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Note 16 - Stock-based Compensation | 6 Months Ended
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May 31, 2022
Notes to Financial Statements |
Share-Based Payment Arrangement [Text Block] |
16. | STOCK-BASED COMPENSATION
2017 Plan The Company has granted stock options and other stock-based awards under its 2017 Stock Option Plan (the “2017 Plan”). The maximum number of shares of common stock which could have been reserved for issuance under the 2017 plan was 1,899,327. The 2017 Plan was administered by the Compensation Committee of the Board. The Compensation Committee determined the persons to whom options to purchase shares of common stock, and other stock-based awards may be granted. Persons eligible to receive awards under the 2017 Plan were employees, officers, directors, and consultants of the Company. Awards were at the discretion of the Compensation Committee. On February 24, 2021, the Company terminated the 2017 Plan and adopted the 2020 Plan (defined below). 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. 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. On February 24, 2021, following the termination of the 2017 Plan, the Company replaced outstanding options under the 2017 Plan with options under the 2020 Plan. In connection with the adoption of the 2020 Plan, the Company cancelled outstanding option awards granted under the 2017 plan. There were no substantive changes to the rights of any holder of options granted under the 2017 plan other than replacing their award certificates with award agreements under the 2020 plan. The grant dates, exercise prices, expiration dates, and vesting provisions of any of the new award agreements under the 2020 plan that replace the certificates issued under the 2017 plan are identical for each grant and no change in valuation or accounting was required. The Board also amended the definition of Disability in the 2020 Plan to provide that “Disability” has the meaning assigned to such term in any individual employment agreement or award agreement with a plan participant and that if no such definition is provided in an award or employment agreement “Disability” is defined as in the 2020 Plan. Stock-Based Compensation Expense Total stock-based compensation expense was $1.6 million for each of the six months ended May 31, 2022 and 2021, respectively. Total stock-based compensation expense was $0.8 million for each of the three months ended May 31, 2022 and 2021, respectively. Total stock-based compensation expense was recorded in Operating expenses in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Loss. During the first half of 2022, the Board of Directors authorized granting of restricted stock unit awards (" RSUs") in excess of the limit stipulated under the 2020 Plan. Additionally, the Company agreed to grant 200,000 RSUs to the CTO in exchange for his waiver of rights to future royalty payments. See Note 21, "Commitments and Contingencies - Royalty Payments," for additional information. These RSUs will be issued following stockholder approval of an increase in the shares authorized for issuance under the 2020 Plan at the Annual Meeting. Because these awards are contingent on shareholder approval at the next annual shareholder meeting, these RSUs are not considered granted under Accounting Standards Codification ("ASC") 718, Compensation - Stock Compensation and are treated as obligation to issue RSU's and are remeasured at the end of each reporting period until its settlement date. The non-cash expense associated with these awards has been estimated at $0.5 million and $1.0 million for the three and six months ended May 31, 2022 based on the Board resolution date as the grant date, along with a Monte Carlo model for double trigger RSUs and a Black Scholes model for simple employment period vesting stock options. The expense is recognized as employee incentive expense within operating expenses in the accompanying Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. The obligation is included in accounts payable and accrued liabilities within the Condensed Consolidated Balance Sheets. The change in fair value of the obligation to issue RSU’s for the three and six months ended amounted to $0.4 million, respectively, and recorded as a reduction in incentive expense within operating expenses in the accompanying Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. Additionally, on March 23, 2022, the Board of Directors approved the issuance of RSU Amendment Agreements to each grantee of the double trigger RSUs in which 50% of the RSUs (778,750 RSUs) were exchanged for stock options. As of May 31, 2022, the increase in the shares authorized for issuance under the 2020 Plan sufficient for the exercise of the replacement stock options was not yet approved by the shareholders. In accordance with ASC 718, Compensation - Stock Compensation, a cancellation of an award accompanied by the concurrent grant of a replacement award shall be accounted for as a modification of the terms of the cancelled award. In addition, these stock options are not considered granted and are therefore treated as obligation to issue stock options and are remeasured at the end of each reporting period until its settlement date. The modification of the awards resulted in additional non-cash expense of $0.8 million for the three and six months ended May 31, 2022 and reclassification of approximately $1.0 million from additional paid in capital to liability. The non-cash expense associated with the modified awards for the three and six months ended May 31, 2022 has been estimated at $0.3 million based on the Board resolution date as of the modification date, along with the Black Scholes model for simple employment period vesting stock options. The expense is recognized as employee incentive expense within operating expenses in the accompanying Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. The obligation is included in accounts payable and accrued liabilities within the Condensed Consolidated Balance Sheets. The change in fair value of the obligation to issue these stock options for the three and six months ended amounted to $0.3 million and recorded as a reduction in incentive expense within operating expenses in the accompanying Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income. On June 17, 2022, the stockholders approved to increase the stock compensation plan by 1,300,000 shares to 3,800,000 shares. This approval allows the RSUs and stock options granted in excess of the limit to be reclassified from liability to equity as the Company's outstanding issuances will be under the pool limit. Consequently, the Company settled the obligation to issue RSUs and options by issuing the related RSUs and stock options and reclassified the fair value of the issuances at June 17, 2022 from accounts payable and accrued liabilities to additional paid-in capital. Restricted Stock Units During the six months ended May 31, 2022 and 2021, the Company granted 626 and 1,573,500 RSUs, respectively. Stock-based compensation expense for the RSUs for the six months ended May 31, 2022 and 2021, was $1.3 million and $1.6 million, respectively. During the six months ended May 31, 2022, 778,750 RSUs were exchanged for an obligation to issue stock options to various employees based on the RSU Amendment Agreement authorized by the Board of Directors, as noted above. During the first quarter of 2022, the Company settled 3,873 RSUs to a former board of director and forfeited 25,000 RSUs to a former employee who was terminated for cause. These RSU's did not vest, as they were based on triggers and performance that were not met. As a result, no expenses were reversed, and going forward no expenses will be recognized. The forfeited RSUs are returned to the pool. As of May 31, 2022, there was $3.1 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. The following table summarizes the RSU activity during the six months ended May 31, 2022:
|  | RSUs |
Unvested and outstanding as of November 30, 2021 |  |  | 1,594,120 |
Granted |  |  | 626 |
Settled |  |  | (3,874 | )
Cancelled |  |  | (778,750 | )
Forfeited |  |  | (25,000 | )
Unvested and outstanding at May 31, 2022 |  |  | 787,122 |
There will be 122,500 RSUs granted upon approval of the Board of Directors, of which none will be vested. Stock Options During the six months ended May 31, 2022 and 2021, the Company granted options to employees and directors to purchase 0 and 29,000 shares of common stock, respectively. The Company recorded stock-based compensation expense for options granted to its employees and directors of $0.1 million and $0.2 million during the six months ended May 31, 2022 and 2021, respectively. The Company recorded stock-based compensation expense for options granted to its employees and directors of $0.05 million and $0.09 million during the three months ended May 31, 2022 and 2021, respectively. As of May 31, 2022, there was $0.3 million of unrecognized stock-based compensation cost related to unvested stock options which is expected to be recognized over a weighted average period of 1.8 years. The following table summarizes option activity under the 2020 Plan during the six months ended May 31, 2022:
|  |  |  |  |  | Weighted-Average |
|  | Stock |  |  | Exercise Price Per Stock |
|  | Options |  |  | Option |
Outstanding, November 30, 2021 |  |  | 586,783 |  |  |  |  |
Exercised |  |  | (250,250 | ) |  | $ | 1.82 |
Forfeited |  |  | (16,000 | ) |  | $ | 14.77 |
Outstanding, May 31, 2022 |  |  | 320,533 |  |  | $ | 4.22 |
Exercisable, May 31, 2022 |  |  | 274,534 |  |  | $ | 1.90 |
There will be 994,750 stock options granted upon approval of the Board of Directors, of which none will be vested.

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