Quarterly report [Sections 13 or 15(d)]

Note 16 - Stock-based Compensation

v3.25.2
Note 16 - Stock-based Compensation
6 Months Ended
May 31, 2025
Notes to Financial Statements  
Share-Based Payment Arrangement [Text Block]

16.

STOCK-BASED COMPENSATION

 

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 the 2020 Plan is 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.

 

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, Topic 14. 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 does not 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 $1.6 million and $1.8 million for the six months ended May 31, 2025 and May 31, 2024, respectively.  Total stock-based compensation expense was $0.7 million and $0.9 million for the three months ended May 31, 2025 and May 31, 2024, respectively. Total stock-based compensation expense was recorded in Operating expenses in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

 

Restricted Stock Units

 

During the three months ended May 31, 2025, the Company granted performance-based restricted stock units (“PSUs”) to certain employees. The number of PSUs that may ultimately vest is contingent upon the achievement of specified GAAP revenue targets for the fiscal year 2026 performance period ( December 1, 2025 through November 30, 2026), as well as the participant’s continued employment through November 30, 2027. The actual number of shares that may be earned ranges from 0% to 200% of the target award, depending on the level of achievement of the performance goals. Any earned PSUs will vest on November 30, 2027, subject to continued service through such date. Compensation expense is recognized for PSUs only to the extent that it is probable the performance conditions will be achieved.

 

During the six months ended May 31, 2025 the Company granted 78,886 RSUs consisting of 46,400 time-based RSUs and 32,486 performance-based RSUs. During the six months ended May 31, 2024, the Company granted 600,000 of the RSUs with a “double trigger” for vesting based on stock price and time, as follows: (1) one-third of the RSUs would be triggered when the Company’s stock trades above $6.00 on a 20-day VWAP, the second one-third of the RSUs would be triggered when the Company’s stock trades above $9.00 on a 20-day VWAP, and the final one-third of the RSUs would 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. Stock-based compensation expense for the RSUs for the six months ended May 31, 2025 and May 31, 2024 was $0.9 million and $0.9 million, respectively. Stock-based compensation expense for the RSUs for the three months ended May 31, 2025 and May 31, 2024 was $0.5 million and $0.4 million, respectively.

 

The assumptions that the Company used in a Monte Carlo simulation model to determine the grant-date fair value of RSUs granted with a double trigger for the six months ended May 31, 2024 were as follows:

 

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  

 

As of  May 31, 2025, there was $3.5 million of unrecognized stock-based compensation cost related to unvested RSUs which is expected to be recognized over a weighted average of 1.1 years. 

 

The following table summarizes the RSU activity during the six months ended May 31, 2025:

 

   

RSUs

 

Unvested and outstanding as of November 30, 2024

    915,230  

Granted

    78,886  

Settled

    (101,001 )

Forfeited

    (1,161 )

Unvested and outstanding at May 31, 2025

    891,954  

 

Of the 101,001 RSUs that were settled during the six months ended May 31, 2025, 1,636 units were withheld by the Company in exchange for the Company paying for the payroll withholding taxes. For the six months ended May 31, 2025, RSUs of 99,366, net, were issued in connection with the settlement of RSUs.

 

Stock Options

The Company recorded stock-based compensation expense for options granted to its employees and directors of $0.7 million and $0.9 million during the six months ended May 31, 2025 and May 31, 2024, respectively, and $0.3 million and $0.5 million for the three months ended May 31, 2025 and 2024, respectively. As of May 31, 2025, there was $0.6 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 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 the six months ended May 31, 2024 were as follows:

 

Risk free rate

    4.10 %

Expected dividends

  $  

Expected volatility

    75.75 %

Expected life (in years)

    6.5  

Market price of the Company’s Common Stock on date of grant

  $ 6.89  

 

The following table summarizes option activity under the 2020 Plan during the six months ended May 31, 2025:

 

                 
           

Weighted-Average

 
   

Stock

   

Exercise Price Per Stock

 
   

Options

   

Option

 

Outstanding, November 30, 2024

    1,241,839     $ 9.11  

Granted

           

Exercised

    (115,050 )     9.38  

Expired

    (586 )     1.90  

Forfeited

    (16,667 )     8.96  

Outstanding, May 31, 2025

    1,109,536     $ 9.11  

Exercisable, May 31, 2025

    900,201     $ 9.44  

 

Of the 115,050 shares issued upon exercise of options, 27,777 options were surrendered due to cashless exercise.