The Company has incurred a cumulative loss of approximately $48.0 million from inception through May 31, 2020. The Company has funded operations through the issuance of common stock, preferred stock, warrants, and convertible notes payable. The Company generates revenue from operations. However, it still faces the risk that it may incur significant losses before the Company’s revenues can sustain its operations. The Company’s future success is dependent upon its ability to raise sufficient capital or generate adequate revenue to cover its ongoing operating expenses. Management’s plans to continue operations include increasing production capacity to fill orders and meet growing demand, seeking to expand sales of the Byrna^® HD in new marketing channels domestically and internationally, and offering new products to drive revenue increases in the way that the April 2019 commencement of Byrna^® HD sales drove the revenue increases during fiscal 2019 and the first six months of fiscal 2020.

During the three months ended May 31, 2020, the Company (1) raised approximately $3.2 million through early warrant exercises, (2) exchanged all of its outstanding convertible debt for preferred stock (see Note 14 for additional information), and (3) generated revenues from operations of approximately $1.2 million. Management also saw an increase in orders with the spread of the pandemic in the United States in the quarter ended May 31, 2020, which we believe reflects growing brand recognition and demand. Subsequent to the end of the quarter, we reported a spike in June orders following a television news mention. We have projected that warrant exercises in the current period are expected to raise additional capital of more than $3 million. Management believes that the foregoing factors evidence substantial progress towards alleviating doubt as to the Company’s ability to continue as a going concern and that substantial doubt may be removed by the end of the current fiscal year. The Company may explore additional financing alternatives to raise capital if needed.

After careful analysis of all relevant positive and negative factors however, including the Company’s historic operating losses, failure to generate a profit to date, past production interruptions, absence of a history of successful product manufacture at the level needed to become profitable, the significant risks to its supply chain and production currently presented by the COVID-19 pandemic, Management has concluded that there can be no assurance that sufficient revenue will be generated, or that financing will be available at all or on favorable terms, to sustain operations. Accordingly, Management has concluded there continues to be substantial doubt as to the Company’s ability to continue as a going concern as of the filing date of these financial statements.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty; such adjustments could be material.