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Note 16 - Stock-based Compensation | 9 Months Ended
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Aug. 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 was 2,500,000. On April 26, 2022, the Company’s Board of Directors approved and on June 17, 2022 the Company's stockholders approved the increase of the number of shares of common stock available for issuance under the 2020 Plan by 1,300,000 shares to a total of 3,800,000 shares. The 2020 Plan is administered by the Compensation Committee of the Board. The Compensation Committee determines the persons to whom options to purchase shares of common stock, stock appreciation rights (“SARs”), restricted stock units (“RSUs”), and restricted or unrestricted shares of common stock may be granted. Persons eligible to receive awards under the 2020 Plan are employees, officers, directors, consultants, advisors and other individual service providers of the Company. Awards are at the discretion of the Compensation Committee. 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 $4.1 million and $2.5 million for the nine months ended August 31, 2022 and 2021, respectively. Total stock-based compensation expense was $2.7 million and $1.0 million for the three months ended August 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 Chief Technology Officer ("CTO") in exchange for his waiver of rights to future royalty payments. See Note 21, "Commitments and Contingencies - Royalty Payments," for additional information. Because these awards were contingent on shareholder approval at the next annual shareholder meeting, these RSUs were not considered granted under Accounting Standards Codification ("ASC") 718, Compensation - Stock Compensation ("ASC 718") and were treated as obligation to issue RSU's and were remeasured at the end of each reporting period until the settlement date on June 17, 2022 and August 3, 2022 (for the RSUs to the CTO). Additionally, on March 23, 2022, the Board of Directors approved the issuance of RSU Amendment Agreements to each grantee of the double trigger RSUs in which 50% of the RSUs (778,750 RSUs) were exchanged for stock options. In accordance with ASC 718, a cancellation of an award accompanied by the concurrent grant of a replacement award shall be accounted for as a modification of the terms of the cancelled award. Similarly, because these stock options were not considered granted under ASC 718, they were therefore treated as obligation to issue stock options and were remeasured at the end of each reporting period until the settlement date on June 17, 2022. On June 17, 2022, the stockholders approved to increase the stock compensation plan by 1,300,000 shares to 3,800,000 shares. 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 of $1.0 million from accounts payable and accrued liabilities to additional paid-in capital. Additionally, the amounts recognized as employee incentive expense for the three months ended August 31, 2022 and 2021 of $0 and $1.4 million, respectively, were reclassified to stock compensation expense. The non-cash expense associated with these rewards were valued at the grant date of June 17, 2022, using a Monte Carlo model for double trigger RSUs and a Black Scholes model for simple employment period vesting stock options. Restricted Stock Units During the nine months ended August 31, 2022 and 2021, the Company granted 376,555 and 174,493 RSUs, respectively. Stock-based compensation expense for the RSUs for the nine months ended August 31, 2022 and 2021, was $2.3 million for each of the years. Stock-based compensation expense for the RSUs for the three months ended August 31, 2022 and 2021, was $1.0 million and $0.9 million, respectively. During the nine months ended August 31, 2022, the Company accelerated the vesting of 3,874 RSUs to a former director and 8,392 RSUs to current board members for 2021 services. During the nine months ended August 31, 2022, 25,000 RSUs were forfeited due 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 were returned to the pool of shares available for issuance under the 2020 Plan. As of August 31, 2022, there was $5.2 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 nine months ended August 31, 2022:
|  | RSUs |
Unvested and outstanding as of November 30, 2021 |  |  | 1,594,120 |
Granted |  |  | 376,555 |
Settled |  |  | (12,266 | )
Cancelled |  |  | (778,750 | )
Forfeited |  |  | (25,000 | )
Unvested and outstanding at August 31, 2022 |  |  | 1,154,659 |
Stock Options During the nine months ended August 31, 2022 and 2021, the Company granted options to employees and directors to purchase 994,750 and 41,000 shares of common stock, respectively. The Company recorded stock-based compensation expense for options granted to its employees and directors of $1.7 million and $0.06 million during the nine months ended August 31, 2022 and 2021, respectively. The Company recorded stock-based compensation expense for options granted to its employees and directors of $1.7 million and $0.05 million during the three months ended August 31, 2022 and 2021, respectively. As of August 31, 2022, there was $3.6 million of unrecognized stock-based compensation cost related to unvested stock options which is expected to be recognized over a weighted average period of 2.5 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 expected volatility is based upon historical volatility of the Company's stock. The expected term for the options is based upon observation of actual time elapsed between employees. The assumption that the Company used to determine the grant-date fair value of stock options granted for the nine months ended nine months ended August 31, 2022 were as follows:
Risk free rate |  |  | 3.34 | %
Expected dividends |  |  | 0.0 |
Expected volatility |  |  | 78.44 | %
Expected life (in years) |  |  | 6.5 |
Market price of the Company’s common stock on date of grant |  |  | 5.51 |
Exercise price |  |  | 7.70 |
The following table summarizes option activity under the 2020 Plan during the nine months ended August 31, 2022:
|  |  |  |  |  | Weighted-Average |
|  | Stock |  |  | Exercise Price Per Stock |
|  | Options |  |  | Option |
Outstanding, November 30, 2021 |  |  | 586,783 |  |  | $ | 3.48 |
Granted |  |  | 994,750 |  |  |  | 7.70 |
Exercised |  |  | (250,250 | ) |  |  | (1.82 | )
Forfeited |  |  | (20,500 | ) |  |  | (11.80 | )
Outstanding, August 31, 2022 |  |  | 1,310,783 |  |  | $ | 6.83 |
Exercisable, August 31, 2022 |  |  | 274,534 |  |  | $ | 1.90 |

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