertising Marketing and advertising related costs are expensed as incurred and are included in operating expenses in the accompanying Consolidated Statements of Operations and Comprehensive Loss and were $ 4.6 million and $ 5.5 million during the years ended November 30, 2023 and 2022 , respectively. n) Research and Development Research and development (“R&D”) costs are expensed as incurred and are included in operating expenses in the accompanying Consolidated Statements of Operations and Comprehensive Loss. R&D costs were $ 0.6 million and $ 0.5 million during the years ended November 30, 2023 and 2022 , respectively. o) Incomes Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. Deferred tax assets are recognized to the extent the Company believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, it would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. F- 10 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) The Company records uncertain tax positions on the basis of a two -step process in which ( 1 ) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and ( 2 ) for those tax positions that meet the more-likely-than- not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company records uncertain tax positions as liabilities and adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of November 30, 2023 and 2022 , the Company has not recorded any uncertain tax positions in the consolidated financial statements. If incurred, the Company recognizes interest and penalties related to income taxes on the income tax expense line in the accompanying Consolidated Statement of Operations and Comprehensive Loss. As of November 30, 2023 and 2022 , no accrued interest or penalties related to income taxes are included in the Consolidated Balance Sheets. The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The Company’s tax years are still open under statute from November 30, 2020 to the present. The resolution of tax matters is not expected to have a material effect on the Company’s consolidated financial statements. p) Loss Per Share Basic loss per share is computed by dividing net loss, reduced by dividends, by the weighted-average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss, reduced by dividends, by the weighted-average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and restricted stock units. q) Stock-Based Compensation The Company accounts for all stock-based payment awards granted to employees and directors as stock-based compensation expense at their grant date fair value,which the Company uses Black-Scholes valuations, Monte Carlo models, and other market valuations to determine fair value. The Company’s stock-based payments include stock options and restricted stock units. The measurement date for employee awards is the date of grant, and stock-based compensation costs are recognized as expense over the employees’ requisite service period, on a straight-line basis. The measurement date for director awards is the date of grant and stock-based compensation costs for non-employees are recognized as expense over the vesting period on a straight-line basis. Stock-based compensation is classified in the accompanying Statements of Operations and Comprehensive Loss based on the function to which the related services are provided, which is included in operating expenses in the accompanying Consolidated Statements of Operations and Comprehensive Loss. Forfeitures are accounted for as they occur. The fair value of each stock option grant is estimated on the date of grant by using either the Black-Scholes or the quoted stock price on the date of grant, unless the awards are subject to market conditions in which case the Company uses the Monte Carlo simulation model. Due to the Company’s limited history, the expected term of the Company’s stock options granted to employees has been determined utilizing the method as prescribed by the Security and Exchange Commission's ("SEC’s") Staff Accounting Bulletin, Topic 14. The expected term for stock options granted to non-employees is equal to the contractual term of the options. The risk-free interest rate is determined by reference to the US Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future. r) Foreign Currency Transactions Foreign currency transactions are transactions denominated in a currency other than a subsidiary’s functional currency. A change in the exchange rates between a subsidiary’s functional currency and the currency in which a transaction is denominated increases or decreases the expected amount of functional currency cash flows upon settlement of the transaction. That increase or decrease in expected functional currency cash flows is recorded as other income (expense), in the accompanying Consolidated Statements of Operations and Comprehensive Loss. F- 11 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) s) Foreign Currency Translation The Company maintains its books and records in US Dollars, which is its functional and reporting currency. Assets and liabilities of the Company’s international subsidiaries in which the local currency is the functional currency are translated into US Dollars at period-end exchange rates. Income and expenses are translated into US Dollars at the average exchange rates during the period. The resulting translation adjustments, including adjustments on intercompany loans that are considered permanent, are included in the Company’s Consolidated Balance Sheets as a component of accumulated other comprehensive loss. The Company considers intercompany loans to be of a permanent or long-term nature if management expects and intends that the loans will not be repaid. For the fiscal years ended November 30, 2023 and 2022, all intercompany loan arrangements were determined to be permanent based on management’s intention as well as actual lending and repayment activity. Therefore, the foreign currency transaction gains or losses associated with the intercompany loans were recorded in accumulated other comprehensive loss in the Consolidated Balance Sheets for the fiscal years ended November 30, 2023 and 2022. t) Other Comprehensive Loss Other comprehensive loss consists of foreign currency translation adjustments. For the fiscal years ended November 30, 2023 and 2022, the Company recorded foreign currency translation losses of $ 0.7 million and $ 0.3 million, respectively, on its intercompany loan, which is considered permanent or long-term nature. u) Fair Value Measurement The Company follows a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to settle a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, a three -tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows: ● Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. ● Level 2 - Inputs (other than quoted prices included in Level 1 ) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. ● Level 3 - Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. v) Recent Accounting Pronouncements Accounting Pronouncements 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 beginning in December 2023. Early adoption is permitted. Adoption of ASU 2017 - 04 is not expected to have a material impact on the Company’s 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, including the loan receivable from Byrna LATAM. This is expected to generally result in earlier recognition of allowances for credit losses. ASU 2016 - 13 will be effective for the Company beginning in December 2023 since it is a smaller reporting company. Early adoption is permitted. The Company believes the adoption of ASU 2016 - 13 will not have a material impact on the consolidated financial statements. F- 12 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) 5. BUSINESS COMBINATIONS 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 $ 2.2 million. There were no acquisition-related expenses. As part of the transaction, the Company acquired 10 trademarks. The Company classified and designated identifiable assets acquired and assessed and determined the useful lives of the acquired intangible assets subject to amortization. Trademarks have an indefinite life as the Company intends to renew the trademarks indefinitely. Cash $ 300 Accounts receivable 38 Inventory 36 Trademarks 360 Customer list intangible 70 Accounts payable ( 59 ) Deferred revenue ( 14 ) Goodwill 1,442 Net assets acquired $ 2,173 Adjustments were made to the acquired assets and liabilities subsequent to the acquisition date. F- 13 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) 6. INVESTMENT AND LOAN IN JOINT VENTURE On January 10, 2023 , the Company acquired a 51 % ownership interest in Byrna LATAM, a corporate joint venture formed to expand the Company’s operations and presence in South American markets, for $ 0.5 million. The Company accounts for the investment in the joint venture using the equity method since the Company does not have voting control of Byrna LATAM. Additionally, the Company does not have substantive participating rights that would result in the Company having control of Byrna LATAM. The Company recorded its share of the joint venture’s loss during the twelve months ended November 30, 2023 of $ 0.6 million in the Consolidated Statements of Operations and Comprehensive Loss as loss from joint venture. The carrying value of the Company's investment in the joint venture at November 30, 2023 is $ 0.0 million and is recorded as investment in joint venture in the Consolidated Balance Sheet. On January 10, 2023 , the Company loaned $ 1.6 million to Byrna LATAM. The loan bears interest at a rate equal to Secured Overnight Financing Rate ("SOFR") plus 3.0 %. The interest rate on the loan was 8.3 % as of November 30, 2023 . The loan amount must be repaid within five years from the date of the loan, or January 10, 2028 . Interest income related to the loan receivable totaled $ 0.1 million for the twelve months ended November 30, 2023 and is included in interest income in the Consolidated Statements of Operations and Comprehensive Loss. The interest receivable on the loan is recorded in the Consolidated Balance Sheet under prepaid expenses and other current assets. During the twelve months ended November 30, 2023, the cumulative net losses of Byrna LATAM exceeded the equity method investment by $ 0.1 million. The carrying basis of the loan receivable was reduced by the $ 0.1 million excess loss from $ 1.6 million to $ 1.5 million. Condensed financial data for Byrna LATAM is summarized below (in thousands). November 30, 2023 Current assets $ 3,357 Non-current assets 29 Current liabilities 299 Other non-curren liabilities 3,250 Year Ended November 30, 2023 Net revenue $ 500 Gross profit 254 Net loss (947) Management regularly evaluates its investment in Byrna LATAM for impairment. Based on evaluations, management concluded that its investment in Byrna LATAM was not impaired in 2023. 7. REVENUE, DEFERRED REVENUE AND ACCOUNTS RECEIVABLE 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 years ended November 30, 2023 and 2022 are summarized below (in thousands). Deferred revenue balance, November 30, 2021 $ 1,125 Net additions to deferred revenue 30,817 Reductions in deferred revenue for revenue recognized during the fiscal year ( 31,144 ) Deferred revenue balance, November 30, 2022 798 Net additions to deferred revenue 31,049 Reductions in deferred revenue for revenue recognized during the fiscal year ( 29,912 ) Deferred revenue balance, November 30, 2023 $ 1,935 Less current portion 1,844 Deferred revenue, non-current $ 91 Revenue Disaggregation The following table presents disaggregation of the Company’s revenue by market and distribution channel (in thousands): Years Ended November 30, Geographical Market 2023 2022 U.S. Domestic $ 40,182 $ 38,856 South Africa 402 2,569 Europe/South America/Asia 1,013 6,431 Canada 1,047 180 Total $ 42,644 $ 48,036 Years Ended November 30, Distribution channel 2023 2022 Wholesale (dealer/distributors) $ 12,737 $ 17,504 E-commerce 29,907 30,532 Total $ 42,644 $ 48,036 Accounts Receivable The Company records accounts receivables due from dealers/distributors, large end-users such as retail stores, security companies and law enforcement agencies. Accounts receivable, net of allowances, was $ 2.9 million, $ 5.9 million, and $ 1.7 million as of November 30, 2023, 2022 and 2021 respectively. An allowance for doubtful accounts receivable is maintained for potential credit losses based upon management's assessment of the expected collectability of all accounts receivable. As of November 30, 2023, 2022 and 2021 , the allowance for doubtful accounts receivable was $ 0.6 million, $ 0.02 million, and $ 0.01 million, respectively. F- 14 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) 8. INVENTORY The Form 10 -K for the fiscal year ended November 30, 2022 incorrectly reported the balances of raw materials, work in process, and finished goods. The amounts presented below are the original reported balances and the adjusted balances as of November 30, 2022. These changes had no impact on previously reported consolidated balance sheets, consolidated results of operations, or shareholders' equity. November 30, 2022 November 30, 2022 As Previously Reported Adjustment As Revised Raw materials $ 7,228 $ 712 $ 7,940 Work in process 701 69 770 Finished goods 7,533 ( 781 ) 6,752 Total $ 15,462 $ — $ 15,462 The following table summarizes inventory as of November 30, 2023 and 2022 , respectively (in thousands). As Revised November 30, November 30, 2023 2022 Raw materials $ 7,543 $ 7,940 Work in process 2,439 770 Finished goods 3,908 6,752 Total $ 13,890 $ 15,462 The Company reviews inventory for excess and obsolete products and makes provisions based on its estimate of the probability that the material will not be consumed or that it will be sold below cost. The inventory reserves were $ 0.7 million and $ 0.7 million at November 30, 2023 and 2022, respectively. 9. PROPERTY AND EQUIPMENT The following table summarizes cost and accumulated depreciation as of November 30, 2023 and 2022 , respectively (in thousands). Estimated Useful November 30, Lives in Years 2023 2022 Computer equipment and software 3 - 5 $ 817 $ 328 Furniture and fixtures 5 273 392 Leasehold improvements 3 - 7 989 910 Machinery and equipment 5 - 7 3,425 2,531 5,504 4,161 Less: accumulated depreciation and amortization 1,701 852 Total $ 3,803 $ 3,309 The Company recognized approximately $ 1.0 million and $ 0.6 million in depreciation expense during the years ended November 30, 2023 and 2022 , respectively. Depreciation expense is presented in the operating expenses and within cost of goods sold in the accompanying Consolidated Statements of Operations and Comprehensive Loss. At November 30, 2023 and 2022 , the Company deposited $ 1.2 million and $ 2.3 million, respectively, with vendors primarily for supply of molds and equipment where the vendors have not completed supply of these assets. The Company placed $ 1.2 million and $ 0.5 million of molds and equipment deposits and software deposits, respectively, from November 30, 2022 into service during fiscal year November 30, 2023 . The Company placed $ 0.9 million of molds and equipment deposits from November 30, 2021 into service during fiscal year November 30, 2022 . The deposits are presented in the Consolidated Balance Sheets as deposits for equipment. 10. INTANGIBLE ASSETS The components of intangible assets were as follows (in thousands): As of November 30, 2023 As of November 30, 2022 Estimated Useful Lives in Years Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Patents 10 - 17 $ 3,931 $ ( 723 ) $ 3,208 $ 3,931 $ ( 468 ) $ 3,463 Trademarks Indefinite 360 — 360 360 — $ 360 Customer List 2 70 ( 55 ) 15 70 ( 21 ) $ 49 Total $ 4,361 $ ( 778 ) $ 3,583 $ 4,361 $ ( 489 ) $ 3,872 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 Consolidated Statements of Operations and Comprehensive Loss. Total intangible assets amortization expense for the years ended November 30, 2023 and 2022 were $ 0.3 million and $ 0.3 million, respectively. Estimated future amortization expense related to intangible assets as of November 30, 2023 are as follows (in thousands): Fiscal Year Ending November 30, 2024 $ 269 2025 254 2026 254 2027 254 2028 254 Thereafter 1,938 Total $ 3,223 F- 15 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) 11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities consist of the following (in thousands): November 30, 2023 2022 Trade payables $ 2,617 $ 3,804 Accrued sales and use tax 834 896 Personnel costs 2,173 1,912 Accrued professional fees 201 349 Other accrued liabilities 333 747 $ 6,158 $ 7,708 F-16 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) 12. LINES OF CREDIT On January 19, 2021, the Company entered into a $ 5.0 million revolving line of credit with a bank. The revolving line of credit bears interest at a rate equal to the Wall Street Journal Prime Rate plus 0.50 %, subject to a floor of 4.00 %. The interest rate on the revolving line of credit was 7.50 % on November 30, 2023 . The revolving line of credit is secured by the Company’s accounts receivable and inventory. The line of credit is subject to an unused fee of 0.25 % paid once annually. The line of credit expired on January 19, 2024. Also on January 19, 2021, the Company entered into a $ 1.5 million equipment financing line of credit with a bank. The line of credit bears interest at a rate equal to the Wall Street Journal Prime Rate plus 0.50 %, subject to a floor of 4.00 %. The interest rate on the equipment financing line of credit was 7.50 % on November 30, 2023 . The line of credit is secured by the Company’s equipment. The line of credit is subject to an unused fee of 0.25 % paid once annually. The line of credit expired on January 19, 2024. As of November 30, 2023 and 2022 , there was no outstanding balance on the revolving line of credit and the Company had not drawn on the equipment financing line of credit. Debt issuance costs related to the lines of credit were $ 0.1 million. Debt issuance costs of $ 0.1 million are being amortized over the term of the debt and are presented as part of Other Assets in the Consolidated Balance Sheets. Amortization of $ 0.03 million for the years ended November 30, 2023 and 2022 is included in Interest income, net in the Consolidated Statements of Operations and Comprehensive Loss. The revolving line of credit and equipment financing line of credit were terminated on January 19, 2024 and not renewed. F-17 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) 13. STOCKHOLDERS’ EQUITY Authorized Shares 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 300,000,000 to 50,000,000 . The decrease became effective upon filing of a Certificate of Amendment to the Company's Certificate of Incorporation on June 17, 2022. Stock Buyback Plan On February 15, 2022, the Company's Board of Directors approved a plan to buy back up to $ 10.0 million worth of shares of the Company's common stock from the open market (“Stock Buyback Plan”). The Company's Stock Buyback Plan was used to return capital to shareholders and to minimize the dilutive impact of stock options and other share-based awards. The Company completed the full $ 10.0 million for the repurchases under the Stock Buyback Plan during March 2022. On April 28, 2022, the Company's Board of Directors approved a plan to buy back up to an additional $ 5.0 million worth of shares of the Company's common stock. The Company completed the full $ 5.0 million repurchase of shares during May 2022. On October 6, 2022, the Company's Board of Directors approved a plan to buy back up to an additional $ 2.5 million worth of shares of the Company's common stock. The Company completed the full $ 2.5 million repurchase of shares during November 2022. No repurchases were made during the fiscal year ended November 30, 2023. The following table summarizes repurchases made during the fiscal year ended November 30, 2022: Number of Average Cost Shares Cost of Shares per Share Shares purchased - February 2022 296,168 $ 2,653,571 $ 9.0 Shares purchased - March 2022 754,081 7,346,422 9.7 Shares purchased - May 2022 729,709 4,999,993 6.9 Shares purchased - October 2022 324,992 2,065,076 6.4 Shares purchased - November 2022 61,037 434,920 7.1 Total 2,165,987 $ 17,499,982 $ 8.1 F- 18 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) 14. STOCK-BASED COMPENSATION 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 2,500,000 . On April 26, 2022, the Company’s Board of Directors approved and on June 17, 2022 the Company's stockholders approved the increase of the number of shares of common stock available for issuance under the 2020 Plan by 1,300,000 shares to a total of 3,800,000 shares. The 2020 Plan is administered by the Compensation Committee of the Board. The Compensation Committee determines the persons to whom options to purchase shares of common stock, stock appreciation rights (“SARs”), restricted stock units (“RSUs”), and restricted or unrestricted shares of common stock may be granted. Persons eligible to receive awards under the 2020 Plan are employees, officers, directors, consultants, advisors and other individual service providers of the Company. Awards are at the discretion of the Compensation Committee. Stock-Based Compensation Expense Total stock-based compensation expense was $ 5.4 million and $ 5.4 million for the years ended November 30, 2023 and 2022 , respectively. Total stock-based compensation expense was recorded in Operating expenses in the accompanying Consolidated Statements of Operations and Comprehensive Loss. During the first half of 2022, the Board of Directors authorized granting of RSUs in excess of the limit stipulated under the 2020 Plan. Additionally, the Company agreed to grant 200,000 RSUs to the former Chief Technology Officer ("CTO") in exchange for his waiver of rights to future royalty payments. See Note 19, "Commitments and Contingencies - Royalty Payments," for additional information. Because these awards were then contingent on shareholder approval at the next annual shareholder meeting, these RSUs were not considered granted under Accounting Standards Codification ("ASC") 718, Compensation - Stock Compensation ("ASC 718" ) and were treated as obligation to issue RSU's and were remeasured at the end of each reporting period until the settlement date on June 17, 2022 and August 3, 2022, which were the dates that the plan limit was increased (for the RSUs to the former CTO). 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 50 % of the RSUs ( 778,750 RSUs) were exchanged for stock options. The original RSUs that were cancelled were issued in 2020 and 2021. In accordance with ASC 718 , a cancellation of an award accompanied by the concurrent grant of a replacement award shall be accounted for as a modification of the terms of the cancelled award. Similarly, because these stock options were then not considered granted under ASC 718, they were therefore treated as obligation to issue stock options and were remeasured at the end of each reporting period until the settlement date on June 17, 2022. On June 17, 2022, the Company settled the obligation to issue RSUs and options by issuing the related RSUs and stock options and reclassified the fair value of the issuances at June 17, 2022 of $ 1.0 million from accounts payable and accrued liabilities to additional paid-in capital. Additionally, the amounts recognized as employee incentive expense totaling $ 1.4 million during fiscal year end 2022 was reclassified to stock compensation expense. The non-cash expense associated with these rewards were valued at the grant date of June 17, 2022, using a Monte Carlo model for double trigger RSUs and a Black Scholes model for simple employment period vesting stock options. Restricted Stock Units During the years ended November 30, 2023 and 2022 , the Company granted 102,720 and 536,805 RSUs, respectively. Stock-based compensation expense for the RSUs for the years November 30, 2023 and 2022 , was $ 3.6 million and $ 2.6 million, respectively. During the year ended November 30, 2023 , the Company accelerated the vesting of 200,000 RSUs held by the Company's former CTO. The acceleration of these 200,000 RSUs resulted in $ 0.5 million of a tax payment for which the Company withheld 89,182 shares from the former CTO in exchange. The acceleration of these RSUs was considered an equity award modification and resulted in an immaterial stock-based compensation expense. During the year ended November 30, 2022 , the Company accelerated the vesting of 3,874 RSUs to a former director and 8,392 RSUs to current board members for 2021 services. The acceleration of these RSUs were considered an equity award modification and resulted in an immaterial stock-based compensation expense. As of November 30, 2023 , there was $ 1.1 million of unrecognized stock-based compensation cost related to unvested RSUs which is expected to be recognized over a weighted average of 1.1 years. RSU Valuation The assumptions that the Company used to determine the grant-date fair value of RSUs granted for the year ended November 30, 2022 are presented in the table below. The Company did not grant RSUs for the year ended November 30, 2023 that required a Monte Carlo simulation model. (Monte Carlo simulation model) 2023 2022 Risk free rate — 3.35 % Expected dividends — 0.00 % Expected volatility — 70 % Expected life (in years) — 1.1 Market price of the Company’s common stock on date of grant — $ 7.69 - 8.24 The following table summarizes the RSU activity during the year ended November 30, 2023 : RSUs Outstanding, November 30, 2021 1,594,120 Granted 536,805 Settled ( 12,266 ) Cancelled ( 778,750 ) Forfeited ( 25,000 ) Outstanding, November 30, 2022 1,314,909 Granted 102,720 Settled ( 213,636 ) Cancelled — Forfeited ( 625,743 ) Outstanding, November 30, 2023 578,250 Of the 213,636 restricted stock units issued, 89,234 units were returned to the Company in exchange for the Company paying for the payroll withholding taxes. For the twelve months ended November 30, 2023, restricted stock units of 124,402 , net, were issued. Stock Options During the years ended November 30, 2023 and 2022 , the Company granted options to employees and directors to purchase 249,999 and 994,750 shares of common stock, respectively. The Company recorded stock-based compensation expense for options granted to its employees and directors of $ 1.8 million and $ 2.8 million during the years ended November 30, 2023 and 2022 , respectively. As of November 30, 2023 , there was $ 2.9 million of unrecognized stock-based compensation cost related to unvested stock options which is expected to be recognized over a weighted average period of 1.6 years. Stock Option Valuation The assumptions that the Company used to determine the grant-date fair value of stock options granted to employees and non-employees for the years ended November 30, 2023 and 2022 were as follows: 2023 2022 Risk free rate 3.63 % 3.34 % Expected dividends 0 % 0 % Expected volatility 77 % 78.44 % Expected life (in years) 6.5 6.5 Market price of the Company’s common stock on date of grant $ 8.96 $ 7.70 Exercise price $ 8.96 $ 7.70 F- 19 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) The following table summarizes option activity under the 2020 Plan during the years ended November 30, 2023 and 2022 : Weighted-Average Stock Exercise Price Per Stock Options Option Outstanding, November 30, 2021 586,783 $ 3.48 Granted 994,750 5.51 Exercised ( 252,250 ) 1.84 Expired ( 5,533 ) 0.88 Forfeited ( 26,000 ) 9.59 Outstanding, November 30, 2022 1,297,750 $ 6.75 Granted 249,999 8.96 Exercised ( 25,000 ) 1.45 Expired ( 30,333 ) 7.70 Forfeited ( 107,750 ) 8.09 Outstanding, November 30, 2023 1,384,666 $ 7.12 Exercisable, November 30, 2023 672,256 $ 5.82 Exercisable, November 30, 2022 267,001 $ 1.63 The stock options outstanding at the end of the year had weighted-average contractual life as follows: 2023 2022 (years) (years) Total outstanding options 6.90 7.39 Total exercisable options 5.29 2.13 F- 20 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) 15. EARNINGS PER SHARE For the years ended November 30, 2023 and 2022 , the Company recorded a 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 years ended November 30, 2023 and 2022 . November 30, 2023 2022 Net loss $ ( 8,192 ) $ ( 7,885 ) Weighted-average number of shares used in computing net loss per share, basic, and diluted 21,919,624 22,364,201 Net loss per share - basic and diluted $ ( 0.37 ) $ ( 0.35 ) The Company’s potential dilutive securities, which include stock options and RSUs have been excluded from the computation of diluted net loss per share as the effect would be anti-dilutive. 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: November 30, 2023 2022 Stock Options 1,384,666 1,297,750 Restricted Stock 578,250 1,314,909 Total 1,962,916 2,612,659 F- 21 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) 16. 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 terminated the royalty payments to the Company's former CTO in December 2021 and the Company granted 200,000 RSUs during the fiscal year ended November 30, 2022 in exchange to waive all future rights and entitlements to the former CTO. During the fiscal year ended November 30, 2023 , the Company and the former CTO agreed to immediately accelerate the 200,000 RSUs, which resulted in $ 0.5 million in accelerated stock compensation expense. Refer to Note 19, "Commitments and Contingencies - Royalty Payments," for additional information. 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 $ 0.03 million and $ 0.03 million during the years ended November 30, 2023 , respectively. Fusady is owned, in equal 25 % shares, by four individual investors. These four individuals also each own 25 % of Bersa S.A. Bersa S.A. is a distributor of the Company’s products in Argentina. The Company’s sales to Bersa S.A. were less than $ 0.06 million and $ 4.0 million for the fiscal years ended November 30, 2023 and 2022. The Company had accounts receivable, which are due within one year as of November 30, 2023, from Bersa S.A. of $ 1.6 million and $ 4.0 million as of November 30, 2023 and November 30, 2022 respectively. 17. 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 February 29, 2028 . The base rent is approximately $ 0.02 million per month. The Company leases office and warehouse space in South Africa that expires in November 2024 . The base rent is approximately $ 0.01 million per month. In December 2022, the Company early terminated and fully exited the associated lease with no penalties incurred. The Company entered into a new lease for a larger facility in November 2022. The base rent is approximately $ 0.07 million per month. The Company leases warehouse and manufacturing space in Fort Wayne, Indiana. The lease expires on July 31, 2025 . The base rent is approximately $ 0.01 million per month. In November 2021, the Company entered into a new lease which commenced in August 2022. The lease expires July 31, 2027 . The base rent is approximately $ 0.02 million per month. The Company sub-leases the former Fort Wayne facility which commenced in August 2022. The amount received from the sub-lease is immaterial. The Company also leases office space in Las Vegas, Nevada, which expires on January 31, 2027 . The base rent is less than $ 0.01 million per month. 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. F- 22 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) As of November 30, 2023 and 2022 , the elements of lease expense were as follows (in thousands): November 30, 2023 2022 Lease Cost: Operating lease cost $ 724 $ 568 Short-term lease cost 40 9 Total lease cost $ 764 $ 577 Other Information: Cash paid for amounts included in the measurement of operating lease liabilities $ 683 $ 447 Operating lease liabilities arising from obtaining right-of-use assets $ — $ 1,698 Operating Leases: Weighted-average remaining lease term (in years) 3.5 4.2 Weighted-average discount rate 9.5 % 9.5 % The Form 10 -K for the fiscal year ended November 30, 2022 incorrectly reported operating lease costs of $ 2,421 . The amount presented above for operating lease costs in 2022 are revised to the corrected amount of $ 568 . This change had no impact on previously reported consolidated balance sheets, consolidated results of operations, or shareholders' equity. F- 23 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) Future lease payments under non-cancelable operating leases as of November 30, 2023 are as follows (in thousands): Fiscal Year Ended November 30, 2024 $ 681 2025 584 2026 527 2027 394 2028 53 Thereafter — Total lease payments 2,239 Less: imputed interest 337 Total lease liabilities $ 1,902 Operating lease liabilities, current $ 644 Operating lease liabilities, non-current $ 1,258 18. INCOME TAXES Loss before income taxes consists of the following (in thousands): Year Ended November 30, 2023 2022 United States $ ( 7,170 ) $ ( 8,185 ) Foreign ( 857 ) 534 Total $ ( 8,027 ) $ ( 7,651 ) The components of the provision (benefit) for income taxes is as follows (in thousands): Year Ended November 30, 2023 2022 Current expense: Federal $ — $ — State 36 83 Foreign — 271 Total current expense: 36 354 Deferred expense (benefit): Federal 4 3 State 2 1 Foreign 123 ( 124 ) Total deferred expense (benefit) 129 ( 120 ) Total income tax provision (benefit) $ 165 $ 234 F- 24 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) A reconciliation of the Company’s statutory income tax rate to the Company’s effective income tax rate is as follows: Year Ended November 30, 2023 2022 Income at US statutory rate 21.00 % 21.00 % State income taxes 0.86 % ( 1.20 )% Permanent differences ( 6.65 )% ( 2.79 )% Foreign rate differential 0.59 % (0.49 )% Valuation allowance ( 17.83 )% ( 16.96 )% Other ( 0.02 )% ( 2.62 )% Total ( 2.05 )% ( 3.06 )% The net deferred income tax asset (liability) balance related to the following (in thousands): November 30, 2023 2022 Net operating loss carryforwards $ 6,551 $ 6,515 Stock compensation 1,835 1,192 Inventory reserve 245 169 Bad debt reserve 130 — Accrued payroll 434 411 Warranty reserve 109 174 Foreign tax credit carryforwards 9 9 Unrealized losses 18 18 Deferred revenue 53 35 Lease liability 410 507 R&E capitalization 399 — Equity investments 136 — Subtotal deferred tax assets 10,329 9,031 Valuation allowance ( 9,271 ) ( 7,839 ) Total deferred tax assets 1,058 1,192 Depreciation and amortization ( 678 ) 554 Right of use asset ( 390 ) 509 Total deferred tax liabilities ( 1,068 ) 1,063 Net deferred tax assets (liabilities) $ ( 10 ) $ 129 The Company notes $ 0.04 million of a United States state refundable tax credit awarded in fiscal year 2023 has been booked above the income tax line in accordance with US GAAP principles. As of November 30, 2023 , the Company had federal and state net operating losses ("NOLs") carryforwards of approximately $ 27.8 million and $ 7.3 million, respectively, which begin to expire in 2025 for federal and state purposes. The federal NOL carryforwards include approximately $ 13.2 million, which do not expire. The Company had foreign NOL carryforwards of $ 0.3 million which can be carried forward indefinitely. Deferred tax assets, which are offset by deferred tax liabilities, are presented in other assets in the accompanying Consolidated Balance Sheets. Future realization of the tax benefits of existing temporary differences and NOL carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. As of November 30, 2023 and 2022 , respectively, the Company performed an evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positive and negative, which included the results of operations for the current and preceding years. The Company determined that it was not possible to reasonably quantify future taxable income and determined that it is more likely than not that all of the worldwide deferred tax assets will not be realized. Accordingly, the Company maintained a full valuation allowance as of November 30, 2023 and 2022 and a full valuation allowance on the US deferred tax assets as of November 30, 2023 and 2022 . Additionally, a deferred tax liability has been established in the United States entity during the fiscal year ended November 30, 2023 relating to tax basis in excess of book basis on an indefinite lived intangible. At November 30, 2023 and 2022 , the Company recognized valuation allowances of $ 9.3 million and $ 7.8 million, respectively, related to its deferred tax assets created in those respective years. The net increase of $ 1.4 million and $ 1.2 million in the valuation allowance reflects the net increase in gross deferred tax asset between November 30, 2023 and 2022 and the prior fiscal years, respectively. Pursuant to Internal Revenue Code Section 382, use of NOL carryforwards may be limited if the Company experiences a cumulative change in ownership of greater than 50% in a moving three -year period. Ownership changes could impact the Company’s ability to utilize the NOL carryforwards remaining at an ownership change date. The Company last completed a Section 382 analysis regarding whether an ownership change had occurred for Company through November 30, 2021. Based on the analysis, the cumulative ownership change is 17.08 %. As a result, no resulting limitation of NOL carryforwards has been considered in determining the full valuation allowance against the related deferred tax assets as noted above. The Tax Cuts and Jobs Act of 2017 requires taxpayers to capitalize and amortize, rather than deduct, research and experimental, or R&E, expenditures under section 174 for tax years beginning after December 31, 2021. This rule became effective for the Company during the fiscal year ended November 30, 2023 and resulted in the capitalization for income tax purposes of R&E costs of $ 2.0 million. The Company will amortize these costs for tax purposes over five years if the R&E was performed in the U.S. and over 15 years if the R&E was performed outside the U.S. F- 25 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) 19. COMMITMENTS AND CONTINGENCIES Royalty Payment Pursuant to the Purchase and Sale Agreement between the Company and its former CTO dated April 13, 2018 and further amended on December 19, 2019, the Company was committed to a minimum royalty payment of $ 0.025 million per year. Royalties on CO2 pistols were to be paid for so long as patents remain effective beginning at 2 ½% of the agreed upon net price of $ 167.60 (“Stipulated Net Price”) for the first year and reduced by 0.1 % each year thereafter until it reaches 1 %. For each substantially new product in this category, the rate would begin again at 2 ½%. Royalties on the fintail projectiles (and any improved versions thereof) will be paid so long as patents remain effective at a rate of 4 % of the agreed upon Stipulated Net Price for fintail projectile products. On January 7, 2022, the Company and its former CTO agreed to waive all future rights and entitlements under such agreement, including without limitation any right, title, or interest in the intellectual property or royalty fees except for those on the fintail projectiles. In exchange for the royalty termination, the Company agreed to grant 200,000 RSU's upon stockholder's approval and renegotiation of the employment contract of the increase in the number of shares of common stock available for issuance under the 2020 Plan. This was approved on August 3, 2022. Refer to Note 14, "Stock-based Compensation" for additional information. The RSU’s vests in two years from January 7, 2022. In June 2023, the Company and the former CTO agreed to accelerate the vesting of the 200,000 RSUs. As a result, the Company recognized stock compensation expense of $ 1.0 million and $ 0.3 million associated with the RSUs during the years ended November 30, 2023 and 2022 , respectively. Legal Proceedings In the ordinary course of its business, the Company may be subject to certain other legal actions and claims, including product liability, consumer, commercial, tax and governmental matters, which may arise from time to time. The Company does not believe it is currently a party to any pending legal proceedings. Notwithstanding, legal proceedings are subject to inherent uncertainties, and an unfavorable outcome could include monetary damages, and excessive verdicts can result from litigation, and as such, could result in a material adverse impact on the Company’s business, financial position, results of operations, and/or cash flows. Additionally, although the Company has specific insurance for certain potential risks, the Company may in the future incur judgments or enter into settlements of claims which may have a material adverse impact on the Company’s business, financial position, results of operations, and/or cash flows. F- 26 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) 20. SEGMENT AND GEOGRAPHICAL DISCLOSURES The Chief Executive Officer, who is also the Chief Operating Decision Maker, evaluates the business as a single entity, which includes reviewing financial information and making business decisions based on the overall results of the business. As such, the Company’s operations constitute a single operating segment and one reportable segment. The tables below (in thousands) summarize the Company’s revenue, long-lived assets and total assets as of November 30, 2023 and 2022 , respectively by geographic region. The Company’s long-lived assets consist of intangible assets, property and equipment, right of use assets, and deposits for equipment: Revenue US South Africa Europe/South America/Asia Canada Total 2023 $ 40,182 $ 402 $ 1,013 $ 1,047 $ 42,644 2022 38,856 2,569 6,431 180 48,036 Long-lived assets US South Africa Total 2023 $ 9,632 $ 722 $ 10,354 2022 10,828 1,046 11,874 Total Assets US South Africa Total 2023 $ 46,388 $ 5,926 $ 52,314 2022 $ 46,308 $ 10,741 57,049 21. FINANCIAL INSTRUMENTS The Company is exposed to risks that arise from its use of financial instruments. This note describes the Company’s objectives, policies and processes for managing those risks and the methods used to measure them. i) Currency Risk The Company held its cash balances within banks in the US in US dollars and with banks in South Africa in US dollars and South African rand. The value of the South African rand against the US dollar may fluctuate with the changes in economic conditions. F- 27 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2023 and 2022 (Amounts expressed in US Dollars) During the years ended November 30, 2023 and 2022 , the US dollar weakened in relation to the South African rand, and upon the translation of the Company’s subsidiaries’ revenues, expenses, assets and liabilities, and intercompany loan held in South African rand, respectively. As a result, the Company recorded a translation adjustment loss of $ 0.4 million and $ 0.6 million primarily related to the South African rand during the years ended November 30, 2023 and 2022 , respectively. The Company’s South African subsidiary's revenues, cost of goods sold, operating costs and capital expenditures are denominated in South African rand. Consequently, fluctuations in the US dollar exchange rate against the South African rand increases the volatility of sales, cost of goods sold and operating costs and overall net earnings when translated into US dollars. The Company is not using any forward or option contracts to fix the foreign exchange rates. Using a 10 % fluctuation in the US exchange rate, the impact on the loss and stockholders’ equity (deficit) is not material. ii) Credit Risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The financial instruments that potentially subject the Company to credit risk consist of cash, accounts receivable, and the loan receivable from Byrna LATAM. The Company maintains cash and cash equivalents with high credit quality financial institutions located in the US and South Africa. The Company maintains cash and cash equivalent balances with financial institutions in the US in excess of amounts insured by the Federal Deposit Insurance Corporation. The Company provides credit to its customers in the normal course of its operations. It carries out, on a continuing basis, credit checks on its customers. The Company loaned $ 1.6 million to Byrna LATAM, which was formed in January 2023 as a joint venture in South America. The ability to collect on the loan depends on the financial operations of Byrna LATAM. 22. SUBSEQUENT EVENTS On January 19, 2024, the revolving line of credit and financing line of credit were terminated and not renewed. Based on the liquidity position of the Company, the Company's management does not believe the lines of credit are necessary to support the operations during fiscal year 2024. F- 28 (3) Exhibits. The following exhibits are filed as part of this Annual Report on Form 10-K. Where such filing is made by incorporation by reference to a previously filed document, such document is identified. Exhibit No. Description 3.1 Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2021). 3.2 Certificate of Amendment to the Certificate of Incorporation, dated April 28, 2021 (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 28, 2021). 3.3 Certificate of Amendment to the Certificate of Incorporation, dated June 17, 2022 (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 17, 2022). 3.4 Amended and Restated By-laws dated April 19, 2021 (incorporated herein by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 23, 2021). 3.5 Certificate of Designations of Series A Convertible Preferred Stock (incorporated herein by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 15, 2020). 3.6 Amendment to the Certificate of Designations of Series A Convertible Preferred Stock, dated January 15, 2021 (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 25, 2021). 4.1 Description of Capital Stock (incorporated herein by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2021). 4.2 Form of Common Stock Purchase Warrant (incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 23, 2018). 4.3 Common Stock Purchase Warrant, dated January 15, 2020 (incorporated herein by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 22, 2020). 10.1# Byrna Technologies Inc. 2020 Amended and Restated 2020 Equity Incentive Plan (incorporated herein by reference to Annex B to the Company's Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on May 6, 2022). 10.2# Consulting Agreement dated June 15, 2016 between the Company and Northeast Industrial Partners, LLC, as amended by Extension Agreement to Consulting Agreement, dated May 1, 2017, between the Company and Northeast Industrial Partners, LLC (incorporated herein by reference to Exhibit 10.2 to the Company's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 28, 2018). 10.3# Form of Incentive Stock Option Award Agreement under the Byrna Technologies Inc. 2020 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1 filed with the Securities Exchange Commission on June 1, 2021). 10.4# Form of Nonqualified Stock Option Award Agreement under the Byrna Technologies Inc. 2020 Incentive Plan (incorporated herein by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1 filed with the Securities Exchange Commission on June 1, 2021). 10.5 Purchase and Sale Agreement by and among the Company and Andre Buys of South Africa, dated April 13, 2018 (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2018). E-1 10.6 Amendment to Purchase and Sale Agreement by and among the Company and Andre Buys of South Africa, dated December 19, 2019 (incorporated herein by reference to Exhibit 10.2 to the Company’ s Current Report on Form 8-K filed with the Securities Exchange Commission on January 8, 2020). 10.7 Manufacturing Supply Agreement by and between the Company and Micron Products, Inc. dated August 11, 2017 (incorporated herein by reference to Exhibit 10.5 to the Company's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 28, 2018). 10.8 License and Supply Agreement by and between the Company and Safariland, LLC dated May 1, 2017 (incorporated herein by reference to Exhibit 10.9 to the Company's Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 28, 2018). 10.9† Securities Purchase Agreement, by and among the Company, Northeast Industrial Partners, LLC, and the purchasers party thereto, dated April 22, 2019 (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 23, 2019). 10.10† Securities Purchase Agreement, by and among the Company, Northeast Industrial Partners, LLC, and the purchasers party thereto, dated July 22, 2019 (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2019). 10.11 Purchase and Sale Agreement by and among by and among the Company and Andre Buys of South Africa, dated April 13, 2018 (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 8, 2020). 10.12 Amendment to Purchase and Sale Agreement by and among the Company and Andre Buys of South Africa, dated December 19, 2019 (incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 8, 2020). 10.13† Stock Purchase Agreement, dated as of May 5, 2020, by and among the Company, Roboro, the Sellers and the Seller Representative (incorporated by reference to Exhibit 10.26 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 18, 2020). E-2 10.14† Asset Purchase Agreement by and among the Company, Kore Outdoor (US) Inc. and Kore Outdoor Inc., dated as of May 12, 2021 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 21, 2021). 10.15# Form of Indemnification Agreement by and between the Registrant and each of its officers and directors (incorporated by reference to Exhibit 10.17 to the Amendment to the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July 12, 2021). 10.16† Asset Purchase Agreement by and between Byrna Technologies Inc. and Fox Labs International, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K wiled with the Securities and Exchange Commission on May 25, 2022). 10.22# Employment Agreement, dated September 1, 2023, by and between the Company and Bryan Ganz (incorporated by reference to Exhibit 10.1 to the Company ’ s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 18, 2023). 21.1 List of Registrant's Subsidiaries* 23.1 Consent of Independent Registered Public Accounting Firm* 31.1 Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).* 31.2 Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).* 32.1 Certification of the Principal Executive Officer and Principal Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350** 97.1 Byrna Technologies Inc. Clawback Policy* 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document* 101.SCH Inline XBRL Taxonomy Extension Schema* 101.CAL Inline XBRL Taxonomy Calculation Linkbase* 101.LAB Inline XBRL Taxonomy Label Linkbase* 101.PRE Inline XBRL Definition Linkbase Document* 101.DEF Inline XBRL Definition Linkbase Document* 104 Cover Page Interactive Data File (embedded within the Inline XBRL Document and include in Exhibit 101) * Filed herewith ** Furnished herewith # Management contract or compensatory plan or arrangement † Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby agrees to provide the Securities and Exchange Commission, upon request, copies of any omitted exhibits or schedules to this exhibit. E-3 Item 16. FORM 10-K SUMMARY Not applicable. 43 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. February 14, 2024 Byrna Technologies Inc. By: /s/ Bryan Ganz Name: Bryan Ganz Title: Chief Executive Officer, President and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Name Position Date /s/ Bryan Ganz Chief Executive Officer, President and Director February 14, 2024 Bryan Ganz (Principal Executive Officer) /s/ David R. North Chief Financial Officer February 14, 2024 David R. North (Principal Financial Officer and Principal Accounting Officer) /s/ Herbert Hughes Chairman February 14, 2024 Herbert Hughes /s/ Leonard Elmore Director February 14, 2024 Leonard Elmore /s/ Chris Lavern Reed Director February 14, 2024 Chris Lavern Reed /s/ Emily Rooney Director February 14, 2024 Emily Rooney 44