Byrna Technologies Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of November 30, 2024 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 our assets; (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 our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Management assessed the effectiveness of our internal control over financial reporting as of November 30, 2024. 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 our internal control over financial reporting. Based on this evaluation management concluded that as of November 30, 2024 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, 2024. 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, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial accounting and reporting. ITEM 9B. OTHER INFORMATION Insider Adoption or Termination of Trading Arrangements On November 7, 2024 , Luan Pham , the Company’s Chief Marketing Officer , adopted a trading plan intended to satisfy Rule 10b5 - 1 (c) to sell up to 33,483 shares of Company common stock between February 12, 2025, and December 31, 2025, subject to certain conditions. On November 21, 2024 , Northeast Industrial Partners LLP adopted a trading plan intended to satisfy Rule 10b5 - 1 (c) to sell up to 50,000 shares of Company common stock between February 20, 2025, and December 31, 2025, subject to certain conditions. On November 22, 2024 , Lisa Wager , the Company's Chief Governance Officer and Corporate Secretary , adopted a trading plan intended to satisfy Rule 10b5 - 1 (c) to sell up to 12,500 shares of Company common stock between February 20, 2025, and December 31, 2025, subject to certain conditions. On November 22, 2024 , Herbert Hughes , the Company’s Chairman , adopted a trading plan intended to satisfy Rule 10b5 - 1 (c) to sell up to 12,000 shares of Company common stock between February 20, 2025, and December 31, 2025, subject to certain conditions. 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 2025 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 2025 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 2025 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 2025 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 2025 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, 2024 and 2023 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, 2024 and 2023 F-3 Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended November 30, 2024 and 2023 F-4 Consolidated Statements of Cash Flows for the years ended November 30, 2024 and 2023 F-5 Consolidated Statements of Changes in Stockholders’ Equity for the years ended November 30, 2024 and 2023 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, 2024 and 2023, and the related consolidated statements of operations and comprehensive income (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, 2024 and 2023 and the consolidated results of their operations and their 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. Income Taxes – Valuation Allowances As discussed in Notes 4 and 18 to the financial statements, the Company recognizes deferred income tax assets and liabilities for the estimated future tax effects attributable to temporary differences and carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized in the future. Future realization of deferred tax assets depends on the existence of sufficient taxable income within the carryforward period. Sources of taxable income include future reversals of deferred tax assets and liabilities, projected future taxable income, tax planning strategies, and results of recent operations. The Company’s valuation allowance for deferred tax assets was $0.8 million as of November 30, 2024, and the Company recorded a tax benefit of $5.8 million during the year ended November 30, 2024 resulting from the reversal of valuation allowance on deferred tax assets. The Company’s determination of the valuation allowance, and its reversal, involves estimates. Management’s primary estimate in determining whether the valuation allowance should be reversed is the projection of future sources of taxable income. Auditing management’s estimate of future sources of taxable income, which affects the recorded valuation allowances, required a high degree of auditor judgment, including the need to involve our income tax specialists. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the 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 accurately estimate future sources of taxable income. With the assistance of our income tax specialists, we considered relevant tax laws and regulations in evaluating the appropriateness of management’s estimates of future sources of taxable income. We evaluated management’s ability to accurately estimate future sources of taxable income by comparing actual results to management’s historical estimates. Further, we evaluated the reasonableness of management’s estimates of future sources of taxable income by comparing the estimates to historical sources of taxable income or losses and evaluating whether there have been any changes that would affect management’s estimates of future sources of taxable income. We evaluated whether the assumptions were consistent with evidence obtained in other areas of the audit. With the assistance of our income tax specialists, we evaluated whether the estimated future sources of taxable income were of the appropriate character to utilize the deferred tax assets under tax law. We evaluated management’s assessment that it is more likely than not that sufficient taxable income will be generated in the future to utilize the net deferred tax assets. /s/ EisnerAmper LLP We have served as the Company’s auditor since 2020. EISNERAMPER LLP Iselin, New Jersey February 7, 2025 F-2 BYRNA TECHNOLOGIES INC. Consolidated Balance Sheets (Amounts in thousands, except share and per share data) November 30, 2024 2023 ASSETS CURRENT ASSETS Cash and cash equivalents $ 16,829 $ 20,498 Accounts receivable, net 2,630 2,945 Inventory, net 19,972 13,890 Prepaid expenses and other current assets 2,623 868 Marketable debt securities 8,904 — Total current assets 50,958 38,201 Deposits for equipment 2,665 1,163 Right-of-use-asset, net 2,452 1,805 Property and equipment, net 3,408 3,803 Intangible assets, net 3,337 3,583 Goodwill 2,258 2,258 Loan to joint venture — 1,473 Deferred tax asset 5,837 — Other assets 1,007 28 TOTAL ASSETS $ 71,922 $ 52,314 LIABILITIES CURRENT LIABILITIES Accounts payable and accrued liabilities $ 13,108 $ 6,158 Operating lease liabilities, current 539 644 Deferred revenue 1,791 1,844 Total current liabilities 15,438 8,646 LONG TERM LIABILITIES Deferred revenue, non-current 17 91 Operating lease liabilities, non-current 2,098 1,258 Total Liabilities 17,553 9,995 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. 25,010,976 shares issued and 22,495,759 outstanding as of November 30, 2024 and, 24,168,014 shares issued and 22,002,027 outstanding as of November 30, 2023 25 24 Additional paid-in capital 133,029 130,426 Treasury stock ( 2,515,217 shares purchased as of November 30, 2024 and 2,165,987 shares purchased as of November 30, 2023) ( 21,253 ) ( 17,500 ) Accumulated deficit ( 56,783 ) ( 69,575 ) Accumulated other comprehensive loss ( 649 ) ( 1,056 ) Total Stockholders’ Equity 54,369 42,319 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 71,922 $ 52,314 See accompanying notes to consolidated financial statements. F-3 BYRNA TECHNOLOGIES INC. Consolidated Statements of Operations and Comprehensive Income (Loss) (Amounts in thousands, except share and per share data) Years Ended November 30, 2024 2023 Net revenues $ 85,756 $ 42,644 Cost of goods sold ( 32,984 ) ( 18,997 ) Gross profit 52,772 23,647 Operating expenses 46,101 31,437 PROFIT (LOSS) FROM OPERATIONS 6,671 ( 7,790 ) OTHER INCOME (EXPENSE) Foreign currency transaction loss ( 576 ) ( 270 ) Interest income, net 1,024 693 Loss from joint venture ( 42 ) ( 603 ) Other Income / (Expense) 7 ( 57 ) INCOME (LOSS) BEFORE INCOME TAXES 7,084 ( 8,027 ) Income tax provision (benefit) ( 5,708 ) 165 NET INCOME (LOSS) 12,792 ( 8,192 ) Foreign exchange translation adjustment 342 ( 436 ) Unrealized gain (loss) on marketable securities 65 — COMPREHENSIVE INCOME (LOSS) $ 13,199 $ ( 8,628 ) Net profit (loss) per share – basic $ 0.57 $ ( 0.37 ) Net profit (loss) per share – diluted $ 0.55 $ ( 0.37 ) Weighted-average number of common shares outstanding during the year – basic 22,504,938 21,919,624 Weighted-average number of common shares outstanding during the year – diluted 23,139,549 21,919,624 See accompanying notes to consolidated financial statements. F-4 BYRNA TECHNOLOGIES INC. Consolidated Statements of Cash Flows (Amounts in thousands) Years Ended November 30, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 12,792 $ ( 8,192 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Stock-based compensation expense 3,403 5,375 Amortization of debt issuance costs 4 28 Operating lease costs 757 666 Depreciation and amortization 1,491 1,262 (Recovery of) Provision for allowance for credit losses ( 176 ) 474 (Recovery of) Provision for allowance for inventory ( 230 ) 514 Loss on disposal of property, plant, and equipment — 466 Loss from joint venture 42 603 Deferred tax (benefit) provision ( 5,837 ) 129 Changes in assets and liabilities, net of acquisition: Accounts receivable 491 2,189 Deferred revenue ( 127 ) ( 414 ) Inventory ( 5,852 ) 542 Prepaid expenses and other current assets ( 1,755 ) 87 Loan receivable 455 — Other assets — 250 Accounts payable and accrued liabilities 6,950 602 Operating lease liabilities ( 669 ) ( 689 ) NET CASH PROVIDED BY OPERATING ACTIVITIES 11,739 3,892 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment ( 2,347 ) ( 903 ) Purchases of marketable securities ( 8,856 ) — Equity method investment in joint venture — ( 520 ) Loan to joint venture — ( 1,556 ) Purchase of patent rights ( 24 ) — NET CASH USED IN INVESTING ACTIVITIES ( 11,227 ) ( 2,979 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from stock option exercises 149 34 Repurchases of common stock ( 3,753 ) — Payment of taxes withheld on issuance of restricted stock units ( 948 ) ( 456 ) NET CASH USED IN FINANCING ACTIVITIES ( 4,552 ) ( 422 ) Effects of foreign currency exchange rate changes 371 ( 61 ) NET CHANGE IN CASH AND CASH EQUIVALENTS FOR THE YEAR ( 3,669 ) 430 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 20,498 20,068 CASH AND CASH EQUIVALENTS, END OF YEAR $ 16,829 $ 20,498 Supplemental schedule of noncash operating activities: Income taxes paid — 48 Operating lease liabilities arising from obtaining right-of-use assets 1,404 — Unrealized gain on marketable securities 65 — Reclassification of interest receivable from accounts receivable to other assets 203 — Recapitalization of loan receivable in connection with the divesture of the joint venture 119 — 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, 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 Issuance of common stock pursuant to exercise of stock options 230,968 — 149 — — — — 149 Issuance of common stock pursuant to vesting of restricted stock units 611,994 1 ( 949 ) — — — — ( 948 ) Stock-based compensation — — 3,403 — — — — 3,403 Repurchase of common shares under Stock Buyback Plan — — — ( 349,230 ) ( 3,753 ) — — ( 3,753 ) Net income — — — — — 12,792 — 12,792 Unrealized gain on marketable securities — — — — — — 65 65 Foreign currency translation — — — — — — 342 342 Balance, November 30, 2024 25,010,976 $ 25 $ 133,029 ( 2,515,217 ) $ ( 21,253 ) $ ( 56,783 ) $ ( 649 ) $ 54,369 See accompanying notes to consolidated financial statements. F-6 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2024 and 2023 (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. These products are sold in both the consumer and security professional markets. The Company operates two manufacturing facilities, a 30,000 square foot facility located in Fort Wayne, Indiana and a 20,000 square foot manufacturing facility located in Pretoria, South Africa. In January 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. On August 19, 2024, the Company sold it’s 51 % ownership interest to Fusady S.A. for $ 1 (the “LATAM Share Purchase Agreement”) and entered into an exclusive distribution, manufacturing and licensing agreement with Byrna LATAM (the “LATAM Licensing Agreement”). 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, 2024 , the Company had incurred a cumulative loss of $ 56.8 million. The Company has funded operations through the issuance of common stock. The Company generated $ 85.8 million in revenue and a net income of $ 12.8 million for the year ended November 30, 2024 . Having achieved profitability this year, the Company is optimistic about its ability to sustain operations through its revenue streams. The Company’s future success will depend on its continued ability to generate sufficient revenue to cover operating expenses and to effectively market its products. 3. BASIS OF PRESENTATION These consolidated financial statements for the years ended November 30, 2024 and 2023 include the accounts of the Company and its subsidiary. 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. 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 allowance for deferred tax assets, incremental borrowing rate on leases, useful life of long-lived assets, allowance for estimated credit losses, and inventory reserves. F- 7 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2024 and 2023 (Amounts expressed in US Dollars) b) Goodwill 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. In accordance with Accounting Standards Codification (ASC) 350, "Intangibles – Goodwill and Other," the Company historically conducted its annual goodwill impairment analysis in the third quarter of each fiscal year. However, for the fiscal year ending November 30, 2024, the Company has elected to change the timing of its annual goodwill impairment review to the fourth quarter. This decision was made to better align the analysis with the Company’s strategic planning processes and to ensure a more comprehensive evaluation of goodwill in light of the latest operational and market conditions. The Company will continue to monitor goodwill for signs of impairment and perform interim assessments if necessary. This change in timing will not impact the Company's overall goodwill balance or financial position, but it may enhance the accuracy and relevance of the impairment assessment conducted. 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 November 30, 2024 and 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. In January 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 accounted for the investment in the joint venture using the equity method since the Company did not have voting control of Byrna LATAM. Additionally, the Company did not have substantive participating rights that would result in the Company having control of Byrna LATAM. On August 19, 2024, the Company sold it’s 51 % ownership interest to Fusady S.A. for $ 1 (the “LATAM Share Purchase Agreement”) and entered into an exclusive distribution, manufacturing and licensing agreement with Byrna LATAM (the “LATAM Licensing Agreement”). See Note 6 , "Investment in Joint Venture" for additional information. The Company recorded its share of the joint venture’s losses during the year ended November 30, 2024 of less than $ 0.1 million, and losses of $ 0.6 million during the year ended November 30, 2023, in the Consolidated Statements of Operations and Comprehensive Income (Loss) as loss from joint venture. The carrying value of the Company's investment in the joint venture at November 30, 2024 and 2023 is at zero in the Consolidated Balance Sheets. 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) Marketable Debt Securities The Company considers debt securities acquired with maturities of greater than 90 days to be available for sale debt securities. Available for sale debt securities are classified as either current or non-current assets based on the nature of the securities and their availability for use in current operations. Securities with an effective maturity greater than one year from the balance sheet date are classified as non-current. Available for sale debt securities are recorded at fair value and unrealized gains and losses are recorded within accumulated other comprehensive income. The estimated fair value of the available for sale debt securities is determined based on quoted market prices or rates for similar instruments. f) Allowance for Expected Credit Losses The Company estimates the balance of its allowance for expected credit losses. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status and makes judgments about the creditworthiness of customers based on ongoing credit evaluations. The Company also considers customer-specific information, current market conditions, and reasonable and supportable forecasts of future economic conditions. Account balances are written off against the allowance when it is determined that the receivable will not be recovered. As of November 30, 2024, 2023, and 2022, the total allowance for credit losses recorded was $ 0.3 million, $ 0.6 million and less than $ 0.1 million, respectively. F- 8 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2024 and 2023 (Amounts expressed in US Dollars) g) 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. h) 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 Income (Loss). Useful lives are determined based upon an estimate of either physical or economic obsolescence or both. i) 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. Indefinite-lived intangible assets are tested for impairment annually during the fourth 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 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. At November 30, 2024 and 2023, the Company determined that there was no impairment of intangible assets. j) 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, 2024 and 2023 , respectively. k) 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 other comprehensive income (loss). The Company uses quoted prices in active markets for identical assets (consistent with the Level 2 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, 2024 and 2023 (Amounts expressed in US Dollars) l) 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. m) 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, 2024 and 2023 was immaterial. The Company sells to dealers and retailers for whom there is no money back guarantee but who may request a return or credit for unforeseen reasons or who may have agreed discounts or allowances to be netted from amounts invoiced. The Company reserves for returns, discounts and allowances based on past performance and on agreement terms and reports revenue net of the estimated reserve. The Company's reserve for returns, discounts, and allowances for the years ended November 30, 2024 and 2023 was immaterial. The Company accounts for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products. Shipping and handling costs associated with the distribution of finished products to customers, are recorded in operating expenses in the accompanying Consolidated Statements of Operations and Comprehensive Income (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 for the years ended November 30, 2024 and 2023 includes $ 1.7 million in advance payments from customers, $ 0.1 million in current portion of sales from extended warranties and less than $0.1 million in unfulfilled e-commerce orders. Long-term deferred revenue pertains to the non-current portion of extended warranty sales. n) 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 Income (Loss) and were $ 12.4 million and $ 4.6 million during the years ended November 30, 2024 and 2023 , respectively. o) 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 Income (Loss). R&D costs were $ 0.6 million and $ 0.6 million during the years ended November 30, 2024 and 2023 , respectively. p) 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, 2024 and 2023 (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, 2024 and 2023 , 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 Income (Loss). As of November 30, 2024 and 2023 , 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. q) Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing net income (loss), reduced by dividends, by the weighted-average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (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. r) 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 Income (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 Income (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 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. s) 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 foreign currency transaction income (loss), in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss). F- 11 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2024 and 2023 (Amounts expressed in US Dollars) t) 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, 2024 and 2023, 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, 2024 and 2023. u) Other Comprehensive Income (Loss) Other comprehensive income (loss) consists of foreign currency translation adjustments and unrealized gains or losses on available for sale securities. For the fiscal years ended November 30, 2024 and 2023, the Company recorded foreign currency translation gain of $ 0.4 million and loss of $ 0.7 million, respectively, on its intercompany loan, which is considered permanent or long-term nature. For the fiscal year ended November 30, 2024, the Company recorded unrealized gains on available for sale securities of $ 0.1 million. Unrealized gains or losses recorded for the fiscal year ended November 30, 2023 was zero . v) 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. w) Recent Accounting Pronouncements The Company considers the applicability and impact of all Accounting Standards Updates ("ASUs"). ASUs not discussed below were assessed and determined to be either not applicable or are expected to have minimal impact on the financial statements. Recently Adopted Accounting Pronouncement In 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016 - 13, Financial Instruments – Credit Losses (Topic 326 ): Measurement of Credit Losses on Financial Instruments. The guidance changes the impairment model used to measure credit losses for most financial assets. A new forward-looking expected credit loss model replaced the existing incurred credit loss model and applies to the Company’s accounts receivables. This is expected to generally result in earlier recognition of allowances for credit losses. The Company adopted ASU 2016 - 13 on December 1, 2023, and it did not have a material impact on the Company’s financial statements. 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. The Company adopted ASU 2017 - 04 on December 1, 2023, and it did not have a material impact on the Company’s financial statements. Accounting Pronouncements Issued but Not Adopted The FASB also issued ASU 2023 - 07: Segment Reporting Topic 280 - Improvements to Reportable Segment Disclosures. This update requires expanded annual and interim disclosures for significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. This update will be effective for fiscal years beginning after December 15, 2023, and is to be applied retrospectively to all periods presented in the financial statements. The Company believes the adoption of ASU 2023 - 07 will not have a material impact on the consolidated financial statements. In 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures. This update standardizes categories for the effective tax rate reconciliation, requires disaggregation of income taxes and additional income tax-related disclosures. This update is required to be effective for the Company for fiscal years beginning after December 15, 2024. The Company is evaluating the effect that ASU 2023 - 09 will have on its financial statements and disclosures. In March 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024 - 03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220 - 40 ): Disaggregation of Income Statement Expenses. This guidance focuses on the disaggregation of income statement expenses. This update requires entities to provide more detailed disclosures about the components of significant expense categories, enhancing the transparency and decision-usefulness of financial statements. The objective is to provide users with a clearer understanding of the nature and variability of expenses reported in the income statement. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently assessing the impact of ASU 2024 - 03 on our financial statement disclosures. While we anticipate that the adoption of this standard will require additional disclosures, we do not expect it to have a material impact on our financial position or results of operations. In January 2025, the Financial Accounting Standards Board (FASB) issued ASU 2025 - 01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220 - 40 ): Clarifying the Effective Date, which provides clarification regarding the effective date for implementing the expense disaggregation disclosures outlined in ASU 2024 - 03. This update is intended to ensure that entities have a clear understanding of the timeline for adopting the new disclosure requirements, thereby promoting consistency and comparability in financial reporting. The clarification specifies that the standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the implications of ASU 2025 - 01 on our implementation timeline and disclosure practices. We remain committed to providing transparent and comprehensive financial information and will ensure compliance with the clarified effective date. F- 12 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2024 and 2023 (Amounts expressed in US Dollars) 5. MARKETABLE DEBT SECURITIES The following table summarizes our marketable securities and available-for-sale investments as of November 30, 2024 ( in thousands): Cost Unrealized Gains Unrealized Losses Fair Value Investments Corporate bonds $ 2,950 $ 18 $ - $ 2,968 $ 2,968 U.S. Treasury securities 5,906 47 - 5,953 5,953 Total $ 8,856 $ 65 $ - $ 8,921 $ 8,921 November 30, 2024 Cost Fair Value Due within one year or less $ 8,856 $ 8,921 November 30, 2024 Fair Value Measurement Based on Quoted Prices in Active Market Significant Other Observable Inputs Significant Unobservable Inputs Cost Fair Value (Level 1) (Level 2) (Level 3) Cash equivalents $ 11,304 $ 11,304 $ 11,304 $ - $ - Corporate bonds 2,950 2,968 - 2,968 - U.S. Treasury securities 5,906 5,953 - 5,953 - Total $ 20,160 $ 20,225 $ 11,304 $ 8,921 $ - November 30, 2023 Fair Value Measurement Based on Quoted Prices in Active Market Significant Other Observable Inputs Significant Unobservable Inputs Cost Fair Value (Level 1) (Level 2) (Level 3) Cash equivalents $ 16,324 $ 16,324 $ 16,324 $ - $ - Corporate bonds - - - - - U.S. Treasury securities - - - - - Total $ 16,324 $ 16,324 $ 16,324 $ - $ - F- 13 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2024 and 2023 (Amounts expressed in US Dollars) 6. INVESTMENT AND LOAN IN JOINT VENTURE In January 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 accounted for the investment in the joint venture using the equity method since the Company did not have voting control of Byrna LATAM. Additionally, the Company did 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 losses for the twelve months ended November 30, 2024 and November 30, 2023, of less than $ 0.1 million and $ 0.6 million, respectively, in the Consolidated Statements of Operations and Comprehensive Income (Loss) as loss from joint venture. The carrying value of the Company's investment in the joint venture on November 30, 2024 and 2023, is at zero in the Consolidated Balance Sheets. On August 19, 2024, the Company sold it’s 51 % ownership interest to Fusady S.A. for $ 1 (the “LATAM Share Purchase Agreement”) and entered into an exclusive distribution, manufacturing and licensing agreement with Byrna LATAM (the “LATAM Licensing Agreement”). This LATAM Licensing Agreement allows Byrna LATAM to exclusively manufacture the Byrna SD launcher and ammunition in certain South American countries and requires Byrna LATAM to pay the Company a royalty on Byrna products manufactured. The amount of royalty earned and outstanding at end of November 30, 2024, was not material. The LATAM Share Purchase Agreement also includes put and call rights based on defined triggers which expire on August 19, 2029. In January 2023, the Company loaned $ 1.6 million to Byrna LATAM. The loan bore interest at a rate equal to Secured Overnight Financing Rate ("SOFR") plus 3.0 %. Interest income related to the loan receivable was less than $ 0.1 million for the year ended November 30, 2024. The interest income is included in interest income in the Consolidated Statements of Operations and Comprehensive Income (Loss). On August 19, 2024, the loan was amended to fix the loan amount at $ 1,431,112 plus accrued interest of $ 203,373 for a total loan amount of $ 1,634,485 . The loan bears an annual rate of interest of 5 % per annum. The loan will be repaid in twelve equal installments starting on August 19, 2025. The loan receivable was recorded as loan to joint venture in the Consolidated Balance Sheets until the consummation of the LATAM Share Purchase Agreement at which time the Company recorded the current portion of the loan as part of Prepaid expenses and other current assets and the non-current portion is recorded as part of Other assets on the Consolidated Balance Sheet as of November 30, 2024. 7. REVENUE, DEFERRED REVENUE AND ACCOUNTS RECEIVABLE Deferred Revenue Changes in deferred revenue, which relate to advance payments, unfulfilled e-commerce orders and amounts to be recognized under extended 3 -year service warranty, for the years ended November 30, 2024 and 2023 are summarized below (in thousands). The Company recognized warranty revenue totaling $ 0.3 million and $ 0.3 million, respectively, during the years ended November 30, 2024 and 2023. 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 1,936 Net additions to deferred revenue 66,120 Reductions in deferred revenue for revenue recognized during the fiscal year ( 66,248 ) Deferred revenue balance, November 30, 2024 1,808 Less current portion 1,791 Deferred revenue, non-current 17 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 2024 2023 U.S. Domestic $ 78,932 $ 40,182 South Africa 198 402 Europe/South America/Asia 4,156 1,013 Canada 2,470 1,047 Total $ 85,756 $ 42,644 Years Ended November 30, Distribution channel 2024 2023 Wholesale (dealer/distributors) $ 19,900 $ 12,737 E-commerce 65,856 29,907 Total $ 85,756 $ 42,644 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 $ 2.6 million, $ 2.9 million, and $ 5.9 million as of November 30, 2024, 2023 and 2022 respectively. Allowance for Expected Credit Losses The Company estimates the balance of its allowance for expected credit losses. In determining the amount of the allowance for credit losses, the Company considers historical collectability based on past due status and makes judgments about the creditworthiness of customers based on ongoing credit evaluations. The Company also considers customer-specific information, current market conditions, and reasonable and supportable forecasts of future economic conditions. Account balances are written off against the allowance when it is determined that the receivable will not be recovered. As of November 30, 2024, 2023 and 2022 , the allowance for credit losses was $ 0.3 million, $ 0.6 million, and less than $ 0.1 million, respectively. F- 14 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2024 and 2023 (Amounts expressed in US Dollars) 8. INVENTORY The following table summarizes inventory (in thousands): November 30, November 30, 2024 2023 Raw materials $ 10,307 $ 7,543 Work in process 3,433 2,439 Finished goods 6,232 3,908 Total $ 19,972 $ 13,890 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 $ 0.4 million and $ 0.7 million at November 30, 2024 and 2023, respectively. 9. PROPERTY AND EQUIPMENT The following table summarizes cost and accumulated depreciation (in thousands): Estimated Useful November 30, Lives in Years 2024 2023 Computer equipment and software 3 - 5 $ 791 $ 817 Furniture and fixtures 5 276 273 Leasehold improvements 3 - 7 1,048 989 Machinery and equipment 5 - 7 4,095 3,425 6,210 5,504 Less: accumulated depreciation and amortization 2,802 1,701 Total $ 3,408 $ 3,803 The Company recognized approximately $ 1.2 million and $ 1.0 million in depreciation expense during the years ended November 30, 2024 and 2023 , respectively. Depreciation expense is presented in the operating expenses and within cost of goods sold in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss). At November 30, 2024 and 2023 , the Company deposited $ 2.7 million and $ 1.2 million, respectively, with vendors primarily for supply of molds and equipment where the vendors have not completed supply of these assets. The Company placed $ 0.4 million and less than $ 0.1 million of molds and equipment deposits and software deposits, respectively, from November 30, 2023 into service during fiscal year November 30, 2024 . 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 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, 2024 As of November 30, 2023 Estimated Useful Lives in Years Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Patents 10 - 17 $ 3,955 $ ( 978 ) $ 2,977 $ 3,931 $ ( 723 ) $ 3,208 Trademarks Indefinite 360 — 360 360 — 360 Customer List 2 70 ( 70 ) — 70 ( 55 ) 15 Total $ 4,385 $ ( 1,048 ) $ 3,337 $ 4,361 $ ( 778 ) $ 3,583 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 Income (Loss). Total intangible assets amortization expense for the years ended November 30, 2024 and 2023 were $ 0.3 million and $ 0.3 million, respectively. Estimated future amortization expense related to intangible assets as of November 30, 2024 are as follows (in thousands): Fiscal Year Ending November 30, 2025 $ 275 2026 257 2027 257 2028 257 2029 257 Thereafter 1,674 Total $ 2,977 F- 15 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2024 and 2023 (Amounts expressed in US Dollars) 11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities consist of the following (in thousands): November 30, 2024 2023 Trade payables $ 7,715 $ 2,617 Accrued sales and use tax 570 834 Personnel costs 4,193 2,173 Accrued professional fees 124 201 Other accrued liabilities 506 333 $ 13,108 $ 6,158 F- 16 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2024 and 2023 (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 bore interest at a rate equal to the Wall Street Journal Prime Rate plus 0.50 %, subject to a floor of 4.00 %. The revolving line of credit was secured by the Company’s accounts receivable and inventory. The line of credit was 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 bore interest at a rate equal to the Wall Street Journal Prime Rate plus 0.50 %, subject to a floor of 4.00 %. The line of credit was secured by the Company’s equipment. The line of credit was subject to an unused fee of 0.25 % paid once annually. The line of credit expired on January 19, 2024. As of November 30, 2024 there was no line of credit in place. As of November 30, 2023 , 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 were amortized over the term of the debt and are presented as part of Other Assets in the Consolidated Balance Sheets. Amortization of less than $ 0.01 million and $ 0.03 million for the years ended November 30, 2024 and 2023 is included in Interest income, net in the Consolidated Statements of Operations and Comprehensive Income (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, 2024 and 2023 (Amounts expressed in US Dollars) 13. STOCKHOLDERS’ EQUITY Stock Buyback Plan On July 31, 2024, the Company's Board of Directors approved a plan to buy back up to $ 10 million worth of shares of Common Stock (the “Stock Buyback Program”). The Company's Stock Buyback Plan is intended to return capital to shareholders and to minimize the dilutive impact of stock options and other sharebased awards. The Stock Buyback Program will expire on the sooner of the two -year anniversary of its initiation or until we reach the aggregate limit of $ 10 million for the repurchases under the program. The repurchased shares are recorded as part of treasury stock and are accounted for under the cost method. In the twelve months ended November 30, 2024, we repurchased 0.3 million shares of common stock for $ 3.8 million. The following table summarizes repurchases made during the fiscal year ended November 30, 2024: Number of Average Cost Shares Cost of Shares per Share Shares purchased - March 2024 21,905 $ 253,003 $ 11.6 Shares purchased - August 2024 291,141 2,994,296 10.3 Shares purchased - September 2024 506 5,695 11.3 Shares purchased - October 2024 35,678 499,997 14.0 Total 349,230 $ 3,752,991 $ 10.7 In March 2024, 21,905 units were repurchased by the Company for $ 0.3 million for shares withheld to pay the payroll tax liability of the vesting RSUs and treated as treasury stock. F- 18 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2024 and 2023 (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 is 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 $ 3.4 million and $ 5.4 million for the years ended November 30, 2024 and 2023 , respectively. Total stock-based compensation expense was recorded in Operating expenses in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss). Restricted Stock Units During the year ended November 30, 2024 the Company granted 600,000 of the RSU's with a “double trigger” for vesting based on stock price and time, as follows: ( 1 ) one - third of the RSUs will be triggered when the Company’s stock trades above $ 6.00 on a 20 -day VWAP, the second one - third of the RSUs will be triggered when the Company’s stock trades above $ 9.00 on a 20 -day VWAP, and the final one - third of the RSUs will be triggered when the stock trades above $ 12.00 on a 20 -day VWAP and ( 2 ) the employee must remain employed by the Company for three years from the effective date for the RSUs to vest. During the year ended November 30, 2023 , the Company did not grant "double trigger" RSUs. In addition, the Company also granted 153,232 and 102,720 time-based RSU's during the years ended November 30, 2024 and 2023 , respectively. Stock-based compensation expense for the RSUs for the years ended November 30, 2024 and 2023 was $ 1.6 million and $ 3.6 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. As of November 30, 2024 , there was $ 2.4 million of unrecognized stock-based compensation cost related to unvested RSUs which is expected to be recognized over a weighted average of 1.6 years. RSU Valuation The assumptions that the Company used in a Monte Carlo simulation model to determine the grant-date fair value of RSU's granted with a double trigger for the year ended November 30, 2024, 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) 2024 2023 Risk free rate 4.33 % — Expected dividends $ — — Expected volatility 33 % — Expected life (in years) 2.7 — Market price of the Company’s common stock on date of grant $ 6.03 — The following table summarizes the RSU activity during the year ended November 30, 2024 : RSUs Outstanding, November 30, 2022 1,314,909 Granted 200,696 Settled ( 213,636 ) Cancelled — Forfeited ( 325,743 ) Outstanding, November 30, 2023 976,226 Granted 753,230 Settled ( 691,596 ) Cancelled — Forfeited ( 122,630 ) Outstanding, November 30, 2024 915,230 Of the 690,077 restricted stock units issued, 57,697 units were returned to the Company and retired in exchange for the Company paying for the payroll withholding taxes, and 21,905 units were repurchased by the Company for $ 0.3 million for shares withheld to pay the payroll tax liability of the vesting RSUs and treated as treasury stock. For the twelve months ended November 30, 2024, restricted stock units of 611,994 , net, were issued. Stock Options During the years ended November 30, 2024 and 2023 , the Company granted options to employees and directors to purchase 199,500 and 249,999 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 $ 1.8 million during the years ended November 30, 2024 and 2023 , respectively. As of November 30, 2024 , there was $ 1.4 million of unrecognized stock-based compensation cost related to unvested stock options which is expected to be recognized over a weighted average period of 1.3 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, 2024 and 2023 were as follows: 2024 2023 Risk free rate 4.10 % 3.63 % Expected dividends 0 % 0 % Expected volatility 76 % 77 % Expected life (in years) 6.5 6.5 Market price of the Company’s common stock on date of grant $ 6.89 $ 8.96 Exercise price $ 6.89 $ 8.96 F- 19 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2024 and 2023 (Amounts expressed in US Dollars) The following table summarizes option activity under the 2020 Plan during the years ended November 30, 2024 and 2023 : Weighted-Average Stock Exercise Price Per Stock Options Option 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 Granted 199,500 6.89 Exercised ( 292,827 ) 3.01 Expired — — Forfeited ( 49,500 ) 7.24 Outstanding, November 30, 2024 1,241,839 $ 9.11 Exercisable, November 30, 2024 766,196 $ 9.58 Exercisable, November 30, 2023 672,256 $ 5.82 The stock options outstanding at the end of the year had weighted-average contractual life as follows: 2024 2023 (in years) (in years) Total outstanding options 7.48 6.90 Total exercisable options 7.04 5.29 F- 20 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2024 and 2023 (Amounts expressed in US Dollars) 15. EARNINGS PER SHARE For the year ended November 30, 2024 , the Company recorded net income and, as such, used diluted weighted-average common shares outstanding when calculating diluted income per share for the year ended November 30, 2024 . Stock options and RSUs that could potentially dilute basic earnings per share (“EPS”) in the future are included in the computation of diluted income per share. For the year ended November 30, 2023 , the Company recorded net loss available to common shareholders. As such, because the dilution impact 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 year ended November 30, 2023 . November 30, 2024 2023 Net income (loss) $ 12,792 $ ( 8,192 ) Weighted-average number of shares used in computing net loss per share, basic 22,504,938 21,919,624 Weighted-average number of shares used in computing net loss per share, diluted 23,139,549 21,919,624 Net income (loss) per share - basic $ 0.57 $ ( 0.37 ) Net income (loss) per share - diluted $ 0.55 $ ( 0.37 ) The Company’s potential dilutive securities, which include stock options and RSUs have been excluded from the computation of diluted net income (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 income (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 income (loss) per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect: November 30, 2024 2023 Stock Options 256,423 1,384,666 Restricted Stock 19,374 578,250 Total 275,797 1,962,916 F- 21 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2024 and 2023 (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, 2023 in exchange to waive all future rights and entitlements to the former CTO. During the fiscal year ended November 30, 2024 , 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 less than $ 0.1 million and less than $ 0.1 million during the years ended November 30, 2024 and 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. There were $ 0.1 million sales to Bersa S.A. during the year ended November 30, 2024 and less than $ 0.1 million for the year ended November 30, 2023. As of November 30, 2023, the Company had accounts receivable of approximately $ 1.6 million. Because of the divesture of the joint venture, Fusady is no longer considered a related party as of November 30, 2024. 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 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 less than $ 0.1 million per month. The Company leases office and warehouse space in South Africa. The Company has exercised its right to extend the lease for an additional year. The lease, which was originally set to expire in December 2024, is now extended to December 2025. 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 less than $ 0.1 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. In March 2024, the Company terminated the lease and sublease on the former Fort Wayne facility. Commencing in July 2024, the Company entered into a new operating lease for warehouse and retail office space located in Fort Wayne, Indiana. The lease term is for five years, commencing on July 15, 2024 and expiring on July 14, 2029 . As of November 30, 2024, the total right-of-use asset amounting to $ 0.3 million and the corresponding lease liability of $ 0.3 million are reflected in the Company's consolidated financial statements. The Company also leases office space in Las Vegas, Nevada, which expires on January 31, 2027 . The base rent is less than $ 0.1 million per month. Commencing in August 2024, the Company entered into a new operating lease for retail office space located in Salem, New Hampshire. The lease term is for seven years, commencing on August 22, 2024 and expiring on August 21, 2029 . As of November 30, 2024, the total right-of-use asset amounting to $ 0.1 million and the corresponding lease liability of $ 0.1 million are reflected in the Company's consolidated financial statements. Commencing in August 2024, the Company entered into a new operating lease for retail office space located in Scottsdale, Arizona. The lease term is for ten years, commencing on August 27, 2024 and expiring on July 31, 2032 . As of November 30, 2024, the total right-of-use asset amounting to $ 0.7 million and the corresponding lease liability of $ 0.7 million are reflected in the Company's consolidated financial statements. Commencing in November 2024, the Company entered into a new operating lease for retail office space located in Franklin, Tennessee. The lease term is for five and a half years, commencing on November 1, 2024 and expiring on April 30, 2030 . As of November 30, 2024, the total right-of-use asset amounting to $ 0.2 million and the corresponding lease liability of $ 0.2 million are reflected in the Company's consolidated financial statements. 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, 2024 and 2023 (Amounts expressed in US Dollars) As of November 30, 2024 and 2023 , the elements of lease expense were as follows (in thousands): November 30, 2024 2023 Lease Cost: Operating lease cost $ 599 $ 724 Short-term lease cost — 40 Total lease cost $ 599 $ 764 Other Information: Cash paid for amounts included in the measurement of operating lease liabilities $ 633 $ 683 Operating lease liabilities arising from obtaining right-of-use assets $ 1,404 $ — Operating Leases: Weighted-average remaining lease term (in years) 4.7 3.5 Weighted-average discount rate 8.04 % 9.5 % F- 23 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2024 and 2023 (Amounts expressed in US Dollars) Future lease payments under non-cancelable operating leases as of November 30, 2024 are as follows (in thousands): Fiscal Year Ended November 30, 2025 $ 713 2026 771 2027 669 2028 356 2029 266 Thereafter 386 Total lease payments 3,161 Less: imputed interest 524 Total lease liabilities $ 2,637 Operating lease liabilities, current $ 539 Operating lease liabilities, non-current $ 2,098 18. INCOME TAXES Income (Loss) before income taxes consists of the following (in thousands): Year Ended November 30, 2024 2023 United States $ 8,226 $ ( 7,170 ) Foreign ( 1,142 ) ( 857 ) Total $ 7,084 $ ( 8,027 ) The components of the provision (benefit) for income taxes is as follows (in thousands): Year Ended November 30, 2024 2023 Current expense: Federal $ 6 $ — State 123 36 Foreign — — Total current expense: 129 36 Deferred expense (benefit): Federal ( 5,164 ) 4 State ( 673 ) 2 Foreign — 123 Total deferred expense (benefit) ( 5,837 ) 129 Total income tax provision (benefit) $ ( 5,708 ) $ 165 F- 24 BYRNA TECHNOLOGIES INC. Notes to Consolidated Financial Statements November 30, 2024 and 2023 (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, 2024 2023 Income at US statutory rate 21.00 % 21.00 % State income taxes 3.15 % 0.86 % Permanent differences 15.06 % ( 6.65 )% Foreign rate differential ( 0.96 )% 0.59 % Valuation allowance ( 118.75 )% ( 17.83 )% Tax credits ( 4.41 )% — % Other 4.60 % ( 0.02 )% Total ( 80.31 )% ( 2.05 )% The net deferred income tax asset (liability) balance related to the following (in thousands): November 30, 2024 2023 Net operating loss carryforwards $ 3,438 $ 6,551 R&D tax credits 318 — Stock compensation 1,033 1,835 Inventory reserve 107 245 Bad debt reserve 70 130 Accrued payroll 879 434 Warranty reserve 57 109 Foreign tax credit carryforwards 9 9 Capital loss carryover 115 — Unrealized losses 14 18 Deferred revenue 21 53 Lease liability 583 410 R&E capitalization 802 399 Business interest limitation 325 — Equity investments — 136 Subtotal deferred tax assets 7,771 10,329 Valuation allowance ( 837 ) ( 9,271 ) Total deferred tax assets 6,934 1,058 Depreciation and amortization ( 555 ) ( 678 ) Right of use asset ( 542 ) ( 390 ) Total deferred tax liabilities ( 1,097 ) ( 1,068 ) Net deferred tax assets (liabilities) $ 5,837 $ ( 10 ) The Company notes $ 0.04 million of a United States state refundable tax credit awarded in the year has been recorded as a component of income before income taxes in accordance with GAAP. As of November 30, 2024, the Company had federal and state NOL carryforwards of approximately $ 13.4 million and $ 4.8 million, respectively, which begin to expire in 2029 for federal and state purposes. The federal NOL carryforwards include approximately $ 10.3 million, which do not expire. The Company had foreign NOL carryforwards of $ 1.2 million which can be carried forward indefinitely. The Company had federal and state research and development tax credits of approximately $ 0.2 and $ 0.1 million, respectively, as of November 30, 2024. The federal and state research and development credits begin to expire in 2044 and 2039, respectively. There were no federal or state research and development tax credits as of November 30, 2023. Deferred tax assets 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, 2024 and 2023, 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 possible to reasonably quantify future taxable income and determined that it is more likely than not that all of the US deferred tax assets will be realized. Accordingly, the Company has reversed most of its US valuation allowance as of November 30, 2024 and maintains a full valuation allowance on the South Africa deferred tax assets as of November 30, 2024. The Company had a full valuation allowance on its worldwide deferred tax assets as of November 30, 2023. Additionally, a deferred tax liability had been established in the United States during the prior year relating to tax basis in excess of book basis on an indefinite lived intangible given the valuation allowance position as of November 30, 2023. At November 30, 2024 and 2023, the Company recognized valuation allowances of $ 0.8 million and $ 9.3 million, respectively, related to its deferred tax assets created in those respective years. The net increase/(decrease) of ( $ 8.5 ) million and $ 1.4 million in the valuation allowance reflects the release of the US valuation allowance for November 30, 2024 and a net increase in gross deferred tax asset between November 30, 2023 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, 2024. Based on the analysis, the cumulative ownership change is 12.07 %. 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 prior year ended November 30, 2023 and resulted in the capitalization for income tax purposes of R&E costs of $ 2.0 million. During the current year ended November 30, 2024, the capitalization for income tax purposes of R&E costs is $ 2.5 million. The Company will amortize these costs for tax purposes over 5 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, 2024 and 2023 (Amounts expressed in US Dollars) 19. COMMITMENTS AND CONTINGENCIES Royalty Payment Pursuant to the Purchase and Sale Agreement, dated April 13, 2018, and further amended on December 19, 2019, the Company was committed to a minimum royalty payment of less than $ 0.1 million per year. Royalties on CO2 pistols were to be paid for so long as patents remain effective. 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 on August 3, 2022, which then 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, and the Company recognized stock compensation expense of $ 1.0 million associated with the RSUs during the year ended November 30, 2023. 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, 2024 and 2023 (Amounts expressed in US Dollars) 20. SEGMENT AND GEOGRAPHICAL DISCLOSURES The CEO, 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, 2024 and 2023 , 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 2024 $ 78,932 $ 198 $ 4,156 $ 2,470 $ 85,756 2023 $ 40,182 $ 402 $ 1,013 $ 1,047 $ 42,644 Long-lived assets US South Africa Total 2024 $ 10,966 $ 896 $ 11,862 2023 $ 9,632 $ 722 10,354 Total Assets US South Africa Total 2024 $ 66,794 $ 5,128 $ 71,922 2023 $ 46,388 $ 5,926 $ 52,314 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, 2024 and 2023 (Amounts expressed in US Dollars) During the years ended November 30, 2024 and 2023 , 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 $ 0.6 million and $ 0.4 million primarily related to the South African rand during the years ended November 30, 2024 and 2023 , 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 and cash equivalents, marketable securities, 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 equivalents balances along with marketable securities 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. As of November 30, 2024 , two of the Company's customers accounted for approximately 36 % of total accounts receivable. As of November 30, 2023 , one customer accounted for 12 % of total accounts receivable. The Company loaned $ 1.6 million to Byrna LATAM in January 2023. The Company determines if an estimate for a credit loss on this loan is needed by considering the financial position of Byrna LATAM, the current economic environment, collections on our accounts receivable balances with Byrna LATAM, as well reasonable and supportable forecasts to support the payment of this loan. The Company reviews these factors quarterly to determine if any adjustments are needed. 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 21, 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 26, 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). 10.17# 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). 10.18# Employment Agreement, dated July 13, 2023, by and between the Company and John Brasseur (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 April 30, 2024) 10.19# Employment Agreement, dated June 12, 2024, by and between the Company and Laurilee Kearnes (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 June 24, 2024). 10.20# Separation Agreement, dated June 19, 2024 between the Company and David North (incorporated by reference to Exhibit 10.2 to the Company’ s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 24, 2024). 10.21 Consulting Agreement, dated June 19, 2024 between the Company and David North (incorporated by reference to Exhibit 10.3 to the Company’ s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 24, 2024). 19.1 Insider Trading Policy* 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 7, 2025 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 7, 2025 Bryan Ganz (Principal Executive Officer) /s/ Laurilee Kearnes Chief Financial Officer February 7, 2025 Laurilee Kearnes (Principal Financial Officer and Principal Accounting Officer) /s/ Herbert Hughes Chairman February 7, 2025 Herbert Hughes /s/ Leonard Elmore Director February 7, 2025 Leonard Elmore /s/ Chris Lavern Reed Director February 7, 2025 Chris Lavern Reed /s/ Emily Rooney Director February 7, 2025 Emily Rooney 44