Byrna Technologies Inc. Income Taxes Disclosure

17.	INCOME TAXES

 

Income (loss) before income taxes consists of the following (in thousands):

 

		Year Ended November 30,
		2025				2024
United States		$	12,418			$	8,226
Foreign			(677	)			(1,142	)
Total		$	11,741			$	7,084

 

The components of the provision (benefit) for income taxes is as follows (in thousands):

 

		Year Ended November 30,
		2025				2024
Current expense:
Federal		$	67			$	6
State			267				123
Foreign			17				—
Total current expense:			351				129
Deferred expense (benefit):
Federal			1,832				(5,164	)
State			(129	)			(673	)
Foreign			—				—
Total deferred expense (benefit)			1,703				(5,837	)
Total income tax provision (benefit)		$	2,054			$	(5,708	)

 

 

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,
		2025				2024
Income at US statutory rate			21.00	%			21.00	%
State income taxes			0.74	%			3.15	%
Permanent differences			(1.82	)%			15.06	%
Foreign rate differential			(0.35	)%			(0.96	)%
Valuation allowance			(0.33	)%			(118.75	)%
Tax credits			(2.03	)%			(4.41	)%
Other			0.28	%			4.60	%
Total			17.49	%			(80.31	)%

 

The net deferred income tax asset (liability) balance related to the following (in thousands):

 

		November 30,
		2025				2024
Net operating loss ("NOL") carryforwards		$	2,002			$	3,438
Research and development tax credits			430				318
Stock-based compensation			1,230				1,033
Inventory reserve			110				107
Allowance for current expected credit losses			14				70
Personnel costs			949				879
Warranty reserves			35				57
Foreign tax credit carryforwards			9				9
Capital loss carryover			118				115
Unrealized losses			23				14
Deferred revenue			—				21
Lease liability			535				583
Research and experimental capitalization			1,113				802
Business interest limitation			425				325
Subtotal deferred tax assets			6,993				7,771
Valuation allowance			(775	)			(837	)
Total deferred tax assets			6,218				6,934
Depreciation and amortization			(1,619	)			(555	)
Right of use asset			(465	)			(542	)
Total deferred tax liabilities			(2,084	)			(1,097	)
Net deferred tax assets (liabilities)		$	4,134			$	5,837

 

The Company notes less than $0.1 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 U.S. GAAP.  As of November 30, 2025, the Company had federal and state NOL carryforwards of approximately $7.5 million and $3.2 million, respectively, which begin to expire in 2029 for federal and state purposes. The federal NOL carryforwards include approximately $4.7 million, which do not expire. The Company had foreign NOL carryforwards of $0.9 million which can be carried forward indefinitely. The Company had federal and state research and development tax credits of approximately $0.2 and $0.2 million, respectively, as of November 30, 2025. The federal and state research and development credits begin to expire in 2044 and 2039, respectively. There were $0.1 and $0.2 million of federal or state research and development tax credits as of  November 30, 2024, respectively. Deferred tax assets are presented separately 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, 2025 and 2024, 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, 2025 and 2024.

 

At November 30, 2025 and 2024, the Company recognized valuation allowances of $0.8 million and $0.8 million, respectively, related to its deferred tax assets. The net increase (decrease) of less than $0.1 million and $(8.5) million in the valuation allowance reflects the net operating loss position in South Africa for November 30, 2025 and the release of the U.S. valuation allowance for November 30, 2024, 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 valuation allowance position 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 through November 30, 2024 of $4.5 million. During the year ended November 30, 2025, the capitalization for income tax purposes of R&E costs is $2.4 million. The Company will amortize these costs for tax purposes over five 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.

 

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted. The OBBBA amends U.S. tax law including provisions related to domestic research and development expenses and bonus depreciation, among others. Bonus depreciation on new fixed asset additions placed in service after January 19, 2025 is now 100% and the Company has included the estimated impact of items affecting its current tax period as part of its income tax expense computed for the year ended November 30, 2025. The provision related to domestic research and development expenses and other provisions are in effect for tax years beginning after December 31, 2024 and will not be in effect for the Company until next year, but the Company does not expect a material impact of the OBBBA on its consolidated financial statements as of November 30, 2025.