Byrna Technologies Inc

BYRNA TECHNOLOGIES INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the three and six months ended May 31, 2024 and 2023

Byrna Technologies Inc. (the “Company” or “Byrna”) is a technology company, specializing in next generation alternatives to traditional firearms without the risk of taking a life. The Company's launchers can be used for self-defense and personal security by consumers in all50 states without a firearms license, subject to local regulations. The Company also sells accessories, pepper sprays, and other personal safety tools. Most of the sales are to consumers in the United States via our Company e-commerce site, the Amazon storefront, or the brick and mortar location in Las Vegas, and through retailers, including big box stores. The Company's products also* maybe sold to private security and public security officers. Since2020,* the Company hasnot manufactured or sold any products to or for use by the military. The Company operatestwo 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.

On* January 10, 2023,the Company created a new joint venture ("Byrna LATAM") with Fusady S.A. ("Fusady") located in Uruguay, to expand the Company's operations and presence in South American markets. The Company holds 51% of the stock in Byrna LATAM, and the remaining 49% of stock in Byrna LATAM is held by Fusady. See Note7,* "Investment in Joint Venture" for additional information.

From inception to* May 31, 2024*, the Company has incurred an accumulated deficit of approximately $67.5 million. The Company has funded operations through the issuance of common stock. The Company generated net income of $2.1 million for thesix months ended* May 31, 2024*. The Company’s future success is dependent upon its ability to continue to raise sufficient capital or generate adequate revenues, to cover its ongoing operating expenses, and also to continue to develop and be able to profitably market its products.

Management projects that all cash needs will be met beyondone year from the time these financial statements are issued.

These unaudited condensed consolidated financial statements for thethree andsix months ended* May 31, 2024and2023* include the accounts of the Company and its subsidiaries. These unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form10-Q and therefore donot include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles in the United States of America (“GAAP”); however, such information reflects all adjustments consisting solely of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. All significant intercompany accounts and transactions have been eliminated in consolidation.

The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto together with management’s discussion and analysis of financial condition and results of operations contained in the Company's annual report on Form10-K for the year ended* November 30, 2023*. In the opinion of management, the accompanying unaudited condensed consolidated financial statements, the results of its operations for thethree andsix months ended* May 31, 2024and2023*, and its cash flows for thesix months ended* May 31, 2024and2023* arenot necessarily indicative of results to be expected for the full year. Certain prior year amounts have been reclassified to conform to the current year presentation.

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The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Future events and their effects cannot be determined with certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and any such differences* may*be material to our condensed consolidated financial statements. Significant estimates include assumptions about stock-based compensation expense, valuation for deferred tax assets, incremental borrowing rate on leases, valuation and carrying value of goodwill and other identifiable intangible assets, useful life of long-lived assets, inventory reserves, and allowance for credit losses.

The Company considers the applicability and impact of all Accounting Standards Updates ("ASUs"). ASUsnot discussed below were assessed and determined to be eithernot applicable or are expected to have minimal impact on the financial statements.

Recently Adopted Accounting Pronouncement

In2016, the Financial Accounting Standards Board ("FASB") issued ASU2016-13, Financial Instruments – Credit Losses (Topic326): Measurement of Credit Losses on Financial Instruments (“ASU2016-13”). The guidance changes the impairment model used to measure credit losses for most financial assets. A new forward-looking expected credit loss model will replace the existing incurred credit loss model and will impact the Company’s accounts receivables. This is expected to generally result in earlier recognition of allowances for credit losses. The Company adopted ASU2016-13 on* December**1,* 2023, and it didnot have a material impact on the Company’s financial statements.

Accounting Pronouncement Issued butNot Adopted

In2023, the FASB issued ASU2023-09 – Income Taxes (Topic740): Improvements to Income Tax Disclosures (“ASU2023-09”). 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 periods beginning after* December 15, 2025.The Company is evaluating the effect that ASU2023*-09 will have on its financial statements and disclosures.

The FASB also issued ASU2023-07: Segment Reporting Topic280 - 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, 2024,and is to be applied retrospectively to all periods presented in the financial statements. Early adoption is permitted. The Company is evaluating the effect that ASU2023*-07 will have on its financial statements and disclosures and believes it willnot have a material impact on the Company’s consolidated financial statements.

On* March 21, 2024,the FASB issued Accounting Standards Update (ASU)2024-01, Compensation—Stock Compensation (Topic718*): Scope Application of Profits Interest and Similar Awards, which provides illustrative guidance to help entities determine whether profits interest and similar awards should be accounted for as share-based payment arrangements within the scope of ASC Topic718, Compensation—Stock Compensation. The Company believes it willnot have a material impact on the Company’s consolidated financial statements.

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Goodwill resulting from a business combination isnot amortized but is reviewed for impairment annually or more frequently when events or changes in circumstances occur that would more likely thannot 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 thannot, reduce the fair value of a reporting unit or to bypass the qualitative assessment in any period and proceed directly to performing the quantitative goodwill impairment test. If the Company concludes, based on the qualitative assessment, that the carrying value of a reporting unit would more likely thannot exceed its fair value, a quantitative assessment is performed which is based upon a comparison of the reporting unit’s fair value to its carrying value. The fair values used in this evaluation are estimated by the Company based upon future discounted cash flow projections for the reporting unit. An impairment charge is recognized for any amount by which the carrying amount of goodwill exceeds its fair value.

The Company performs its annual review for impairment during thethird quarter of each year. The Company assesses goodwill for impairment at the reporting unit level, which is defined as an operating segment orone 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 level as a whole. The Company has determined that, as of* August 31, 2023,there wasno impairment of goodwill, and there have beenno* events through* May 31, 2024*that would indicate that a potential impairment to Goodwill has occurred.

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 accounts for the investment in the joint venture using the equity method since the Company doesnot* have voting control of Byrna LATAM. Additionally, the Company doesnot 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 income during thethree andsix months ended* May 31, 2024* of less than $0.1 million and losses of $0.2 million and $0.3 million during thethree andsix months ended* May 31, 2023*, respectively, in the Consolidated Statements of Operations and Comprehensive Income (Loss) as income (loss) from joint venture. The carrying value of the Company's investment in the joint venture at* May 31, 2024* and* November 30, 2023* is atzero in the Consolidated Balance Sheets.

In* January 2023,the Company loaned $1.6 million to Byrna LATAM. The loan bears interest at a rate equal to Secured Overnight Financing Rate ("SOFR") plus 3.0%. The interest rate on the loan was 8.3% as of May 31, 2024*. The principal amount and accrued interest on the loan amount must be repaid within five years from the date of the loan, or* January 10, 2028.Interest income related to the loan receivable was approximately $0.03 million and $0.06 millionfor thethree* andsix months ended* May 31, 2024*, respectively. The interest income is included in interest income in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). The loan receivable is recorded as loan to joint venture in the Consolidated Balance Sheets.

Advertising costs are expenses as incurred and reported in Operating Expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), and include costs of advertising, tradeshows, and other activities designed to enhance demand for the Company's products. The Company reported advertising costs of approximately $2.5 million and $5.3 million for thethree andsix months ended* May 31, 2024*, respectively, $0.6 million and $1.5 million for thethree andsix months ended* May 31, 2023*, respectively.

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The Company generates most of its revenue through e-commerce portals to consumers, as well as wholesale distribution of its products and accessories to dealers/distributors and retail stores. The Company also sells products to large end-users such as private security companies and law enforcement agencies. The Company doesnot manufacture or sell any products regulated by the Bureau of Alcohol, Tobacco, Firearms and Explosives or for military applications. 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 generally30-60 days for established customers, whereas new wholesale and large end-user customers have prepaid terms for theirfirst 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 withinone year of sale. The Company also sells an extended warranty for the same terms overthree years. The extended 3-year warranty can be purchased separately from the product and is classified as a service warranty. Since a warranty for thefirst year after sale is included and non-separable from all launcher purchases, the Company considers this extended warranty to represent a service obligation during thesecond andthird 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 thesecond andthird year after sale. The Company recognizes an estimated reserve based on its analysis of historical experience, and an evaluation of current market conditions.

The Company offers e-commerce customers a14-day money-back guarantee, which allows for a full refund of the purchase price, excluding shipping charges, within14 days from the date of delivery. The right of return creates a variable component to the transaction price and needs to be considered for any possible constraints. The Company estimates returns using the expected value method, as there will likely be a range of potential return amounts. The Company’s reserve for returns under the14-day money back guarantee for thethree andsix months ended* May 31, 2024and2023* was immaterial.

The Company doesnot offer a money-back guarantee to dealers or retailers. These customers* mayrequest a return or credit for unforeseen reasons or mayhave agreed discounts or allowances to be netted from amounts invoiced. Accordingly, 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 thethree* andsix months ended* May 31, 2024and2023* 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 Condensed 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.

Accounts Receivable

The Company records accounts receivables due from dealers/distributers, large end-users such as retail stores, security companies, and law enforcement agencies. Accounts receivable, net of allowances, was $1.6 million, $2.9 million and $5.9 million as of* May 31, 2024*,* November 30, 2023*, and* November 30, 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 willnot be recovered. As of* May 31, 2024*,* November 30, 2023*, and* November 30, 2022*, the total allowance for credit losses recorded was $0.3 million, $0.5 million and less than $0.02 million, respectively.

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Deferred Revenue

The balance of deferred revenue, which relate to unfulfilled e-commerce orders and amounts to be recognized under extended 3-year service warranty, as of* May 31, 2024* and* May 31, 2023* was $1.5 million and $0.6 million, respectively, and $1.9 million and $0.8 million as of* November 30, 2023and2022*, respectively. The Company recognized warranty revenue totaling $0.1 million and $0.2 million, respectively, during thethree andsix months ended* May 31, 2024* and $0.08 million and $0.1 million, respectively, during thethree andsix months ended* May 31, 2023*.

Revenue Disaggregation

The following table presents disaggregation of the Company’s revenue by distribution channel (in thousands):

The following table summarizes inventory (in thousands):

The following table summarizes cost and accumulated depreciation (in thousands):

The Company recognized $0.5 million and $0.4 million in depreciation expense during thesix months ended* May 31, 2024and2023*, respectively. The Company recognized $0.3 million and $0.2 million in depreciation expense during thethree months ended* May 31, 2024and2023*, respectively. Depreciation expense is presented in the operating expenses and within cost of goods sold in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

At* May 31, 2024* and* November 30, 2023*, the Company had deposits of $1.7 million and $1.2 million, respectively, with vendors primarily for supply of machinery (molds) and equipment where the vendors havenot completed the supply of these assets and is presented as Deposits for equipment in the Condensed Consolidated Balance Sheets.

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The components of intangible assets were as follows (in thousands):

The trademarks have an indefinite life and will be assessed annually for impairment. All other intangible assets are finite-lived.

Intangible assets amortization expenses are recorded within operating expenses in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). Total intangible assets amortization expense for thesix months ended* May 31, 2024and2023* were $0.1 million. Total intangible assets amortization expense for thethree months ended* May 31, 2024and2023* were less than $0.1 million.

Estimated future amortization expense related to intangible assets as of* May 31, 2024* are as follows (in thousands):

The Company’s accounts payable and accrued liabilities consist of the following (in thousands):

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2020 Plan

On* October 23, 2020,the Company's Board of Directors 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 the2020 Plan is 3,800,000 shares. The2020 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* maybe granted. Persons eligible to receive awards under the2020* Plan are employees, officers, directors, consultants, advisors and other individual service providers of the Company. Awards are at the discretion of the Compensation Committee.

The Company accounts for all stock-based payment awards granted to employees and non-employees as stock-based compensation expense at their grant date fair value. The Company’s stock-based payments include stock options, RSUs, and incentive warrants. 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 non-employee awards is generally the date the services were completed, resulting in financial reporting period adjustments to stock-based compensation during either the expected term or the contractual term. Stock-based compensation costs for non-employees are recognized as expense over the vesting period on a straight-line basis. Forfeitures are accounted for as they occur.

The fair value of each grant is estimated on the date of grant by using either the Black-Scholes, Binomial Lattice, 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 SEC’s Staff Accounting Bulletin, Topic14. The risk-free interest rate is determined by reference to the U.S. 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 doesnot expect to pay any cash dividends in the foreseeable future.

Stock-Based Compensation Expense

Stock-based compensation costs are recognized as expense over the employee's requisite service period, on a straight-line basis. Total stock-based compensation expense was $1.8 million and $3.0 million for thesix months ended* May 31, 2024and2023*, respectively. Total stock-based compensation expense was $0.9 million and $1.5 million for thethree months ended* May 31, 2024and2023*, respectively. Total stock-based compensation expense was recorded in Operating expenses in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

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Restricted Stock Units

During thesix months ended* May 31, 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 a20-day VWAP, thesecond one-third of the RSUs will be triggered when the Company’s stock trades above $9.00 on a20-day VWAP, and the finalone-third of the RSUs will be triggered when the stock trades above $12.00 on a20-day VWAP and (2) the employee must remain employed by the Company forthree years from the effective date for the RSUs to vest. During thesix months ended* May 31, 2023*, the Company didnot grant "double trigger" RSUs. In addition, the Company also granted 81,656 and 9,805 time-based RSU's during thesix months ended* May 31, 2024and2023*, respectively. Stock-based compensation expense for the RSUs for thesix months ended* May 31, 2024and2023* was $0.9 million and $2.0 million, respectively, and for thethree months ended* May 31, 2024and2023* was $0.4 million and $1.0 million, respectively.

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 thesix months ended* May 31, 2024* were as follows:

As of* May 31, 2024*, there was $1.9 million of unrecognized stock-based compensation cost related to unvested RSUs which is expected to be recognized over a weighted average of 2.0 years.

The following table summarizes the RSU activity during thesix months ended* May 31, 2024*:

Of the 658,281 restricted units issued,68,940 units were returned to the Company in exchange for the Company paying for the payroll withholding taxes. For thesix months ended* May 31, 2024*, RSUs of 589,341, net, were issued.

Stock Options

The Company recorded stock-based compensation expense for options granted to its employees and directors of $0.9 million and $0.9 million during thesix months ended* May 31, 2024and2023*, respectively, and for thethree months ended* May 31, 2024and2023* was $0.5 million and $0.5 million, respectively. As of* May 31, 2024*, there was $2.5 million of unrecognized stock-based compensation cost related to unvested stock options which is expected to be recognized over a weighted average period of 1.7 years.

Stock Option Valuation

The fair value of stock options at the date of grant was estimated using the Black Scholes option pricing model. The assumptions that the Company used to determine the grant-date fair value of stock options granted for thesix months ended* May 31, 2024* were as follows:

The following table summarizes option activity under the2020 Plan during thesix months ended* May 31, 2024*:

Of the 244,465 shares issued upon exercise of options,37,033 options were used due to cashless exercise.

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For thethree andsix months ended* May 31, 2024*, the Company recorded net income and, as such, used diluted weighted-average common shares outstanding when calculating diluted income per share for thethree andsix months ended* May 31, 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 thethree andsix months ended* May 31, 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 thethree andsix months ended* May 31, 2023*.

The following table sets forth the allocation of net income (loss) for thethree andsix months ended* May 31, 2024and2023*, respectively:

The following table reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS for thethree andsix months ended* May 31, 2024and2023*:

The following potential common shares, presented based on amounts outstanding at each period end, were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:

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 2021and granted 200,000 RSUs during the fiscal year ended ** November 30, 2022in exchange to waive all future rights and entitlements to the former CTO. During the fiscal year ended November 30, 2023,*the Company and the former CTO agreed to immediately accelerate the 200,000 RSUs, which resulted in $0.5 million in accelerated stock compensation expense.

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,withno* stated termination date. Sublease payments received were a nominal amount for thethree andsix months ended* May 31, 2024and2023*.

Fusady is owned, in equal 25% shares, byfour individual investors. Thesefour 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 thethree andsix months ended* May 31, 2024* and less than $0.05 million and $0.1 million for thethree andsix months ended* May 31, 2023*. As of* May 31, 2024*, the Company had accounts receivable of approximately $0 and $1.6 million as of* November 30, 2023.*

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Operating Leases

The Company has operating leases for real estate in the United States and South Africa and doesnot have any finance leases.

In2019, 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 byone* year. The new lease expiration date is* February *29, 2028.

The Company leases office and warehouse space in South Africa that expires in* December 2024.*

The Company leases warehouse and manufacturing space in Fort Wayne, Indiana. The lease expires on* July 31, 2025.Commencing in August 2022,the Company sub-leased the former Fort Wayne facility. 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.

The Company also leases office space in Las Vegas, Nevada, which expires on* January 31, 2027.*

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 tonot exercise.

For thethree andsix months ended* May 31, 2024*, the elements of lease expense were as follows (in thousands):

Future lease payments under non-cancelable operating leases as of* May 31, 2024* are as follows (in thousands):

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For thethree months ended* May 31, 2024*, the Company recorded a nominal amount of income tax expense. For thethree months ended* May 31, 2023*, the Company recorded an income tax expense of $0.02 million. For thethree months ended* May 31, 2024and2023*, the effective tax rate was 0.1% and 1.6%, respectively. For thesix months ended* May 31, 2024*, the Company recorded a nominal amount of income tax expense. Forsix months ended* May 31, 2023*, the Company recorded an income tax benefit of $0.04 million. For thesix months ended* May 31, 2024and2023*, the effective tax rate was 0.2% and (1.3)%, respectively. The Company’s tax rate differs from the statutory rate of 21.0% due to the effects of state taxes net of federal benefit, the foreign tax rate differential as a result of Byrna South Africa, effects of permanent non-deductible expenses, the recording of a valuation allowance against the deferred tax assets generated in the current period, and other effects.

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 $0.03 million per year. Royalties onCO2* 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 intwo* 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 our business, the Company* maybe subject to certain other legal actions and claims, including product liability, consumer, commercial, tax and governmental matters, which mayarise from time to time. The Company doesnot* 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* mayin 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.

The CEO, who is also the Chief Operating Decision Maker, evaluates the entire 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 andone reportable segment.

The tables below summarize the Company’s revenue for thethree andsix months ended* May 31, 2024and2023*, respectively, by geographic region (in thousands):

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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.

The Company held its cash balances within banks in the U.S. in U.S. dollars and with banks in South Africa in U.S. dollars and South African rand. The Company’s operations are conducted in the U.S. and South Africa. The value of the South African rand against the U.S. dollar* may*fluctuate with changes in economic conditions.

During thesix months ended* May 31, 2024*, in comparison to the prior year period, the U.S. dollar on average was stronger in relation to the South African rand, and upon the translation of the Company’s subsidiaries’ revenues, expenses, assets and liabilities held in South African rand. The Company recorded a translation adjustment gain of $0.03 million and loss of $1.2 million related to the South African rand during thesix months ended* May 31, 2024and2023*, respectively.

The Company’s South African subsidiary revenues, cost of goods sold, operating costs and capital expenditures are denominated in South African rand. Consequently, fluctuations in the U.S. 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 U.S. dollars. The Company isnot using any forward or option contracts to fix the foreign exchange rates. Using a 10% fluctuation in the U.S. exchange rate, the impact on the loss and stockholders’ equity isnot material.

Credit risk is the risk thatone 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, cash equivalents, accounts receivable, and the loan receivable from Byrna LATAM. The Company maintains cash with high credit quality financial institutions located in the U.S. and South Africa. The Company maintains cash and cash equivalent balances with financial institutions in the U.S. in excess of amounts insured by the Federal Deposit Insurance Corporation.

The Company is exposed to credit losses on accounts receivable balances. The Company uses a simplified approach to calculate a general provision for credit losses. An allowance is calculated for each aging “bucket,” based on the risk profile of that bucket. The Company revisits the reserve periodically, butno less than quarterly, with the same analytical approach in order to determine if the allowance needs to be increased or decreased, based calculation of each aging bucket.

The Company loaned $1.6 million to Byrna LATAM, which was formed in* January 2023*as a joint venture in South America. 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.

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