Quarterly report pursuant to Section 13 or 15(d)


9 Months Ended
Aug. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  


Employment-Related Commitments

On September 4, 2020, the Company’s Board of Directors (the “Board”) approved entry into an employment agreement with Ganz to continue to serve as the Chief Executive Officer of the Company (the “Employment Agreement”). The Employment Agreement, which is subject to approval of the Company’s stockholders, is to be effective as of August 31, 2020 (the “Effective Date”) and has a term of three (3) years from the Effective Date, unless terminated earlier pursuant to the terms of the Employment Agreement. Upon approval of the Employment Agreement, Ganz’ base salary will be effective retroactively from June 1, 2020; the difference of $52,500 between the base salary and prior salary over the period from June 1, 2020 to August 31, 2020 is to be paid by the end of the fiscal year. In addition, subject to compliance with applicable law and such approvals as may be required by the exchanges on which the Company’s common stock is listed at the time of the grant, Ganz will be granted 9,000,000 restricted stock unit awards (“RSUs”). The RSUs shall have a “double trigger” for vesting based on stock price and time, as follows: (1) one-third of the RSUs will be triggered when the Company’s stock trades above $2.00 on a 20-day volume weighted average closing price (“VWAP”), the second one-third of the RSUs will be triggered when the Company’s stock trades above $3.00 on a 20-day VWAP, and the final one-third of the RSUs will be triggered when the stock trades above $4.00 on a 20-day VWAP and (2) Ganz must remain employed by the Company for three years from the Effective Date for the RSUs to vest.


Effective August 31, 2020, the Board appointed a new Chief Financial Officer who is expected to receive a grant of 600,000 RSUs, as part of an omnibus employee compensation plan expected to be approved at the Company’s November 2020 Annual Shareholders’ Meeting, that will vest based upon his time at the Company and the Company’s stock price appreciation.


In 2018, the Company entered into consulting agreements (the “Consulting Agreements”) with two consultants pursuant to which each was paid $7,500 per month, which increased to $10,000 per month subsequent to the month the Company commenced shipping the Byrna® HD product to customers. In addition, the Company issued to each consultant 750,000 Incentive Warrants to purchase common shares of the Company at a strike price equal to the average trading price of the Company on the OTC QB during the 20 business days preceding such approval. The Incentive Warrants vested 50% upon issuance and balance upon the completion of the service term on December 31, 2019. The Incentive Warrants have a three-year life. See Note 8, “Stock-Based Compensation.”


Pursuant to the amended agreement related to final payment to Buys for the Portfolio of registered patent rights (see Note 18, “Patent Rights”), the Company is committed to a minimum royalty payment of $25,000 per year. Royalties on CO2 pistols are to be paid for so long as patents remain effective beginning at 2 ½% of the agreed upon a net price of $167.60 (“Stipulated Net Price”) for the first year and reduced by .1% each year thereafter until it reaches 1%. For each substantially new product in this category the rate will begin again at 2 ½%. Royalties on the fintail projectiles (and any improved versions thereof) will be paid so long as patents remain effective at a rate of 4% of the agreed upon Stipulated Net Price for fintail projectile products.


Legal Proceedings

In the ordinary course of our business, the Company may be subject to certain other legal actions and claims, including product liability, consumer, commercial, tax and governmental matters, which may arise from time to time. The Company does not believe it is currently a party to any pending legal proceedings. Notwithstanding, legal proceedings are subject-to inherent uncertainties, and an unfavorable outcome could include monetary damages, and excessive verdicts can result from litigation, and as such, could result in a material adverse impact on the Company’s business, financial position, results of operations, and/or cash flows. Additionally, although the Company has specific insurance for certain potential risks, the Company may in the future incur judgments or enter into settlements of claims which may have a material adverse impact on the Company’s business, financial position, results of operations, and /or cash flows.