Under the terms of the Asset Purchase Agreement, the Company iswas required to deposit a holdback liability in the amount of CAD$1,000 into an interest-bearing account as security for potential indemnification claims against the seller. The holdback amount will be released three years from the closing date subject to amounts withheld for actual, pending or potential claims. The Company also agreed to issue 191,267 shares of the Company’s common stock to the ~~former owners~~seller of the Amika Mobile assets on each of the first, second and third anniversaries of the closing date. The total number of shares of common stock the Company is obligated to issue is 573,801. The fair value of the Company’s common stock on the closing date was $5.98, resulting in an addition of $3,431 to additional paid-in-capital. During the three months ended June 30, 2021, the Company accelerated the issuance of 121,703 of such shares of common stock to a former owner of the Amika Mobile assets. 452,098 shares of the Company’s common stock remain subject to issuance under this obligation. The cash portion of the purchase price was funded from cash on hand.

The Company incurred ~~$242~~$264 in expenses related to this transaction through ~~December 31, 2020.~~ June 30, 2021. These expenses were recorded in selling, general and administrative expenses in the condensed consolidated statement of operations as follows: $22 in the second quarter of fiscal 2021,$10 in the first quarter of fiscal 2021, $132 in the fourth quarter of fiscal 2020 and $100 in the third quarter of fiscal 2020.

The estimated fair value of the identifiable intangible assets acquired and their estimated useful lives are as follows:

Identifiable intangible assets consist of certain technology and customer relationships purchased from Amika Mobile. Identifiable intangible assets are amortized over their estimated useful lives based upon a number of assumptions, including the estimated period of economic benefit and utilization. The weighted average amortization period for identifiable intangible assets acquired is 7 years. These intangible assets are classified as Level 3 in the ASC ~~Topic~~ topic 820 ~~three-tier~~three-tier fair value hierarchy.

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

The goodwill for Amika Mobile is attributable to combining the Company’s existing emergency communications solutions with the software and software development capabilities of Amika Mobile to enhance product offerings. Goodwill is also attributable to the skill level of the acquired workforce. ~~The Company will continue to analyze the transaction and refine its calculations, as appropriate during the measurement period, which could affect the value of goodwill.~~ Goodwill from the Amika Mobile asset purchase will not be deductible for tax purposes.

Genasys Inc.

7.	Notes to the Condensed Consolidated Financial Statements (in thousands, except per share and share amounts) (Unaudited) 7.INVENTORIES,, NET

Inventories, net consisted of the following:

	December 31,			September 30,			June 30,			September 30,
	2020			2020			2021			2020
Raw materials	$	5,859		$	5,220		$	5,557		$	5,220
Finished goods		763			841			797			841
Work in process		927			456			791			456
Inventories, gross		7,549			6,517			7,145			6,517
Reserve for obsolescence		(586	)		(568	)		(723	)		(568	)
Inventories, net	$	6,963		$	5,949		$	6,422		$	5,949

8.	8.PROPERTY AND EQUIPMENT,, NET

Property and equipment, net consisted of the following:

	December 31,			September 30,			June 30,			September 30,
	2020			2020			2021			2020
Office furniture and equipment	$	1,244		$	1,181		$	1,241		$	1,181
Machinery and equipment		1,193			1,184			1,248			1,184
Leasehold improvements		2,056			2,056			2,155			2,056
Construction in progress		28			8			29			8
Property and equipment, gross		4,521			4,429			4,673			4,429
Accumulated depreciation		(2,636	)		(2,499	)		(2,837	)		(2,499	)
Property and equipment, net	$	1,885		$	1,930		$	1,836		$	1,930

Depreciation expense was $106 and $131 for the three months ended June 30, 2021, and 2020, respectively. Depreciation expense was $306 and $397 for the nine months ended June 30, 2021, and 2020, respectively.

Three months ended December 31,

2020

2019

Depreciation expense
$ 99 $ 134

9. GOODWILL AND INTANGIBLE ASSETS

~~GOODWILL AND INTANGIBLE ASSETS~~

Goodwill is attributable to the acquisition of Genasys Spain and of Zonehaven, and the Amika Mobile asset purchase and is due to combining the integrated emergency critical communications, mass messaging solutions and software development capabilities with existing ~~LRAD~~hardware products for enhanced offerings and the skill level of the acquired workforces. The Company periodically reviews goodwill for impairment in accordance with relevant accounting standards. During the ~~three~~nine months ended ~~December 31, 2020,~~ June 30, 2021, the Company added ~~$5,663~~$20,992 in goodwill related to the Zonehaven acquisition and the Amika Mobile asset purchase. There were no0 impairments to goodwill during the ~~three~~nine months ended ~~December 31, 2020.~~June 30, 2021.

Intangible assets and goodwill related to Genasys Spain are translated from Euros to U.S. dollars at the balance sheet date. The net impact of foreign currency exchange differences arising during the period related to goodwill and intangible assets was an increase of ~~$156.~~$46. Intangible assets and goodwill related to Amika Mobile are translated from Canadian dollars to U.S. dollars at the balance sheet date. During the ~~three~~nine months ended ~~December 31, 2020,~~ June 30, 2021, the Company added ~~$2,820~~$13,128 in intangible assets related to the Zonehaven acquisition and the Amika Mobile asset purchase. The net impact of foreign currency exchange differences arising during the ~~period~~ nine months ended June 30, 2021, related to goodwill and intangible assets from the Amika Mobile asset purchase was an increase of ~~$375.~~ $613.

The changes in the carrying amount of goodwill by segment for the nine months ended June 30, 2021, are as follows:

	Hardware		Software		Total
Balance as of September 30, 2020	$	0	$	2,472	$	2,472
Acquisition		0		20,992		20,992
Currency translation		0		444		444
Balance as of June 30, 2021	$	0	$	23,908	$	23,908

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

The Company’s intangible assets consisted of the following:

	December 31,			September 30,			June 30,			September 30,
	2020			2020			2021			2020
Developed technology	$	3,297		$	655
Technology							$	12,148		$	655
Customer relationships		990			627			1,878			627
Trade name portfolio		238			228			631			228
Non-compete agreements		258			247			250			247
Patents		72			72			72			72
		4,855			1,829			14,979			1,829
Accumulated amortization		(1,112	)		(886	)		(1,548	)		(886	)
	$	3,743		$	943		$	13,431		$	943

Amortization expense was $295 and $74 for the three months ended June 30, 2021, and 2020, respectively. Amortization expense was $647 and $223 for the nine months ended June 30, 2021, and 2020, respectively.

As of ~~December 31, 2020,~~ June 30, 2021, future amortization expense is as follows:

Fiscal year ending September 30,

2021 (remaining nine months)
$ 501
2022
664
2023
630
2024
615
2025
480
Thereafter
853
Total estimated amortization expense
$ 3,743

~~Amortization expense was $182 for the three months ended December 31, 2020. Amortization expense was $75 for the three months ended December 31, 2019.~~

Fiscal year ending September 30,
2021 (remaining three months)	$	546
2022		2,185
2023		2,152
2024		2,138
2025		2,007
Thereafter		4,403
Total estimated amortization expense	$	13,431

10.10. PREPAID EXPENSES AND OTHER

~~PREPAID EXPENSES AND OTHER~~

Prepaid expenses and other current assets consisted of the following:

	December 31,		September 30,		June 30,		September 30,
	2020		2020		2021		2020
Deposits for inventory	$	90	$	54	$	528	$	54
Prepaid insurance		185		264		355		264
Dues and subscriptions		106		151		255		151
Trade shows and travel		104		103		95		103
Other		228		288		231		288
	$	713	$	860	$	1,464	$	860

Deposits for inventory

Deposits for inventory consisted of cash payments to vendors for inventory to be delivered in the future.

Prepaid i~~nsurance~~insurance

Prepaid insurance consisted of premiums paid for health, commercial and corporate insurance. These premiums are amortized on a straight-line basis over the term of the agreements.

Dues and subscriptions

Dues and subscriptions consist of payments made in advance for software subscriptions and trade and professional organizations. These payments are amortized on a straight-line basis over the term of the agreements.

Trade shows and travel

Trade shows and travel consists of payments made in advance for trade show events.

Genasys Inc.

11.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

11. ACCRUED LIABILITIES

~~ACCRUED LIABILITIES~~

Accrued liabilities consisted of the following:

	December 31,		September 30,		June 30,		September 30,
	2020		2020		2021		2020
Payroll and related	$	1,343	$	2,545	$	2,705	$	2,545
Deferred revenue		576		731		748		731
Customer deposits		4,938		3,683		9,439		3,683
Accrued contract costs		857		719		89		719
Warranty reserve		134		126		143		126
Other		-		76		181		76
Total	$	7,848	$	7,880	$	13,305	$	7,880

Other liabilities-noncurrent consisted of the following:

	December 31,		September 30,		June 30,		September 30,
	2020		2020		2021		2020
Deferred extended warranty revenue	$	275	$	293	$	344	$	293
Customer deposits						1,654		0
Deferred tax liabilities						2,729		0
Asset purchase holdback liability		640		-		693		0
Total	$	915	$	293	$	5,420	$	293

Payroll and related

Payroll and related consisted primarily of accrued vacation, bonus, sales commissions and benefits.

Deferred ~~Revenue~~revenue

Deferred revenue as of ~~December 31, 2020~~ June 30, 2021, included prepayments from customers for services, including extended warranty, scheduled to be performed in the twelve months ~~ended December 31, 2021.~~ending June 30, 2022.

Customer ~~Deposits~~deposits

Customer deposits represent amounts paid by customers as a down payment on hardware orders to be delivered in future periods. The customer deposits classified as noncurrent relate to orders that are expected to be delivered during the ~~next twelve months.~~fourth quarter of our fiscal year ended September 20, 2022.

Accrued contract costs

Accrued contract costs consist of accrued expenses for contracting a ~~third-party~~third-party service provider to fulfill repair and maintenance obligations required under a contract with a foreign military for units sold in the year ended September 30, 2011. Payments to the service provider will be made annually upon completion of each year of service. A new contract was signed with the customer in May 2019 to continue repair and maintenance services through May 2024. These services are being recorded in cost of revenues to correspond with the revenues for these services.

W~~arranty Reserve~~Warranty reserve

Changes in the warranty reserve and extended warranty were as follows:

	December 31,			September 30,			June 30,			September 30,
	2020			2020			2021			2020
Beginning balance	$	126		$	150		$	126		$	150
Warranty provision		15			16			44			16
Warranty settlements		(7	)		(40	)		(27	)		(40	)
Ending balance	$	134		$	126		$	143		$	126

The Company establishes a warranty reserve based on anticipated warranty claims at the time product revenue is recognized. Factors affecting warranty reserve levels include the number of units sold, anticipated cost of warranty repairs and anticipated rates of warranty claims. The Company evaluates the adequacy of the provision for warranty costs each reporting period and adjusts the accrued warranty liability to an amount equal to estimated warranty expense for products currently under warranty.

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

Deferred ~~Extended~~ ~~Warranty Revenue~~extended warranty revenue

Deferred extended warranty revenue consists of warranties purchased in excess of the Company’s standard warranty. Extended warranties typically range from one to two years.

Deferred tax liability

In connection with the Zonehaven acquisition, the Company recorded a deferred tax liability related to tax basis differences on acquired intangible assets.

Asset purchase holdback liability

In connection with the Amika Mobile asset purchase, the Company recorded a ~~holdabck~~holdback liability related to future adjustments to assets and ~~liabilities and as security for potential indemnification claims.~~liabilities. Adjustments ~~and indemnification claims~~ of up to CAD$1,000 ~~(USD$785)~~ (USD$807) will be deducted from the asset purchase holdback liability for up to three years from the closing date. The liability is recorded at fair value in the condensed consolidated balance sheet.

12.

12. DEBT

~~DEBT~~

In connection with the acquisition of Genasys Spain the Company ~~acquired~~assumed certain debts of Genasys Spain. The carrying value of the acquired debt approximates fair value. The balances of the acquired debt consist of loans with governmental agencies as of ~~December 31, 2020.~~ June 30, 2021. Loans with governmental agencies represent interest free debt granted by ministries within Spain for the purpose of stimulating economic development and promoting research and development. Loans with governmental agencies as of ~~December 31, 2020~~ June 30, 2021, are as follows:

Agency	Due Date	Principal			Due Date	Principal
Ministry of Economy and Competitiveness	February 2, 2022	$	37		February 2, 2022	$	18
Ministry of Economy and Competitiveness	February 2, 2024		295	(a)	February 2, 2024		286	*(a)*
		$	332			$	304

(a)

This loan is secured by ~~$295~~$286 of cash pledged as collateral by Genasys Spain, which is the current balance of the loan. This amount is included in restricted cash ~~at December 31, 2020.~~ as of June 30, 2021. The Company expects the Ministry of Economy and Competitiveness to declare the terms of the loan satisfied within ~~fiscal 2021~~the next twelve months and that the outstanding balance of the loan will be paid in full during ~~fiscal 2021.~~the next twelve months. Accordingly, this has been included in the current portion of notes payable as of ~~December 31, 2020.~~June 30, 2021.

The following is a schedule of future annual payments as of ~~December 31, 2020:~~June 30, 2021:

2021	$	314
2022		18	$	304
Total	$	332	$	304

Revolving line of credit

On March 8, 2021, the Company entered into an agreement with MUFG Union Bank, N.A. for a $10 million revolving line of credit. Outstanding balances on the revolving line of credit bear interest at a per annum rate equal to the London Interbank Offered Rate (“LIBOR”) plus 2.25%. The ~~current portion~~agreement contains a provision for determining an alternative interest rate index in the event the LIBOR rate is no longer available. The agreement contains standard covenants, including affirmative financial covenants, such as the maintenance of ~~debt~~a short-term liquidity ratio and a senior leverage ratio, in addition to negative covenants which limit the incurrence of additional indebtedness, loans and equity investments, disposition of assets, mergers and consolidations and other matters customarily restricted in such agreements. The maturity date of this revolving line of credit is ~~$314~~March 31, 2023. As of June 30, 2021, there were 0 borrowings on the revolving line of credit. The Company incurred and capitalized $38 of issuance costs related to this revolving line of credit. These issuance costs have and will be amortized on a straight-line basis over the ~~noncurrent portion~~term of ~~debt is $18.~~the loan.

1417

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

13.

13. LEASES

~~LEASES~~

The Company determines if an arrangement is a lease at inception. The guidance in ASC Topic 842 defines a lease as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. Operating ~~ROU~~Right of Use (“ROU”) assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. The Company’s leases do not provide an implicit rate. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Additionally, the portfolio approach is used in determining the discount rate used to present value lease payments. The operating ROU asset includes any lease payments made and excludes lease incentives and initial direct costs incurred.

The Company entered into operating leases for office and production facilities and equipment under agreements that expire at various dates through 2028. The Company elected the package of practical expedients permitted under the new lease standard. In electing the practical expedient package, the Company is not required to reassess whether an existing or expired contract is or contains a lease, reassess the lease classification for expired or existing leases nor reassess the initial direct costs for leases that commenced before the adoption of Topic 842. The Company also elected the short-term lease exemption such that the new lease standard was applied to leases greater than one year in duration. Leases with an initial term of twelve months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

For leases beginning on or after October 1, 2019, lease components are accounted for separately from non-lease components for all asset classes. Certain of the Company’s leases contain renewal provisions and escalating rental clauses and generally require the Company to pay utilities, insurance, taxes and other operating expenses. The renewal provisions of existing lease agreements were not included in the determination of the operating lease liabilities and the operating ROU assets. Variable payments such as excess usage fees on existing equipment leases were not included in the determination of the lease liabilities and the operating ROU assets as the achievement of the specified target that triggers the variable lease payment is not considered probable. In addition, the Company’s facility lease in Spain has an escalating lease clause based on a consumer price index which is considered a variable lease payment and is not included in the determination of the lease liability and operating ROU asset. A 10% increase in the index would increase the total lease liability approximately $19. The Company’s leases do not contain any residual value guarantees or material restrictive covenants.

Upon adoption of Topic 842 as of October 1, 2019, the Company recognized on its consolidated balance sheet an initial measurement of approximately $7,815 of operating lease liabilities, and approximately $5,824 of corresponding operating ROU assets, net of tenant improvement allowances. There was no cumulative effect adjustment to retained earnings as a result of the transition to Topic 842. The adoption of Topic 842 did not have a material impact on the Company’s consolidated statement of operations.

During the ~~three~~nine months ended ~~December 31, 2020,~~ June 30, 2021, the Company added an additional operating ROU asset of ~~$248~~$259 and operating lease ~~liability~~liabilities of ~~$248~~$259 for office ~~space in connection with the Amika Mobile asset purchase.~~space. The tables below show the operating ROU assets and liabilities as of September 30, 2020, and the balances as of ~~December 31, 2020,~~ June 30, 2021, including the changes during the periods.

Operating ROU
assets

Operating lease ROU asset at September 30, 2020
$ 5,285
Additional operating lease ROU assets
248
Less amortization of operating lease ROU assets
(170 )
Effect of exchange rate on operating lease ROU assets
21
Operating lease ROU asset at December 31, 2020
$ 5,384

	Operating ROU assets
Operating lease right of use asset at September 30, 2020	$	5,285
Additional operating lease right of use assets		259
Less amortization of operating lease right-of-use assets		(518	)
Effect of exchange rate on operating lease right of use assets		22
Operating lease right of use asset at June 30, 2021	$	5,048

	Operating lease liabilities			Operating lease liabilities
Operating lease liabilities at September 30, 2020	$	7,166		$	7,166
Additional operating lease liabilities		248			259
Less lease principal payments on operating lease liabilities		(202	)		(618	)
Effect of exchange rate on operating lease liabilities		21			22
Operating lease liabilities at December 31, 2020		7,233
Operating lease liabilities at June 30, 2021					6,829
Less non-current portion		(6,385	)		(5,952	)
Current portion at December 31, 2020	$	848
Current portion at June 30, 2021				$	877

1518

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

As of ~~December 31, 2020,~~ June 30, 2021, the Company’s operating leases have a weighted-average remaining lease term of ~~7.34~~6.86 years and a weighted-average discount rate of ~~4.13%~~4.12%. The maturities of the operating lease liabilities are as follows:

Fiscal year ending September 30,
2021 (remaining nine months)	$	840
2021 (remaining three months)				$	292
2022		1,146			1,144
2023		1,090			1,091
2024		1,085			1,086
2025		1,162			1,162
Thereafter		3,104			3,104
Total undiscounted operating lease payments		8,427			7,879
Less imputed interest		(1,194	)		(1,050	)
Present value of operating lease liabilities		7,233		$	6,829
Less lease liability, noncurrent		(6,385	)
Lease liability, current portion	$	848

For the three months ended ~~December 31, 2020~~ June 30, 2021, and ~~2019,~~2020, total lease expense under operating leases was approximately ~~$236~~$246 and ~~$225~~$228, respectively. ~~The Company did not have any~~For the nine months ended June 30, 2021, and 2020, total lease expense under operating leases was approximately $735 and $674, respectively. For the three and nine months ended June 30, 2021, total short-term lease expense was $1 and $3, respectively. There was 0 short-term lease expense during the three and nine months ended ~~December 31, 2020 and December 31, 2019.~~June 30, 2020.

14.

14. INCOME TAXES

~~INCOME TAXES~~

For the ~~three~~nine months ended ~~December 31, 2020,~~ June 30, 2021, the Company recorded income tax ~~benefit~~expense of $5$506 reflecting an effective tax rate of ~~31.2%~~22.48%. For the ~~three~~nine months ended ~~December 31, 2019,~~ June 30, 2020, the Company recorded an income tax expense of ~~$172~~$742 reflecting an effective tax rate of ~~21.8%~~22.8%. The Company continues to maintain a partial valuation allowance against its deferred tax assets as the Company believes that the negative evidence that it will be able to recover these net deferred tax assets outweighs the positive evidence.

Accounting Standards Codification Topic 740, Accounting for Uncertainty in Income Taxes, requires the Company to recognize in its consolidated financial statements uncertainties in tax positions taken that may not be sustained upon examination by the taxing authorities. If interest or penalties are assessed, the Company would recognize these charges as income tax expense. The Company has not recorded any income tax expense or benefit for uncertain tax positions.

15.

15. COMMITMENTS AND CONTINGENCIES

~~COMMITMENTS AND CONTINGENCIES~~

Litigation

The Company may at times be involved in litigation in the ordinary course of business. The Company will, from time to time, when appropriate in management’s estimation, record adequate reserves in the Company’s consolidated financial statements for pending litigation. Currently, there are no pending material legal proceedings to which the Company is a party or to which any of its property is subject.

Bonus ~~Plan~~plan

The Company has a bonus plan for employees, in accordance with their terms of employment, whereby they can earn a percentage of their salary based on meeting targeted objectives for orders received, revenue, operating income, and operating cash flow. In the ~~three~~nine months ended ~~December 31, 2020,~~ June 30, 2021, the Company recorded ~~$459~~$1,505 of bonus expense. In the ~~three~~nine months ended ~~December 31, 2019,~~ June 30, 2020, the Company recorded ~~$408~~$1,143 of bonus expense.

A~~mika~~Amika Mobile ~~Asset Purchase~~asset purchase

In connection with the Amika Mobile asset purchase, the Company recorded a holdback liability related to future adjustments to assets and ~~liabilities and as security for potential indemnification claims.~~liabilities. Adjustments ~~and indemnification claims~~ of up to CAD$1,000 ~~(USD$785)~~ (USD$807) will be deducted from the asset purchase holdback liability for up to three years from the closing date. The liability is recorded at fair value in the condensed consolidated balance sheet.

The Company also agreed to issue 191,267 shares of the Company’s common stock to the ~~former owners~~seller of the Amika Mobile assets on each of the first, second and third anniversaries of the closing date. The total number of shares of common stock the Company is obligated to issue is 573,801. The fair value of the Company’s common stock on the closing date was $5.98, resulting in the addition of $3,431 to additional paid-in-capital. During the three months ended June 30, 2021, the Company accelerated the issuance of 121,703 of such shares of common stock to a former owner of the Amika Mobile assets. 452,098 shares of the Company’s common stock remain subject to issuance under this obligation.

1619

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

16.16. SHARE-BASED COMPENSATION

Stock Option Plans

~~At December 31, 2020,~~ As of June 30, 2021, the Company had two equity incentive plans. The 2005 Equity Incentive Plan (“(“2005 Equity Plan”) was terminated with respect to new grants in March 2015 but remains in effect for grants issued prior to that time. The Amended and Restated 2015 Equity Incentive Plan (“(“2015 Equity Plan”) was ~~approved~~adopted by the Company’s Board of Directors on December 6, 2016 and approved by the Company’s stockholders on March 14, 2017. The 2015 Equity Plan was amended by the Company’s Board of Directors on December 8, 2020 to increase the number of shares authorized for issuance from 5,000,000 to 10,000,000. On March 16, 2021, the Company’s stockholders approved a plan amendment. The 2015 Equity Plan authorizes the issuance of stock options, restricted stock, stock appreciation rights, restricted stock units and performance awards, to an aggregate of ~~5,000,000~~10,000,000 new shares of common stock to employees, directors, advisors or consultants. ~~At December 31, 2020,~~ As of June 30, 2021, there were options and restricted stock units outstanding covering ~~115,000~~92,500 and ~~2,942,018~~3,015,637 shares of common stock under the 2005 Equity Plan and 2015 Equity Plan, respectively and ~~483,480~~5,143,165 shares of common stock available for grant for a total of ~~3,540,498~~8,251,302 shares of common stock currently ~~available~~authorized and unissued under the two equity plans.

Share-Based Compensation

The Company’s employee stock options have various restrictions that reduce option value, including vesting provisions and restrictions on transfer and hedging, among others, and are often exercised prior to their contractual maturity.

There were ~~215,000~~275,000 stock options granted during the ~~three~~nine months ended ~~December 31, 2020.~~ June 30, 2021. There were 1,133,727 stock options granted during ~~fiscal~~the nine months ended June 30, 2020. The weighted average estimated fair value of employee stock options granted during the ~~three~~nine months ended ~~December 31, 2020~~ June 30, 2021 was calculated using the Black-Scholes option-pricing model with the following weighted average assumptions (annualized percentages):

	Three months ended						Nine months ended
	December 31,						June 30,
	2020			2019			2021			2020
Volatility		48.6	%		40.2	%		48.5	%		44.5	%
Risk-free interest rate		0.6	%		1.5	%		0.6	%		1.4	%
Forfeiture rate		3.8	%		10.0	%
Dividend yield		0.0	%		0.0	%		0.0	%		0.0	%
Expected term		6.9			5.0			6.6			5.4

Expected volatility is based on the historical volatility of the Company’s common stock over the period commensurate with the expected term of the options. The risk-free interest rate is based on rates published by the Federal Reserve Board. The contractual term of the options was seven years. The expected term is based on observed and expected time to post-vesting exercise. The expected forfeiture rate is based on past experience and employee retention data. Forfeitures are estimated at the time of the grant and revised in subsequent periods if actual forfeitures differ from those estimates. Such revision adjustments to expense will be recorded as a cumulative adjustment in the period in which the estimate is changed. The Company has not paid a dividend in fiscal 2021 and did not pay a dividend in fiscal ~~2021 or in fiscal~~ 2020.

As of ~~December 31, 2020,~~ June 30, 2021, there was approximately ~~$1,067~~$787 of total unrecognized compensation costs related to outstanding employee stock options. This amount is expected to be recognized over a weighted average period of ~~2.6~~2.1 years. To the extent the forfeiture rate is different from what the Company anticipated, stock-based compensation related to these awards will be different from the Company’s expectations.

Performance-Based Stock Options

On August 1, 2016, the Company awarded a performance-based stock option (PVO) to purchase 750,000 shares of the Company’s common stock to a key executive, with a contractual term of seven years. At the grant date, there were 375,000 performance-based stock options assigned to performance criteria within each of fiscal 2019 and 2020. Vesting is based upon the achievement of certain performance criteria for each of fiscal 2019 and 2020 including a minimum free cash flow margin and net revenue targets. Additionally, vesting is subject to the executive being employed by the Company at the time the Company achieves such financial targets.

The Company determined that certain performance conditions related to the 2019 and 2020 performance criteria were achieved. 187,500 options related to the 2019 performance criteria vested and 375,000 options related to the 2020 performance criteria vested. The Company recorded a total of $459 in stock-based compensation expense for these options through September 30, 2020, in selling, general and administrative expenses in the consolidated statement of operations.

On October 4, 2019, the Company awarded a performance-based stock option (PVO) to purchase 800,000 shares of the Company’s common stock to a key executive, with a contractual term of seven years. Vesting is based upon the achievement of certain performance criteria for each of fiscal 2022 and 2023 including a minimum free cash flow margin and net revenue targets. Additionally, vesting is subject to the executive being employed by the Company at the time the Company achieves such financial targets. ~~The~~Through June 30, 2021, the Company has not recorded stock-based compensation expense related to these options.

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

The Company did not grant any PVO’s during the ~~three~~nine months ended ~~December 31, 2020.~~June 30, 2021.

Restricted Stock Units

During fiscal 2018, the Board of Directors granted 93,330 restricted stock units (“RSUs”) to employees that will vest equally over three years on each of the firstthree anniversary dates of the grant. These were issued at a market value of $210, which will be expensed on a straight-line basis over the ~~three-year~~three-year life of the grants.

~~On February 7,~~ During fiscal 2019, the Board of Directors approved non-employee director compensation to include an annual grant of 30,000 RSUs to each of the Company’s five non-employee directors that will vest on the first anniversary of the grant date. These were issued at a market value of $413, were expensed on a straight-line basis through the March 12, 2020 vest date. Also, during fiscal 2019,granted 99,300 RSUs ~~were granted~~ to employees that will vest equally over three years on each of the firstthree anniversary dates of the grant. These were issued at a market value of $248, which have and will be expensed on a straight-line basis over the ~~three-year~~three-year life of the grants. ~~There~~

On March 10, 2020, each member of the Board of Directors received a grant of 30,000 RSUs that vested on the first anniversary of the grant date. These were noissued at a market value of $425, which were expensed on a straight-line basis through the March 10, 2021 vest date. Also, in fiscal 2020, 81,270 RSUs were granted to employees that will vest over three years on the anniversary date of the grant. These were issued at a market value of $258, which have and will be expensed on a straight-line basis over the three-year life of the grants.

On March 16, 2021, each member of the Board of Directors received a grant of 27,883 RSUs that vested on the first anniversary of the grant date. These were issued at a market value of $1,100, which have and will be expensed on a straight-line basis through the March 16, 2022 vest date. Also, during the fiscal 2021, 145,950 RSUs were granted to employees that will vest over three years on the anniversary date of the grant. These were issued at a market value of $989, which have and will be expensed on a straight-line basis over the three-year life of the grants. During the quarter, 5,000 RSUs with immediate vesting were granted to an employee at a market value of $25. These were expensed during the quarter ended June 30, 2021.

During the nine months ended ~~December 31, 2020.~~June 30, 2021, the Company retained 22,073 shares of common stock to satisfy tax withholding obligations upon the vesting of RSUs issued to employees. During the nine months ended June 30, 2020, the Company retained 13,063 shares of common stock to satisfy tax withholding obligations upon the vesting of RSUs issued to employees. These shares were not acquired pursuant to any repurchase plan or program.

Compensation expense for RSUs was ~~$138~~$363 and $750 for the three months and nine months ended ~~December 31, 2020.~~June 30, 2021, respectively. Compensation expense for RSUs was ~~$126~~$136 and $431 for the three and nine months ended ~~December 31, 2019.~~June 30, 2020, respectively. As of June 30, 2021, there was approximately $1,534 of total unrecognized compensation costs related to outstanding RSUs. This amount is expected to be recognized over a weighted average period of 1.61 years.

A summary of the restricted stock units of the Company as of ~~December 31, 2020~~ June 30, 2021, is presented below:

Number of
Shares

Weighted
Average Grant
Date Fair Value

Outstanding September 30, 2020
303,014 $ 2.82
Granted
- $ -
Released
- $ -
Forfeited/cancelled
(277 ) $ 2.26
Outstanding December 31, 2020
302,737 $ 2.82

	Number of Shares			Weighted Average Grant Date Fair Value
Outstanding September 30, 2020		303,014		$	2.82
Granted		290,315		$	7.28
Released		(228,633	)	$	2.83
Forfeited/cancelled		(277	)	$	2.26
Outstanding June 30, 2021		364,419		$	6.37

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

Stock Option Summary Information

A summary of the activity in options to purchase the capital stock of the Company as of ~~December 31, 2020~~ June 30, 2021, is presented below:

	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Outstanding September 30, 2020		2,659,305		$	2.56		2,659,305		$	2.56
Granted		215,000		$	6.87		275,000		$	6.80
Forfeited/expired		(94,125	)	$	1.99		(104,125	)	$	2.57
Exercised		(25,899	)	$	2.06		(86,462	)	$	1.97
Outstanding December 31, 2020		2,754,281		$	2.92
Exerciseable December 31, 2020		1,500,749		$	2.08
Outstanding June 30, 2021							2,743,718		$	3.00
Exerciseable June 30, 2021							1,520,058		$	2.19

Options outstanding are exercisable at prices ranging from $1.31 to ~~$6.87~~$8.03 per share and expire over the period from ~~2020~~2021 to ~~2027~~2028 with an average life of ~~4.42~~4.07 years. The aggregate intrinsic value of options outstanding and exercisable ~~at December 31, 2020~~ as of June 30, 2021, was ~~$9,993~~$7,150 and ~~$6,670,~~$5,049, respectively. The aggregate intrinsic value represents the difference between the Company’s closing stock price on the last day of trading for the quarter, which was ~~$6.52~~$5.48 per share, and the exercise price multiplied by the number of applicable options. The total intrinsic value of stock options exercised during the ~~three~~nine months ended ~~December 31, 2020~~ June 30, 2021, was ~~$113~~$455 and proceeds from these exercises ~~was $54.~~were $170. The total intrinsic value of stock options exercised during the ~~three~~nine months ended ~~December 31, 2019~~ June 30, 2020, was ~~$128~~$1,236 and proceeds from these exercises ~~was $144.~~were $996.

The following table summarized information about stock options outstanding ~~at December 31, 2020:~~as of June 30, 2021:

					Weighted Average		Weighted Average				Weighted Average						Weighted Average		Weighted Average				Weighted Average
Range of	Range of		Number		Remaining		Exercise		Number		Exercise		*Range of*		*Number*		*Remaining*		*Exercise*		*Number*		*Exercise*
Exercise Prices	Exercise Prices		Outstanding		Contractual Life		Price		Exercisable		Price		*Exercise Prices*		*Outstanding*		*Contractual Life*		*Price*		*Exercisable*		*Price*
$1.31	-	$1.86		373,054		2.64	$	1.66		351,460	$	1.66	-	$1.86		334,991		2.20	$	1.64		328,116	$	1.64
$1.99	-	$1.99		937,500		3.18	$	1.99		937,500	$	1.99	-	$1.99		937,500		2.69	$	1.99		937,500	$	1.99
$2.02	-	$3.17		95,000		0.91	$	2.42		95,000	$	2.42
$2.16													-	$3.17		72,500		0.60	$	2.52		72,500	$	2.52
$3.39	-	$3.40		1,133,727		5.83	$	3.39		104,289	$	3.40	-	$3.40		1,133,727		5.34	$	3.39		146,005	$	3.40
$6.87	-	$6.87		215,000		6.94	$	6.87		12,500	$	6.87
$5.05													-	$8.03		265,000		6.85	$	6.75		35,937	$	6.87
				2,754,281		4.42	$	2.92		1,500,749	$	2.08				2,743,718		4.07	$	3.00		1,520,058	$	2.19

The Company recorded ~~$44~~$84 and ~~$32~~$186 of stock option compensation expense for employees, directors and consultants for the three months ended ~~December 31, 2020,~~ June 30, 2021, and ~~2019,~~2020, respectively. The Company recorded $206 and $345 of stock option compensation expense for employees, directors and consultants for the nine months ended June 30, 2021, and 2020, respectively.

Share-Based Compensation

The Company recorded share-based compensation expense and classified it in the condensed consolidated statements of operations as follows:

	Three Months Ended				Three months ended				Nine months ended
	December 31,				June 30,				June 30,
	2020		2019		2021		2020		2021		2020
Cost of revenues	$	5	$	4	$	10	$	5	$	24	$	16
Selling, general and administrative		171		143		424		311		904		738
Research and development		6		11		12		6		28		22
	$	182	$	158	$	446	$	322	$	956	$	776

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

117. STOCKHOLDERS’7~~. STOCKHOLDERS’~~ EQUITY

Summary

The following table summarizes changes in the components of stockholders’ equity during the ~~three~~nine months ended ~~December 31, 2020~~ June 30, 2021, and the ~~three~~nine months ended ~~December 31, 2019 (amounts~~June 30, 2020 (amounts in thousands, except par value and share amounts):

										Accumulated																	Accumulated
					Additional					Other			Total								*Additional*						*Other*			*Total*
	Common Stock				Paid-in		Accumulated			Comprehensive			Stockholders'			*Common Stock*					*Paid-in*			*Accumulated*			*Comprehensive*			*Stockholders'*
	Shares		Amount		Capital		Deficit			Loss			Equity			*Shares*			*Amount*		*Capital*			*Deficit*			*Loss*			*Equity*
Balance at September 30, 2020		33,561,544	$	336	$	91,248	$	(41,858	)	$	(250	)	$	49,140			33,561,544		$	336	$	91,248		$	(41,858	)	$	(250	)	$	49,140
Share-based compensation expense		-		-		182		-			-			182			-			0		182			0			0			182
Issuance of common stock upon exercise of stock options, net		25,899		-		54		-			-			54			25,899			0		54			0			0			54
Obligation to issue common stock		-		-		3,431		-			-			3,431			-			0		3,431			0			0			3,431
Other comprehensive loss		-		-		-		-			469			469
Accumulated other comprehensive income																	-			0		0			0			469			469
Net loss		-		-		-		(619	)		-			(619	)		-			0		0			(619	)		0			(619	)
Balance at December 31, 2020		33,587,443	$	336	$	94,915	$	(42,477	)	$	219		$	52,657			33,587,443		$	336	$	94,915		$	(42,477	)	$	219		$	52,657

Share-based compensation expense																	-		$	0	$	328		$	0		$	0		$	328
Issuance of common stock upon exercise of stock options, net																	60,563			1		116			0			0			116
Issuance of common stock upon vesting of restricted stock units																	223,633			2		0			0			0			0
Shares retained for payment of taxes in connection with net share settlement of restricted stock units																	(22,073	)		0		(141	)		0			0			(141	)
Accumulated other comprehensive loss																	-			0		0			0			(78	)		(78	)
Net income																	-			0		0			262			0			262
Balance at March 31, 2021																	33,849,566		$	339	$	95,218		$	(42,215	)	$	141		$	53,144

Share-based compensation expense																	-		$	0	$	446		$	0		$	0		$	446
Issuance of common stock upon vesting of restricted stock units																	5,000			0		0			0			0			0
Issuance of common stock in business combination																	2,165,824			22		10,938			0			0			10,938
Release of obligation to issue commons stock																	121,703			1		0			0			0			0
Accumulated other comprehensive income																	-			0		0			0			183			183
Net income																	-			0		0			290			0			290
Balance at June 30, 2021																	36,142,093		$	362	$	106,602		$	(41,925	)	$	324		$	65,001

1923

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Accumulated

Comprehensive

Stockholders'

Shares

Amount

Capital

Deficit

Loss

Equity

Balance at September 30, 2019
32,949,987 $ 330 $ 89,572 $ (53,732 ) $ (459 ) $ 35,381
Share-based compensation expense
- - 158 - - 158
Issuance of common stock upon exercise of stock options, net
83,343 1 144 - - 144
Other comprehensive loss
- - - - 85 85
Net income
- - - 620 - 620
Balance at December 31, 2019
33,033,330 $ 331 $ 89,874 $ (53,112 ) $ (374 ) $ 36,388

												Accumulated
						*Additional*						*Other*			*Total*
	*Common Stock*					*Paid-in*			*Accumulated*			*Comprehensive*			*Stockholders'*
	*Shares*			*Amount*		*Capital*			*Deficit*			*Loss*			*Equity*
Balance at September 30, 2019		32,949,987		$	330	$	89,572		$	(53,732	)	$	(459	)	$	35,381
Share-based compensation expense		-			0		158			0			0			158
Issuance of common stock upon exercise of stock options, net		83,343			1		144			0			0			144
Accumulated other comprehensive income		-			0		0			0			85			85
Net income		-			0		0			620			0			620
Balance at December 31, 2019		33,033,330		$	331	$	89,874		$	(53,112	)	$	(374	)	$	36,388

Share-based compensation expense		-			0		296			0			0			296
Issuance of common stock upon exercise of stock options, net		56,861			0		114			0			0			114
Issuance of common stock upon vesting of restricted stock units		198,106			0		0			0			0			0
Shares retained for payment of taxes in connection with net share settlement of restricted stock units		(13,063	)		0		(41	)		0			0			(41	)
Stock buyback		(156,505	)		0		(398	)		0			0			(398	)
Accumulated other comprehensive loss		-			0		0			0			(69	)		(69	)
Net loss		-			0		0			302			0			302
Balance at March 31, 2020		33,118,729		$	331	$	89,845		$	(52,810	)	$	(443	)	$	36,592

Share-based compensation expense		-			0		322			0			0			322
Issuance of common stock upon exercise of stock options, net		371,815			4		738			0			0			738
Accumulated other comprehensive income		-			0		0						51			51
Net income		-			0		0			1,504			0			1,504
Balance at June 30, 2020		33,490,544		$	335	$	90,905		$	(51,306	)	$	(392	)	$	39,207

Common ~~Stock Activity~~stock activity

On March 18, 2021, the Company filed an amendment to its Certificate of Incorporation, as amended, with the Secretary of State of Delaware to increase the authorized number of shares of common stock of the Company from 50,000,000 to 100,000,000 shares (the “Amended Certificate”). The Amended Certificate was approved by the Company’s stockholders at the Company’s Annual Meeting of Stockholders on March 16, 2021.

During the ~~three~~nine months ended ~~December 31, 2020,~~ June 30, 2021, the Company issued ~~25,899~~86,462 shares of common stock and received gross proceeds of ~~$54~~$170 in connection with the exercise of stock options. During the ~~three~~nine months ended ~~December 31, 2019,~~ June 30, 2020, the Company issued ~~83,343~~512,019 shares of common stock and received gross proceeds of ~~$144~~$996 in connection with the exercise of stock options. During the nine months ended June 30, 2021, the Company issued 206,560 shares of common stock in connection with the vesting of RSUs. During the nine months ended June 30, 2020, the Company issued 185,043 shares of common stock in connection with the vesting of RSUs.

In connection with the Amika Mobile asset purchase, the Company agreed to issue 191,267 shares of the Company’s common stock to the former ~~owners~~owner of the Amika Mobile assets on each of the first, second and third anniversaries of the closing date. The total number of shares of common stock the Company is obligated to issue is 573,801. The fair value of the Company’s common stock on the closing date was $5.98, resulting in the addition of $3,431 to additional paid-in-capital. During the three months ended June 30, 2021, the Company accelerated the issuance of 121,703 of such shares of common stock to a former owner of Amika Mobile. 452,098 shares of the Company’s common stock remain subject to issuance under this obligation.

In connection with the Zonehaven acquisition, the Company issued 2,165,824 shares of the Company’s common stock to the former owners of Zonehaven. The fair value of the Company’s stock on the closing date was $5.05, resulting in the addition of $10,938 to additional-paid-in-capital.

Share ~~Buyback Program~~buyback program

In December 2018, the Board of Directors approved a new share buyback program beginning January 1, 2019 and expiring on December 31, 2020, under which the Company was authorized to repurchase up to $5 million of its outstanding common shares. In December 2020, the Board of Directors extended the buyback program until December 31, 2022. The previous program expired on December 31, 2018.

During the ~~three~~nine months ended ~~December 31, 2020 and 2019, no~~June 30, 2021, 0 shares were repurchased by the Company. During the nine months ended June 30, 2020, the Company repurchased 156,505 shares for $398.

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

Dividends

There were no0 dividends declared in the ~~three~~nine months ended ~~December 31, 2020~~ June 30, 2021 and ~~2019.~~2020.

18.18.NET INCOME (LOSS) ~~INCOME~~ PER SHARE

The following table sets forth the computation of basic and diluted net income per share:

	Three months Ended					Three months ended				Nine months ended
	December 31,					June 30,				June 30,
	2020			2019		2021		2020		2021			2020
Net (loss) income	$	(619	)	$	620
Net income (loss)						$	290	$	1,504	$	(67	)	$	2,426

Basic (loss) income per share	$	(0.02	)	$	0.02
Diluted (loss) income per share	$	(0.02	)	$	0.02
Basic income (loss) per share						$	0.01	$	0.05	$	(0.00	)	$	0.07
Diluted income (loss) per share						$	0.01	$	0.04	$	(0.00	)	$	0.07

Weighted average shares outstanding - basic		33,573,755			32,977,765		34,109,167		33,289,426		33,797,774			33,122,042
Assumed exercise of dilutive options		-			732,855		1,161,778		991,489		0			756,201
Weighted average shares outstanding - diluted		33,573,755			33,710,620		35,270,945		34,280,915		33,797,774			33,878,243

Potentially diluted securities outstanding at period end excluded from diluted computation as the inclusion would have been antidilutive:
Options		2,754,281			708,727		1,035,000		893,750		2,743,718			893,750
RSU		302,737			-		0		0		364,469			0
Obligation to issue common stock							452,098		0		452,098			0
Total		3,057,018			708,727		1,487,098		893,750		3,560,285			893,750

19. 19.SEGMENT INFORMATION

The Company is engaged in the design, development and commercialization of directed and multidirectional sound technologies, voice broadcast products, ~~and~~ location-based mass messaging solutions for emergency warning and ~~workforce management.~~enterprise safety, and evacuation planning and public safety resources. The Company operates in ~~two~~2 business segments: Hardware and Software and its ~~principle~~principal markets are North and South America, Europe, the Middle East and Asia. As reviewed by the Company’s chief operating decision maker, the Company evaluates the performance of each segment based on sales and operating income. Cash and cash equivalents, marketable securities, accounts receivable, inventory, property and equipment, deferred tax assets, goodwill and intangible assets are primary assets identified by segment. The accounting policies for segment reporting are the same for the Company as a ~~whole and transactions between the two operating segments are not material.~~whole.

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

The following table presents the Company’s segment disclosures:

	Three months ended June 30,						Nine months ended June 30,
	2021			2020			2021			2020

Revenue from external customers
Hardware	$	11,875		$	11,599		$	29,887		$	27,820
Software		752			372			2,069			1,209
	$	12,627		$	11,971		$	31,956		$	29,029

Intersegment revenues
Hardware	$	0		$	0		$	0		$	0
Software		581			552			1,187			1,381
	$	581		$	552		$	1,187		$	1,381

Segment operating income (loss)
Hardware	$	1,671		$	2,144		$	3,420		$	3,525
Software		(1,151	)		(203	)		(3,040	)		(559	)
	$	520		$	1,941		$	380		$	2,966

Other expenses:
Depreciation and amortization expense
Hardware	$	98		$	127		$	282		$	387
Software		303			78			671			233
	$	401		$	205		$	953		$	620

Income tax expense
Hardware	$	228		$	473		$	506		$	742
Software		0			0			0			0
	$	228		$	473		$	506		$	742

~~For the three months ended December 31, 2020:~~

Revenue from
External Customers

Intersegment
Revenues

Operating
Income

Depreciation and
amortization expense

Income Tax
Benefit

Hardware
$ 7,389 $ 160 $ 90 $ (5 )
Software
639 351 (853 ) 191
$ 8,028 $ 351 $ (693 ) $ 281 $ (5 )

~~As of December 31, 2020:~~

	June 30, 2021		September 30, 2020
Long-lived assets
Hardware	$	1,826	$	1,924
Software		37,349		3,421
	$	39,175	$	5,345

Total assets
Hardware	$	53,232	$	61,152
Software		40,335		5,015
	$	93,567	$	66,167

Long-lived assets

Total Assets

Hardware
$ 1,863 $ 56,021
Software
12,265 14,582
$ 14,128 $ 70,603

~~For the three months ended December 31, 2019:~~

Revenue from
External Customers

Intersegment
Revenues

Operating
Income

Depreciation and
amortization expense

Income Tax
Expense

Hardware
$ 8,362 $ - $ 861 $ 131 $ 172
Software
420 385 (165 ) 78 -
$ 8,782 $ 385 $ 696 $ 209 $ 172

~~As of September 30, 2020:~~

Long-lived assets

Total Assets

Hardware
$ 1,924 $ 61,152
Software
3,421 5,015
$ 5,345 $ 66,167

20.20. MAJOR CUSTOMERS,, SUPPLIERS AND RELATED INFORMATION

For the three months ended ~~December 31, 2020,~~ June 30, 2021, revenues from ~~one~~1 customer accounted for ~~52%~~62% of total revenues with no other single customer accounting for more than 10% of revenues. ~~At December 31, 2020, accounts receivable~~For the nine months ended June 30, 2021, revenues from ~~three customers~~1 customer accounted for ~~48%, 14% and 10%~~54% of total ~~accounts receivable,~~revenues with no other single customer accounting for more than 10% of revenues. As of June 30, 2021, accounts receivable from 2 customers accounted for 51% and 17% of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

For the three months ended ~~December 31, 2019,~~ June 30, 2020, revenues from ~~two customers~~1 customer accounted for ~~62% and 13%~~64% of total revenues with no other single customer accounting for more than 10% of revenues. ~~At December 31, 2019, accounts receivable~~For the nine months ended June 30, 2020, revenues from ~~two customers~~1 customer accounted for ~~66% and 10%~~63% of total ~~accounts receivable,~~revenues with no other single customer accounting for more than 10% of revenues. As of June 30, 2020, accounts receivable from 2 customers accounted for 60% and 17% of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

Revenue from customers in the United States was ~~$5,712~~$10,564 and $9,600 for the three months ended ~~December 31, 2020.~~June 30, 2021, and 2020, respectively. Revenue from customers in the United States was ~~$6,512~~$24,401 and $22,523 for the ~~three~~nine months ended ~~December 31, 2019.~~June 30, 2021, and 2020, respectively. The following table summarizes revenues by geographic region. Revenues are attributed to countries based on customer’s delivery location.

	Three months ended December 31,				Three months ended June 30,				Nine months ended June 30,
	2020		2019		2021		2020		2021		2020
Americas	$	6,014	$	6,804	$	11,090	$	9,961	$	25,496	$	23,871
Asia Pacific		1,011		1,548		887		948		4,110		3,129
Europe, Middle East and Africa		1,003		430		650		1,062		2,350		2,029
Total Revenues	$	8,028	$	8,782	$	12,627	$	11,971	$	31,956	$	29,029

2127

~~Item~~

Item2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

The discussion and analysis set forth below should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the related notes included under Item 1 of this Quarterly Report on Form 10-Q, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended September 30, 2020.

Forward Looking Statements

This report contains certain statements of a forward-looking nature relating to future events or future performance. Words such as ~~“expects,~~“expects,” ~~“anticipates,~~“anticipates,” ~~“intends,~~“intends,” ~~“plans,~~“plans,” ~~“believes,~~“believes,” ~~“seeks,~~“seeks,” ~~“estimates”~~“estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the only means of identifying forward-looking statements. Prospective investors are cautioned that such statements are only predictions ~~and~~- actual events or results may differ materially. In evaluating such statements, prospective investors should specifically consider various factors identified in this report and any matters set forth under Part I, Item1A (Risk Factors) of our Annual Report on Form 10-K, which could cause actual results to differ materially from those indicated by such forward-looking statements.

Overview

Genasys Inc. is a global provider of critical communications hardware and software solutions designed to help keep people safe. Our unified platform encompasses a multi-channel approach to deliver alerts, notifications, instructions, and information before, during, and after public safety and enterprise threats, critical events, and other crisis situations.

Our multi-channel approach includes:

•

~~LRAD~~^® ~~(Long Range Acoustic Device~~^®), ~~the world’s leading Acoustic Hailing Device (“AHD”), projects sirens~~

• LRAD® (Long Range Acoustic Device®), the world’s leading Acoustic Hailing Device (“AHD”), projects alert tones and audible voice messages with exceptional vocal clarity in a 30° beam from close range to 5,500 meters.

• ~~GEM™~~GEM™ (Genasys Emergency Management) is our unified software platform for cloud, on-premise or hybrid operations that supports 2-way communications and seamlessly integrates with physical systems to initiate life-safety actions in defined geographic areas. GEM receives and manages simultaneous inputs from panic buttons, government agency or weather alert feeds, sensor events from digital thermometers, access control, fire panels, camera systems, and more. Using the information derived from the inputs, GEM delivers alerts and notifications on multiple channels, including SMS, CBC, MMS, desktop, laptop, tablet and smartphone pop-ups, social media, VoIP, callouts, public address, overhead displays, digital signs, tickers, RSS feeds, and email on any platform.

• ~~Integrated~~IMNS (Integrated Mass Notification ~~Solutions~~Systems) span multiple hardware and software notification channels to reach at risk individuals and populations. These ~~solutions~~systems include Genasys voice speaker arrays, which project sirens and audible voice messages 60° - 360° with industry-leading vocal clarity from close range to more than 14 square kilometers, and GEM software designed to deliver SMS, CBC, text, email, and social media alerts to people at risk in defined geographic areas. Our ~~integrated~~IMNS solutions are compatible with the Federal Emergency Management Agency (“FEMA”) Integrated Public Alert & Warning System (“IPAWS”) and other major emergency warning protocols.

• NEWS (National Emergency Warning Systems) are deployed directly on mobile carrier networks to send critical alerts and life-saving information across SMS and CBC channels to anyone, anywhere with no opt-in required. NEWS empowers national emergency management personnel to send hyper-specific instructions to at risk populations and monitor evacuation progress.

• Zonehaven™is a cloud-based, software platform that uses critical data and modeling capabilities to deliver simple, usable insights to help emergency responders, communities, counties, and states plan for and successfully respond to All Hazards emergency situations

The Company’s critical communication systems are being used in 72more than 100 countries throughout the world in a range of diverse applications, including public safety, emergency warning, mass notification, defense, law enforcement, critical event management, and many more. We continue to develop new communication innovations and believe we have significant competitive advantages in our principal markets.

LRAD systems represent a technological breakthrough in broadcasting audible, highly intelligible voice messages and tones over long distances and high ambient noise using minimal power. By broadcasting audible voice messages with exceptional vocal clarity and only where needed, we offer novel sound applications that conventional bullhorns, loudspeakers, public address, and emergency warning systems cannot achieve. Our LRAD systems are designed to enable users to safely hail and warn, inform and direct, prevent misunderstandings, determine intent, establish large safety zones, resolve uncertain situations, and save lives. The LRAD product line ~~is comprised of~~offers a full range of ~~AHDs~~AHD and communication solutions - from portable devices to permanently installed, remotely operated systems. We continue to expand into new markets and add new models and features to meet customer requirements.

Building on the success of our LRAD systems, we designed and developed our multidirectional Genasys mass notification product line. Unlike siren-only installations, our public safety mass notification ~~(“PSMN”)~~ hardware systems broadcast both emergency warning sirens and highly intelligible voice messages with uniform 60° - 360° coverage over local and wide areas. We believe our ability to shape the broadcast coverage area, our industry-leading speech intelligibility, and our multiple system activation and control options enable us to successfully compete in the large and growing mass notification market.

GEM is our cloud, on-premise or hybrid based software notification platform that enables emergency personnel, first responders, municipalities, companies, educational institutions, and government agencies to send public safety warnings and notifications to the mobile devices and desktop computers of individuals or populations in specific geographic areas with reliability, speed and ease. Alerts and notifications can be sent from a desktop or our mobile ~~applications.~~application.

NEWS’ location-based SMS software technology sends geo-specific alerts to mobile phones in crisis-affected areas. With no opt in or app download required, NEWS provides the industry’s fastest location-based SMS alert service available, finding and sending SMS public safety alerts and notifications to thousands of mobile phones in near real time.

Zonehaven reduces evacuation and response times for communities, counties, and regions during disasters and other crisis situations. The zone-based evacuation plans include population locations, structures, and traffic flow, and local knowledge of past emergencies and known local hazards. Zonehaven provides a single access point for public safety agencies to gather data and disseminate critical information, evacuation routes, and incident status

Genasys offers the only unified critical communications platform that provides multi-modal, geo-targeted mobile device alerts, and speaker arrays that ~~deliver~~broadcast audible messages with industry-leading vocal clarity and area coverage. Our user-friendly software interface and mobile application manages and delivers notifications and information to people at risk, before, during, and after crisis situations.

Business developments in the fiscal quarter ended ~~December 31, 2020:~~June 30, 2021:

~~Closed Amika Mobile asset purchase~~• Acquired Zonehaven, an emergency evacuation planning and ~~rebranded its business as Genasys Communications Canada~~public safety resources software provider

~~Announced $7.7~~• Received $28.0 million in follow-on AHD program of record orders from the U.S. ~~defense orders~~Army

~~Awarded~~• Announced $9.0 million U.S. ~~Navy SBIR program research and development project~~Army mobile mass notification systems order

• Awarded mass notification and emergency management software services contract from Riverside County, CA

• Received ~~$1.6~~$3.0 million in LRAD domestic and international security orders

• Announced $1.0 million in international ~~law enforcement, homeland security~~infrastructure protection and ~~mass notifications~~wildlife preservation orders

~~Recognized in Gartner 2020 Market Guide for Emergency/Mass Notification Services Solutions~~• Received IMNS order from Southern Marin Fire Protection District

Revenues ~~for~~in the ~~Company’s first~~third fiscal quarter ~~of fiscal 2020,~~ended June 30, 2021, were ~~$8.0~~$12.6 million, ~~a decrease~~an increase from ~~$8.8~~$11.9 million in the ~~first~~third fiscal quarter of ~~fiscal 2019. LRAD~~2020. The increase in revenues was driven by increases of AHD, ~~revenues decreased $680 thousand~~IMNS and ~~integrated mass notification solutions decreased $293 thousand, while~~software revenues. AHD revenue was $11,420, an increase of $961 or 9%, IMNS revenue was $455, a decrease of $685 or 60%, and software revenue ~~increased $219 thousand,~~of $752, an increase of $380 or 102%, compared towith the ~~first~~third fiscal quarter of 2020. Based on the ~~prior year. The~~ timing of government budget cycles, ~~government~~ financial issues, the impact of the COVID-19 pandemic and ~~military conflict~~leadership change in certain areas of the world, delays in awarding contracts often ~~delay contract awards,~~occur, resulting in uneven quarterly revenues. Gross profit ~~decreased~~increased compared towith the same quarter in the prior year primarily as a result of ~~lower sales,~~ higher ~~software engineering expenses and additional engineering charges resulting from a more precise process to allocate engineering expenses to cost of~~ sales. Operating expenses increased ~~12.6%~~36% from ~~$3.9~~the prior year quarter, from $4.5 million to ~~$4.4~~$6.2 million in the quarter ended ~~December 31, 2020, as~~June 30, 2021. Third fiscal quarter of 2021 results reflect $228 of income tax expense, compared towith $473 in the ~~same period a~~prior year ~~ago.~~quarter. We reported a net ~~loss~~income of ~~$619 thousand~~$290 for the ~~first~~ quarter, ~~of fiscal 2021,~~ or ~~a loss of $0.02~~$0.01 per share, compared towith net income of ~~$620 thousand,~~$1,504, or ~~income of $0.02~~$0.05 per share, for the same quarter in the prior year.

Overall Business Outlook

Our product line-up continues to gain worldwide awareness and recognition through media exposure, product demonstrations, and word of mouth as a result of positive responses and increased acceptance of our products. We believe we have a solid global brand, technology, and product foundation with our LRAD systems and ~~integrated~~IMNS solutions, which we have expanded over the years to serve new markets and customers for greater business growth. We believe that we have strong market opportunities for our product offerings throughout the world in the homeland security and defense sectors as a result of increasing threats to government, commerce, law enforcement, borders, and critical infrastructure. Our directional and multidirectional product offerings also have many applications within the fire rescue, public safety, maritime, asset protection, and wildlife ~~control and~~ preservation business segments.

The proliferation of natural disasters, crisis situations, and civil unrest require technologically advanced, multi-channel solutions to deliver clear and timely critical communications to help ~~make and~~ keep the public safe during emergencies. Businesses are also incorporating communication systems that locate and help safeguard employees when critical events occur.

By providing the only unified platform that combines audible, highly intelligible voice broadcast systems and mass messaging software, Genasys seeks to deliver reliable, fast, and intuitive solutions for sending location-based audible voice communications and geolocation-targeted messages and texts to mobile devices to help keep the public and ~~employees~~workers safe.

Genasys has developed a global market for LRAD systems and advanced emergency warning notification solutions. We have a reputation for producing quality products that feature industry-leading vocal intelligibility and geo-targeted mass messaging. While the mass notification market is more mature with many established manufacturers and suppliers, we believe that our advanced technology and unified multi-channel platform provides opportunities to succeed in the large and growing public safety, emergency warning, and mass notification markets. We also plan to expand and strengthen domestic and international sales by ~~opening sales offices in key regions and~~ adding strategic mass notification partners, distributors, and dealers.

We plan to continue building on our AHD leadership position by offering enhanced ~~directional~~voice broadcast and multidirectional voice broadcast systems and accessories for an expanding range of applications. In executing our strategy, we use direct sales to governments, militaries, large end-users, and system integrators. We have built a worldwide distribution channel consisting of partners and resellers that have significant expertise and experience selling integrated communication solutions into our various target markets. As our primary AHD sales opportunities are with domestic and international government, military, and law enforcement agencies, we are subject to each customer’s unique budget cycle, which leads to long selling cycles and uneven revenue flow, complicating our product planning.

In fiscal 2021, we intend to continue to pursue domestic and international business opportunities with the support of business development consultants, key representatives, and resellers. We plan to grow our revenues through increased direct sales to militaries and large commercial and defense-related companies that desire to integrate our communication technologies into their product offerings. This includes building on fiscal 2020 domestic defense sales by pursuing further U.S. military opportunities. We also plan to pursue mass notification, government, law enforcement, fire rescue, homeland and international security, private and commercial security, border security, maritime security, and wildlife preservation ~~and control~~ business opportunities. In addition to the matters above, we are authorized for the performance of services and provision of goods pursuant to ~~the~~ Delaware General Corporation Law.

In March 2020, the World Health Organization ("WHO") classified the COVID-19 outbreak as a pandemic. While the impact of the COVID-19 pandemic did not have a material adverse effect on our financial position or results of operations for the ~~three~~nine months ended ~~December 31, 2020,~~June 30, 2021, we ~~have been monitoring~~monitor the developments and ~~assessing~~assess areas where there is potential for our business to be impacted. A significant portion of our sales force is working remotely, which could, among other things, negatively impact our ability to engage in sales-related initiatives, or efficiently conduct day-to-day operations. Other businesses and governments with which we engage are likely operating under similar restrictions and experiencing disruptions, which may create obstacles in the coordination of business activities, including the negotiation and fulfillment of orders. Disruptions in the supply chain could negatively impact our ability to source materials or manufacture and distribute products. While we do not currently anticipate a material reduction in demand for our commercialized products, we could experience a decrease in new orders, which could negatively impact our revenues and reduce our liquidity and cash flows. Growth in revenue could also be impeded by these factors. The financial markets have been subject to significant volatility that could impact our ability to enter into, modify, and negotiate favorable terms and conditions relative to equity and debt financing activities. We have ~~$19.6~~$14.5 million in cash and cash equivalents as of ~~December 31, 2020,~~June 30, 2021, which we believe provides sufficient capital to fund our operations for at least the next twelve months and withstand the potential near-term consequences of the pandemic, although liquidity constraints and access to capital markets could adversely impact our liquidity and warrant changes to our investment strategy. While we have not yet experienced a material impact, the full magnitude of the pandemic cannot be measured at this time, and therefore, any of the aforementioned circumstances, as well as other factors, may cause our results of operations to vary substantially from year to year and quarter to quarter.

Based on various standards published to date, we believe the work our associates perform is critical, essential and life sustaining. We are taking a variety of measures to promote the safety and security of our employees while ensuring the availability and functionality of our critical infrastructure. We are following Center for Disease Control guidelines to reduce the transmission of COVID-19, such as the imposition of travel restrictions, cancellation of events, the promotion of social distancing, the adoption of work-from-home arrangements, and limiting access to our facilities. Some or all of these policies and initiatives could impact our operations. In addition, the following events related to the COVID-19 pandemic could result in lost or delayed revenue to the Company: limitations on the ability of our suppliers to meet delivery requirements and commitments; limitations on the ability of our employees to perform their work due to illness caused by the pandemic, or local, state or federal orders requiring employees to remain at home; limitations on the ability of carriers to deliver our products to customers; unforeseen deviations from customers or foreign governments restricting the ability to do business; and, limitations on the ability of our customers to pay us on a timely basis, if at all.

A large number of components and sub-assemblies ~~produced~~manufactured by outside suppliers within our supply chain are produced within 50 miles of our facility. We source a small amount of component parts from suppliers in China. It is also likely that some of our suppliers source parts in China. The COVID-19 pandemic has adversely impacted worldwide supply chains and the ability to obtain sufficient amounts of component parts, including semiconductor chips and integrated circuits, resins, coating and other equipment and components. Negative impacts on our supply chain could have a material adverse effect on our business. We are in contact with ~~those~~our suppliers and evaluating what impact, if any, may result from COVID-19.

Critical Accounting Policies

We have identified a number of accounting policies as critical to our business operations and the understanding of our results of operations. These are described in our consolidated financial statements located in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended September 30, 2020. The impact and any associated risks related to these policies on our business operations is discussed below and throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported and expected financial results.

The methods, estimates and judgments we use in applying our accounting policies, in conformity with U.S. generally accepted accounting principles, have a significant impact on the results we report in our financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The estimates affect the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

Comparison of Results of Operations for the Three Months Ended June 30, 2021 and 2020 (in thousands)

	Three Months Ended
	June 30, 2021						June 30, 2020
				% of					% of
				Total					Total			Fav(Unfav)
	Amount			Revenue			Amount		Revenue			Amount			%
Revenues:
Product sales	$	10,719			84.9	%	$	10,933		91.3	%	$	(214	)		(2.0	%)
Contract and other		1,908			15.1	%		1,038		8.7	%		870			83.8	%
Total revenues		12,627			100.0	%		11,971		100.0	%		656			5.5	%

Cost of revenues		5,941			47.0	%		5,500		45.9	%		(441	)		(8.0	%)
Gross Profit		6,686			53.0	%		6,471		54.1	%		215			3.3	%

Operating expenses
Selling, general and administrative		4,776			37.8	%		3,330		27.8	%		(1,446	)		(43.4	%)
Research and development		1,390			11.0	%		1,200		10.0	%		(190	)		(15.8	%)
Total operating expenses		6,166			48.8	%		4,530		37.8	%		(1,636	)		(36.1	%)

Income from operations		520			4.1	%		1,941		16.2	%		(1,421	)		(73.2	%)

Other income (expense)		(2	)		(0.0	%)		36		0.3	%		(38	)		(105.6	%)

Income before income taxes		518			4.1	%		1,977		16.5	%		(1,459	)		(73.8	%)
Income tax expense		228			1.8	%		473		4.0	%		245			51.8	%
Net income	$	290			2.3	%	$	1,504		12.6	%	$	(1,214	)		(80.7	%)

Net revenue
Hardware	$	11,875			94.0	%	$	11,599		96.9	%	$	276			2.4	%
Software		752			6.0	%		372		3.1	%		380			102.2	%
Total net revenue	$	12,627			100.0	%	$	11,971		100.0	%	$	656			5.5	%

The tables above set forth for the periods indicated certain items of our condensed consolidated statements of operations expressed in dollars and as a percentage of net revenues. The financial information and the discussion below should be read in conjunction with the condensed consolidated financial statements and notes contained in this report.

2431

Revenues

Revenues increased in the current quarter compared to the same quarter in the prior year primarily due to the timing of deliveries in backlog as of March 31, 2021, as compared with March 31, 2020. Current year quarter AHD revenue was $11,420, software revenue was $752 and IMNS revenue was $455. This represented increases of $961, or 9%, for AHD and $380, or 102% for software offset by a decrease of $685, or 60% for IMNS revenue compared with the same prior year period. The receipt of orders is often uneven due to the timing of government budgets or approvals. The increase in software revenue in this year’s period is primarily from professional services revenue on new software contracts and the sale of a software license to one customer. As of June 30, 2021, we had aggregate deferred revenue of $1,092 for extended warranty obligations and software support agreements.

Gross Profit

The increase in gross profit in the quarter compared with the same period in the prior year was primarily due to the higher level of revenue. Gross profit as a percentage of revenue was lower in the fiscal 2021 third quarter due to a 61% increase in engineering personnel, primarily software related. Higher software expenses were due to the recent additions of Amika Mobile (through our Canadian subsidiary Genasys Communication Canada) and Zonehaven, and additional employees to support the Australia, EU and enterprise software initiatives.

As our products have varying gross margins, product mix may affect gross profits. In addition, our margins vary based on the sales channels through which our products are sold in a given period. We continue to implement product updates and changes, including raw material and component changes that may impact product costs. With such product updates and changes we have limited warranty cost experience and estimated future warranty costs can impact our gross margins. We do not believe that historical gross profit margins should be relied upon as an indicator of future gross profit margins.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $1,446, or 43%, over the prior year quarter primarily due to a 79% increase in sales and marketing personnel over the prior year to support future revenue growth opportunities, including opening sales offices in Singapore, the United Arab Emirates, and Puerto Rico. Additional sales and administrative personnel were added through two acquisitions this fiscal year.

We incurred non-cash share-based compensation expenses allocated to selling, general and administrative expenses in the three-months ended June 30, 2021, and 2020 of $424 and $311, respectively.

We may expend additional resources on the marketing and selling of our products in future periods as we identify ways to optimize potential opportunities, including the June 2022 European Public Warning Systems mandate and enterprise software services. Commission expenses will fluctuate based on the nature of our sales.

Research and Development Expenses

Research and development expenses increased $190 compared with the same quarter in the prior year. The higher cost was due to increases in engineering personnel and expending more engineering labor in support of development activities compared to the prior year period.

Included in research and development expenses for the three months ended June 30, 2021 and 2020, was $12 and $6, respectively, of non-cash share-based compensation costs.

Research and development costs vary period to period due to the timing of projects, the amount of support provided on customer projects, and the timing and use of outside consulting, design and development firms. We continually improve our product offerings and we expect to continue to expand our product line with new products, customizations and enhancements. Based on current plans, we may expend additional resources on research and development in the current year compared to the prior year.

Net Income

Net income in the third quarter of fiscal year 2021 was $290, a decrease of $1,214 compared with the third quarter of fiscal year 2020. The decrease was primarily due to increased selling, general and administrative expenses, offsetting the higher revenue and gross profit in the third quarter of fiscal year 2021.

Comparison of Results of Operations for the ThreeNine Months Ended ~~December 31, 20~~20June 30, 2021 and 20192020 (in thousands)

	Three Months Ended																	Nine Months Ended
	December 31, 2020						December 31, 2019											June 30, 2021						June 30, 2020
				% of					% of												% of					% of
				Total					Total			Fav(Unfav)									Total					Total			Fav(Unfav)
	Amount			Revenue			Amount		Revenue			Amount			%			Amount			Revenue			Amount		Revenue			Amount			%
Revenues:
Product sales	$	6,950			86.6	%	$	8,008		91.2	%	$	(1,058	)		(13.2%	)	$	27,800			87.0	%	$	26,494		91.3	%	$	1,306			4.9	%
Contract and other		1,078			13.4	%		774		8.8	%		304			39.3	%		4,156			13.0	%		2,535		8.7	%		1,621			63.9	%
Total revenues		8,028			100.0	%		8,782		100.0	%		(754	)		(8.6%	)		31,956			100.0	%		29,029		100.0	%		2,927			10.1	%

Cost of revenues		4,324			53.9	%		4,180		47.6	%		(144	)		(3.4%	)		16,229			50.8	%		13,946		48.0	%		(2,283	)		(16.4	%)
Gross Profit		3,704			46.1	%		4,602		52.4	%		(898	)		(19.5%	)		15,727			49.2	%		15,083		52.0	%		644			4.3	%

Operating expenses
Selling, general and administrative		3,331			41.5	%		2,822		32.1	%		(509	)		(18.0%	)		11,931			37.3	%		8,884		30.6	%		(3,047	)		(34.3	%)
Research and development		1,066			13.3	%		1,084		12.3	%		18			1.7	%		3,416			10.7	%		3,233		11.1	%		(183	)		(5.7	%)
Total operating expenses		4,397			54.8	%		3,906		44.5	%		(491	)		(12.6%	)		15,347			48.0	%		12,117		41.7	%		(3,230	)		(26.7	%)

(Loss) income from operations		(693	)		(8.6%	)		696		7.9	%		(1,389	)		(199.6%	)
Income from operations																			380			1.2	%		2,966		10.2	%		(2,586	)		(87.2	%)

Other income		69			0.9	%		96		1.1	%		(27	)		(28.1%	)		59			0.2	%		202		0.7	%		(143	)		(70.8	%)

(Loss) income before income taxes		(624	)		(7.8%	)		792		9.0	%		(1,416	)		(178.8%	)
Income tax (benefit) expense		(5	)		(0.1%	)		172		2.0	%		177			102.9	%
Income before income taxes																			439			1.4	%		3,168		10.9	%		(2,729	)		(86.1	%)
Income tax expense																			506			1.6	%		742		2.6	%		236			31.8	%
Net (loss) income	$	(619	)		(7.7%	)	$	620		7.1	%	$	(1,239	)		(199.8%	)	$	(67	)		(0.2	%)	$	2,426		8.4	%	$	(2,493	)		(102.8	%)

Net revenue
Hardware	$	7,389			92.0	%	$	8,362		95.2	%		(973	)		(11.6%	)	$	29,887			93.5	%	$	27,820		95.8	%	$	2,067			7.4	%
Software		639			8.0	%		420		4.8	%		219			52.1	%		2,069			6.5	%		1,209		4.2	%		860			71.1	%
Total net revenue	$	8,028			100.0	%	$	8,782		100.0	%	$	(754	)		(8.6%	)	$	31,956			100.0	%	$	29,029		100.0	%	$	2,927			10.1	%

Revenues

Revenues ~~decreased $754 or 8.6%,~~increased 10% for the nine-month period ended June 30, 2021, compared towith the same ~~quarter in the prior year. LRAD AHD revenues decreased $680 and integrated mass notification solutions decreased $293, while software revenue increased $219, compared to the~~ prior year ~~quarter. Lower revenue in the first quarter of fiscal 2021 was largely~~period primarily due to the ~~delay~~timing for delivery of ~~a ready-to-ship order because~~ the ~~customer-required payment was not received prior to~~backlog at September 30, 2020 compared with the ~~quarter end. This shipment subsequently was shipped early in~~September 30, 2019 backlog. AHD revenues were $28,288 for the ~~fiscal second quarter. Software~~current year nine-month period, up $2,789, or 11%, IMNS revenue was ~~higher primarily due to increased professional services performed on recent orders.~~$1,599, down $722, or 31%, and software revenue was $2,069, up $860, or 71%, compared with the same prior year period. The receipt of orders iswill often be uneven due to the timing of ~~government budgets~~approvals or ~~approvals. At December 31, 2020,~~budgets. As of June 30, 2021, we had aggregate deferred revenue of ~~$851~~$1,092 for extended warranty obligations and software support agreements.

Gross Profit

The ~~decrease~~increase in gross profit ~~compared to the same period~~ in the ~~prior year~~nine months ended June 30, 2021, was primarily due to higher sales volume. Gross profit as a percentage of revenue was lower ~~hardware revenue, an 86%~~compared to the prior year period primarily due to a 64% increase in ~~software~~ engineering personnel, ~~over last year and additional engineering charges resulting from a more precise process to charge engineering expenses to cost of sales in the current fiscal year.~~primarily software related. Higher software expenses were due ~~primarily~~ to the recent ~~addition~~additions of Amika Mobile (through our Canadian subsidiary Genasys Communications Canada), and Zonehaven, and additional employees to support the Australia, EU and enterprise software initiatives.

As our products have varying gross margins, product mix may affect gross profits. In addition, our margins vary based on the sales channels through which our products are sold in a given period. We continue to implement product updates and changes, including raw material and component changes that may impact product costs. WeWith such product updates and changes we have limited warranty cost experience ~~with product updates and changes~~ and estimated future warranty costs can impact our gross margins. We do not believe that historical gross profit margins should be relied upon as an indicator of future gross profit margins.

2533

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased ~~$509, or 18.0%, over~~$3,047 in the nine months ended June 30, 2021, compared with the prior year ~~quarter.~~period. The increase in selling, general and administrative expenses was ~~largely~~primarily due to a ~~50%~~60% increase in sales and marketing personnel over the prior year to support future business and revenue growth opportunities.

We incurred non-cash share-based compensation expenses allocated to selling, general and administrative expenses in the ~~three-months~~nine months ended ~~December 31,~~June 30, 2021, and 2020, of $904 and ~~2019 of $171 and $143,~~$738, respectively.

We may expend additional resources on the marketing and selling of our products in future periods as we identify ways to optimize potential ~~opportunities, including the June 2022 European Union Mandate for Public Warning Systems and the new enterprise software services from our recent business combination.~~opportunities. Commission expenses will fluctuate based on the nature of our sales.

Research and Development Expenses

Research and development expenses increased ~~$18, essentially unchanged~~$183. The higher costs were due to increases in engineering personnel and expending more engineering labor in support of development activities compared to the ~~same quarter in the~~ prior ~~year.~~year period.

Included in research and development expenses for the ~~three~~nine months ended ~~December 31,~~June 30, 2021, and 2020, were $28 and ~~2019, was $6 and $11, respectively,~~$22 of non-cash share-based compensation ~~costs.~~costs, respectively.

Research and development costs vary period to period due to the timing of projects, the amount of support provided on customer projects, and the timing and ~~extent~~use of ~~using~~ outside consulting, design and development firms. We continually improve our product offerings and we expect to continue to expand our product line with new products, customizations and enhancements. Based on current plans, we may expend additional resources on research and development in the current year compared to the prior year.

Net Loss/Income

Net loss inof $67 for the first ~~quarter~~nine months of fiscal year 2021, was ~~$619,~~ a decrease of ~~$1,239,~~$2,493 compared towith net income in the ~~first quarter of fiscal~~prior year ~~2020. The~~period. This decrease was primarily due to the ~~lower revenue and increased~~higher operating expenses, ~~resulting from additional engineering, sales and marketing employees.~~partially offset by the higher revenue, in the current year period.

Liquidity and Capital Resources

The Company’s financial condition and liquidity remain strong. Cash and cash equivalents ~~at December 31, 2020~~as of June 30, 2021, was ~~$19,584,~~$14,540, down ~~$3,735~~$8,779, compared towith $23,319 atas of September 30, ~~2020, primarily due to the Amika Mobile asset purchase.~~2020. We had short-term marketable securities of ~~$5,517 at December 31, 2020,~~$5,976 as of June 30, 2021, compared towith $4,265 atas of September 30, 2020. We had long-term marketable securities of ~~$2,419 at December 31, 2020,~~$2,297 as of June 30, 2021, compared towith $3,805 atas of September 30, 2020. In addition, we have a $10 million line of credit with MUFG bank. As of June 30, 2021, the Company had no outstanding balances against the line of credit. The credit agreement requires the Company to comply with various financial and operating covenants and as of June 30, 2021, the Company was in compliance with these covenants. Other than cash and cash equivalents, short and long-term marketable securities, other working capital, ~~and~~ expected future cash flows from operating activities in subsequent periods and the line of credit, we have no unused sources of liquidity at this time.

Although there is uncertainty related to the anticipated impact of the recent COVID-19 outbreak on the Company’s future results, we believe our efficient business model and strong balance sheet keep us positioned to manage our business through this crisis as it continues to unfold. We continue to manage all aspects of our business including, but not limited to, monitoring the financial health of our customers, suppliers and other third-party relationships and developing new opportunities for growth.

Principal factors that could affect our liquidity include:

• ability to meet sales projections;

• government spending levels;

• introduction of competing technologies;

• product mix and effect on margins;

• ability to reduce current inventory levels;

• product acceptance in new markets;

• value of shares repurchased; ~~and~~

• value of dividends ~~declared.~~declared;

• impact of COVID-19 on global market conditions; and

• impact of COVID-19 on customers’ ability to pay.

Principal factors that could affect our ability to obtain cash from external sources include:

• volatility in the capital markets; and

• market price and trading volume of our common stock.

Based on our current cash position, and assuming currently planned expenditures and level of operations, we believe we have sufficient capital to fund operations for the twelve-month period subsequent to the issuance of the interim financial information. However, we operate in a rapidly evolving and unpredictable business environment that may change the timing or amount of expected future cash receipts and expenditures. Accordingly, there can be no assurance that we may not be required to raise additional funds through the sale of equity or debt securities or from credit facilities. Additional capital, if needed, may not be available on satisfactory terms, or at all.

Cash Flows

Our cash flows from operating, investing and financing activities, as reflected in the condensed consolidated statements of cash flows, are summarized in the table below:

	Three months ended						Nine months ended
	December 31, 2020			December 31, 2019			June 30, 2021			June 30, 2020
Cash provided by (used in):
Operating activities	$	1,272		$	(1,781	)	$	8,314		$	3,711
Investing activities		(4,264	)		(137	)	$	(16,237	)	$	(2,425	)
Financing activities		54			144		$	(27	)	$	540

Operating Activities

Net loss of ~~$619~~$67 for the ~~three~~nine months ended ~~December 31, 2020~~June 30, 2021 was ~~increased~~offset by ~~$667~~$3,257 of ~~net~~ non-cash items that included depreciation and amortization, share-based compensation, operating ROU asset amortization, warranty provision, inventory obsolescence, ~~and~~ both realized and unrealized loss on a foreign currency forward ~~contract.~~contract, and a reduction to deferred income taxes. Cash ~~used~~provided by operating activities infor the ~~quarter~~current year reflected an increase of $1,134 in accounts payable, primarily for inventory ~~of $1,114 due to a fiscal first quarter customer order that was not shipped until the fiscal second quarter,~~related purchases, and a ~~net decrease of $314~~$5,988 increase in accrued and other liabilities, primarily ~~for payment of incentive compensation earned~~from a $7,410 increase in customer deposits resulting from increased hardware orders, received this fiscal year ~~2020,~~ offset by ~~increased customer deposits.~~a $630 reduction to accrued contract costs. Cash ~~provided by~~used in operating activities ~~included~~for the nine months ended June 30, 2021, reflected a ~~decrease~~$788 increase in ~~accounts receivable of $2,300 due to lower fiscal first quarter revenue compared to shipments~~inventory, a $636 increase in ~~the fourth quarter of fiscal year 2020, lower~~ prepaid ~~expenses~~expense, and ~~other of $120, and an~~a $574 increase in accounts ~~payable of $232.~~receivable.

Net income of ~~$620~~$2,426 for the ~~three~~nine months ended ~~December 31, 2019~~June 30, 2020, was increased by ~~$759~~$2,755 of non-cash items that included a reduction to deferred income taxes, share-based compensation, depreciation and amortization, warranty provision, amortization of operating right of use assets, and inventory obsolescence. Cash used byin operating activities ~~in the quarter~~as of June 30, 2020, reflected an increase in accounts receivable of ~~$2,286~~$2,722 due to higher sales with net credit terms in the quarter compared towith the fourth quarter of fiscal 2019 a decrease in payroll and related of $1,008, primarily for payment of incentive compensation earned in fiscal 2019, and lower accrued and other liabilities of $907, largely due to a decrease in customer deposits resulting from shipments in the quarter and an increase ~~of $321~~ in inventory of $1,667 to support the current backlog. Cash provided by operating activities included an increase in accounts payable of $2,040, primarily for inventory related purchases, a decrease in prepaid expenses and other of ~~$761,~~$732, and an increase in ~~accounts payable~~accrued liabilities of ~~$604.~~ $148.

We had accounts receivable of ~~$3,159 at December 31, 2020,~~$6,270 as of June 30, 2021, compared towith $5,442 at September 30, 2020. Terms with individual customers vary greatly. We regularly provide thirty-day terms to our customers if credit is approved. Our receivables can vary dramatically due to overall sales volume, quarterly variations in sales, timing of shipments to and receipts from large customers, payment terms and the timing of contract payments.

~~At December 31, 2020~~As of June 30, 2021, and September 30, 2020, our working capital was ~~$25,603~~$17,764 and $29,796, respectively. The decrease in working capital was primarily due to the use of cash to complete the Amika Mobile asset purchase and Zonehaven acquisition in the first ~~quarter~~and third quarters respectively of fiscal year 2021.

Investing Activities

Our net cash used in investing activities was ~~$4,264~~$16,237 for the ~~three~~nine months ended ~~December 31, 2020,~~June 30, 2021, compared towith cash used in investing activities of ~~$137~~$2,425 for the ~~three~~nine months ended ~~December 31, 2019.~~June 30, 2020. In the first ~~quarter~~nine months of fiscal 2021, ~~$4,367~~$15,848 was used for acquisitions. In the ~~Amika Mobile asset purchase. In addition,~~first nine months of fiscal 2021, we ~~decreased~~increased our holdings of short and long-term marketable securities by ~~$132,~~$208, compared towith an increase of ~~$51~~$2,314 in the ~~three~~nine months ended ~~December 31, 2019.~~June 30, 2020. Cash used in investing activities for the purchase of property and equipment was ~~$29~~$181 and ~~$86~~$111 for the ~~three~~nine months ended ~~December 31,~~June 30, 2021, and 2020, ~~and 2019,~~ respectively. We anticipate ~~some~~ additional expenditures for tooling and equipment during the balance of fiscal year 2021.

Financing Activities

In the ~~three~~nine months ended ~~December 31,~~June 30, 2021, we used $27 for financing activities, compared with $540 provided by financing activities for the nine months ended June 30, 2020. In the first nine months of fiscal 2021, we received $170 from the exercise of stock options, which was offset by $141 of cash used to settle statutory tax withholding requirements on behalf of our employees upon vesting of restricted stock awards. During the first nine months of fiscal 2020, proceeds from the exercise of stock options ~~provided $54 of cash, compared~~were $996 and we used $398 to ~~proceeds from stock options of $144 for the three months ended December 31, 2019.~~repurchase company common stock.

In December 2018, the Board of Directors approved a new share buyback program beginning January 1, 2019, under which the Company was authorized to repurchase up to $5 million of its outstanding common shares. During the ~~quarters~~quarter ended ~~December 31, 2020 and 2019~~June 30, 2021, no shares were repurchased. ~~At December 31,~~During the quarter ended June 30, 2020, no shares were repurchased. As of June 30, 2021, all repurchased shares were ~~retired and~~retired. As of June 30, 2021, $4.1 million was available for share repurchase under this program. In December 2020, the board extended this program’s expiration date to December 31, 2022.

Recent Accounting Pronouncements

New pronouncements issued for future implementation are discussed in Note 3, Recent Accounting Pronouncements, to our condensed consolidated financial statements.

Item3.Quantitative and Qualitative Disclosures about Market Risk.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures about Market Risk.~~

Foreign Currency Risk

We consider our direct exposure to foreign exchange rate fluctuations to be minimal. The transactions of our Spanish subsidiary are denominated primarily in Euros and the transactions of our Canadian subsidiary are denominated primarily in Canadian dollars, which is a natural hedge against foreign currency fluctuations. Currency translation gains and losses are primarily related to our Spanish and Canadian subsidiaries, whereby assets and liabilities are translated from the respective functional currency into U.S. dollars using period-end exchange rates, which impacts other comprehensive income.

All other sales to customers and all arrangements with third-party manufacturers, with one exception, provide for pricing and payment in U.S. dollars, and, therefore, are not subject to exchange rate fluctuations. Increases in the value of the U.S. dollar relative to other currencies could make our products more expensive, which could negatively impact our ability to compete. Conversely, decreases in the value of the U.S. dollar relative to other currencies could result in our suppliers raising their prices to continue doing business with us. Fluctuations in currency exchange rates could affect our business in the future.

~~Item~~

Item4.Controls and Procedures.

~~Controls and Procedures.~~

We are required to maintain disclosure controls and procedures designed to ensure that material information related to us, including our consolidated subsidiaries, is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of our disclosure controls and procedures as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~December 31, 2020.~~June 30, 2021.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during our fiscal quarter ended ~~December 31, 2020,~~June 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Our process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies which may be identified during this process.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PART II. OTHER INFORMATION

Item 1.Legal Proceedings.

~~Legal Proceedings.~~

We may at times be involved in litigation in the ordinary course of business. We will also, from time to time, when appropriate in management’s estimation, record adequate reserves in our consolidated financial statements for pending litigation. Currently, there are no pending material legal proceedings to which the Company is a party or to which any of its property is subject.

~~Item 1A.~~

~~Risk Factors.~~

As a Smaller Reporting Company as defined by Rule 12b-2 of the Exchange Act and in item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this item.

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds.~~

~~None.~~

~~Item 3. Defaults Upon Senior Securities.~~

~~None.~~

~~Item 4.~~

~~Mine Safety Disclosures.~~

~~Not Applicable.~~

2836

~~Item 5.~~

Item1A.Risk Factors.

There have been no material changes to the risk factors described under Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2020, filed with the SEC on December 10, 2020, except for those noted below:

Supply chain disruptions. The COVID-19 pandemic has adversely impacted worldwide supply chains and the ability to obtain sufficient amounts of component parts, including semiconductor chips and integrated circuits, resins, coating and other equipment and components. Negative impacts on our supply change could have a material adverse effect on our business.

Reference rate reform. Borrowings under our credit facility with MUFG Union Bank, N.A. will bear an interest rate based on certain tenors of the London interbank offered rate (“LIBOR”) plus a credit spread. In July 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that, after 2021, it will stop compelling banks to submit rates for the calculation of LIBOR. The discontinuation, reform, or replacement of LIBOR could result in interest rate increases, which could adversely affect our cash flows and operating results.

Zonehaven acquisition. Our ability to recognize the expected synergies and other benefits of the Zonehaven acquisition, difficulties in integrating Zonehaven post-closing, diversion of management time addressing post-closing transaction-related issues, uncertainties related to litigation involving the acquisition of Zonehaven, uncertainties related to unanticipated integration costs or undisclosed liabilities assumed, uncertainties related to the acceptance of the Zonehaven acquisition and its products by third parties.

Item2.Unregistered Sales of Equity Securities and Use of Proceeds.

~~Other Information.~~

None.

~~Item 6.~~

Item3.Defaults Upon Senior Securities.

None.

Item4.Mine Safety Disclosures.

Not Applicable.

Item5.Other Information.

None.

Item6.Exhibits.

~~10.1~~2.1	~~Asset Purchase~~ Agreement and Plan of Merger dated as of ~~August 9, 2020, by and~~June 7, 2021, among Genasys ~~Inc, Genasys Communications Canada ULC, Amika Mobile Corporation, 12232618 Canada Ltd. And each of the other signatories set forth~~Inc., ZH Acquisition I Inc., ZH Acquisition II Inc., Zonehaven Inc., and Charles Crocker in his capacity as Seller Representative. Incorporated by reference to Exhibit 2.1 to Current Report on the signature pages thereto.*Form 8-K filed on June 10, 2021.

31.1	Certification of Richard S. Danforth, Principal Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2	Certification of Dennis D. Klahn, Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Richard S. Danforth, Principal Executive Officer and Dennis D. Klahn, Principal Financial Officer.*

101.INS	Inline XBRL Instance Document* Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH	Inline XBRL Taxonomy Extension Schema Document*

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document*

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document*

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document*

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document*

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed concurrently ~~herewith.~~herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GENASYS INC.

Date: ~~February 10,~~July 28, 2021	By:	/s/ Dennis D. Klahn
		Dennis D. Klahn,, ChiefFinancialOfficer
		(Principal Financial Officer)

Delaware	87-0361799
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

16~~262~~16262 West Bernardo Drive,, San Diego, California	92127
(Address of principal executive offices)	(Zip Code)

Title of each class	Trading Symbol(s)	Name of each ~~class~~exchange on which securities are registered
Common stock, $0.00001 par value per share	~~Trading Symbol(s)~~GNSS	~~Name of each exchange on which securities are registered~~NASDAQ Capital Market
~~Common stock, $0.00001 par value per share~~

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

Emerging growth company ☐		☐

	Three months ended						Nine months ended
	December 31,						June 30,
	2020			2019			2021			2020
Operating Activities:
Net (loss) income	$	(619	)	$	620		$	(67	)	$	2,426

Adjustments to reconcile net income to net cash provided by operating activities
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		281			209			953			620
Amortization of debt issuance costs								7			0
Warranty provision		15			(19	)		44			2
Inventory obsolescence		100			94			315			168
Share-based compensation		182			158			956			776
Realized loss on foreign currency forward contract		(48	)		-			(48	)		0
Unrealized loss on foreign currency forward contract		(28	)		-			(28	)		0
Deferred income taxes		(5	)		172			506			742
Amortization of operating lease right of use assets		170			145
Amortization of operating lease right of use asset								518			446
Accretion of acquisition holdback liability								34			0

Changes in operating assets and liabilities:
Accounts receivable, net		2,300			(2,286	)		(574	)		(2,722	)
Inventories, net		(1,114	)		(321	)		(788	)		(1,667	)
Prepaid expenses and other		120			761			(636	)		732
Accounts payable		232			604			1,134			2,040
Accrued and other liabilities		(314	)		(1,918	)		5,988			148
Net cash provided by (used in) operating activities		1,272			(1,781	)
Net cash provided by operating activities								8,314			3,711

Investing Activities:
Purchases of marketable securities		(1,793	)		(640	)		(4,457	)		(5,497	)
Proceeds from maturities of marketable securities		1,925			589			4,249			3,183
Purchase of Amika Mobile		(4,367	)		-
Cash paid for acquisitions net of cash acquired								(15,848	)		0
Capital expenditures		(29	)		(86	)		(181	)		(111	)
Net cash used in investing activities		(4,264	)		(137	)		(16,237	)		(2,425	)

Financing Activities:
Proceeds from exercise of stock options		54			144			170			996
Net cash provided by financing activities		54			144
Repurchase of common stock								0			(398	)
Shares retained for payment of taxes in connection with settlement of restricted stock units								(141	)		(41	)
Payments on promissory notes								(18	)		(17	)
Cash paid for debt issuance costs								(38	)		0
Net cash (used in) provided by financing activities								(27	)		540
Effect of foreign exchange rate on cash		1			14			(18	)		(9	)
Net decrease in cash, cash equivalents, and restricted cash		(2,937	)		(1,760	)
Net (decrease) increase in cash, cash equivalents, and restricted cash								(7,968	)		1,817
Cash, cash equivalents and restricted cash, beginning of period		23,996			19,517			23,996			19,517
Cash, cash equivalents and restricted cash, end of period	$	21,059		$	17,757		$	16,028		$	21,334

		-			-
Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets:
Reconciliation of cash, cash equivalents and restricted cash to the consolidated
balance sheets:
Cash and cash equivalents	$	19,584		$	17,092		$	14,540		$	20,668
Restricted cash, current portion		295			270			286			271
Long-term restricted cash		1,180			395			1,202			395
Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows	$	21,059		$	17,757		$	16,028		$	21,334

	Nine months ended June 30,
	2021			2020
Noncash investing and financing activities:
Change in unrealized loss on marketable securities	$	(6	)	$	(3	)
Common stock issued in connection with the purchase of Zonehaven	$	(10,938	)	$	0
Obligation to issue common stock in connection with the Amika Mobile asset purchase	$	(2,703	)	$	0
Initial measurement of operating lease right of use assets	$	259		$	5,824
Initial measurement of operating lease liabilities	$	259		$	7,815

Business combinations accounted for as a purchase
Fair value of net assets acquired	$	30,980		$	0

Cash paid (net of cash acquired of $644)	$	11,481
Common stock issued		10,938
Shareholder representative reserve payable		150
	$	22,569

Assets acquired
Accounts receivable	$	255
Deferred tax asset		106
Intangible assets		10,100
Goodwill		15,403
Total assets acquired	$	25,864

Liabilities assumed
Accounts payable	$	194
Accrued liabilities		372
Deferred tax liability		2,729
Total liabilities assumed		3,295
Net assets acquired	$	22,569

	Fair Value		Estimated Useful Lives (in years)
Developed Technology	$	8,800		7
Trade Names		400		5
Customer Relationships		900		5
	$	10,100

Cash paid	$	4,367
Asset purchase holdback liability		613
Common stock to be issued		3,431
	$	8,411

Assets Acquired
Assets acquired
Prepaid expenses	$	2	$	2
Fixed assets		22		22
Operating lease right of use asset		248		248
Intangible Assets		2,820
Intangible assets				2,820
Goodwill		5,663		5,590
Total assets acquired	$	8,755	$	8,682

Liabilities assumed
Accrued liabilities	$	96	$	23
Operating lease liability		248		248
Total liabilities assumed		344		271
Net Assets acquired	$	8,411
Net assets acquired			$	8,411

	Fair Value		Useful Lives (in years)		Fair Value		Estimated Useful Lives (in years)
Developed technology	$	2,500		7	$	2,500		7
Customer relationships		320		7		320		7
	$	2,820			$	2,820

	Customer deposits			Deferred revenue			Total contract liabilities			Customer deposits			Deferred revenue			Total contract liabilities
Balance at September 30, 2020	$	3,683		$	1,024		$	4,707		$	3,683		$	1,024		$	4,707
New performance obligations		3,476			245			3,721			13,821			1,176			14,997
Recognition of revenue as a result of satisfying performance obligations		(2,221	)		(439	)		(2,660	)		(6,411	)		(1,124	)		(7,535	)
Effect of exchange rate on deferred revenue		-			21			21			0			16			16
Balance at December 31, 2020	$	4,938		$	851		$	5,789
Balance at June 30, 2021										$	11,093		$	1,092		$	12,185
Less: non-current portion		-			(275	)		(275	)		(1,654	)		(344	)		(1,998	)
Current portion at December 31, 2020	$	4,938		$	576		$	5,514
Current portion at June 30, 2021										$	9,439		$	748		$	10,187

	June 30, 2021
	Cost Basis		Unrealized Gain		Fair Value		Cash Equivalents		Short-term Securities		Long-term Securities
Level 1:
Money Market Funds	$	208	$	0	$	208	$	208	$	0	$	0

Level 2:
Certificates of deposit		1,193		0		1,193		0		469		724
Municipal securities		5,879		2		5,881		0		4,451		1,430
Corporate bonds		1,199		0		1,199		0		1,056		143
Subtotal		8,271		2		8,273		0		5,976		2,297

Total	$	8,479	$	2	$	8,481	$	208	$	5,976	$	2,297

	Carrying Value		Level 1		Level 2		Level 3		Gain/ (Loss)
Goodwill from Zonehaven acquisition	$	15,403	$	0	$	0	$	15,403	$	0
Intangible assets from Zonehaven acquisition	$	9,974	$	0	$	0	$	9,974	$	0
Goodwill from Amika Mobile asset purchase	$	6,001	$	0	$	0	$	6,001	$	0
Intangibles from Amika Mobile asset purchase	$	2,703	$	0	$	0	$	2,703	$	0
Operating lease ROU asset from Amika Mobile asset purchase	$	259	$	0	$	0	$	259	$	0

	Operating ROU assets
Operating lease ROU asset at September 30, 2020	$	5,285
Additional operating lease ROU assets		248
Less amortization of operating lease ROU assets		(170	)
Effect of exchange rate on operating lease ROU assets		21
Operating lease ROU asset at December 31, 2020	$	5,384

	Revenue from External Customers		Intersegment Revenues		Operating Income			Depreciation and amortization expense		Income Tax Benefit
Hardware	$	7,389			$	160		$	90	$	(5	)
Software		639		351		(853	)		191
	$	8,028	$	351	$	(693	)	$	281	$	(5	)

	Long-lived assets		Total Assets
Hardware	$	1,863	$	56,021
Software		12,265		14,582
	$	14,128	$	70,603