The Offering

By means of this prospectus a number of persons are offering to sell up to:

For purposes of this prospectus, the Unit Shares and the Warrant Shares are collectively referred to as the “Shares”. Although we will receive proceeds if any of the Warrants are exercised, we will not receive any proceeds from the sale of the Shares by the selling shareholders. Any proceeds received from the exercise of Warrants will be used for general corporate purposes. We will pay for the expenses of this offering which are estimated to be $14,161.

The purchase of the securities offered by this prospectus involves a high degree of risk. Risk factors include our history of losses and our need for additional capital. For a description of certain important factors that should be considered by prospective investors, see “Risk Factors” beginning on page 25 of the Fiscal 2017 10-K which is incorporated herein by reference.

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INCORPORATION OF DOCUMENTS BY REFERENCE

We incorporate by reference the filed documents listed below, except as superseded, supplemented or modified by this prospectus, and any future filings, other than current reports furnished under Item 2.02 or Item 7.01 of Form 8-K and exhibits filed on such form that are related to such items, we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering which is the subject of this prospectus. Information in such future filings updates and supplements the information provided in this prospectus.

The number of shares of our common stock that will be outstanding after this offering is based on shares of our common stock outstanding as of         , 2021, and excludes:

●      shares of our common stock issuable upon the exercise of outstanding but unexercised options, of which              are vested, to purchase shares of our common stock as of          , 2021, under the Byrna Technologies, Inc. 2020 Equity Incentive Plan (the “2020 Plan”), with a weighted average exercise price of $            per share;

●      shares of our common stock issuable upon the settlement of restricted stock units outstanding as of          , 2021 under the 2020 Plan; and

●      shares of our common stock reserved for future issuance under the 2020 Plan.

Except as otherwise indicated, all information in this prospectus assumes or reflects:

● no exercise of the underwriters’ option to purchase additional shares;

● no exercise or settlement of outstanding stock options; and

● the Reverse Stock Split.

Summary Consolidated Financial Data

The following tables provide our summary consolidated financial data and should be read in conjunction with “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements, related notes and other financial information included elsewhere in this prospectus. We have derived the summary consolidated statements of income data for the fiscal years ended November 30, 2020 and 2019 from our audited consolidated financial statements appearing elsewhere in this prospectus. The summary condensed statements of income data for the three months ended February 29, 2020 and February 28, 2021, and the consolidated balance sheet data as of February 28, 2021 have been derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected in the future, and the results for any interim period are not necessarily indicative of the results that may be expected in any full year.

We will provide, without charge,

The consolidated balance sheet data as of February 28, 2021 are presented below:

RISK FACTORS

        Investing in our common stock involves a high degree of such person, a copyrisk. These risks include, but are not limited to, those described below, each of any orwhich may be relevant to an investment decision. You should carefully consider the risks and uncertainties described below, together with all of the documents incorporated by reference above, including exhibits. Requests should be directed to:

Security Devices International Inc.
107 Audubon Road, Bldg 2, Suite 201
Wakefield, MA 01880
(978) 868-5011
dthrasher@securitydii.com

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This prospectus and the documents that are incorporated by reference intoother information contained in this prospectus, contain or incorporate by reference “forward-looking statements” withinincluding the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended, that may be identified by the use of words like “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “project,” “consider,” “predict,” “potential,” “feel,” or other comparable terminology. Forward-looking statements reflect our good-faith evaluation of information available at the time the forward-looking statements were made. However, such statements are dependent on and, therefore, can be influenced by a number of external variables over which we have little or no control. For a discussion of significant risk factors applicable to us, see Part II, Item 7,section titled “Management’s Discussion and Analysis of Financial Condition and PlanResults of Operation”Operations” and our consolidated financial statements and the related notes, before deciding whether to invest in shares of our common stock. If any of the following risks or other risks actually occur, our business, financial condition, results of operations, and future prospects could be materially harmed. In that event, the market price of our common stock could decline, and you could lose part or all of your investment. The risks and uncertainties described below are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” above.

Risks Related to Our Business

We have a limited operating history on which you can evaluate our business.

We have a limited operating history on which you can evaluate our business. Although our corporate entity has existed since 2005, we have only been manufacturing and selling the Byrna HD, our largest source of revenue, since April 2019. Moreover, many members of our key senior management team are relatively new to their positions. Our Chief Financial Officer (“CFO”), including the Section captioned “Risk Factors” therein,Chief Supply Chain Officer, and Chief People Officer (“CPO”) began their current roles late in the Fiscal 2017 10-K, which is incorporated by referencethird quarter in this prospectus. Forward-looking statements are not,2020, our Chief Marketing and should not be relied upon as, a guaranteeRevenue Officer (“CMO”) began his role in the first quarter of future performance or results, nor will they necessarily prove to be accurate indications of the times at or by which any such performance or results will be achieved.2021, and our Chief Governmental Affairs Officer began his role in 2020. As a result, actual outcomesour business may be subject to many of the problems, expenses, delays, and results may differ materially from those expressedrisks inherent in forward-looking statements. the rapid growth of a relatively new business and the integration of key personnel and infrastructure.

We undertakehave a history of operating losses and we cannot guarantee that we will ever achieve sustained profitability.

We have recorded a net loss in all reporting periods since our inception. Our net loss for the years ended November 30, 2020 and 2019 was $12.6 million and $4.4 million, respectively, our accumulated deficit at November 30, 2020 was $50.2 million. Our net loss for the quarters ended February 28, 2021 and February 29, 2020 was $0.3 million and $2.3 million, respectively, our accumulated deficit at February 28, 2021 was $50.5 million. There can be no obligationassurance of success in reducing our net losses or becoming profitable, and even if we do become profitable, there can be no assurance of continued profitability.

We expect to update or revise forward-looking statements.

DILUTION

The Company does not have adequate revenue to fund all of its operational needs and may require additional financing to continue its operations if it is unablein the future to generate substantial revenue growth. If we do not obtain such additional financing, our business prospects, financial condition and results of operations could be adversely affected.

There can be no assurance that such financing will be available at all or on favorable terms. Failure to generate substantial revenue growth could result in delay or indefinite postponement of the Company’s deployment of its products, andsignificantly grow our revenues may result in the Company lookingus seeking to obtain such additional financing resultingwhich could result in possible dilution. Any suchdelay of our development and sale of our products. Subsequent financing willmay dilute the ownership interest of the Company’s shareholdersour stockholders at the time of the financing and may dilute the value of their shareholdings.stock.

DESCRIPTION OF COMMON STOCK

If we are unable to successfully implement our business plan for the sale of the Byrna HD, our revenue growth could be slower than we expect and our business, operating results and financial condition could be adversely affected.

There can be no assurance that our revenues or revenue growth can be sustained. Revenue growth that we have achieved or may achieve may not be indicative of future operating results. The Byrna HD is a new product and its long-term adoption by the U.S. consumer market, and by potential other markets including law enforcement, private security, and international markets, remains unknown. Among other things, production delays, including as a result of the COVID-19 pandemic, excessive costs, performance failures, new legislation or regulation, competition, or negative publicity could stall or prevent its success in the market and generation of revenue. In addition, we have increased and may increase further our operating expenses in order to fund increases in our manufacturing, distribution, and sales and marketing efforts and increase our administrative resources in anticipation of future growth. To the extent that increases in such expenses precede or are not subsequently followed by increased revenues, our business, operating results and financial condition may be materially adversely affected.

We may not be able to effectively manage our growth.

As we grow our business, slower growing or reduced demand for our products, increased competition, a decrease in the growth rate of our overall market, failure to develop and successfully market new products, or the maturation of our business or market could harm our business. We expect to make significant investments in research and development and sales and marketing, expand our operations and infrastructure, design and develop or acquire new products, and enhance our existing products. If our sales do not increase at a sufficient rate to offset these increases in our operating expenses, our profitability may decline in future periods.

We have expanded our operations rapidly since our inception. The scope and complexity of our business have increased substantially over the past several years. We have only a limited history operating our business at its current scale. Key members of our management team do not have substantial tenure working together. Consequently, if our operations continue to grow at a rapid pace, we may experience difficulties in managing this growth and building the appropriate processes and controls. Continued growth may increase the strain on our resources, and we could experience operating difficulties, including difficulties in sourcing, logistics, recruiting, maintaining internal controls, marketing, designing innovative products, and meeting consumer needs. If we do not adapt to meet these evolving challenges, the strength of our brand may erode, the quality of our products may suffer, we may not be able to deliver products on a timely basis to our customers, and our corporate culture may be harmed.

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

We may be subject to proceedings or claims that may arise in the ordinary course of the business, which could include product and service warranty claims, which could be substantial. If our products fail to perform as warranted and we fail to quickly resolve product quality or performance issues in a timely manner, our reputation may be tarnished, potential sales may be lost, and we may be forced to pay damages. The occurrence of product defects and the inability to correct errors could result in the delay or loss of market acceptance of our products, material warranty expense, diversion of technological and other resources from our product development efforts, and the loss of credibility with customers, manufacturer’s representatives, distributors, dealers and end-users, any of which could have a material adverse effect on our business, operating results and financial conditions.

Our products are used in activities and situations that involve risk of personal injury. Our products expose us to potential product liability, warranty liability, and personal injury claims and litigation relating to the use or misuse of our products, including allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product or activities associated with the product, negligence, and strict liability. If successful, any such claims could have a material adverse effect on our business, operating results, and financial condition. Defects in our products may result in a loss of sales, recall expenses, delay in market acceptance, and damage to our reputation and increased warranty costs, which could have a material adverse effect on our business, operating results, and financial condition. In addition, our reputation may be adversely affected by such claims, whether or not successful, including potential negative publicity about our products.

We issued a product safety notice in February 2021 and, as a result, took a reserve of $195,000, which we believe to have been adequate. If the safety update fails in the future, new issues arise, or a substantial number of consumers continue to seek exchanges we could also experience damage to our reputation, business, operations (including production rate) and revenues.

We maintain general liability insurance that includes product liability coverage in amounts that we believe are reasonable, but there is no assurance that we will be able to maintain such insurance on acceptable terms, if at all, in the future and product liability claims may exceed the amount of insurance coverage.

The failure to attract and retain key personnel could have an adverse effect on our operating results.

Our success depends substantially on the efforts and abilities of our senior management and key personnel. The competition for qualified management and key personnel is intense. The loss of services of one or more of our key employees or the inability to hire, train, and retain additional key personnel could delay the development and sale of our products, disrupt our business, and interfere with our ability to execute our business plan.

In addition, our ability to maintain our competitive position is dependent to a large degree on the efforts and skills of our senior management team, including Bryan Ganz, our President, Chief Executive Officer and Chairman of the Board of Directors. The loss of the services of one or more of our key personnel could materially and adversely affect our operations.

We depend on the sale of our personal security devices.

Although we do sell certain other products (such as our 40mm product line) and we expect to introduce new products, including products acquired in connection with the acquisition of Mission Less Lethal assets in May 2021, our revenue is derived almost exclusively from the sale of the Byrna HD. The sale of such personal security devices is influenced by a variety of economic, social, and political factors, including without limitation the level of confidence of consumers in our products and in the security and reliability of online shopping and e-commerce on which we significantly rely, which may result in volatile sales. Sales of the Byrna HD, including its ammunition and accessories, represented 99% of our total revenue for the year ended November 30, 2020 and 100% of our total revenue for the quarter ended February 28, 2021. There can be no assurances of continued demand for the Byrna HD, and any change in the factors that impact demand and sales that are likely to materially and adversely affect our prospects.

Our business depends on maintaining and strengthening our brand and generating and maintaining demand for our products, and a reduction in such demand could harm our results of operations.

The Byrna name and brand image are integral to the growth of our business, as well as to the implementation of our strategies for expanding our business. Our success depends on the value and reputation of our brand, which, in turn, depends on factors such as the quality, design, performance, functionality, and durability of our products, the image of our e-commerce platform and retail presence, our communication activities, including advertising, social media, and public relations, and our management of the customer experience, including direct interfaces through customer service. Maintaining, promoting, and positioning our brand are important to expanding our customer base, and will depend largely on the success of our marketing and merchandising efforts and our ability to provide consistent, high quality customer experiences. We intend to make substantial investments in these areas in order to maintain and enhance our brand, however such investments may not be successful. Ineffective marketing, negative publicity, product diversion to unauthorized distribution channels, product or manufacturing defects, counterfeit products, unfair labor practices, failure to protect the intellectual property rights in our brand, and inability to provide satisfactory customer service experience as we rapidly expand our business, are some of the potential threats to the strength of our brand, and those and other factors could rapidly and severely diminish customer confidence in us. Furthermore, these factors could cause our customers to lose the personal connection they feel with the Byrna brand. We believe that maintaining and enhancing our brand image in our current markets and in new markets where we have limited brand recognition is important to expanding our customer base. If we are unable to maintain or enhance our brand in current or new markets, our growth strategy and results of operations could be harmed.

We are dependent on our relationships with key third-party suppliers for our business.

We rely on certain third-party suppliers for our business, including sole source suppliers. Sole source suppliers account for approximately 35-40% of the components in our Byrna HD and 100% of the chemical irritant projectiles we sell as well as certain accessories. Our future operating results depend upon our ability to obtain timely delivery of a sufficient amount and a reliable quality of all components on commercially reasonable terms. Failure of a supplier’s business or consolidation within the industry could further limit our ability to purchase key components at all (in the case of sole source suppliers) or in sufficient quantities and on commercially reasonable terms. Demands of competitors with larger operations and stronger bargaining power could also limit our ability to purchase key components in sufficient quantities on commercially reasonable terms. Failure of our suppliers to provide sufficient quantities of components on favorable terms, meet quality standards, or deliver components on a timely basis has occurred due to industry shortages of certain raw materials or for reasons related to the COVID-19 pandemic, and could occur in the future for similar or other reasons. Such failures could delay or stop our production, result in possible lost sales and seriously threaten our liquidity and revenues.

We are dependent on the quality of parts supplied by and quality controls of our third-party suppliers.

The Byrna HD contains over 100 parts and we rely on third-party suppliers to deliver parts and materials that comply with our specifications. While we test 100% of our finished products, we do not test 100% of the components and materials they contain. We use randomized statistical inspection for components and materials and these protocols, while we believe them to be reliable, have inherent limitations and may miss parts that do not meet specifications. If those parts pass our completed launcher testing but subsequently cause failures of the products in which they are installed, we may need to undertake product recalls or implement protocols for improved performance or safety, which could negatively impact our reputation and business. Moreover, if any such part failure resulted in a physical injury, it could also subject us to the risks of potential product liability actions and, if our stock price were impacted, security class actions.

Higher costs or unavailability of components, freight, materials and accessories, including ammunition, could adversely affect our financial results.

Delays caused by industry allocations, material shortages (such as plastic or resins), or obsolescence have occurred as a result of the COVID-19 pandemic, may continue and could occur in the future (due to the COVID-19 pandemic or other reasons). Such delays may take weeks or months to resolve and may result in increased costs as well as production and product fulfillment delays. In addition, in some cases, parts obsolescence may require a product re-design to ensure quality replacement components. These delays could cause significant delays in manufacturing and loss of sales, leading to adverse effects significantly impacting our financial condition or results of operations and could injure our reputation.

Our freight and import costs and the timely delivery of our products could be adversely impacted by a number of factors which could reduce the profitability of our operations, including: higher fuel costs; potential port closures; theft in transit; permit or customs clearance issues; increased government regulation or changes for imports of foreign products into the United States; delays created by terrorist attacks or threats, public health issues and pandemics and epidemics, national disasters or work stoppages; and other matters. Any interruption of supply for any material components of our products could significantly delay the shipment of our products and have a material adverse effect on our revenues, profitability and financial condition. International or domestic geopolitical or other events, including the imposition of new or increased tariffs and/or quotas by the U.S. government on any of these raw materials or components, could adversely impact the supply and cost of these raw materials or components, and could adversely impact the profitability of our operations. Significantly, the COVID-19 pandemic has, and may continue to, adversely impact our costs and product delivery timing and the availability and favorable pricing of materials used in our products. In addition, due to rapidly increasing demand for our products, we have faced significant challenges, including production backlogs and resulting customer complaints. All of the forgoing could negatively impact our financial results.

If we are unable to successfully design and develop or acquire new products, our business may be harmed.

To maintain and increase sales we must continue to introduce new products and improve or enhance our existing products or new products. The success of our new and enhanced products depends on many factors, including anticipating consumer preferences, finding innovative solutions to consumer problems or acquiring new solutions through mergers and acquisitions, differentiating our products from those of our competitors, and maintaining the strength of our brand. The design and development of our products as well as acquisitions of other businesses are costly and we typically have several products in development at the same time. Problems in the design or quality of our products, or delays in product introduction, may harm our brand, business, financial condition, and results of operations.

Our business could be harmed if we are unable to accurately forecast demand for our products or our results of operations.

To ensure adequate inventory supply, we forecast inventory needs and often place orders with our manufacturers before we receive firm orders from our retail partners or customers. If we fail to accurately forecast demand, we may experience excess inventory levels or a shortage of product.

If we underestimate the demand for our products, we or our suppliers may not be able to scale to meet our demand, and this could result in delays in the shipment of our products and our failure to satisfy demand, as well as damage to our reputation and retail partner relationships. If we overestimate the demand for our products, we could face inventory levels in excess of demand, which could result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would harm our gross margins. For example, driven by strong customer demand and a shortage of product in 2020, we experienced a product backlog. In addition, failures to accurately predict the level of demand for our products could cause a decline in sales and harm our results of operations and financial condition.

In addition, we may not be able to accurately forecast our results of operations and growth rate. Forecasts may be particularly challenging as we expand into new markets and geographies and develop and market new products for which we have no or limited historical data. Our historical sales, expense levels, and profitability may not be an appropriate basis for forecasting future results. Our lack of historical data related to new products makes it particularly difficult to make forecasts related to such products. The lead times and reliability of our suppliers has been inconsistent as a result of the COVID-19 pandemic, and may be affected by global events in the future. These effects are expected to last through the remainder of the pandemic. Pandemic related variances require a very quick pivot and adjustments to the supply chain, production and marketing. If we are unable to make these changes quickly or at all our inventory, production and sales may be materially affected.

Failure to accurately forecast our results of operations and growth rate could cause us to make poor operating decisions that we may not be able to correct in a timely manner. Consequently, actual results could be materially different than anticipated. Even if the markets in which we compete expand, we cannot assure you that our business will grow at similar rates, if at all. Forecasting has been particularly challenging during the COVID-19 pandemic.

We rely on a limited number of third parties for shipping, transportation, logistics, marketing and sales of our products and components. A loss of any of such third-party relationships would have a material adverse effect on our operating results.

We rely on third parties to ship, transport, and provide logistics for our products and components. Our dependence on a limited number of third parties for these services leaves us particularly vulnerable due to our need to secure these parties’ services on favorable terms. Loss of, or an adverse effect on, any of these relationships or failure of any of these third parties to perform as expected could have a material and adverse effect on our operations, sales, revenue, margins, liquidity, reputation and financial and operating results.

We are dependent on our relationships with third parties for assistance in the preparation of our financial statements, which allow us to meet our financial reporting obligations.

We utilize third-party consultants to assist management in the preparation of our financial statements. Our ability to meet our future financial reporting obligations will continue to depend in part on such services provided by these third parties. Changes in such third-party relationships, personnel, or capacity may impact our ability to timely file our financial statements, which could impact our ability to maintain our listings on the Nasdaq Capital Market and CSE. Failure to maintain such listings could materially adversely affect our ability to raise capital. We have encountered challenges meeting reporting timelines in the past, and we may experience additional challenges in the future.

Any future litigation could have a material adverse impact on our results of operations, financial condition and liquidity.

From time to time, we may be subject to litigation including product liability claims, intellectual property claims, employment-related claims, commercial disputes, regulatory and enforcement action and stockholder class and derivative actions. Risks associated with legal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods of time. In addition, our reputation could be adversely affected by negative publicity surrounding such events regardless of whether or not claims against us are successful. A successful claim brought against us in excess of available insurance or not covered by insurance or indemnification agreements, or any claim that results in significant adverse publicity against us, could have a material adverse effect on our business and our reputation. Furthermore, the litigation process can put material or excessive demands on the time of management and employees, interfering with performance of regular responsibilities and stressing or delaying business operations, and the outcome of litigation is inherently uncertain. We can provide no assurances that these matters will not have a material adverse effect on our business.

If we deliver products with defects, we may be subject to product recalls or negative publicity, our credibility may be harmed, market acceptance of our products may decline, and we may be exposed to liability.

We sell complex products including products that are new to the market and without a long performance history. These products may contain certain design and manufacturing defects including defects in materials and components that we purchase from third parties. There can be no assurance we will be able to detect and fix all defects in the products we sell. Accordingly, our products may experience quality and service problems from time to time that could result in decreased sales and operating margin and harm to our reputation.

We issued a product safety notice in February 2021 and, in connection therewith, took a reserve of $195,000 which we believe to have been adequate. If the safety update fails in the future, new issues arise, or a substantial number of consumers continue to seek an updated product, we could also experience damage to our reputation, business, operations (including production rate) and revenues.

Seasonality may in the future cause our operating results to vary from quarter to quarter.

The seasonality of our sales may cause our operating results to vary in the future. Seasonal variations in our operating results may reduce our cash on hand, increase our inventory levels, and extend our accounts receivable collection periods. This in turn may cause us to increase our debt levels and interest expense to fund our working capital requirements.

Our business relationships with third parties could cause us to expend significant resources and incur substantial business risk with no assurance of financial return.

We rely upon business relationships for the manufacturing and distribution of certain products. Our business depends upon our ability to manufacture and sell our products to our customers. We currently do not have the capabilities to manufacture some of our products and product components on our own and are required to enter into agreements with third parties for certain of such services. Additionally, due to the introduction of the Byrna HD in the fiscal year ended November 30, 2019, we only began recently to establish a sales team for our product and utilize third-party manufacturer’s representatives and a third party e-commerce shopping platform to facilitate sales most sales of such product. We also rely upon third parties for materials and components, as well as shipping, certain marketing and sales-related services. There can be no assurance that such business relationships can be maintained, will be extended or renewed, or will achieve their goals. If we are unable to enter into business relationships for distribution and sales or if any of our current business relationships are terminated or fail to achieve their goals, our business, operating results and financial condition will be materially adversely affected.

To the extent that we internally develop a sales force, the cost of establishing and maintaining a sales force would be substantial and may exceed our cost effectiveness. The acquisition or development of a sales and distribution infrastructure could require substantial resources, which may divert the attention of our management and key personnel and defer our product development and deployment efforts. In addition, in marketing our products, we would likely compete with companies that currently have extensive and well-funded marketing and sales operations. Despite marketing and sales efforts, we may be unable to compete successfully against these companies. We may not be able to do so on favorable terms. We could rely on third parties to market and sell our products in certain territories, rather than establishing an internal sales force. When we contract with third parties, including entering into collaborations with partners, for the sale and marketing of our products, revenues depend upon the efforts of these third parties, which may not be successful. If we fail to establish successful marketing and sales capabilities or to make arrangements with third parties for such purposes, our business, financial condition, results of operations and prospects will be materially adversely affected.

Our business depends on our ability to prevent or mitigate the effects of a cybersecurity attack.

Our information technology systems, including third party run e-commerce and payment service systems, may be subject to cyber-attacks, security breaches or computer hacking including a ransomware attack encrypting corporate information technology equipment, a directed attack against us or a data breach or cyber incident happening to a third-party network and affecting us. Regardless of our efforts, there may still be a breach, and the costs to eliminate, mitigate or address the aforementioned threats and vulnerabilities before or after a cyber-incident could be significant. Any such breaches or attacks could result in interruptions, delays or cessation of operations and loss of existing or potential suppliers or customers. Moreover, at this time, we do not carry cyber-insurance. In addition, breaches of our security measures and the unauthorized dissemination of sensitive personal, proprietary or confidential information about our business, our business partners, customers or other third parties could expose us to significant potential liability and reputational harm. Moreover, any material disruption or breach of our information technology systems or those of third-party partners could materially damage our customer and business partner relationships, and subject us to significant reputational, financial, legal, and operational consequences.

Risks Related to Our Industry

The markets for security products and non-lethal defense technology are in a state of technological change which could have a material adverse impact on our business, financial condition and results of operations.

The markets for security products and non-lethal defense technology, in which our products and services are characterized, are associated with rapidly changing technology, which could result in product obsolescence or short product life cycles. Accordingly, our success is dependent upon our ability to anticipate technological and other changes and to successfully identify, obtain, develop and market new products that satisfy evolving customer requirements. There can be no assurance that we will successfully develop new products or enhance and improve our existing products or that any new products and enhanced and improved existing products will achieve market acceptance. Further, there can be no assurance that competitors will not market products that have perceived advantages over our products or which render the products currently sold by us obsolete or less marketable.

We must commit significant resources to developing new products before knowing whether our investments will result in products the market will accept. To remain competitive, we may be required to invest significantly greater resources then currently anticipated in research and development and product enhancement efforts.

The non-lethal defense technology industry and security products markets are highly competitive and our success depends upon our ability to effectively compete with numerous worldwide business.

We face competition from a number of businesses, including worldwide businesses, many of which have substantially greater financial resources, operating scale, and a broader range of product offerings than we do. In the law enforcement market, in particular, we face competitors who have long-term, established relationships with security professionals who subscribe to an integrated suite of their products, some of which offer features that our current products do not support, and who may have made substantial investments in their hardware, creating an entry barrier to introduction of our competing product. Such competition could adversely affect our ability to win new contracts and sales and renew existing contracts. We operate in a period of intense competition in some key markets, which could affect the profitability of the contracts and sales we do win. If we cannot successfully compete in our industry and business segments, our business, financial condition and results of operations could suffer.

Expansion of sales of our product to schools, law enforcement and other governmental or quasi-governmental entities may require expenditure of resources and lengthen our sale cycle.

Generally, entities such as schools, law enforcement and other governmental or quasi-governmental entities consider a wide range of issues before committing to purchase non-lethal defense products, including product benefits, training costs, the cost to use our products in addition to, or in place of, other products, budget constraints and product reliability, safety and efficacy. Such considerations may result in a sales cycle that is longer than and different from sales process related to dealers and consumers. Adverse publicity surrounding our products or the safety of such products also could lengthen our sales cycle with these customers. In addition, if we successfully expand sales of our products to these customers, we could encounter challenges related to funding of law enforcement and other governmental and quasi-governmental entities generally, the economic impact of the COVID-19 pandemic on the operating budgets of agencies, states and municipalities that fund such entities and the recent changes in public sentiment around police funding. We may incur substantial selling costs and expend significant effort in connection with the evaluation of our products by such potential customers before they place an order. If these potential customers do not ultimately purchase our products, we will have expended significant resources and received no revenue in return.

Epidemic and pandemic diseases (including the COVID-19 pandemic) could have a material adverse effect on our business, financial condition, results of operations, cash flows, and ability to comply with regulatory requirements.

Outbreaks of epidemic, pandemic, or contagious diseases, such as COVID-19, could cause disruptions in our business and the businesses of third parties who we depend upon for materials and manufacturing, marketing and other services. These disruptions could include disruptions in our ability to receive materials, manufacture our products, distribute our products, market our products, or obtain services. These disruptions have caused, and could cause further, closures of our facilities or the facilities of our suppliers, manufacturers and dealers, as well as cancellation of events that present significant marketing opportunities such as industry conventions, and trade shows. Any disruption of the businesses of our suppliers, manufacturers or dealers would likely impact our sales and operating results. In addition, a significant outbreak of epidemic, pandemic, or contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products. Any of these events could have a material adverse effect on our business, financial condition, results of operations, or cash flows. Additionally, such outbreaks could disrupt our ability to timely file periodic reports required by the Securities and Exchange Commission or the stock exchanges on which our common stock is listed, which may lead to the delisting or downgrading of our common stock on such stock exchanges.

In particular, the COVID-19 pandemic restrictions intended to prevent and mitigate its spread, challenges related to vaccination rollout and new variants of the virus have impacted, and may continue to (and the future outbreak of other highly infectious or contagious diseases likely would), significantly and negatively impact our business, for reasons including without limitation: the shut-down of production facilities and distribution facilities as a result of government restrictions, illness and special cleaning; slow-down in production and increased costs due to COVID-19-related health and safety protocols; limited availability of plastic and other components of our products which cause price pressures as well as impair our ability to meet production demand; and shipping challenges. Since March 2020, many of our employees worked remotely for an extended period of time and some continue to do so. Additional extended periods of remote work arrangements could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks, and impair our ability to manage our business. Remote work conditions, including challenges in coordinating with third parties and lack of access to certain records and documents, have caused administrative issues and contributed to our inability in some cases to timely file certain reports required by the SEC. Moreover, the COVID-19 pandemic has had and is expected to continue to have a significant negative impact on general economic conditions, which could adversely impact the sales of our products. All of the forgoing may adversely impact our financial results.

In addition to the impacts the COVID-19 pandemic has had and may continue to have on our operations and administrative functions and those of our third-party suppliers and manufacturers, the demands the pandemic is placing on government agencies, law enforcement and potentially military organizations may impact the ability of customers and potential customers to purchase our 40mm products or future products directed at those sectors. Similarly, the overall economic downturn, loss of jobs, loss of savings, and loss of disposable income and liquidity on the part of consumers could adversely affect the market for our Byrna HD and other consumer directed products we may introduce. Moreover, policies instituted to reduce the transmission of COVID-19 may impact or interrupt components and products moving through our supply chain. If facilities close or produce low volume due to the COVID-19 pandemic, we may have difficulty sourcing products to sell in the future and may incur additional costs and lost revenue. Any of these events could have a material adverse effect on our business, financial condition, results of operations, or cash flows.

Our revenues and profits depend on the level of customer spending for our products, which is sensitive to general economic conditions and other factors.

Our products are discretionary items for customers. Therefore, the success of our business depends significantly on economic factors and trends in consumer spending. There are a number of factors that influence consumer spending, including actual and perceived economic conditions, consumer confidence, disposable consumer income, consumer credit availability, unemployment, and tax rates in the markets where we sell our products. Consumers also have discretion as to where to spend their disposable income and may choose to purchase other items or services if we do not continue to provide high-quality products at appropriate price points. As global economic conditions continue to be volatile and economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable and subject to declines. Any of these factors could harm discretionary consumer spending, resulting in a reduction in demand for our products, decreased prices for our products, and harm to our business and results of operations.

Our performance is influenced by a variety of economic, social, and political factors.

Our performance is influenced by a variety of economic, social, and political factors. General economic conditions and consumer spending patterns can negatively impact our operating results. Economic uncertainty, unfavorable employment levels, declines in consumer confidence, increases in consumer debt levels, increased commodity prices, and other economic factors may affect consumer spending on discretionary items and adversely affect the demand for our products. In times of economic uncertainty, consumers tend to defer expenditures for discretionary items, which could negatively affect demand for our products. Any substantial deterioration in general economic conditions that diminish consumer confidence or discretionary income could reduce our sales and adversely affect our operating results.

Political and social factors can affect our performance. Concerns about elections, as well as firearm-related incidents and social reaction thereto, and legislature and policy shifts resulting from those elections can affect the demand for our products. In addition, speculation about control of firearms, firearm products, and ammunition at the federal, state, and local level and heightened fears of terrorism and crime can affect consumer demand for our products. Often, such concerns result in an increase in near-term consumer demand and subsequent softening of demand when such concerns subside. Inventory levels in excess of customer demand may negatively impact operating results and cash flow.

Federal and state legislatures frequently consider legislation relating to the regulation of CO2 fired launchers. If such legislation develops, we could find it difficult, expensive, or even impossible to comply with them, impeding new product development and distribution of existing products. Conversely, new legislation could increase the demand for non-lethal weapons like the Byrna HD beyond our current forecasts and strain or exceed production capability, which could harm our reputation and adversely impact our business.

Risks Related to Regulation

We are subject to extensive regulation and could incur fines, penalties and other costs and liabilities under such requirements.

We are authorizedsubject to issue 200,000,000numerous federal, state and local environmental, health and safety legislation and other applicable regulations, laws, and measures relating to the manufacture and sale of our products. There can be no assurance that we will not experience difficulties with our efforts to comply with applicable regulations as they change in the future or that our continued compliance efforts (or failure to comply with applicable requirements) will not have a material adverse effect on our results of operations, business, prospects and financial condition. Our continued compliance with present and changing future laws could restrict our ability to sell our products and expand our operations.

Changes in government policies and legislation could adversely affect our financial results.

The manufacture, sale, purchase, possession and use of weapons (including CO2 powered launchers and chemical irritant devices), ammunitions, firearms, and explosives are subject to federal, state, local, and foreign laws. If such regulation becomes more expansive in the future, it could have a material adverse effect on our business, operating results, financial condition, and cash flows. The Byrna HD is a relatively new product. that may be subject to certain law and regulations, including those related to CO2 powered launchers, “pepper spray” or “tear gas” devices, and future legislation or regulation. New legislation, regulations, or changes to or new interpretations of existing regulation could impact our ability to manufacture or sell the Byrna HD and our projectiles, or limit their market, which could impact our cost of sales and demand for Byrna products. Similarly changes in laws related to the domestic or international use of chemical irritants by civilians or law enforcement could impact both our cost of sales and the size of the reachable market.

We may be subject, both directly and indirectly, to the adverse impact of existing and potential future government regulation of our products, technology, operations and markets. For example, the development, production, (re-)exportation, importation, and transfer of our products and technology is subject to U.S. and foreign export control, sanctions, customs, import and anti-boycott laws and regulations, including the Export Administration Regulations (the “EAR”) (collectively, “Trade Control Laws”). If one or more of our products or technology, or the parts and components we buy from others, is or becomes subject to the International Traffic in Arms Regulations (the “ITAR”) or national security controls or other controls under the EAR, this could significantly impact our operations, for example by severely limiting our ability to sell, (re-)export, or otherwise transfer our products and technology, or to release controlled technology to foreign person employees or others in the United States or abroad. We may not be able to obtain licenses and other authorizations required under the applicable Trade Control Laws. The failure to satisfy the requirements under the Trade Control Laws, including the failure or inability to obtain necessary licenses or qualify for license exceptions, could delay or prevent the development, production, (re-)export, import, and/or in-country transfer of our products and technology, which could adversely affect our revenues and profitability.

Failure by us, our employees, or others working on our behalf to comply with the applicable Trade Control Laws could result in administrative, civil, or criminal liabilities, including fines, suspension, debarment from bidding for or performing government contracts, or suspension of our export privileges, which could have a material adverse effect on us. We transact with suppliers and others who are exposed to similar risks. Violations of the Trade Control Laws or other applicable laws and regulations could materially adversely affect our products, technology, brand, growth efforts, employees, and business.

Health and safety risks could expose us to potential liability and adversely affect our operating results and financial condition.

Health and safety issues related to our products may arise that could lead to litigation or other action against us, to regulation of certain of its product components, or to negative publicity. We may be required to modify our technology and may not be able to do so. We may also be required to pay damages that may adversely affect our financial condition. Even if these concerns prove to be baseless, the resulting negative publicity could affect our ability to market certain of our products and, in turn, could harm our business and results from operations.

We are exposed to operating hazards and uninsured risks that could adversely impact our operating results and financial condition.

Our business is subject to a number of risks and hazards including loss of parts or finished goods in inventory or shipment, labor disputes and changes in the regulatory environment. Such occurrences could delay or halt production or sale of goods, result in damage to equipment, personal injury or death, monetary losses and possible legal liability. Although we currently maintain freight and inventory insurance and general liability insurance in amounts which we consider adequate, the nature of these risks is such that liabilities might exceed policy limits, the liabilities and hazards might not be insurable, or we may elect in the future not to insure against such liabilities due to high premium costs or other reasons, in which event we could incur significant costs that could have a materially adverse effect upon our financial position.

Tariffs, sanctions, restrictions on imports or other trade barriers between the United States and various countries, most significantly China, may impact our revenue and results of operations.

Political changes and trends such as populism, protectionism, economic nationalism and sentiment toward internationally operating companies, and resulting tariffs, export controls, trade sanctions, sanctions blocking statutes, or other trade barriers, or changes to tax or other laws and policies, have been and may continue to be disruptive and costly to our business, and these can interfere with our expanding international sales, supply chain, production costs, customer relationships, and competitive position. For example, general trade tensions between the United States and China began escalating in 2018, with multiple rounds of U.S. tariffs on Chinese-made goods taking effect. These tariffs currently affect some of the components of our products we import from China, and we may be required to raise our prices on those products due to the tariffs or share the cost of such tariffs with our customers, which could harm our operating performance. We work closely with third parties who monitor, evaluate and keep us informed about the potential impact of the effective and proposed tariffs as well as other recent changes in foreign trade policy on our supply chain, costs, sales and profitability and seek to implement strategies to mitigate such impact, including reviewing sourcing options and working with our vendors and merchants to seek to minimize product coming from China both in existing and new product development and select suppliers in low cost regions where tariff issues are less challenging. Notwithstanding these efforts, it is possible that further tariffs may be imposed on our other imports, or that our business will be impacted by retaliatory trade measures taken by China or other countries in response to existing or future tariffs, causing us to raise prices or make changes to our operations, any of which could materially harm our revenue or operating results. Further escalation of specific trade tensions, such as those between the United States and China, or in global trade conflict more broadly could be harmful to global economic growth, and related decreases in confidence or investment activity in the global markets would adversely affect our business performance. We do business in emerging market jurisdictions, such as South Africa, where economic, political and legal risks are heightened.

Data privacy and security laws and regulations in the jurisdictions in which we do business could increase the cost of our operations and subject us to possible sanctions and other penalties.

Our business is subject to a number of federal, state, local and foreign laws and regulations governing data privacy and security, including with respect to the collection, storage, use, transmission and protection of personal information.

In addition, a number of U.S. states have enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of sensitive personal information, such as social security numbers, financial information and other personal information. For example, all 50 states now have data breach laws that require timely notification to individual victims, and at times regulators, if a company has experienced the unauthorized access or acquisition of sensitive personal data. State law developments, which may impose substantial penalties for violations, could impose significant costs for investigations and compliance, allow private class-action litigation and carry significant potential liability for our business. We do not currently have insurance to cover us in the event of a data breach.

The interpretation and enforcement of these laws and regulations are uncertain and subject to change, and it may require substantial costs to assess, monitor and implement compliance with any additional requirements. Failure to comply with applicable law, including international data protection laws and regulations could result in government enforcement actions (which could include substantial civil or criminal penalties), private litigation or adverse publicity and could negatively affect our operating results and business.

Failure to comply with the U.S. Foreign Corrupt Practices Act or other applicable anti-corruption legislation, and export controls and trade sanctions, could result in fines or criminal penalties if we expand our business abroad.

We, our business partners, and the industries in which we operate are subject to continuing scrutiny by regulators, other governmental authorities and private sector entities or individuals in the United States, South Africa, the European Union, China, and other jurisdictions, which may lead to enforcement actions, adverse changes to our business practices, fines and penalties, or the assertion of private litigation claims and damages that could be material. For example, the expansion of our business internationally exposes us to export controls, trade sanctions import and export clearance requirements, customs, tariffs, anti-corruption legislation, anti-boycott requirements and other obligations and restrictions imposed by the United States and other governments. The U.S. Departments of Justice, Commerce, Treasury, State, U.S. Customs and Border Protection, and other U.S. and foreign agencies and authorities have a broad range of civil and criminal penalties they may seek to impose against companies for violations of export controls, trade sanctions, import and export clearance requirements, customs regulations, anti-corruption legislation, including the Foreign Corrupt Practices Act, anti-boycott requirements and other federal statutes, sanctions and regulations and, increasingly, similar or more restrictive foreign laws, rules and regulations, which may also apply to us. By virtue of these laws and regulations, and under laws and regulations in other jurisdictions, we may be obliged to limit our business activities, we may incur costs for becoming and staying compliant, and we may be subject to enforcement actions or penalties for noncompliance, including fines, suspension, debarment from bidding for or performing government contracts, or suspension of our export privileges, which could materially adversely affect our business, operations, products, technology, brand, growth efforts, employees, and business partners. In recent years, U.S. and foreign governments have increased their oversight and enforcement activities with respect to these laws and we expect the relevant agencies to continue to increase these activities. A violation of these laws, sanctions or regulations could result in restrictions on our exports, civil and criminal fines or penalties and could adversely impact our business, operating results, and financial condition. There can be no assurance that the risk management and compliance programs we adopt will mitigate legal and compliance risks.

If our independent suppliers and manufacturing partners do not comply with ethical business practices or with applicable laws and regulations, our reputation, business, and results of operations would be harmed.

Our reputation and our customers’ willingness to purchase our products depend in part on our suppliers’, manufacturers’, and retail partners’ compliance with ethical employment practices, such as with respect to child labor, wages and benefits, forced labor, discrimination, safe and healthy working conditions, and with all legal and regulatory requirements relating to the conduct of their businesses. We do not exercise control over our suppliers, manufacturers, and retail partners and cannot guarantee their compliance with ethical and lawful business practices. If our suppliers, manufacturers, or retail partners fail to comply with applicable laws, regulations, safety codes, employment practices, human rights standards, quality standards, environmental standards, production practices, or other obligations, norms, or ethical standards, our reputation and brand image could be harmed and we could be exposed to litigation and additional costs that would harm our business, reputation, and results of operations.

Risks Related to our Intellectual Property

If we are unable to protect our intellectual property, we may lose a competitive advantage or incur substantial litigation costs to protect our rights.

Our future success depends upon our proprietary technology. Our protective measures, including patent and trade secret protection and nondisclosure agreements, may prove inadequate to protect our proprietary rights. The right to stop others from misusing our trademarks, service marks, patents, designs and copyright in commerce depends to some extent on our ability to show evidence of enforcement of our rights against such misuse in commerce. Our efforts to stop improper use, if insufficient, may lead to loss of trademark and service mark rights, brand loyalty, and notoriety among our customers and prospective customers. The scope of any patent that we have or may obtain may not prevent others from developing and selling competing products. The validity and breadth of claims covered in technology patents involve complex legal and factual questions, and the resolution of such claims may be highly uncertain, and expensive. In addition, our patents may be held invalid upon challenge, or others may claim rights in or ownership of our patents.

We may be subject to intellectual property infringement claims, which could cause us to incur litigation costs and divert management attention from our business.

While we believe that our products and intellectual property do not infringe upon the proprietary rights of third parties, and undertake efforts to design around existing third-party patents or designs that we are aware of, a substantial portion of our commercial success depends upon us not infringing the intellectual property rights of others. We may become subject to claims by third parties that our technology infringes their intellectual property rights. Although all reasonable efforts are made to avoid third-party patents, there is no assurance that were a lawsuit to be brought by a third party, we would prevail. We may also become subject to these claims through indemnities that we provide to manufacturer’s representatives, distributors, dealers, retail partners, and certain service providers and consultants.

Any intellectual property infringement claims against us, with or without merit, could be costly and time-consuming to defend and divert our management’s attention from our business. If our products were found to infringe a third party’s proprietary rights, we could be required to enter into costly royalty or licensing agreements to be able to sell our products, and any allegation of infringement could cause certain reputational damage for us and the Byrna brand. Royalty and licensing agreements, if required, may not be available on terms acceptable to us or at all.

Risks Related to our Securities

Our trading market is limited, and the trading market for our common stock may not develop or be sustained.

Our common stock is listed in the United States on the Nasdaq Capital Market (since May 5, 2021, prior to which date our common stock was listed for quotation on the OTCQB marketplace operated by OTC Markets Group Inc.) and in Canada on the CSE; trading has been limited, a substantial amount of our outstanding shares of common stock were issued in private placement and subject to resale restrictions under federal securities laws, and we cannot predict the trading volume in our common stock. In the absence of an active trading market:

A limited trading market could impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. A limited trading market may also reduce the fair market value of your shares and may also impair our ability to raise capital to continue to fund operations by selling shares.

We may not maintain qualification for listing on Nasdaq, which may impair your ability to sell your shares.

Our common stock is currently listed on the Nasdaq Capital Market and in Canada on the CSE. The Nasdaq Capital Market requires listed companies to meet certain listing criteria including total number of stockholders, Board of Directors independence, minimum stock price, total value of public float, and in some cases total stockholders’ equity and market capitalization requirements. If for any reason our common stock does not maintain eligibility for listing on the Nasdaq Capital Market, we may list our common stock elsewhere, such as one of the OTC markets, which are generally considered less liquid and more volatile than a national securities exchange, and could mean that certain institutional investors could no longer hold or purchase our stock, and as a result, a purchaser of our common stock may find it more difficult to dispose of, or to obtain accurate quotations as to the price of their shares. This would materially and adversely affect the liquidity of our common stock.

The market price of our common stock may be volatile, which could result in substantial losses for purchasers.

The market price for our common stock may be volatile in response to factors including the following:

In addition, if we are unable to successfully meet investor expectations, even if by only a small margin, there could be significant impact on the market price of our common stock.

In some cases, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our business operations and reputation.

Our common stock is listed on two separate stock markets, and investors seeking to take advantage of price differences between such markets may create unexpected volatility in our stock price; in addition, investors may not be able to move stocks for trading between such markets.

Our common stock is listed on both the Nasdaq Capital Market and the CSE. Price levels for our ordinary shares could fluctuate significantly on either market, independent of our share price on the other market. Investors could seek to sell or buy our shares to take advantage of any price differences between the two markets through a practice referred to as arbitrage. Any arbitrage activity could create unexpected volatility on either exchange with respect to both our share price and the volume of shares available for trading.

Exercise of options or warrants or vesting of restricted stock units may have a dilutive effect on your percentage ownership and may result in a dilution of your voting power and an increase in the number of shares of common stock eligible for future resale in the public market, which may negatively impact the trading price of our shares of common stock. Holders

The exercise of some or all of our outstanding options and warrants, and the vesting of restricted stock units, could result in significant dilution in the percentage ownership interest of our existing stockholders and in a significant dilution of voting rights and earnings per share.

As of May 31, 2021, we had outstanding (i) warrants to purchase up to 99,055 shares of our common stock at a weighted exercise price of approximately $1.78 per share, (ii) options for the issuance of up to 642,050 shares of our common stock upon exercise at a weighted average exercise price of $3.01 under our 2020 Equity Incentive Plan, and (iii) 17,479,928 restricted stock units.

A failure of our control systems to prevent error or fraud may materially harm our company.

Proper systems of internal controls over financial accounting and disclosure are critical to the operation of a public company. Given the size of our company and the limited number of fulltime employees that we have employed, there may continue to be certain limitations on the effectiveness of our internal controls. Moreover, we do not expect that disclosure controls or internal control over financial reporting will prevent all errors and all fraud, if any. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Failure of our control systems to prevent error or fraud could materially and adversely impact us.

Risks Related to this Offering

Investors may not be able to resell their shares at or above the public offering price.

We listed our common stock on the Nasdaq Capital Market on May 5, 2021, prior to which date our common stock was traded on the OTCQB. Our stock is also traded on the CSE. The public offering price for our common stock will be determined through negotiations between the underwriters and us, and may vary substantially from the market price of our common stock following this offering. If you purchase shares of our common stock in this offering, you may not be able to resell those shares at or above the public offering price at which you purchased such shares.

Our directors, executive officers, and significant stockholders may be able to influence us after this offering.

Upon completion of this offering, our directors, executive officers, and other holders of more than 5% of our common stock, together with their affiliates, will own, in the aggregate, 34.8% of our outstanding common stock. As a result, these stockholders, acting together, may have the ability to influence the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. In addition, these stockholders, acting together, may be able to influence the management and affairs of our company. Accordingly, this concentration of ownership might decrease the market price of our common stock by:

● delaying, deferring, or preventing a change in control of the company;

● impeding a merger, consolidation, takeover, or other business combination involving us; or

● discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of the company.

Our stock price may be volatile or may decline, including due to factors beyond our control, resulting in substantial losses for investors purchasing shares in this offering.

The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

● actual or anticipated fluctuations in our results of operations;

● the financial projections we may provide to the public, any changes in these projections, or our failure to meet these projections;

● failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

● ratings changes by any securities analysts who follow our company;

● sales or potential sales of shares by our stockholders, or the filing of a registration statement for these sales;

● adverse market reaction to any indebtedness we may incur or equity we may issue in the future;

● announcements by us or our competitors of significant innovations, acquisitions, strategic partnerships, joint ventures, or capital commitments;

● publication of adverse research reports about us, our industry, or individual companies within our industry;

● publicity related to problems in our manufacturing or the real or perceived quality of our products, as well as the failure to timely launch new products that gain market acceptance;

● changes in operating performance and stock market valuations of companies in our industry;

● price and volume fluctuations in the overall stock market, including as a result of trends in the U.S. or global economy;

● any major change in our Board of Directors or management;

● lawsuits threatened or filed against us or negative results of any lawsuits;

● security breaches or cyberattacks;

● legislation or regulation of our business;

● loss of key personnel;

● new products introduced by us or our competitors;

● developments with respect to our trademarks, patents, or proprietary rights;

● general market conditions; and

● other events or factors, including those resulting from war, incidents of terrorism, pandemics, or responses to these events, which could be unrelated to us or outside of our control.

In addition, stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies in our industry. In the past, stockholders of other public companies have instituted securities class action litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and harm our business, results of operations, financial condition, reputation, and cash flows. As a result, you may be unable to resell your shares of common stock at or above the public offering price at which you purchased your shares.

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline.

The trading market for our common stock will be influenced to some extent by the research and reports that industry or financial analysts publish about us and our business. We do not control these analysts. We may be slow to attract research coverage and the analysts who publish information about our common stock could have had relatively little experience with us or our industry, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our stock price, our stock price could decline. If one or more of these analysts cease to regularly cover us or fail to publish reports, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.

We may invest or spend the proceeds of this offering in ways with which you may not agree or in ways which may not yield a return.

We estimate that the net proceeds from the sale of shares of our common stock in this offering will be approximately $ million, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We expect to use the net proceeds from this offering for working capital and other general corporate purposes. We may also use a portion of the net proceeds from this offering for acquisitions or strategic investments in complementary businesses or technologies. We do not currently have any plans for any such acquisitions or investments. We have not allocated specific amounts of net proceeds for any of these purposes. Our management will have considerable discretion in the application of the net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds will be used appropriately or to influence our decisions regarding the use of proceeds. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from the intended uses described in this prospectus. The net proceeds may be used for purposes that do not result in an increase in the value of our business, which could cause our stock price to decline.

Substantial future sales, or the perception or anticipation of future sales, of shares of our common stock could cause our stock price to decline.

Our stock price could decline as a result of substantial sales of our common stock, or the perception or anticipation that such sales could occur, particularly sales by our directors, executive officers, and significant stockholders, a large number of shares of our common stock becoming available for sale, or the perception in the market that holders of a large number of shares intend to sell their shares.

In connection with this offering, subject to certain exceptions, our executive officers and directors, and certain shareholders, have agreed to enter into lock-up agreements that restrict their ability to sell or transfer shares of our capital stock for 180 days following the offering. The representatives may, in their sole discretion, permit our shareholders who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements.

We may in the future register shares of common stock that we have issued or may issue under our equity compensation plans and shares of common stock that have been issued upon the conversion of certain convertible securities. Accordingly, these shares will be able to be freely sold in the public market upon issuance as permitted by any applicable securities laws, applicable vesting requirements, and the lock-up agreements described above to the extent such shares are held by our executive officers and directors.

Purchasers in this offering will experience immediate and substantial dilution.

The public offering price per share will be substantially higher than the pro forma net tangible book value per share of our common stock outstanding prior to this offering. As a result, investors purchasing common stock in this offering will experience immediate dilution of $      per share based on an assumed public offering price of $      per share. In addition, we have issued options and warrants to acquire common stock at prices significantly below the public offering price. To the extent outstanding options and warrants are ultimately exercised, there will be further dilution to investors in this offering. In addition, if we issue additional equity securities, you will experience additional dilution.

The ongoing requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the Nasdaq Capital Market listing standards and other applicable securities laws, rules, and regulations. Our recent required compliance with these laws, rules, and regulations since our listing on Nasdaq on May 5, 2021 increased our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and results of operations. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and our internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures, and our internal control over financial reporting to meet this standard, significant resources and management oversight may be required. Further, we are subject to the CSE listing standards and applicable law, rules and regulations in Canada, all of which makes some activities even more difficult, time-consuming, or costly, and increase demand on our systems and resources. As a result, management’s attention may be diverted from other business concerns and our costs and expenses will increase, which could harm our business and results of operations. Although we have already hired additional employees to comply with these requirements, we will need to hire more employees in the future or engage outside consultants, which will increase our costs and expenses.

In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs, and making some activities more time consuming. These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from sales-generating activities to compliance activities. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal, administrative, or other proceedings against us and our business may be harmed.

As a result of disclosure of information in this prospectus and in filings required of us as a public company, our business and financial condition will become more visible, which could be advantageous to, or harm our relationships with, our competitors, suppliers, manufacturers, retail partners, and customers. These disclosures may also make it more likely that we will experience an increase in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and results of operations could be harmed, and even if the claims are resolved in our favor the time and resources necessary to resolve them could divert the resources of our management and harm our business and results of operations.

Our charter documents and Delaware law could make it more difficult for a third party to acquire us and discourage a takeover

Our Certificate of Incorporation, Amended and Restated Bylaws, and Delaware law contain certain provisions that may have the effect of deterring or discouraging, among other things, a non-negotiated tender or exchange offer for shares of common stock, a proxy contest for control of our company, the assumption of control of our company by a holder of a large block of common stock, and the removal of the management of our company. Such provisions also may have the effect of deterring or discouraging a transaction which might otherwise be beneficial to stockholders. Our certificate of incorporation also may authorize our board of directors, without stockholder approval, to issue one or more series of preferred stock, which could have voting and conversion rights that adversely affect or dilute the voting power of the holders of common stock. Delaware law also imposes conditions on certain business combination transactions with “interested stockholders.” Our certificate of incorporation authorizes our Board of Directors to fill vacancies or newly created directorships. A majority of the directors then in office may elect a successor to fill any vacancies or newly created directorships. Such provisions cold limit the price that investors might be willing to pay in the future for shares of our common stock and impede the ability of the stockholders to replace management.

The elimination of monetary liability against our directors, officers, and employees under Delaware law and the existence of indemnification rights to our directors, officers, and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers, and employees. We also expect to enter into contractual indemnification obligations under employment agreements with our executive officers. The foregoing indemnification obligations could result in our incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage us from bringing a lawsuit against our directors and officers for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if successful, might otherwise benefit our company and our stockholders.

Our amended and restated bylaws provide exclusive forum provisions applicable to substantially all disputes between us and our stockholders as well as claims brought under the Securities Act of 1933, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.

 Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) is the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation; (b) any action asserting a claim for breach of a fiduciary duty owed by any director, officer, employee, or agent of the Corporation to the Corporation or the Corporation’s stockholders; (c) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, the Certificate of Incorporation, or these by-laws; or (d) any action asserting a claim governed by the internal affairs doctrine.

In addition, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint against us asserting a cause of action arising under the Securities Act of 1933, as amended. These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions or multiple jurisdictions, which could result in expensive and protracted litigation with potentially conflicting outcomes that could exhaust our insurance coverage leaving us exposed to substantial legal expenses and judgments, or otherwise harm our business, results of operations, and financial condition.

We do not intend to pay dividends on our common stock for the foreseeable future. If our stock price does not appreciate after you purchase our shares, you may lose some or all of your investment.

We currently intend to retain any future earnings and do not expect to pay any dividends on our common stock in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our Board of Directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors that our Board of Directors may deem relevant. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

USE OF PROCEEDS

We estimate that the net proceeds from the sale of shares of our common stock in this offering will be approximately $       million, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We expect to use the net proceeds from this offering for working capital and other general corporate purposes. We may also use a portion of the net proceeds from this offering for acquisitions or strategic investments in complementary businesses or technologies. We do not currently have any plans for any such acquisitions or investments. We have not allocated specific amounts of net proceeds for any of these purposes.

Each $1.00 increase (decrease) in the assumed public offering price of $       per share would increase (decrease) the net proceeds to us by approximately $     , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of       shares in the number of shares offered by us would increase (decrease) the net proceeds to us by approximately $     , assuming that the assumed public offering price remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

DIVIDEND POLICY

We intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our Board of Directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors that our Board of Directors may deem relevant.

DILUTION

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the offering price per share and the pro forma net tangible book value per share after this offering. Historical net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding. Dilution in pro forma net tangible book value per share represents the difference between the amount per share paid by purchasers of our common stock in this offering and the pro forma net tangible book value per share of common stock immediately after the consummation of this offering.

Our historical net tangible book value as of _______, 2021 was $       , or $     per share.

After giving effect to the sale by us of the           shares of our common stock that we are selling in this offering at the public offering price of $      per share, less underwriting discounts and commissions and estimated offering expenses payable by us and after giving effect to the use of proceeds described in this prospectus, our pro forma net tangible book value as of          , 2021 would have been approximately $       million, or approximately $         per share. This represents an immediate increase in net tangible book value of $          per share to existing stockholders and an immediate dilution in net tangible book value of $         per share to new investors of common stock in this offering. The following table illustrates this per share dilution:

If the underwriters exercise their option to purchase additional shares of our common stock in full, our as adjusted net tangible book value will be $ , or $3.90 per share, and the dilution per share of common stock to new investors will be $ per share. The discussion and tables above are based on            shares of our common stock outstanding as of          , 2021, and excludes:

●          shares of our common stock issuable upon the exercise of outstanding but unexercised options, of which        are vested, to purchase shares of our common stock as of        , 2021, under the Byrna Technologies, Inc. 2020 Equity Incentive Plan (the “2020 Plan”), with a weighted average exercise price of $         per share;

●          shares of our common stock issuable upon the settlement of restricted stock units outstanding as of          , 2021 under the 2020 Plan, with an estimated grant date fair value of $           per share; and

●          shares of our common stock reserved for future issuance under the 2020 Plan.

Except as otherwise indicated, all information in this prospectus assumes or reflects:

● no exercise of the underwriters’ option to purchase additional shares;

● no exercise or settlement of outstanding stock options; and

● the Reverse Stock Split.

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following tables provide our summary consolidated financial data and should be read in conjunction with “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements, related notes and other financial information included elsewhere in this prospectus. We have derived the summary consolidated statements of income data for the fiscal years ended November 30, 2020 and 2019 from our audited consolidated financial statements appearing elsewhere in this prospectus. The summary condensed statements of income data for the three months ended February 29, 2020 and February 28, 2021, and the consolidated balance sheet data as of February 28, 2021 have been derived from our unaudited interim consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected in the future, and the results for any interim period are not necessarily indicative of the results that may be expected in any full year.

⁽¹⁾ Adjusted EBITDA, Non-GAAP net income (loss), and Non-GAAP net income (loss) per share are non-GAAP financial measures. These non-GAAP financial measures do not replace the presentation of our GAAP financial results and should only be used as a supplement to, not as a substitute for, our financial results presented in accordance with GAAP. Please refer to “Selected Consolidated Financial and Other Data – Non-GAAP financial measures” for a description of the use of such measure and reconciliations to comparable GAAP financial measures.

The consolidated balance sheet data as of February 28, 2021 are presented below:

Non-GAAP financial measures

In addition to providing financial measurements based on generally accepted accounting principles in the United States (GAAP), we provide the following additional financial metrics that are not prepared in accordance with GAAP (non-GAAP): adjusted EBITDA, non-GAAP net income (loss), and non-GAAP net income (loss) per share (basic and diluted). Management uses these non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes and to evaluate our financial performance. We believe that these non-GAAP financial measures help us to identify underlying trends in our business that could otherwise be masked by the effect of certain expenses that we exclude in the calculations of the non-GAAP financial measures.

Accordingly, we believe that these non-GAAP financial measures reflect our ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business and provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects.

These non-GAAP financial measures do not replace the presentation of our GAAP financial results and should only be used as a supplement to, not as a substitute for, our financial results presented in accordance with GAAP. There are limitations in the use of non-GAAP measures, because they do not include all the expenses that must be included under GAAP and because they involve the exercise of judgment concerning exclusions of items from the comparable non-GAAP financial measure. In addition, other companies may use other non-GAAP measures to evaluate their performance, or may calculate non-GAAP measures differently, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.

Adjusted EBITDA. Adjusted EBITDA is defined as comprehensive loss (income) as reported in our consolidated statements of income excluding the impact of (i) interest expense; (ii) income tax provision; (iii) depreciation and amortization; (iv) stock-based compensation expense; (v) accretion of debt discounts; (vi) other income – forgiveness of Paycheck Protection Program loan; (vii) other financing costs; (viii) loss on extinguishment of debt; (ix) warrant inducement expense; and (x) change in fair value of derivative liabilities. Our Adjusted EBITDA measure eliminates potential differences in performance caused by variations in capital structures (affecting finance costs), tax positions, the cost and age of tangible assets (affecting relative depreciation expense) and the extent to which intangible assets are identifiable (affecting relative amortization expense). We also exclude certain one-time and non-cash costs.

Non-GAAP net income (loss) and non-GAAP net income (loss) per share. Non-GAAP net income (loss) is defined as comprehensive loss (income) as reported in our consolidated statements of income excluding the impact of (i) stock-based compensation expense; (ii) accretion of debt discounts; (iii) other income – forgiveness of Paycheck Protection Program loan; (iv) loss on extinguishment of debt; (v) warrant inducement expense; and (vi) change in fair value of derivative liabilities. Our non-GAAP net income (loss) measure eliminates potential differences in performance caused by certain non-cash and one-time costs. We also provide non-GAAP net income (loss) per share by dividing non-GAAP net income (loss) by the average basic or diluted shares outstanding for the period.

The following table reconciles Adjusted EBITDA to GAAP comprehensive loss, the most directly comparable financial measure, calculated and presented in accordance with GAAP (in thousands):

The following table reconciles Non-GAAP net income (loss) and Non-GAAP net income (loss) per share – basic and diluted to GAAP comprehensive loss the most directly comparable financial measure, calculated and presented in accordance with GAAP (in thousands):

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to those statements included elsewhere in this prospectus. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” and elsewhere in this prospectus. Some of the numbers included herein have been rounded for the convenience of presentation.

OVERVIEW

We are a provider of non-lethal security products for the consumer and professional security markets. Our flagship product is the Byrna HD, which fires various projectiles designed to disable an assailant or threat from a safe distance of up to 60 feet. In addition to launchers and projectiles, we also sell various accessory products and Byrna-branded apparel. Our products are sold into the U.S. consumer market through our e-commerce storefront and network of third-party distributors and dealers. Internationally, we rely primarily on distributors with local expertise to market our products. With respect to the law enforcement market, we generally sell our products directly through our Train the Trainer educational program.

We believe our non-lethal security solutions can provide consumers and professionals with an alternative to firearms, presenting options to enhance security and de-escalate dangerous situations while avoiding the potentially tragic consequences of firing a gun. In light of prevalent gun violence in U.S. society and incidents of police using deadly force, in some cases leading to significant civil unrest, we believe our solutions offer a practical solution to address these significant social challenges.

We were incorporated in 2005 as Security Devices International Inc. Our sole product at the time was our 40 mm Blunt Impact Projectile (BIP), focused on the law enforcement market, which was designed to carry more energy more safely and accurately than competing non-lethal projectiles. We believe the BIP was, and remains today, a leading product in the 40 mm non-lethal projectile category. Despite its favorable performance attributes, BIP sales did not scale as anticipated due to the regulated nature of the product and the need for us to sell directly to each law enforcement customer serially. We continue to sell the BIP today, but in low volumes.

In 2018, we recognized the opportunity to pivot to the consumer market and introduce a non-lethal personal security device that any consumer could easily obtain and operate, allowing us to grow more efficiently and address a larger potential market. We acquired the core intellectual property to develop a consumer-focused product in April 2018. In February 2019, we introduced the Byrna HD personal security device, and later that year changed our name to Byrna Technologies Inc.

Sales of the Byrna HD have grown rapidly since introduction. For fiscal 2019, the first year the Byrna HD was commercially available, we generated $924,419 in revenue, however for fiscal 2020, we generated $16.6 million in revenue. Our comprehensive loss during those periods was $4.4 million and $12.5 million, respectively. Our revenue growth has been driven by greater market awareness of our solutions.

We are focused on continuing our revenue growth and capitalizing on the significant market opportunity that we see in the consumer, law enforcement, private security and school safety markets. Our growth strategy involves introducing new launchers, projectiles and accessories, opening new sales channels, including a planned Amazon e-commerce storefront, and investing in greater marketing of our solutions. We seek to establish Byrna as a leading consumer lifestyle brand in the non-lethal security market and to leverage our loyal customer base and brand equity to introduce new products and enter new product categories.

Our business model is based on the upfront sale of launcher devices, which then enables us to sell projectiles and accessories to our customers over the lifetime of their products. We believe our ability to sell follow-on consumable products will provide us with greater visibility into future revenues as the number of consumers who own our launchers increases. We also believe that our loyal customer base, which we refer to as Byrna Nation, is likely to recommend our products to friends and families, and that our existing customers are prime candidates to purchase new versions of our products as they are introduced. We believe these factors create a positive cycle of upfront sales followed by sales related to consumables, accessories, friends and family recommendations, and product upgrades.

RESULTS OF OPERATIONS

Our results for the quarter ended February 28, 2021 underscore the increasing demand for our products generally and for our Byrna HD personal security device in particular. They also illustrate, however, how our business has been and is continuing to be impacted by the COVID-19 pandemic.

Ongoing Impact of the COVID-19 Pandemic

The continuing COVID-19 pandemic, restrictions intended to prevent and mitigate its spread, challenges related to vaccination rollout, and new variants of the virus have impacted, and are expected to continue to impact our business in ways and to a degree we cannot predict. During the quarter ended February 28, 2021 we had to temporarily close production facilities and distribution facilities on several occasions due to outbreaks of illness and special cleaning. Safety protocols for our workers, illnesses, and quarantines have reduced the workforce at times, slowed down optimal production and increased costs including costs of testing and personal protective equipment (PPE). Our employees in South Africa have been subject to government imposed curfews and our employees in Massachusetts to orders limiting the number of people that can occupy the workplace, necessitating staggered schedules and remote work that can complicate job performance and slow our management and administrative processes in ways we have not quantified beyond the direct costs associated with PPE and safety and cleaning expenses. During the quarter ended February 28, 2021, many of our employees have been working remotely for an extended period of time. An extended period of remote work arrangements could strain our business continuity plans, increase operational risk, including but not limited to cybersecurity risks, and impair our ability to manage our business. Remote work conditions, including challenges in coordinating with third parties and lack of access to certain records and documents, have caused administrative issues in prior periods and could in the future cause similar or new issues. These types of events could impact our financial results as well as our ability to make timely filings. Additionally, during the quarter ended February 28, 2021, the pandemic and related air freight constrictions have delayed certain deliveries of parts and materials and exacerbated the limited availability of plastic and other components of our products which cause price pressures as well as potentially impair our ability to meet production demand and shipping challenges. Continuation of these shortages and restrictions may raise costs and delay production if our supply chain management is not adequate to maintain needed production and could affect consumer sentiment about our Company as well as our financial results. Flaws in the vaccination rollout or vaccine resistant variants may extend or expand the risks to our business presented by the pandemic.

In addition to the impacts that the COVID-19 pandemic has had and may continue to have on our operations and administrative functions and those of our third-party suppliers, manufacturers and service providers, the demands the pandemic is placing on government agencies, law enforcement and potentially military organizations may impact the ability of customers and potential customers to purchase our current products or new products targeted for such sectors. Similarly, the overall economic downturn, loss of jobs, loss of savings, and loss of disposable income and liquidity on the part of consumers could adversely affect the market for our Byrna HD and other consumer directed products we may introduce. Moreover, policies instituted to reduce the transmission of COVID-19 may impact or interrupt components and products moving through our supply chain. If facilities close or produce low volume due to COVID-19, we may have difficulty sourcing supplies for existing or new products to sell in the future and may incur additional costs and lost revenue. While we have managed these risks during the quarter ended February 28, 2021 without a material adverse effect on our business, financial condition, results of operations, or cash flows, there is no assurance we will continue to be able to do so.

Three months ended February 28, 2021 as compared to three months ended February 29, 2020:

Net Revenue

Revenues were $8.9 million in the first quarter of 2021 which represents an increase of $8.7 million as compared to the prior year period revenues of $0.1 million. This increase was due to increased sales of the Byrna HD and driven by a growing market awareness of the product.

Cost of Goods Sold

Cost of goods sold was $4.2 million in the first quarter of 2021 compared to $0.2 million in the prior year period. This $4.0 million increase is primarily due to the increase in related sales volume and also to the costs associated with the manufacture and corresponding sales of the Byrna^® HD and related products.

Gross Profit

Gross profit is calculated as total revenue less cost of goods sold and gross margin is calculated as gross profit divided by total revenue. 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, inspection costs and the shipping and handling costs. Gross profit was $4.7 million in the first quarter of 2021, or 53% of net revenue as compared to negative gross margin of approximately $29,000, or 20% of net revenue in the prior year period. The increase in gross profit is primarily due to the increase in sales volume of Byrna HD products.

Operating Expenses/Loss from Operations

Operating expenses were $5.2 million in the first quarter of 2021, which represents an increase of $3.6 million as compared to the prior year period operating expenses of $1.6 million. This increase was driven by the rapid growth in revenue and the sales, general and administrative structure necessary to manage it including: approximately $1.6 million increase in payroll and related expenses related to the ramp up of infrastructure and Byrna HD production, approximately $0.4 million increase in freight, approximately $0.3 million insurance, approximately $0.2 million increase in professional fees, approximately $0.2 million increase in bank fees related to sales transaction processing, approximately $0.1 million increase in accounting and auditing fees and approximately $0.1 million increase in marketing expenses related to the Byrna HD products.

Accretion of Debt Discounts and Interest Expense

Accretion of debt discounts decreased $0.5 million in the first quarter of 2021 to $0 from $0.5 million in the prior year period. These decreases resulted from the exchange in April 2020 of then-outstanding convertible notes into shares of Series A Convertible Preferred Stock (the “Note Exchange”), resulting in the write-off of all unamortized debt discounts and a decrease in interest expense. As of February 28, 2021, we no longer have any outstanding notes payable.

Income on Extinguishment of Debt

Income on extinguishment of debt was $0.2 million and $0 during the three months ended February 28, 2021 and February 29, 2020, respectively and relates to the forgiveness of the $0.2 million of funding under the Paycheck Protection Program (“PPP”). See Note 14, “Notes Payable,” in the Notes to Condensed Consolidated Financial Statements for further discussion.

Income Tax Provision

Our effective income tax rate for continuing operations for the three months ended February 28, 2021 and February 29, 2020 was 0%. Our 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.

We are subject to income tax in the United States, as well as in various state and international jurisdictions. The federal and state tax authorities can generally reduce a net operating loss (but not create taxable income) for a period outside the statute of limitations in order to determine the correct amount of net operating loss which may be allowed as a deduction against income for a period within the statute of limitations. Additional information regarding the statutes of limitations can be found in Note 19, “Income Taxes,” in the Notes to Consolidated Financial Statements included in Item 8 of our Annual Report on Form 10-K for the year ended November 30, 2020.

On March 27, 2020, the $2 trillion bipartisan Coronavirus Aid, Relief and Economic Security (CARES) Act was passed. The CARES Act includes a variety of economic and tax relief measures intended to stimulate the economy, including loans for small businesses, payroll tax credits/deferrals, and corporate income tax relief. Due to our history of net operating losses and full valuation allowance, the CARES Act did not have a significant effect on the income tax provision, as the corporate income tax relief was directed towards cash taxpayers.

Year ended November 30, 2020, as compared to year ended November 30, 2019:

Revenue

Revenues were $16.6 million for the year ended November 30, 2020 which represents an increase of $15.6 million or approximately 1,744.4% as compared to prior year revenues of $0.9 million. This increase was primarily due to rapid growth in sales of the Byrna^® HD which was introduced and only on the market for approximately six months during the fiscal year ended November 30, 2019. Sales of the new product were driven by increased market awareness and grew rapidly, particularly during the second half of fiscal year 2020.

Cost of Goods Sold

Cost of goods sold was $9.1 million in the fiscal year ended November 30, 2020 compared to $0.8 million in the fiscal year ended November 30, 2019. This $8.2 million increase is primarily due to the increase in production and sales of the Byrna HD and related products.

Gross Profit

Gross profit is calculated as total revenue less cost of goods sold and gross margin is calculated as gross profit divided by total revenue. Included as cost of goods sold are costs associated with the production and procurement of products, such as labor, inbound freight costs, manufacturing depreciation, purchasing and receiving costs, and inspection costs. Gross profit was $7.5 million for the year ended November 30, 2020, or approximately 45.2% of net revenue as compared to $0.1 million, or 16.1% of net revenue in the year ended November 30, 2019. The increase in gross profit in fiscal 2020 is due to the increase in the sales volume of ByrnaHD products.

Operating Expenses/Operating Loss

Operating expenses were $11.8 million in the fiscal year ended November 30, 2020, which represents an increase of $8.4 million or approximately 247.1% over 2019 operating expenses of $3.4 million. This increase was driven by the rapid growth in revenue and the selling, general and administrative structure necessary to manage it. Approximately $5.4 million of the increase was in payroll and stock compensation cost which increased from $1.1 million in 2019 to $6.5 million in the fiscal year ended November 30, 2020. The fiscal year ended November 30, 2020 included a one-time expense of $0.7 million for sales taxes not collected from customers on orders paid before state sales level thresholds triggered the requirement. There was no such expense in the fiscal year ended November 30, 2019. The increase in size and complexity of the organization and its transactions drove an increase in regulatory, accounting and auditing fees to $0.8 million from $0.2 million in the fiscal year ended November 30, 2020 from 2019, respectively. Marketing costs rose by $0.7 million from $0.4 million in the fiscal year ended November 30, 2019 to $1.0 million in the fiscal year ended November 30, 2020. General office expenses increased by $0.5 million, as the business expanded into new facilities, from $0.3 million to $0.8 million. Bank fees for processing of credit card sales transactions increased by $0.2 million due to the increase in sales volume. The increase in operating expenses resulted in a loss from operations of $4.3 million in the fiscal year ended November 30, 2020 as compared to a loss from operations of $3.3 million in the fiscal year ended November 30, 2019.

Accretion of Debt Discounts and Interest Expense

Accretion of debt discounts decreased by approximately $0.3 million in the fiscal year ended November 30, 2020 to $0.8 million from $1.1 million in the fiscal year ended November 30, 2019. Interest expense decreased $0.2 million to $0.2 million in 2020 from $0.4 million in 2019. These decreases resulted from the Exchange in April 2020 which eliminated interest expense for the year ended November 30, 2020, resulting in the write-off of all unamortized debt discounts and a decrease in interest expense. See Note 13, “Convertible Notes Payable and Derivative Liabilities,” in the Notes to Consolidated Financial Statements for the year ended November 30, 2020 included herein for further discussion.

Loss on Extinguishment of Debt

Loss on extinguishment of debt was $6.0 million and $0 for the fiscal years ended November 30, 2020 and 2019, respectively and relates to the debt exchanged for preferred stock discussed above. See Note 13, “Convertible Notes Payable and Derivative Liabilities,” in the Notes to Consolidated Financial Statements for the year ended November 30, 2020 included herein for further discussion.

Warrant Inducement Expense

Warrant inducement expense was $0.8 million and $0 during the fiscal years ended November 30, 2020 and 2019, respectively and relates to the difference in fair value of warrants exercised at the reduced price of $0.16 per warrant as compared to the $0.25 contractual exercise price. See Note 14, “Stockholders’ Equity (Deficit),” in the Notes to Consolidated Financial Statements for the year ended November 30, 2020 included herein for further discussion.

Change in Fair Value of Derivative Liabilities

Change in fair value of derivative liabilities decreased $0.4 million from $0.4 million in 2019 to $0 in 2020. The amount recognized in 2019 related to the Canadian debentures which were repaid on May 31, 2019. See Note 13, “Convertible Notes Payable and Derivative Liabilities,” in the Notes to Consolidated Financial Statements for the year ended November 30, 2020 included herein for additional information.

Income Tax Expense

Due to the loss before income taxes, there was no income tax in 2019. However, in 2020 the South African subsidiary had taxable profits and recognized income tax expense of $0.3 million.

LIQUIDITY AND CAPITAL RESOURCES

Three months ended February 28, 2021:

Cash Flow Summary

Cash and restricted cash as of February 28, 2021 was $4.2 million, a decrease of $5.4 million from the amount as of November 30, 2020 of $9.7 million. Approximately $2.2 million of the cash on hand at February 28, 2021 was restricted due to holds placed on its use by our merchant services vendor pending fulfillment of backorders prepaid by credit cards. 

We have incurred a cumulative loss of approximately $50.5 million from inception through February 28, 2021. We had funded operations through the issuance of common stock, warrants, and convertible notes payable. It still is expected to incur significant losses before our revenues sustain its operations. Our future success is dependent upon our ability to raise sufficient capital or generate adequate revenue, to cover its ongoing operating expenses, and also to continue to develop and be able to profitably market its products.

Operating Activities

Cash used in operating activities was $5.4 million during the three months ended February 28, 2021 compared to $0.7 million during the prior year period. Net loss was $0.3 million and $2.3 million for the three months ended February 28, 2021 and February 29, 2020, respectively. Significant changes in noncash and working capital activity, are as follows:

Investing Activities

Cash used in investing activities was approximately $25,000 in the first quarter of 2021 as compared to approximately $44,000 in the prior year period.

Financing Activities

Cash provided by financing activities was $0.1 million during the three months ended February 28, 2021 as compared to cash provided by financing activities of $0 in the prior year period, and included $0.1 million proceeds from warrant exercises, offset by approximately $55,000 debt issuance costs.

We were not subject to any financial or non-financial covenants under its financing arrangements as of February 28, 2021.

Year ended November 30, 2020:

Cash and restricted cash as of November 30, 2020 was approximately $9.7 million, an increase of approximately $8.5 million from the balance as of November 30, 2019 of $1.2 million. Approximately $6.4 million of the cash on hand at year end was restricted due to holds placed on its use by our merchant services vendor pending fulfillment of backorders prepaid by credit cards.

Despite a net loss of $12.6 million for the year ended November 30, 2020, operating activities provided $2.5 million of net cash because the loss was driven by $10.4 million of non-cash expenses including $1.3 million stock-based compensation expense, $0.8 million accretion of debt discounts, $6.0 million loss on extinguishment of debt, $0.8 million warrant inducement, $0.4 million issuance of stock for services and $0.2 million depreciation and amortization expense. Moreover, restricted cash increased due to the $4.9 million increase in deferred revenue. The rapid growth of our operations increased working capital balances but increases in accounts receivable, prepaid expenses and inventory were offset by increases in accounts payable and other liabilities such that the net change in these working capital balances added $0.3 million to cash.

The $2.6 million of cash provided by operating activities for the year ended November 30, 2020 was offset by the use of $2.0 million invested in business assets including $1.4 million for property and equipment, $0.5 million for the acquisition of Roboro and $0.1 million for the acquisition of patent rights.

Financing activities provided $7.8 million of the increase in cash for the year ended November 30, 2020. This included $7.2 million from the exercise of warrants, $0.5 million reduction of the purchase price of Roboro in exchange for common stock, $0.2 million proceeds from the PPP loan offset by $0.1 million from repayment of notes payable. Management believes that increasing cash provided by operations due to the significant increases in revenue, production levels, and order fulfillment, and reduction of material restrictions or limits on cash by its credit card processors, together with the availability of a new $6.5 million credit facility consisting of a $5 million revolving line of credit and a $1.5 million equipment line of credit closed subsequent to the year-end will be adequate to provide for its liquidity requirements. See Note 24, “Subsequent Events” in the Notes to Consolidated Financial Statements included in this prospectus for additional information.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 4, “Summary of Significant Accounting Policies,” in the Notes to Condensed Consolidated Financial Statements included in this prospectus for a discussion of recently issued and adopted accounting standards.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our Condensed Consolidated Financial Statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions. Our significant accounting policies are outlined in Note 4, “Summary of Significant Accounting Policies,” in the Notes to Consolidated Financial Statements included this prospectus. During the three months ended February 28, 2021, there were no significant changes to our critical accounting policies from those described in our Annual Report on Form 10-K for the year ended November 30, 2020.

BUSINESS

Our Vision

Our vision is to provide consumers and professionals with a safe and effective, non-lethal alternative to firearms that will enable our customers to safely and effectively protect themselves, their families and their communities.

Company Overview

We are a non-lethal self-defense technology company specializing in innovative, next-generation solutions for security situations that do not require the use of lethal force. Our mantra is Live Safe, and our core mission is to empower people to safely embrace life. We seek to fulfill our mission by developing easy-to-use self-defense tools that are designed to allow people to live more safely. We are also focused on providing law enforcement and private security customers with non-lethal alternatives to firearms that are intended to reduce shootings and facilitate trust with the communities they serve.

Our product portfolio includes:

Ourflagship personal security device, the Byrna HD, is a powerful and effective non-lethal self-defense device that is powered by CO2 and fires ..68 caliber spherical kinetic and chemical irritant projectiles that are designed to disable a threat from a standoff distance of up to 60 feet. We have designed our Byrna devices to function as a platform that can be enhanced, upgraded and customized in a modular fashion with our accessory products. Only Byrna projectiles are approved for use with Byrna launchers, which creates the potential for reoccurring sales of consumable products. We also offer our Blunt Impact Projectile line of non-lethal munitions for 40 millimeter rifled launchers utilized by law enforcement, correctional services and military customers.

Our products are sold in both the consumer and security professional markets. In the consumer market, our solutions are designed to provide ordinary civilians – homeowners and renters, parents and grandparents, campers, truckers, real estate agents, store owners and anyone else who faces potential threats from would-be assailants – with an effective, non-lethal tool to disable, disarm and deter would be assailants and to escape harm’s way. In the professional market, our products are designed to provide domestic and international law enforcement agencies, corrections and custodial officers, private security professionals, private investigators and other professional security users with a practical, non-lethal option to address threats and resolve conflicts without the need to resort to lethal force. In addition, we are focused on providing our non-lethal security solutions to enhance the safety of schools, houses of worship, outdoor venues and other locations that have proven to be vulnerable to acts of violence. Our products can be purchased in most U.S. locations quickly, simply and discreetly, without the requirement for a license, background check or waiting period.

Our strategy is to establish Byrna as a consumer lifestyle brand associated with the confidence people can achieve by knowing they can protect themselves, their loved ones and those around them. We believe we have a significant opportunity to leverage the Byrna brand to expand our product line, broaden our user base and generate increasing sales from new and existing customers.

Our Market Opportunity

The traditional non-lethal weapons market is projected to grow from $7.5 billion in 2020 to $11.9 billion by 2027, according to Global Industry Analysts. This traditional market includes a broad range of products primarily focused on law enforcement and military applications, including rubber, wax and plastic bullets, stun grenades, water cannons, pepper sprays, tear gas and electroshock weapons. We address a portion of the traditional non-lethal market, as our current and future products are designed to meet the stringent requirements of law enforcement and professional security customers, while providing a novel, more humane, less dangerous option for security and threat de-escalation. However, we believe our addressable market could be larger than the traditional non-lethal market, as we are seeking to open up the consumer market by introducing personal security solutions that are easy to use, effective, affordable and accessible, without permits, waiting periods or background checks. We believe our ability to simultaneously address the consumer market and traditional non-lethal market is a key competitive advantage for us.

In the consumer market, our products are designed to provide peace of mind and protection, while reducing the risk of potentially fatal mistakes that can have life-altering legal, financial, and psychological impacts. Importantly, our products are designed to appeal to the needs of gun owners and non-gun owners alike. There are approximately 82 million gun owners in the United States, according to data from Gallup and the United States Census Bureau. We believe our products offer gun owners an attractive option – a truly effective personal safety device, with a familiar “look and feel” of a firearm, but without the higher risk of potentially fatal mistakes or accidents. For the remaining 173 million adults in the United States who do not own a gun, our products are designed to provide a safe, effective, and non-lethal way to protect themselves and their families.

The professional market represents a significant opportunity for our non-lethal security products. Domestically, there are approximately 917,000 police officers, detectives and criminal investigators, according to the U.S. Bureau of Labor Statistics. Incidents of police shootings and deaths related to the use of conductive energy devices have become a growing problem in the United States, leading to loss of life, civil unrest and distrust between police officers and civilians. According to The Washington Post, there have been over 6,300 police shootings since 2015, and Reuters reports at over 1,000 deaths from conductive energy devices since the early 2000s. Given the human, social and financial impacts of these fatal events, law enforcement organizations are seeking non-lethal tools that can safely protect the officer and the community and de-escalate dangerous situations without having to resort to deadly force. Beyond law enforcement, there are a number of other security-related professions in the United States that we believe are prime candidates for our Byrna HD device, including 800,000 private security guards, 346,000 corrections officers and 90,000 private detectives, based on data from the U.S. Bureau of Labor Statistics.

We are also targeting the international professional security market, which we believe is multiple times larger than the U.S. market. There are approximately 10 million police officers located in the top 30 international countries based on police population, according to data compiled by World Atlas. In addition, there are an estimated 19 million international private security workers, according to The Guardian. We believe the international professional security market presents an attractive growth opportunity for us given increasing demand for de-escalation tools and growing acceptance of our non-lethal approach in many regions around the world.

We also see an urgent need to equip US schools with non-lethal security products to help address the tragic increase in school shooting events. According to data published by the Naval Postgraduate School’s Center for Homeland Defense and Security, there have been approximately 460 shooting events in K-12 schools during the last five years. We believe our non-lethal security products offer school personnel valuable options to intervene in dangerous situations without bringing lethal firearms onto school property. According to the U.S. Department of Education, there are over 132,000 elementary and secondary schools and over 6,600 colleges and universities in the United States, presenting a significant opportunity to deploy our solutions to enhance school safety.

In addition, other public spaces face increasing security challenges, including houses of worship, bars and nightclubs, concert venues, sporting arenas and public transportation centers. Each of these venues presents an opportunity to equip employees and security personnel with non-lethal tools to enhance security without introducing lethal firearms into crowded civilian environments.

Our Products

Our flagship product is the Byrna HD, a compact, ergonomically designed, handheld personal security device with the size and form factor of a compact handgun. It is easy to use, has virtually no recoil and is designed to fire accurately with an effective range of 60 feet. The Byrna HD utilizes our patented technology and more than 60 custom designed parts. The Byrna HD comes with multiple easily reloadable magazines that can hold five .68 caliber projectiles (with plans to increase this capacity to seven projectiles). The Byrna HD is designed to provide a non-lethal alternative to a firearm, effective at a much safer stand-off distance than pepper spray or conductive energy devices, which have recommended maximum ranges of 10 feet and 20 feet, respectively.

Byrna HD Launchers – Available in Five Colors

In May 2021, we acquired Mission Less Lethal, one of the leading U.S. manufacturers of .68 caliber, non-lethal, shoulder-fired launchers for law enforcement and other security professionals, both domestically and internationally. With this acquisition, we will be offering the full Mission Less Lethal product line, including the MLR, Mission 4, TPR and TCR launchers. While we have been focused on hand-held, pistol type non-lethal devices, Mission has been focused on non-lethal rifles, including semi-automatic and fully automatic shoulder fired launchers capable of firing up to 12 rounds per second. These rifles are well suited to meet specific situational needs of security professionals, including law enforcement, private security and corrections customers.

Mission Less Lethal Tactical Compact Rifle (TCR)

We offer a range of .68 caliber projectiles for different applications. Our chemical irritant projectiles include Byrna Max, which contains a pepper and tear gas blend, and Byrna Pepper, which includes only a pepper irritant. These chemical irritant projectiles are designed to intensely burn an assailant’s eyes and skin and impair their respiratory system upon contact, with quick-acting, incapacitating effects. We also offer Byrna Kinetic, a lower-cost, hard plastic projectile that can be used for self-defense or training, and Byrna Inert, a projectile filled with inert powder for training to simulate use of chemical irritant rounds. In addition, we plan to soon introduce the Eco-Kinetic line of projectiles which are environmentally safe, fully biodegradable and highly accurate rounds for both safety and recreational uses. We offer selected projectiles in five-count, 25-count and 95-count packages.

Byrna Kinetic Projectiles

We also market a range of accessories that allow our users to customize, carry, load, power and maintain their Byrna launchers. These accessories include laser sights, flashlight attachments, spare magazines, barrel extensions, holsters and CO2 cartridges. We also offer our customers apparel featuring the Byrna brand and emphasizing our Live Safe motto. Together, our projectiles, accessories and apparel provide us with an attractive source of ongoing revenue from our base of Byrna owners.

Our Competitive Strengths

We believe the following strengths distinguish us from our competitors and position us for a leadership position in the non-lethal personal security market:

Our Growth Strategy

The following are the key pillars of our growth strategy that we believe will enable us to establish Byrna as a leading solutions provider in the non-lethal security market:

We also plan to introduce new projectiles, including:

We also expect to introduce new accessories, including:

Sales and Marketing

We sell our products into the consumer market through our Byrna e-commerce store and a network of over 550 local, regional and national outdoor and sporting goods stores, either directly or through distributors. We also plan to begin selling our products through an Amazon storefront in the next three months, further broadening our reach into the consumer market. In addition, we plan to open a retail store and showroom in Las Vegas in late 2021, and will consider opening other stores and showrooms in select high-density retail areas. In the professional security market, we seek to drive purchases through our Train the Trainer program developed for police and security officers, with a focus on educating the proper use of force and de-escalation methods.

Our international sales are fulfilled primarily by select distribution partners that have expertise in their local markets. International sales represented 6.5% of revenue in our fiscal year 2020, however we see the potential to increase our international sales mix as foreign law enforcement customers are showing growing interest in Byrna devices serving as a non-lethal, secondary security device, and the Byrna approach is increasingly seen as a favorable de-escalation solution. In March 2020, we hired Etienne Roux, Executive Vice President of International Sales and Marketing, with responsibility for developing our global sales and distribution network.

Our marketing efforts are focused on creating brand awareness for Byrna by utilizing promotional specials and banner ads, and driving traffic to our e-commerce store through the use of digital marketing tools. We also place a heavy emphasis on customer reviews and ratings. As of May 31, 2021, we had over 1,400 verified customer reviews and had received an average satisfaction rating of 4.7 out of 5.0. In early 2020, we implemented a nationwide reseller and distribution network of brick-and-mortar outlets and engaged third-party firms to market our products to dealers in the outdoor and sporting goods sectors.

In June 2020, and then again in April 2021, Byrna was highlighted on a popular national news program. These high profile events led to significant surges in orders on our e-commerce store and further raised our brand recognition nationally. We believe these events demonstrated the positive and rapid impacts that additional visibility of our products and brand can have on our sales. Our current marketing strategy includes engaging key influencers in relevant markets to highlight the benefits of our security solutions to their respective networks of followers, engaging in public dialogues about firearm regulation, school safety and the expansion of police programs and training in the use of non-lethal weapons, and expanding our use of targeted digital marketing tools.

During 2020, we hired R.J. Boatman as our Chief Governmental Affairs Officer. Mr. Boatman, who was co-developer and former Operations Director of the nation’s first Center for Safe and Secure Schools at the Harris County Department of Education and the former Executive Director of the Texas Safe Schools Alliance, is implementing our Learn Safe school safety program designed to provide school officials with the security tools and training needed to respond effectively to threats of school violence.

Manufacturing, Quality and Suppliers

We operate two manufacturing facilities. In the United States, we opened a 14,000 square foot facility in 2020 located in Fort Wayne, Indiana – the nation’s most active city for developing and manufacturing CO2-powered devices for security, sport and recreation. We utilize our Fort Wayne facility to fulfill domestic demand for our launchers. To satisfy production demand in international markets, we operate a 10,000 square foot manufacturing facility located in Pretoria, South Africa. Both facilities utilize a human capital-oriented model with highly-skilled manual assembly of precision components. We believe that we have sufficient capacity to meet our production needs for at least the next two years, and that additional capacity is available to us on commercially reasonable terms.

We rigorously test 100% of our products at our production facilities before shipment to ensure our products meet stringent quality and performance standards. We also conduct long-term testing of our launchers during the development phase. For the development of our Byrna LE device, we plan to engage a third-party lab to conduct development testing and certification. We measure in-field quality by the rate of returns requested. Of the over 80,000 launchers shipped in the US as of May 31, 2021, only 1.2% have been returned as a result of product-related issues. Excluding returns associated our voluntary safety update, our return rate is 0.4%.

Our Byrna HD includes 114 distinct parts, including more than 60 custom designed parts. We source these components from third-party suppliers in the US and overseas. In August 2020, we hired David Schultz, Chief Supply Chain Officer, and expanded our roster of vendors in order to ensure adequate supply chain capacity and mitigate the risks of component constraints. Our projectiles are currently sourced from a third-party supplier in South Africa, but we are working to establish the capability to manufacture projectiles in our own facilities, which is expected to improve quality and supply flow and reduce dependence on third parties.

Research and Development

We conduct research and development activities to enhance existing products and develop new products at our headquarters, in Andover, Massachusetts. Our design team is comprised of experts in the fields of mechanical design, precision manufacturing and CO2-powered propulsion. We are currently focused on executing the commercial introduction of a series of new launchers, including the Byrna SD, Byrna LE, Byrna CP, and Byrna PE. These new launchers benefit from innovations in the areas of greater muzzle velocity, more efficient utilization of CO2, improved triggers, higher capacity magazines, improved sighting systems, yet keeping the product compact and ergonomic. We are also investing engineering resources to develop proprietary projectiles both for the consumer and law enforcement markets. Finally, we will be devoting development resources to integrate and enhance the recently acquired Mission Less Lethal products line into our portfolio.

Intellectual Property

Our success and ability to compete effectively depends in part on our ability to protect our proprietary technology and to establish and adequately protect our intellectual property rights. To establish and protect our proprietary rights, we rely upon a combination of patent, copyright, trade secret and trademark laws, and contractual restrictions such as confidentiality agreements, licenses and intellectual property assignment agreements. We maintain a policy requiring certain of our employees, contractors, consultants and other third parties to enter into confidentiality and proprietary rights agreements as needed to control access to our proprietary information.

We have 59 active issued patents and five trademarks protecting our proprietary brands, including one patent and one trademark obtained through the acquisition of Mission Less Lethal in May 2021. We continue to review our product development efforts to assess the existence and patentability of new intellectual property. In addition, through the acquisition of Mission Less Lethal, we now hold exclusive rights to use all of the intellectual property of Kore Outdoor, Inc. (the previous owner of Mission Less Lethal) for non-lethal applications. We also believe that our know-how in complex manufacturing utilizing precision components is a key element of our intellectual property.

Our Competition

Our non-lethal security products compete with manufacturers of:

In addition, manufacturers of traditional firearms may introduce products competitive with ours. Many of our existing and potential competitors benefit from strong brand recognition, broad product lines, well-established distribution, loyal resellers and customers and significant financial resources. We expect to encounter new competitors as the non-lethal security market grows and as we enter new markets both domestically and internationally. We believe our Byrna line of products is competitive in terms of price, quality, appearance, features, performance and reliability, but we must continue to innovate and increase brand awareness in order to stay competitive.

Our Properties

Our corporate headquarters is located at 100 Burtt Road, Suite 115, Andover, Massachusetts. We also have a manufacturing and distribution center in located at 5020 Industrial Rd, Fort Wayne, Indiana. We also have properties located in Pretoria, South Africa where we manufacture some of our products, and Las Vegas, Nevada which houses a sales and marketing center. All of our properties are leased.

Our Employees

As of May 31, 2021, we had approximately 175 full and part-time employees, including 117 in manufacturing and distribution. We believe that our employee relations are good. We expect to continue expanding our employee base to support our growth plans.

MANAGEMENT

Directors and Executive Officers

As of the date of this prospectus, our directors and officers are as follows:

Directors

Paul Jensen has been our Director since July 13, 2018. Mr. Jensen first joined us as our President and Chief Operating Officer on October 1, 2017 and served as our Chief Executive Officer from July 13, 2018 until he retired on April 1, 2019. From April 2008 to June 2017, Mr. Jensen served as chief executive officer of HALO Maritime Defense Systems (“HALO”), a technology company he co-founded that provides advanced marine automated security systems. Prior to HALO, Mr. Jensen worked for Nypro Inc., a plastics injection molding contract manufacturer. Mr. Jensen also served in the United States Army, with 9 years of active duty serving in command positions with the 82nd Airborne Division and XVIII Airborne Corps and at the U.S. Military Academy, as an Assistant Professor of Chemistry. Mr. Jensen graduated from the United States Military Academy at West Point and received a M.S. in Chemistry from M.I.T. and a M.B.A. from Golden Gate University. Mr. Jensen is a graduate of the Senior Executive Program at the University of Tennessee, has served on the adjunct faculty at the Fuqua School of Business, Duke University, and is a Hertz Fellow.

Herbert Hughes has been our Director since July 9, 2019. Mr. Hughes has over 30 years of experience in the financial industry as an advisor and leader of a diverse range of businesses. Since March 2017, Mr. Hughes has been the chief financial officer of Wormhole Labs, a technology company in augmented reality and gaming industry and serves on its board of directors. Mr. Hughes has also been a managing director of HHM Capital, since 2005, a financial institution which provides investment banking and advisory services to ultra-high net worth individuals and families. From March 2015 to June 2019, Mr. Hughes was the chief executive officer of Domino Sands, an oil service business. Mr. Hughes also served as the Head of Derivatives and Capital Allocation at Bass Brothers Investments from 1995 to 2003, Portfolio Manager at Weston Capital of Paloma Partners from 1991 to 1995, Partner at Paramount Capital Group from 1985-1991, and trader at Kidder Peabody from 1982 to 1985. Mr. Hughes received a B.A. in 1982 from Harvard University.

Chris Lavern Reed has been our Director since 2020. Mr. Reed was a partner of Garcia Reed Investments, LLC, a real estate management entity, from April 2012, and managing partner from 2018, until January 2021. Mr. Reed has also served as an annuitant for the U.S. Department of State, overseeing classified investigations, since October 2018. From December 2016 to July 2018, Mr. Reed served as the special agent in charge and director of the United States Agency of International Development in the Office of the Inspector General (“USAID OIG”). Prior to his employment at the USAID OIG, Mr. Reed served with the U.S. Department of Justice, Bureau of Alcohol, Tobacco, Firearms and Explosives. Mr. Reed is veteran of the U.S. Marine Corps. Mr. Reed holds a B.A. from Indiana University, an M.A. from Northern Arizona University and an M.B.A. from Champlain College. He also is a graduate of the Congressional Fellow Program from Georgetown University and the Executive Development Program from Columbia University.

Clive Denis Bode has been our Director since November 2020. From 2017 through present, Mr. Bode has served as Chief Legal Advisor to Tarrant Management, LLC and as Chief Legal Officer for David Bonderman’s family office. Mr. Bode is also a Partner in TPG Capital (since 2001) and has served as its Chief Legal Officer (from 2001 to 2017). From 1986 through 2001, Mr. Bode served as Senior Advisor to the Bass Organization. Mr. Bode was an attorney at Vinson and Elkins from 1977 through 1986 (partner from 1984 through 1986). Mr. Bode is a director of BGH, LLC (since 2019), Far-Eastern Shipping Company PLC (from 2014-2018), TPG Capital (UK) Ltd. (since 2015), and has served as a director of various other TPG portfolio companies beginning in or about 2015. In addition, Mr. Bode served on the Board of La Quinta Corporation and the board of directors of La Quinta Properties, Inc. from 1999 through 2018 (Chair from 1999 through 2004). Mr. Bode received a B.A. from Oakland University (Michigan) and J.D. from The University of Michigan Law School.

Executive Officers

Bryan Scott Ganz became our President effective July 13, 2018, Chief Executive Officer effective April 1, 2019 and has been our Director since June 2016. Mr. Ganz brings more than 30 years of global business experience in sales management, manufacturing, new product design and development, as well as mergers and acquisitions. Mr. Ganz had been the founder of MITL, an industrial tire company sold to Trelleborg in 2012. From 1991 to 2009 Mr. Ganz held a number of roles culminating with CEO of GPX International, Inc. and its predecessor Galaxy Tire Inc. Mr. Ganz started his career at Paramount Capital Group where he was a partner from 1985 to 1991. Mr. Ganz is the founder and majority shareholder of Northeast Industrial Partners LLC, a holding company that owns and operates privately held businesses. In addition, he is a principal in Scudder Bay Capital LLC, a captive private REIT. Mr. Ganz has a J.D. from Columbia Law School where he was a Harlan Fiske Stone Scholar and a B.S. in Business Administration from Georgetown University.

David North was named our Chief Financial Officer effective August 31, 2020. He previously served as Vice President and Corporate Controller, from October 2017 to January 2020, at Velcro Group Corp., a multinational manufacturer with operations in North America, South America, Asia and Europe. From July 2011 to October 2017, Mr. North served as Corporate Controller for the L.S. Starrett Company (NYSE:SCX), a manufacturer of measurement tools with operations in North America, Brazil, China and Europe. Mr. North began his career at Deloitte and Touche. He holds a B.A. from Dartmouth College, a M.S. in Accounting from New York University, and is a Certified Public Accountant registered in the state of New York.

Lisa Wager was named our Chief Legal Officer effective October 29, 2018 and Corporate Secretary since April 1, 2019. Ms. Wager has not had any other employment during the prior three years. Previously, Ms. Wager was a Partner at Morgan Lewis. Ms. Wager has a J.D. from Columbia Law School where she was a Harlan Fiske Stone and B.S. from Union College.

Family Relationships

There are no family relationships between any of our directors and executive officers.

Board Committees

We have established an Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee. The composition and responsibilities of each of the committees of our Board of Directors is described below. Members serve on these committees until their resignation or until otherwise determined by our Board of Directors. Our Board of Directors may establish other committees as it deems necessary or appropriate from time to time.

Audit Committee

Our Audit Committee is responsible for, among other things, assisting our Board of Directors with oversight of: (1) the integrity of our financial statements; (2) legal, ethical and risk management compliance programs; (3) our systems of internal accounting and financial reporting control; (4) our independent registered public accounting firm’s qualifications and independence and performance. Our Audit Committee has the direct authority and responsibility to appoint, compensate, oversee and where appropriate, replace or retain our independent registered public accounting firm. Our Audit Committee is established in accordance with Section 3(a)(58)(A) of the Exchange Act.

As of the date of this prospectus, the members of our Audit Committee are Herbert Hughes (Chair), Clive Denis Bode and Chris Lavern Reed. Each of these Committee members is “independent” within the meaning of Rule 10A-3 under the Exchange Act. Our board has determined that Herbert Hughes is an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K. Herbert Hughes serves as Chairman of our Audit Committee.

Compensation Committee

Our Compensation Committee is responsible for, among other things, reviewing and recommending to our Board of Directors: (1) compensation levels of our Chief Executive Officer and other executive officers, including salary rates, participation in incentive compensation plans and other forms of compensation; (2) reviewing and approving on an annual basis the corporate goals and objectives with respect to compensation for our executive officers; and (3) the compensation of our outside directors. The Compensation Committee also administers our equity incentive plans.

Many key compensation decisions are made during the first quarter of the fiscal year as the Compensation Committee meets to: (1) review performance for the prior year, determine awards under our incentive plans, and set compensation targets and objectives for the coming year. However, our Compensation Committee also views compensation as an ongoing process and may convene special meetings in addition to its regularly scheduled meetings throughout the year for purposes of evaluation, planning and appropriate action.

As of the date of this prospectus, the members of our Compensation Committee are Clive Denis Bode (Chair) and Herbert Hughes. Each of these Committee members is “independent” within the meaning of Rule 10A-3 under the Exchange Act. In addition, each member of our Compensation Committee qualifies as a “non-employee director” under Rule 16b-3 of the Exchange Act.

Nominating and Corporate Governance Committee

Our Nominating and Governance Committee is responsible for assisting our Board of Directors by: (1) identifying individuals qualified to become members of our Board of Directors and its committees; (2) recommending to our Board of Directors nominees for election to the Board at the annual meeting of stockholders; and (3) assisting our Board of Directors in assessing director performance and the effectiveness of the Board of Directors as a whole

As of the date of this prospectus, the members of our Nominating and Corporate Governance Committee are Paul Jensen (Chair), Chris Lavern and Clive Denis Bode.

Director Independence

Our Board of Directors is comprised of a majority of independent directors as defined in Rule 5605(a)(2) of the Marketplace Rules of the Nasdaq. Our Board of Directors has reviewed the independence of our directors under the applicable standards of Nasdaq. Based on this review, our Board of Directors determined that each of the following directors is independent under those standards: Herbert Hughes, Chris Reed, and Clive Bode.

Codes of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, including our Chief Executive Officer and Chief Financial Officer. A copy of our Code of Business Conduct and Ethics is available free of charge on our website at ir.byrna.com. We intend to disclose any amendment to or waiver from a provision of our Code of Business Conduct and Ethics that requires disclosure on our website at ir.byrna.com. We also have a formal Whistleblower Policy and Insider Trading Policy.

Compensation Committee Interlocks and Insider Participation

During 2021, our Board of Directors participated in deliberations concerning executive officer compensation. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee (or other board committee performing equivalent functions) of any entity that has one or more of its executive officers serving on our Board of Directors or compensation committee.

Limitation of Liability and Indemnification of Directors and Officers

We are incorporated under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law (“DGCL”) provides that a Delaware corporation may indemnify any persons who are, or are threatened to be made, parties to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee, or agent of such corporation, or is or was serving at the request of such corporation as an officer, director, employee, or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit, or proceeding, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may indemnify any persons who are, or are threatened to be made, parties to any threatened, pending, or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee, or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee, or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests, except that no indemnification is permitted without judicial approval if such person is adjudged to be liable to the corporation. To the extent that a present or former officer or director is successful on the merits or otherwise in the defense of any action, suit, or proceeding referred to above, or in the defense of any claim, issue, or matter therein, the corporation must indemnify him or her against the expenses (including attorneys’ fees) that such officer or director has actually and reasonably incurred. Our certificate of incorporation, as amended, provides that our directors will not be personally liable to the company or our stockholders except for liability (i) for any breach of the director’s duty of loyalty to the company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived improper personal benefit. In addition, our bylaws, as amended, provides for the indemnification of our directors and officers to the fullest extent permitted by law.

Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director, except for liability for any:

● breach of a director’s duty of loyalty to the corporation or its stockholders;

● act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

● unlawful payment of dividends or redemption of shares; or

● transaction from which the director derives an improper personal benefit.

Our bylaws, as amended, provide that expenses incurred by any director in defending any such action, suit or proceeding in advance of its final disposition shall be paid by us, provided such director must repay amounts in excess of the indemnification such director is ultimately entitled to.

We expect to enter into indemnification agreements with our directors, executive officers and certain other officers and agents pursuant to which they are provided indemnification rights that are broader than the specific indemnification provisions contained in the DGCL.

Section 174 of the DGCL provides, among other things, that a director who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock purchase or redemption may be held liable for such actions. A director who was either absent when the unlawful actions were approved, or dissented at the time, may avoid liability by causing his or her dissent to such actions to be entered on the books containing the minutes of the meetings of the board of directors at the time such action occurred or immediately after such director receives notice of the unlawful actions.

Non-Employee Director Compensation

Compensation of Directors

The following table summarizes the director compensation for all of our non-employee directors who served at any time during fiscal year 2020:

(1) Director did not stand for reelection at the 2020 Annual Meeting of Stockholders.

During the year ended November 30, 2020, stock and cash compensation granted to each non-employee member of the Board of Directors was determined by the Compensation Committee after consultation with an outside consultant based on certain criteria including peer data and goals including incentive and retention (discussed above). Each director who served a full year received 3,100 shares and $55,000, and each director who served less than a full year received a pro-rated portion of the same. In addition, fixed cash amounts were granted to the chairs of the board committees and, where chairs changed during the year, such amount was divided pro rata based on months served.

EXECUTIVE COMPENSATION

Our Compensation Philosophy

Our compensation philosophy is to compensate all employees (including our named executive officers) at a level sufficient to attract, motivate, and retain the talent we need to achieve or surpass our short-term and long-term goals for our business, without promoting irresponsible behavior. Guided by this philosophy, our pay and benefits practices reflect our vision and values, and the general condition of the economy, and are built on a framework of pay-for-performance, comprehensive position evaluations, and market-competitiveness. Executive management, with approval of our Board of Directors, fulfills our responsibility to promote the best interests of our stockholders through the execution of sensible compensation principles and practices.

Compensation Process

Our Compensation Committee is independent and involved. Each member of the committee is an independent director and is a non-employee director under the applicable rules of Nasdaq and the SEC, respectively. In fulfilling its duties and responsibilities, the Compensation Committee may consult with members of management and hire independent consultants. In addition, our Chief Executive Officer works with our Compensation Committee in making recommendations regarding our overall compensation policies and plans as well as specific compensation levels for our other officers and key employees, other than the Chief Executive Officer. Executives are not present for discussion of or decisions on their own compensation.

Compensation Components

We utilize three general forms of compensation for our named executive officers: base salary, short-term incentive compensation, and long-term incentive compensation. We deliver compensation at various levels of the organization in different ways.

Base salary

We pay base salaries to attract and retain talented employees, including our named executive officers. Base salary increases are driven primarily by demonstrated value to our organization and are reviewed annually and adjusted from time to time, based on a review of market data and an assessment of company, business unit and individual performance and experience. Merit increases are awarded based on the performance of the employee.

Short-Term Incentives

We pay annual cash incentive compensation to our executive officers related to individual performance targets. We balance the security provided by base salary with the “at-risk” feature of annual incentive compensation to attract and retain top quality employees and provide proper incentive to enhance the value of our common stock for our stockholders.

Long-Term Incentives

We link compensation levels with performance results and ensure sustained alignment with stockholder interests by providing equity-based awards to our executive officers under our 2020 Equity Incentive Plan and previously issued under our 2017 Equity Incentive Plan. In addition, we believe equity awards provide an important retention tool for our executive officers because the awards are subject to multi-year performance periods and vesting. Awards under this plan consist of equity-based awards, including restricted stock, restricted share units, stock appreciation rights and stock options.

Summary Compensation Table

The following table sets forth all compensation paid to our named executive officers at the end of the fiscal years ended November 30, 2020 and 2019. Individuals we refer to as our “named executive officers” include our Chief Executive Officer and our two other most highly compensated other executive officers whose salary and bonus for services rendered in all capacities exceeded $100,000 during the fiscal year ended November 30, 2020. The table below and associated footnotes reflect the Reverse Stock Split.

Notes:

Employment Agreements

Bryan Ganz

Our Board of Directors approved and stockholders ratified on November 19, 2020 an employment agreement with Bryan Ganz to be effective August 31, 2020 (the “Ganz Agreement”). The Ganz Agreement provides that Mr. Ganz will be paid an annual salary for $450,000, and a target bonus of 100% of his base salary, subject to his achievement of criteria established by the Compensation Committee. In addition, in consideration of Mr. Ganz’s rendering of services thereunder, Byrna issued to Mr. Ganz 900,000 RSUs under the 2020 Plan, which RSUs will vest one-third when Byrna’s stock trades above $20.00 on a 20-day closing volume weighted average price (“VWAP”), one-third when Byrna’s stock trades above $30.00 on a 20-day VWAP, and one-third when Byrna’s stock trades above $40.00 on a 20-day VWAP; provided, that Mr. Ganz must remain employed by Byrna for three years from the effective date of the Ganz Agreement (subject to certain terms therein). As of May 31, 2021, the performance trigger for one-third of the RSUs has been achieved. Mr. Ganz is also entitled to participate in employee benefit plans maintained by Byrna on behalf of its employees.

The Ganz Agreement has a three-year term, with optional renewal by mutual agreement of Byrna and Mr. Ganz. In connection with the Ganz Agreement, Byrna and Mr. Ganz entered into a Non-competition and Non-solicitation Agreement, covering a period of 12 months from the date of termination of Mr. Ganz’ employment.

The severance provisions applicable to Mr. Ganz are discussed below under “Potential Payments upon Termination or Change of Control.”

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information concerning the outstanding equity awards of each of the Named Executive Officers as of November 30, 2020. The table below and associated footnotes reflect the Reverse Stock Split:

STOCK AWARDS

Potential Payments upon Termination or Change of Control

In the event of termination of the Employment Agreement by Mr. Ganz for good reason or by Byrna without cause, Mr. Ganz will be entitled to receive (subject to his execution of a release): (a) the accrued amounts (i.e. any accrued but unpaid base salary and accrued by unused vacation, reimbursement for business expenses properly incurred, and employee benefits to which Mr. Ganz is entitled under employee benefit plans as of the termination date); (b) twelve months base salary plus an amount equal to the target bonus amount; (c) extended time to satisfy the price vesting triggers on the RSUs; and (d) reimbursement for monthly COBRA premiums paid by Mr. Ganz until the earliest of (i) the twelve month anniversary of the termination, (ii) termination of COBRA eligibility; and (iii) the date on which Mr. Ganz becomes eligible to receive substantially similar coverage from another source.

Equity Compensation Plans

The following description of the principal terms of the 2020 Plan, which governs all outstanding awards (and which replaced all previous plans), is a summary and is qualified in its entirety by the full text of the 2020 Plan, which is attached as Annex B to our Proxy Statement filed with the SEC on November 13, 2020.

Administration. In general, the 2020 Plan will be administered by the Compensation Committee of our Board.The Compensation Committee will determine the persons to whom options to purchase shares of our Common Stock, stock appreciation rights (SARs), restricted stock units (“RSUs”), and restricted or unrestricted shares of our Common Stock may be granted. The Compensation Committee may also establish rules and regulations for the administration of the 2020 Plan and amendments or modifications of outstanding awards, subject to stockholder approval where required under applicable laws. The Compensation Committee may delegate authority to the chief executive officer and/or other executive officers to grant options and other awards to employees (other than themselves), subject to applicable law and the 2020 Plan. No options, stock purchase rights or awards may be made under the 2020 Plan on or after October 23, 2030, but the 2020 Plan will continue thereafter while previously granted options, SARs or other awards remain outstanding.

Eligibility. Persons eligible to receive options, SARs or other awards under the 2020 Plan are those employees, officers, directors, consultants, advisors and other individual service providers of our Company and our subsidiaries who, in the opinion of the Compensation Committee, are in a position to contribute to our success, or any person who is determined by the Compensation Committee to be a prospective employee, officer, director, consultant, advisor or other individual service provider of us or any of our subsidiaries. As awards under the 2020 Plan are within the discretion of the Compensation Committee, we cannot determine how many individuals in each of the categories described above will receive awards.

Shares Subject to 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.

“Incentive stock options,” or “ISOs,” that are intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), may be granted under the 2020 Plan with respect to all of the 2,500,000 shares of Common Stock authorized for issuance under the 2020 Plan. If any option or SAR granted under the 2020 Plan terminates without having been exercised in full or if any award is forfeited, or is settled in cash, the number of shares of Common Stock as to which such option or award was forfeited, withheld or paid, will be available for future grants under the 2020 Plan.

The number of shares authorized for issuance under the 2020 Plan and the foregoing share limitations are subject to customary adjustments for stock splits, stock dividends or similar transactions.

Terms and Conditions of Options. The Compensation Committee will determine the exercise price of options granted under the 2020 Plan. The exercise price of stock options may not be less than the fair market value per share of our Common Stock on the date of grant (or 110% of fair market value in the case of ISOs granted to a ten-percent stockholder).

If on the date of grant the Common Stock is listed on a stock exchange or is quoted on the automated quotation system of Nasdaq Capital Market, the fair market value will generally be the closing sale price on the date of grant (or the last trading day on which trades were made before the date of grant if no trades occurred on the date of grant), or if the Common Stock is not listed on a national securities exchange, the fair market value will be the mean between the bid and offered prices as quoted by any nationally recognized interdealer quotation system for such date or, in the absence of quoted bid and offered prices on such date, the mean between the bid and offered prices as quoted on the immediately preceding date on which such amounts were quoted. If no such prices are available, the fair market value will be determined in good faith by the Compensation Committee based on the reasonable application of a reasonable valuation method.

No option may be exercisable for more than ten years (five years in the case of an ISO granted to a ten-percent stockholder) from the date of grant. Options granted under the 2020 Plan will be exercisable at such time or times as the Compensation Committee prescribes at the time of grant. No employee may receive ISOs that first become exercisable in any calendar year in an amount exceeding $100,000. The Compensation Committee may, in its discretion, permit a holder of an option to exercise the option before it has otherwise become exercisable, in which case the shares of our Common Stock issued to the recipient will continue to be subject to the vesting requirements that applied to the option before exercise.

Generally, the option price may be paid (a) in cash or cash equivalent, or (b) by such other means as the Compensation Committee may accept. The Compensation Committee is also authorized to establish a cashless exercise program and to permit the exercise price (or tax withholding obligations) to be satisfied by reducing from the shares otherwise issuable upon exercise a number of shares having a fair market value equal to the exercise price.

No option may be transferred other than by will or by the laws of descent and distribution, and during a recipient’s lifetime, an option may be exercised only by the recipient. However, the Compensation Committee may permit the holder of an option (other than an ISO), SAR or other award to transfer the option, right or other award to immediate family members or a family trust for estate planning purposes. The Compensation Committee will determine the extent to which a holder of a stock option may exercise the option following termination of service with us.

Stock Appreciation Rights. The Compensation Committee may grant SARs, independent of or in connection with an option. The Compensation Committee will determine the other terms applicable to SARs. The strike price per share of a SAR will be determined by the Compensation Committee, but the strike price may not be less than the fair market value per share of our Common Stock on the date of grant of the SAR. The maximum term of any SAR granted under the 2020 Plan is ten years from the date of grant. Generally, each SAR will entitle a participant upon exercise to an amount equal to: the number of shares of Common Stock subject to the SAR that are being exercised multiplied by the excess, if any, of the fair market value of one share of Common Stock on the exercise date over the applicable strike price, less an amount equal to any applicable federal, state, local and non-U.S. income and employment taxes required to be withheld. We shall pay such amount in cash, in shares of Common Stock valued at fair market value, or any combination thereof, as determined by the Committee. Any fractional shares of Common Stock shall be settled in cash.

Restricted Stock and Restricted Stock Units.The Compensation Committee may award restricted shares of Common Stock and/or RSUs under the 2020 Plan. Restricted stock awards consist of shares of stock that are transferred to a participant subject to restrictions that may result in forfeiture if specified conditions are not satisfied. RSUs confer the right to receive shares of our Common Stock, cash, or a combination of shares and cash, at a future date upon or following the attainment of certain conditions specified by the Compensation Committee. The restrictions and conditions applicable to each award of restricted stock or RSUs may include performance-based conditions. Dividends with respect to restricted stock may be paid to the holder of the shares as and when dividends are paid to stockholders or at the time that the restricted stock vests, as determined by the Compensation Committee. Dividend equivalent amounts may be paid with respect to RSUs either when cash dividends are paid to stockholders or when the RSUs vest. Unless the Compensation Committee determines otherwise, holders of restricted stock will have the right to vote the shares.

Other Stock-Based Awards.The Compensation Committee may award other types of equity-based awards under the 2020 Plan, including the grant of shares of our Common Stock that do not have vesting requirements.

Effect of Certain Corporate Transactions. The Compensation Committee may, at the time of the grant of an award, provide for the effect of a change in control (as defined in the 2020 Plan) on any award, including (i) accelerating or extending the time periods for exercising, vesting in, or realizing gain from any award, (ii) eliminating or modifying the performance or other conditions of an award, or (iii) providing for the cash settlement of an award for an equivalent cash value, as determined by the Compensation Committee. The Compensation Committee may, in its discretion and without the need for the consent of any recipient of an award, also take one or more of the following actions contingent upon the occurrence of a change in control: (a) cause any or all outstanding options and SARs to become immediately exercisable, in whole or in part; (b) cause any other awards to become non-forfeitable, in whole or in part; (c) cancel any option or SAR in exchange for a substitute option; (d) cancel any award of restricted stock, or RSUs, in exchange for a similar award of the capital stock of any successor corporation; (e) cancel or terminate any award for cash and/or other substitute consideration in exchange for an amount of cash and/or property equal to the amount, if any, that would have been attained upon the exercise of such award or realization of the participant’s rights as of the date of the occurrence of the change in control, but if the change in control consideration with respect to any option or SAR does not exceed its exercise price or strike price, as applicable, the option or SAR may be canceled without payment of any consideration; or (f) make such other modifications, adjustments or amendments to outstanding awards as the Compensation Committee deems necessary or appropriate.

Amendment, Termination. Our Board may at any time amend the 2020 Plan for the purpose of satisfying the requirements of the Code, or other applicable law or regulation or for any other legal purpose, provided that, without the consent of our stockholders, the Board may not (a) increase the number of shares of Common Stock available under the 2020 Plan, (b) change the group of individuals eligible to receive options, SARs and/or other awards, or (c) extend the term of the 2020 Plan.

Other Information

A “new plan benefits” table, as described in the SEC’s proxy rules, is not provided because the grant of options and other awards under the 2020 Plan is discretionary, and we cannot determine now the specific number or type of options or awards to be granted in the future to any particular person or group. However, please refer to “Executive Compensation” in this proxy statement, which provides information on the grants made in the previous fiscal year under the 2017 Plan, and please refer to the description of grants made to our non-employee directors under the 2017 Plan in the last previous year under the heading “Director Compensation” in this proxy statement.

U.S. Federal Income Tax Consequences

Following is a summary of the U.S. federal income tax consequences of option and other grants under the 2020 Plan. Optionees and recipients of other rights and awards granted under the 2020 Plan are advised to consult their personal tax advisors before exercising an option or SAR or disposing of any stock received pursuant to the exercise of an option or SAR or following the vesting and payment of any award. In addition, the following summary is based upon an analysis of the Code as currently in effect, existing laws, judicial decisions, administrative rulings, regulations and proposed regulations, all of which are subject to change and does not address state, local, foreign or other tax laws.

Treatment of Options

The Code treats incentive stock options and nonstatutory stock options differently. However, as to both types of options, no income will be recognized to the optionee at the time of the grant of the options under the 2020 Plan, nor will our Company be entitled to a tax deduction at that time.

Generally, upon exercise of a nonstatutory stock option (including an option intended to be an incentive stock option but which has not continued to so qualify at the time of exercise), an optionee will recognize ordinary income tax on the excess of the fair market value of the stock on the exercise date over the exercise price. Our Company will be entitled to a tax deduction in an amount equal to the ordinary income recognized by the optionee in the fiscal year which includes the end of the optionee’s taxable year. We will be required to satisfy applicable withholding requirements in order to be entitled to a tax deduction. In general, if an optionee, in exercising a nonstatutory stock option, tenders shares of our Common Stock in partial or full payment of the exercise price, no gain or loss will be recognized on the tender. However, if the tendered shares were previously acquired upon the exercise of an incentive stock option and the tender is within two years from the date of grant or one year after the date of exercise of the incentive stock option, the tender will be a disqualifying disposition of the shares acquired upon exercise of the incentive stock option.

For incentive stock options, there is no taxable income to an optionee at the time of exercise. However, the excess of the fair market value of the stock on the date of exercise over the exercise price will be taken into account in determining whether the “alternative minimum tax” will apply for the year of exercise. If the shares acquired upon exercise are held until at least two years from the date of grant and more than one year from the date of exercise, any gain or loss upon the sale of such shares, if held as capital assets, will be long-term capital gain or loss (measured by the difference between the sales price of the stock and the exercise price). Under current federal income tax law, a long-term capital gain will be taxed at a rate which is less than the maximum rate of tax on ordinary income. If the two-year and one-year holding period requirements are not met (a “disqualifying disposition”), an optionee will recognize ordinary income in the year of disposition in an amount equal to the lesser of (i) the fair market value of the stock on the date of exercise minus the exercise price or (ii) the amount realized on disposition minus the exercise price. The remainder of the gain will be treated as long-term capital gain, depending upon whether the stock has been held for more than a year. If an optionee makes a disqualifying disposition, our Company will be entitled to a tax deduction equal to the amount of ordinary income recognized by the optionee.

In general, if an optionee, in exercising an incentive stock option, tenders shares of Common Stock in partial or full payment of the exercise price, no gain or loss will be recognized on the tender. However, if the tendered shares were previously acquired upon the exercise of another incentive stock option and the tender is within two years from the date of grant or one year after the date of exercise of the other option, the tender will be a disqualifying disposition of the shares acquired upon exercise of the other option.

As noted above, the exercise of an incentive stock option could subject an optionee to the alternative minimum tax. The application of the alternative minimum tax to any particular optionee depends upon the particular facts and circumstances which exist with respect to the optionee in the year of exercise. However, as a general rule, the amount by which the fair market value of the Common Stock on the date of exercise of an option exceeds the exercise price of the option will constitute an item of “adjustment” for purposes of determining the alternative minimum taxable income on which the alternative tax may be imposed. As such, this item will enter into the tax base on which the alternative minimum tax is computed, and may therefore cause the alternative minimum tax to become applicable in any given year.

Treatment of Stock Appreciation Rights

Generally, the recipient of a SAR will not recognize any income upon grant of the SAR, nor will our Company be entitled to a deduction at that time. Upon exercise of a SAR, the holder will recognize ordinary income, and our Company generally will be entitled to a corresponding deduction, equal to the excess of the fair market value of our Common Stock on the date of exercise over the strike price of the SAR.

Treatment of Restricted Stock and RSU Awards

Generally, absent an election to be taxed currently under Section 83(b) of the Code (a “Section 83(b) Election”), there will be no federal income tax consequences to either the recipient or our Company upon the grant of a restricted stock award or award of performance shares. At the expiration of the restriction period and the satisfaction of any other restrictions applicable to the restricted shares, the recipient will recognize ordinary income and our Company generally will be entitled to a corresponding deduction equal to the fair market value of the Common Stock at that time. If a Section 83(b) Election is made within 30 days after the date the restricted stock award is granted, the recipient will recognize an amount of ordinary income at the time of the receipt of the restricted shares, and our Company generally will be entitled to a corresponding deduction, equal to the fair market value (determined without regard to applicable restrictions) of the shares at such time, less any amount paid by the recipient for the shares. If a Section 83(b) Election is made, no additional income will be recognized by the recipient upon the lapse of restrictions on the shares (and prior to the sale of such shares), but, if the shares are subsequently forfeited, the recipient may not deduct the income that was recognized pursuant to the Section 83(b) Election at the time of the receipt of the shares.

The recipient of an unrestricted stock award will recognize ordinary income, and our Company generally will be entitled to a corresponding deduction, equal to the fair market value of our Common Stock that is the subject of the award when the award is made.

The recipient of a restricted stock unit will recognize ordinary income as and when the units vest. The amount of the income will be equal to the fair market value of the shares of our Common Stock issued at that time, and our Company will be entitled to a corresponding deduction. The recipient of a restricted stock unit will not be permitted to make a Section 83(b) Election with respect to such award.

Parachute Payments

The vesting of any portion of an option or other award that is accelerated due to the occurrence of a change of control may cause a portion of the payments with respect to such accelerated awards to be treated as “parachute payments” as defined in Section 280G of the Code. Any such parachute payments may be non-deductible to us, in whole or in part, and may subject the recipient to a non-deductible 20% federal excise tax on all or a portion of such payment (in addition to other taxes ordinarily payable).

Section 409A

If an award under the 2020 Plan is subject to Section 409A of the Code, but does not comply with the requirements of Section 409A of the Code, the taxable events as described above could apply earlier than described, and could result in the imposition of additional taxes and penalties. Participants are urged to consult with their tax advisors regarding the applicability of Section 409A of the Code to their awards.

Tax Withholding

As and when appropriate, we shall have the right to require each optionee purchasing shares of Common Stock and each grantee receiving an award of shares of Common Stock under the 2020 Plan to pay any federal, state or local taxes required by law to be withheld.

CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

The following is a summary of transactions that occurred on or after November 30, 2018 to which we were a party, in which the amount involved exceeded 1% of our total assets, and in which any of our executive officers, directors, or beneficial holders of more than 5% of our capital stock had or will have a direct or indirect material interest. We believe the terms of the transactions described below were comparable to terms we could have obtained in arms’-length dealings with unrelated parties.

Each agreement described below is filed as an exhibit to the registration of which this prospectus forms a part, and the following descriptions are qualified by reference to such agreements.

On April 13, 2018, Byrna entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”) with André Buys pursuant to which we purchased certain intellectual property from Mr. Buys for consideration to consist of a first payment of cash at the closing and a second payment of $500,000 cash or $750,000 in Byrna’s common stock (the “Second Payment”), and engaged him as our Chief Technology Officer (“CTO”). Under the Purchase and Sale Agreement, we are prohibited from terminating Mr. Buys without cause prior to April 13, 2021. On December 19, 2019, Byrna and Buys entered into an amendment to the Agreement (the “Amendment”) which provided, among other things, that in lieu of the Second Payment, we would issue to Mr. Buys (and/or his designees) shares of restricted common stock of Byrna valued at $630,000 as soon after the effective date of the Amendment as it is approved by the Board of Directors. We also agreed to make an additional cash payment of $80,000 to Mr. Buys, which has been paid. Under the Amendment the number of shares to be issued was to be calculated based on the average closing price of our stock for the 20 days before the Amendment was signed and approved by the Board of Directors, both of which occurred on December 19, 2019. The Amendment also terminates Mr. Buys’ security interest in and reversionary rights to the intellectual property covered by the Agreement, modifies certain terms of the Purchase and Sale Agreement relating to royalties, raises Mr. Buys’ compensation as CTO to $12,500 per month and provides that, upon Mr. Buy’s relocation to Boston, he will become a full-time employee of Byrna and earn a salary of $14,000 per month plus certain benefits. We expensed $204,813 and $8,333 for royalties due to Mr. Buys during the years ended November 30, 2020 and 2019, respectively. We also recorded stock-based compensation expense of $16,909 during the years ended November 30, 2020 and 2019, respectively, related to stock options granted to Buys in 2018 to acquire 150,000 shares of common stock.

We subleased office premises at our Massachusetts headquarters to a corporation owned and controlled by Ganz beginning July 1, 2020. Monthly sublease payments will be equal to 15% of our operating costs. No sublease income was received during the year ended November 30, 2020. Sublease payments commenced on December 2020.

Related Person Transactions Policy and Procedure

Our audit committee must review and approve any related person transaction we propose to enter into. Our audit committee is responsible for overseeing the policies and procedures relating to transactions that may present actual, potential or perceived conflicts of interest and may raise questions as to whether such transactions are consistent with the best interest of our company and our stockholders. In addition, our audit committee will keep our independent auditors informed of our relationships and transactions with related parties that are significant.

Any potential related party transaction that is brought to the audit committee’s attention will be analyzed by the committee, in consultation with outside counsel or members of management, as appropriate, to determine whether the transaction or relationship does, in fact, constitute a related party transaction. At its meetings, the audit committee will be provided with the details of each new, existing or proposed related party transaction, including the terms of the transaction, the business purpose of the transaction and the benefits to us and to the relevant related party.

PRINCIPAL STOCKHOLDERS

The following table sets forth, as of May 31, 2021 (giving effect to the Reverse Stock Split), information regarding beneficial ownership of our capital stock by:

 Beneficial ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power of the applicable security, including options that are currently exercisable or exercisable within 60 days of May 3, 2021. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown that they beneficially own, subject to community property laws where applicable.

Our calculation of the percentage of beneficial ownership is based on 20,692,985 shares of our common stock issued and outstanding as of May 31, 2021.

Common stock subject to stock options currently exercisable or exercisable within 60 days of May 31, 2021, are deemed to be outstanding for computing the percentage ownership of the person holding these securities and the percentage ownership of any group of which the holder is a member but are not deemed outstanding for computing the percentage of any other person.

* Less than 1%

(1) Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Byrna Technologies Inc., 100 Burtt Road, Suite 115, Andover, Massachusetts 01810.

(2) Consists of (i) 584,132 shares held by the Alan L. Meltzer Revocable Trust, of which Mr. Meltzer is the trustee, (ii) 122,260 shares of our common stock owned by Mr. Meltzer in an individual retirement account, and (iii) 585,810 shares of our common stock owned by the Alan & Amy Meltzer Family Foundation.

(3) Consists of (i) 479,243 shares of common stock owned by Mr. Ganz in his individual capacity, (ii) 2,000 shares of our common stock owned by Mr. Ganz in an individual retirement account, (iii) 478,059 shares of common stock owned by Northeast Industrial Partners LLC, of which Mr. Ganz is the majority holder, (iv) 70,753 and 2,600 shares of common stock owned by the Judith Ganz Trust and the David Ganz Trust, respectively, of which Mr. Ganz is the trustee, and (v) options exercisable into 60,000 shares of our common stock within 60 days of May 19, 2021.

(4) Consists of (i) 126,427 shares of our common stock owned by Ms. Wager in her individual capacity (of which 270 shares are held in a custodial capacity in UGMA accounts), (ii) 38,160 shares of our common stock owned by Pacific Premier Trust Co. for the benefit of Ms. Wager’s individual retirement account, and (iii) options exercisable into 60,000 shares of our common stock within 60 days of May 31, 2021.

(5) Consists of (i) 4,100 shares of common stock owned by Mr. Hughes in his individual capacity, (ii) 83,586 shares of our common stock owned by Pacific Premier Trust Co. for the benefit of Mr. Hughes’ individual retirement account (iii) warrants exercisable into 21,054 shares of our common stock within 60 days of May 31, 2021, and (iv) options exercisable into 17,500 shares of our common stock within 60 days of May 31, 2021.

(6) Consists of (i) 279,519 shares of our common stock owned by Mr. Jensen and (ii) options exercisable into 8,750 shares of our common stock within 60 days of May 31, 2021.

DESCRIPTION OF REGISTRANT’S SECURITIES

The following description of Byrna capital stock is a summary only and is not a complete description of such terms. This description is subject to the detailed provisions of, and is qualified in its entirety by reference to, Delaware law, the Byrna Certificate of Incorporation and the Byrna bylaws, as amended. The Byrna Certificate of Incorporation and bylaws are filed with the SEC as exhibits to the Annual Report on Form 10-K for the fiscal year ended November 30, 2020, and will be sent to our stockholders free of charge upon written or telephonic request.

Authorized Capital Stock

Byrna’s authorized capital stock consists of 300,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share.

Outstanding Capital Stock

As of May 31, 2021, there were 20,692,985 shares of our common stock issued and outstanding. The authorized but unissued shares of our common stock are each entitled to cast one voteavailable for each share heldfuture issuance without stockholder approval, unless otherwise required by applicable law or the rules of any applicable securities exchange. All of Byrna’s issued and outstanding shares of common stock are validly issued, fully paid and non-assessable.

Reverse Stock Split

On April 27, 2021, we effected a ten-for-one Reverse Stock Split. All owners of record on all matters presentedas of April 27, 2021 received one issued and outstanding share of our common stock in exchange for 10 outstanding shares of our common stock. No fractional shares were issued in connection with the Reverse Stock Split. All fractional shares created by the ten-for-one exchange were rounded down to the shareholders.next whole share, with cash paid in lieu of fractional shares. The Reverse Stock Split had no impact on the par value per share of our common stock, which remains at $0.001. All current and prior period amounts related to shares, share prices and loss per share, presented in our consolidated financial statements and the accompanying Notes have been restated for the Reverse Stock Split.

Byrna Common Stock

Except with respect to voting rights, conversion rights and certain distributions of our capital stock, holders of our common stock will rank equally with respect to distributions and have identical rights, preferences, privileges and restrictions, including the right to attend meetings and receive any information distributed by Byrna with respect to such meetings.

Dividends

Holders of our common stock are entitled to receive ratably such dividends as may be authorized by the Board and declared by our Board of DirectorsByrna from time to time out of funds legally available and, in thefunds. In no event will any stock dividends or stock splits or combinations of liquidation, to share pro rata in any distribution of our assets after payment of liabilities. Our Board of Directors is not obligated to declare a dividend. It is not anticipated that dividends willstock be paid in the foreseeable future.

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Holders of ourauthorized, declared or made on common stock do not have preemptive rights to subscribe to additional shares if issued. There are no conversion, redemption, sinking fund or similar provisions regardingunless the common stock. All outstanding shares of common stock are fullytreated equally and identically.

The ability of the Board to authorize, and our ability to declare and pay, dividends on our common stock is subject to the laws of the State of Delaware and the terms of any senior securities (including the terms of our preferred stock) Byrna may then have outstanding.

Voting Rights

Each holder of our common stock is entitled to one vote for each share of record held on all matters submitted to a vote of our stockholders, except as otherwise required by law. Directors are elected by a majority of the votes cast at the meeting of the stockholders, provided, however, that if the Secretary determines that the number of nominees for director exceeds the number of directors to be elected, directors shall be elected by a plurality of the votes of the shares represented in person or by proxy at any meeting of stockholders held to elect directors and entitled to vote on such election of directors.

Unless otherwise required by law, the Certificate of Incorporation, or the Bylaws, any matter, other than the election of directors, brought before any meeting of stockholders shall be decided by the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the matter.

Liquidation Rights

In the event of Byrna’s liquidation, dissolution or winding up, holders of our common stock are entitled to share ratably in all of our assets remaining after payment of liabilities, including but not limited to the liquidation preference of any then outstanding our preferred stock.

Preferred Stock

Our Certificate of Incorporation authorizes the Board to establish one or more series of preferred stock. Unless required by law or any stock exchange and subject to the rights and preferences of the holders of any outstanding shares of our preferred stock, the authorized shares of our preferred stock are available for issuance without further action by the stockholders. The Board is authorized to divide the preferred stock into series and, with respect to each series, is required by the laws of the State of Delaware to fix and determine the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms or conditions of redemption of each such series. The number of authorized shares of our preferred stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority of our common stock, without a vote of the holders of the preferred stock, unless a vote of the holders of the preferred stock is required by law or pursuant to the terms of such preferred stock. Without stockholder approval, Byrna could issue preferred stock that could impede or discourage an acquisition attempt or other transaction that some, or a majority, of Byrna’s stockholders may believe is in their best interests or in which they may receive a premium for their common stock over the market price of the common stock.

Warrants

Since November 28, 2017, we issued warrants to purchase an aggregate of approximately 4,800,000 shares of our common stock at an exercise price of between $1.50 and $2.50 per share on a post Reverse-Stock-Split basis (the “Warrants”). No warrants have been issued since April 8, 2020. Generally, warrants may be exercised until the five-year anniversary of the issue date, subject to early termination in some circumstances. From November 28, 2017 through May 31, 2021, warrants were exercised to purchase approximately 4,700,000 shares. As of May 31, 2021 there were 99,055 Warrants outstanding.

Authorized but Unissued Byrna Capital Stock

The DGCL does not generally require stockholder approval for the issuance of authorized shares, and the Board may issue new shares from time to time without further approval of the holders of our common stock. These additional shares may be used for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions.

One of the effects of the existence of unissued and unreserved common stock or preferred stock may be to enable the Board to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of Byrna by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive our stockholders of opportunities they may believe are in their best interests or in which they may receive a premium for their Byrna common stock over the market price of the common stock.

Anti-Takeover Effects of Provisions of Applicable Law and the Byrna Certificate of Incorporation and Byrna Bylaws

Certain provisions of the DGCL may have the effect of delaying, deterring or preventing a transaction or a change in the control that might otherwise be in the best interests of our stockholders.

Delaware Anti-Takeover Statute

We are subject to Section 203 of the DGCL regulating corporate takeovers. In general, Section 203 prohibits a publicly held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder unless:

Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who owns 15% or more of a corporation’s outstanding voting securities, or is an affiliate or associate of the corporation and within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting securities, and affiliates and associates of such person. The existence of this provision may have an anti-takeover effect with respect to transactions our Board of Directors does not approve in advance. Section 203 may also discourage attempts that might result in a premium over the market price for the shares of capital stock held by stockholders.

Annual Meetings; Limits on Special Meetings

Byrna holds an annual meeting of stockholders each year. Byrna’s 2020 annual and special meeting of stockholders was held on November 19, 2020. Special meetings of the stockholders may be called only by (i) Byrna’s president, (ii) the Board, or (iii) Byrna’s secretary, upon the written request of the holders of a majority of all shares outstanding and entitled to vote on the business to be transacted at the meeting.

Choice of Forum

Unless we consent to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint against us asserting a cause of action arising under the Securities Act.

Listing

The Byrna common stock is listed in the United States on the Nasdaq Capital Market and in Canada on the Canadian Securities Exchange under the symbol “BYRN.”

Transfer Agent and Registrar

The primary transfer agent and registrar for Byrna common stock is Transhare Corp., and the co-transfer agent in Canada is TSX Trust Company.

DESCRIPTION OF INDEBTEDNESS

Credit Facility

On January 19, 2021, we entered into a Commercial Loan and Security Agreement with Needham Bank. The Loan Agreement provides for (a) a revolving line of credit and (b) a non-revolving line of credit for equipment. The revolving line of credit bears interest at a rate equal to the Wall Street Journal Prime Rate plus 0.50%, subject to a floor of 4.00%. The Credit Facility is secured by substantially all of our assets. Interest is payable under each facility monthly in arrears.

Revolving Credit Facility

The revolving credit facility, which matures January 19, 2023, allows us to borrow up to $5 million. As of May 31, 2021, we have drawn down $1.5 million under the revolving credit facility.

Equipment Line of Credit

The equipment line of credit, which matures January 19, 2023, allows us to borrow up to $1.5 million through term notes issued from time to time for equipment purchases. Each note matures six years after its issuance date. After the first anniversary of each term note, we must pay, in addition to interest, amortization payments based on a five-year amortization schedule. As of May 31, 2021, we had no outstanding indebtedness under the equipment line of credit.

CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of certain U.S. federal income tax consequences relevant to the purchase, ownership, and disposition of our common stock issued pursuant to this offering, but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code, Treasury regulations promulgated or proposed thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service, or the IRS, in each case in effect as of the date hereof. These authorities may be changed, possibly with retroactive effect, so as to result in U.S. federal income tax consequences different from those set forth below. We have not sought, and will not seek, any rulings from the IRS regarding the matters discussed below, and there can be no assurance that the IRS will not take a position contrary to those discussed below or that any position taken by the IRS will not be sustained.

This summary is limited to holders who purchase our common stock pursuant to this offering and who hold shares of our common stock as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment purposes). This summary does not address the tax consequences arising under the laws of any non-U.S., state, or local jurisdiction or under U.S. federal gift and estate tax laws or the effect, if any, of the alternative minimum tax, the Medicare contribution tax imposed on net investment income, or the recently enacted changes to Section 451 of the Code with respect to conforming the timing of income accruals to financial statements. In addition, this discussion does not address tax considerations applicable to a holder’s particular circumstances or to a holder that may be subject to special tax rules, including, without limitation:

● banks, insurance companies, or other financial institutions;

● partnerships or other entities or arrangements classified as partnerships for U.S. federal income tax purposes and investors therein;

● tax-exempt organizations or governmental organizations;

● controlled foreign corporations, passive foreign investment companies, and corporations that accumulate earnings to avoid U.S. federal income tax;

● brokers or dealers in securities or currencies;

● traders in securities that elect to use a mark-to-market method of accounting for their securities holdings;

● U.S. expatriates and former citizens or former long-term residents of the United States;

● persons who hold our common stock as a position in a hedging transaction, “straddle,” “conversion transaction,” or other risk reduction transaction;

● persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation;

● tax-qualified retirement plans;

● U.S. holders (as defined below) whose functional currency is not the U.S. dollar;

● qualified foreign pension funds as defined in Section 897(l)(2) of the Code and entities all of the interest which are held by qualified foreign pension funds; and

● persons deemed to sell our common stock under the constructive sale provisions of the Code.

In addition, if a partnership (including an entity or arrangement classified as a partnership for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships that hold our common stock, and partners in such partnerships, should consult their tax advisors.

THE RULES GOVERNING THE U.S. FEDERAL INCOME TAXATION ARE COMPLEX AND THIS SUMMARY IS FOR GENERAL INFORMATION ONLY. YOU SHOULD CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION, AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP, AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX RULES, U.S. ALTERNATIVE MINIMUM TAX RULES, OR UNDER THE LAWS OF ANY NON-U.S., STATE, OR LOCAL TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.

U.S. Holders

For purposes of this discussion, a “U.S. holder” is a beneficial owner of our common stock that is, for U.S. federal income tax purposes:

● an individual who is a citizen or resident of the United States;

● a corporation or other entity taxable as a corporation created or organized in the United States or under the laws of the United States, any state thereof, or the District of Columbia;

● an estate whose income is subject to U.S. federal income tax regardless of its source; or

● a trust (x) whose administration is subject to the primary supervision of a U.S. court and which has one or more “United States persons” (as defined in the Code) who have the authority to control all substantial decisions of the trust or (y) which has made an election under applicable Treasury regulations to be treated as a United States person for U.S. federal income tax purposes.

Taxation of Distributions

If we pay distributions in cash or other property (other than certain distributions of our stock or rights to acquire our stock) to U.S. holders of shares of our common stock, such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and non-assessable.profits, as determined under U.S. federal income tax principles. Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. holder’s adjusted tax basis in our common stock. Any remaining excess distribution will be treated as gain realized on the sale or other disposition of the common stock and will be treated as described under ��Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock” below.

Dividends we pay to a U.S. holder that is a taxable corporation generally will qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions (including, but not limited to, dividends treated as investment income for purposes of investment interest deduction limitations), and provided certain holding period requirements are met, dividends we pay to a non-corporate U.S. holder may constitute “qualified dividends” subject to tax at the maximum tax rate accorded to long-term capital gains. If the holding period requirements are not satisfied, a corporation may not be able to qualify for the dividends received deduction and would have taxable income equal to the entire dividend amount, and non-corporate holders may be subject to tax on such dividend at ordinary income tax rates instead of the preferential rates that apply to qualified dividend income.

Gain or Loss on Sale, Taxable Exchange or Other Taxable Disposition of Common Stock

Upon a sale or other taxable disposition of our common stock, a U.S. holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. holder’s adjusted tax basis in the common stock. Any such capital gain or loss generally will be long-term capital gain or loss if the U.S. holder’s holding period for the common stock disposed exceeds one year. If the holding period requirements are not satisfied, any gain on a sale or other taxable disposition of the shares would be subject to short-term capital gain treatment and would be taxed at ordinary income tax rates. Long-term capital gains recognized by non-corporate U.S. holders are generally eligible for reduced rates of tax. The deductibility of capital losses is subject to limitations.

A U.S. holder’s adjusted tax basis in common stock generally will equal the U.S. holder’s acquisition cost for the common stock less any prior distributions treated as a return of capital. In the case of any shares of common stock originally acquired as part of an investment unit, the acquisition cost for the share of common stock that was part of such unit would equal an allocable portion of the acquisition cost of the unit based on the relative fair market values of the components of the unit at the time of acquisition.

Information Reporting and Backup Withholding

In general, information reporting requirements may apply to dividends paid to a U.S. holder and to the proceeds of the sale or other disposition of our shares of common stock, unless the U.S. holder is an exempt recipient. Backup withholding may apply to such payments if the U.S. holder fails to provide a taxpayer identification number, a certification of exempt status or has been notified by the IRS that it is subject to backup withholding (and such notification has not been withdrawn).

Any amounts withheld under the backup withholding rules generally should be allowed as a refund or a credit against a U.S. holder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS.

Non-U.S. Holders

For purposes of this discussion, you are a “non-U.S. holder” if you are a beneficial owner of our common stock and you are neither a U.S. holder, as defined above, nor an entity or arrangement classified as a partnership for U.S. federal income tax purposes.

Distributions

As described under “Dividend Policy” in this prospectus, we do not expect to make any distributions for the foreseeable future. However, if we do make distributions on our common stock, other than certain pro rata distributions of common stock, those distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent distributions exceed both our current and our accumulated earnings and profits, they will first constitute a return of capital and will reduce your adjusted tax basis in our common stock, but not below zero, and then any excess will be treated as capital gain from the sale of our common stock, subject to the tax treatment described below in “—Gain on Sale or Other Taxable Disposition of Common Stock.”

Any dividend paid to you generally will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividend, or such lower rate as may be specified by an applicable income tax treaty, except to the extent that the dividends are “effectively connected” dividends, as described below. In order to claim treaty benefits to which you are entitled, you must provide us with a properly completed IRS Form W-8BEN or W-8BEN-E (or other appropriate form) certifying qualification for the reduced treaty rate. If you do not timely furnish the required documentation, but are otherwise eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty, you may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. If you hold our common stock through a financial institution or other agent acting on your behalf, you will be required to provide appropriate documentation to the agent, who then will be required to provide certification to us or our paying agent, either directly or through other intermediaries.

We may withhold up to 30% of the gross amount of the entire distribution even if greater than the amount constituting a dividend, as described above, to the extent provided for in the Treasury Regulations. If tax is withheld on the amount of a distribution in excess of the amount constituting a dividend, then a refund of any such excess amounts may be obtained if a claim for refund is timely filed with the IRS.

Dividends received by you that are effectively connected with your conduct of a trade or business within the United States (and, if an applicable income tax treaty requires, attributable to a permanent establishment or fixed base maintained by you in the United States) are exempt from the U.S. federal withholding tax described above. In order to claim this exemption, you must provide us with an IRS Form W-8ECI (or other successor form) properly certifying that the dividends are effectively connected with your conduct of a trade or business within the United States. Such effectively connected dividends, although not subject to U.S. federal withholding tax, are generally taxed at the same graduated U.S. federal income tax rates applicable to United States persons, net of certain deductions and credits. In addition, if you are a corporate non-U.S. holder, you may also be subject to a branch profits tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on your effectively connected earnings and profits for the taxable year that are attributable to such dividends, as adjusted for certain items.

Gain on Sale or Other Taxable Disposition of Common Stock

Subject to the discussions below under “Backup Withholding and Information Reporting” and “Additional Withholding Tax on Payments Made to Foreign Accounts”, you generally will not be required to pay U.S. federal income tax on any gain realized upon the sale or other taxable disposition of our common stock unless:

● the gain is effectively connected with your conduct of a U.S. trade or business (and, if an applicable income tax treaty requires, the gain is attributable to a permanent establishment or fixed base maintained by you in the United States);

● you are an individual who is present in the United States for a period or periods aggregating 183 days or more during the taxable year in which the sale or disposition occurs and certain other conditions are met; or

● our common stock constitutes a U.S. real property interest by reason of our status as a “United States real property holding corporation,” or a USRPHC, for U.S. federal income tax purposes, at any time during the shorter of the five-year period ending on the date of the sale or other taxable disposition of, or your holding period for, our common stock.

If you are a non-U.S. holder described in the first bullet above, you generally will be subject to U.S. federal income tax on the gain derived from the sale or other taxable disposition (net of certain deductions or credits) under regular graduated U.S. federal income tax rates generally applicable to United States persons, and corporate non-U.S. holders described in the first bullet above also may be subject to branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.

If you are an individual non-U.S. holder described in the second bullet above, you will be subject to U.S. federal income tax at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on the gain derived from the sale or other taxable disposition, which may be offset by U.S. source capital losses for that taxable year (even though you are not considered a resident of the United States), provided that you have timely filed U.S. federal income tax returns with respect to such losses.

With respect to the third bullet above, in general, we would be a USRPHC if our “U.S. real property interests” comprised at least 50% of the sum of the fair market value of our worldwide real property interests plus our other assets used or held in our trade or business. We believe that we are not currently and (based upon our projections as to our business) will not become a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property interests relative to the fair market value of our non-U.S. real property interests and our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition by a non-U.S. holder of our common stock will not be subject to U.S. federal income tax if our common stock is “regularly traded” (within the meaning of applicable Treasury regulations) on an established securities market, and such non-U.S. holder owned, actually or constructively, five percent or less of our common stock at any time during the applicable period described above.

You should consult your tax advisor regarding any potential applicable income tax or other treaties that may provide for different rules.

Backup Withholding and Information Reporting

Payments of dividends on our common stock will not be subject to backup withholding, provided you either certify your non-U.S. status, such as by furnishing a valid IRS Form W-8BEN, W-8BEN-E, or W-8ECI (or other applicable form), or otherwise establish an exemption. However, information returns are required to be filed with the IRS in connection with any dividends on our common stock paid to you, regardless of whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of our common stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting, if the applicable withholding agent receives the certification described above or you otherwise establish an exemption. Proceeds of a disposition of our common stock conducted through a non-U.S. office of a non-U.S. broker generally will not be subject to backup withholding or information reporting.

Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement to tax authorities in your country of residence, establishment, or organization.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or credit against a non-U.S. holder’s U.S. federal income tax liability, provided that the required information is furnished to the IRS in a timely manner.

Additional Withholding Tax on Payments Made to Foreign Accounts

Sections 1471 through 1474 of the Code and Treasury regulations thereunder, commonly referred to as the Foreign Account Tax Compliance Act, or FATCA, generally will impose a U.S. federal withholding tax of 30% on dividends paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. government requiring, among other things, that it undertakes to withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders, and to annually identify accounts held by certain “specified United States persons” or “United States-owned foreign entities” (each as defined in the Code). Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes. Prospective investors are encouraged to consult with their own tax advisors regarding the possible implications of FATCA on their investment in our common stock.