UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 20212022

or

☐         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto.

Commission File Number: 000-24248

GENASYS INC.

(Exact name of registrant as specified in its charter)

(858) 676-1112

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   ☒   Yes     ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes  ☒    No

The number of shares of Common Stock, $0.00001 par value, outstanding on May 11, 20215, 2022 was 33,849,566.36,578,085.

1. OPERATIONS

Genasys Inc. (formerly LRAD® Corporation), a Delaware corporation (the “Company”), is engaged in the design, developmenta global provider of critical communications hardware and commercializationsoftware systems designed to alert, inform, and protect. The Company's unified platform receives information from a wide variety of directedsensors and multidirectional sound technologies, voice broadcast products,Internet-of-Things (IoT) inputs to collect real-time information on developing and location-based mass messaging solutions foractive emergency warningsituations. The Company uses this information to create and workforce management. The principal markets for the Company’s proprietary sound reproduction technologies, voice broadcast productsdisseminate alerts, warnings, notifications, and mass messaging solutions are in Northinstructions through multiple channels before, during, and South America, Europe, the Middle Eastafter public safety and Asia. On October 23, 2019, the Company announced its rebrandingenterprise threats, critical events, and began doing business as Genasys Inc.other crisis situations.

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

General

The Company’s unaudited interim condensed consolidated financial statements included herein have been prepared in accordance with the instructions to Form 10-Q10-Q and Article 8 of Regulation S-XS-X and the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In management’s opinion, the accompanying financial statements reflect adjustments necessary to present fairly the financial position, results of operations, and cash flows for those periods indicated, and contain adequate disclosure to make the information presented not misleading. Adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the footnotes. The condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended September 30, 20202021, included in the Company’s Annual Report on Form 10-K,10-K, as filed with the SEC on December 10, 2020. November 23, 2021. The accompanying condensed consolidated balance sheet at as of September 30, 2020 2021 has been derived from the audited consolidated balance sheet at as of September 30, 2020 2021 contained in the above referenced Form 10-K.10-K. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.

Principles of Consolidationconsolidation

The Company has seveneight wholly owned subsidiaries, Genasys II Spain, S.A.US.A.U. (“Genasys Spain”), Genasys Communications Canada ULC (“Genasys Canada”), Genasys Singapore PTE Ltd, Genasys Puerto Rico, LLC, Zonehaven LLC, and Genasys Inc. (branch) in the United Arab Emirates and two currently inactive subsidiaries, Genasys America de CV and LRAD International Corporation. The condensed consolidated financial statements include the accounts of these subsidiaries after elimination of intercompany transactions and accounts.

Cash, cash equivalents and restricted cash

The Company considers all highly liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. As of March 31, 2021, 2022, the amount of cash and cash equivalents was $18,455.$8,977. As of September 30, 2020, 2021, the amount of cash and cash equivalents was $23,319.$13,167.

The Company considers any amounts pledged as collateral or otherwise restricted for use in current operations to be restricted cash. In addition, the Company excludes from cash and cash equivalents cash required to fund specific future contractual obligations related to business combinations. Restricted cash is classified as a current asset unless amounts are not expected to be released and available for use in operations within one year. As of March 31, 2021, 2022, the current portion of restricted cash was $282$267, and the noncurrent portion was $1,190.$1,096. As of September 30, 2020, 2021, the current portion of restricted cash was $282$279, and the noncurrent portion was $395.$1,082.

Immaterial Correction of Prior Period Financial Statements

During the quarter ended December 31, 2020, Company management identified an immaterial error in the previously issued September 30, 2020 consolidated balance sheet. This error resulted in an overstatement of prepaid expenses and accrued liabilities of $5,205 related to a foreign currency forward contract which was presented on a gross basis rather than on a net basis. There was no impact to the consolidated statement of operations or the consolidated statement of cash flows as of September 30, 2020, as a result of this misstatement. Further, there was no impact to the condensed consolidated financial statements as of, and for the six months ended March 31, 2021, as the forward contract was settled during the first quarter of fiscal 2021.  SEC Staff Accounting Bulletin: No. 99 – Materiality and No. 108 – Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements were used by management to evaluate the impact of the misstatement. Management concluded that this misstatement had no material impact on either the accompanying condensed consolidated balance sheet as of March 31, 2021 or the previously issued consolidated balance sheet as of September 30, 2020, and therefore the misstatement was corrected in the accompanying condensed consolidated balance sheet as of September 30, 2020. All financial information contained in the accompanying notes to these condensed consolidated financial statements has been revised to reflect the correction of this error.

Reclassifications

Where necessary, thecertain prior year’s information has been reclassified to conform to the current year presentation.

(in thousands, except per share and share amounts)

(Unaudited)

3. RECENT ACCOUNTING PRONOUNCEMENTS

New pronouncements pending adoption

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13,2016-13, Measurement of Credit Losses on Financial Instruments, which supersedes current guidance by requiring recognition of credit losses when it is probable that a loss has been incurred. The new standard requires the establishment of an allowance for estimated credit losses on financial assets including trade and other receivables at each reporting date. The new standard will result in earlier recognition of allowances for losses on trade and other receivables and other contractual rights to receive cash. In November 2019, the FASB issued ASU No. 2019-10,2019-10, Financial Instruments – Credit Losses (Topic 326)(ASC 326), Derivatives and Hedging (Topic 815)(ASC 815) and Leases (Topic 842)(ASC 842), which extends the effective date of Topic ASC 326 for certain companies until fiscal years beginning after December 15, 2022. The new standard will be effective for the Company in the first quarter of its fiscal year beginning October 1, 2023, and early adoption is permitted. The Company has not completed its review of the impact of this standard on its consolidated financial statements. However, based on the Company’s history of immaterial credit losses from trade receivables, managementthe Company does not expect that the adoption of this standard will have a material effect on the Company’s consolidated financial statements.

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

In March 2020, the FASB issued ASU No. 2020-04,2020-04, Reference Rate Reform (Topic 848)(ASC 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU No. 2020-042020-04 provides optional guidance, expedients and exceptions for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this update apply to all entities, subject to meeting the criteria, which participate in contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU No. 2020-042020-04 was subsequently amended by ASU No. 2021-01,2021-01, Reference Rate Reform (Topic(ASC 848)848), Scope, which refines the scope of Topic ASC 848 and permits optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships. The amendments of these updates are available to all entities as of March 12, 2020 through December 31, 2022. The Company has not yet adopted these amendments.intends to adopt this standard when LIBOR is discontinued. The Company’s managementCompany does not expect that the adoption of this standard will have a material effect on the Company’s consolidated financial statements.

New pronouncements adopted4. REVENUE RECOGNITON

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which improves fair value disclosure requirements by removing disclosures that are not cost beneficial, clarifying disclosures’ specific requirements and adding relevant disclosure requirements. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The new guidance is effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted ASU No. 2018-13 on October 1, 2020, with no impact to the condensed consolidated financial statements.

On October 2, 2020, the Company completed the purchase of the assets of Amika Mobile Corporation (“Amika Mobile”) pursuant to an Asset Purchase Agreement. Amika Mobile is a leading provider of integrated emergency critical communications based in Ottawa, Canada. The Company believes the Amika Mobile asset purchase will expand the Company’s enterprise software solutions and enhance the Company’s unified multi-channel critical communications platform.

The Amika Mobile asset purchase was accounted for as a business combination using the acquisition method pursuant to ASC Topic 805. As the acquirer for accounting purposes, the Company has estimated the purchase consideration, assets acquired and liabilities assumed as of the acquisition date, with the excess of the purchase consideration over the fair value of net assets acquired recognized as goodwill. The estimated fair value of assets purchased and liabilities assumed in certain cases may be subject to revision based on the final determination of fair value.

The consideration consisted of the following:

(in thousands, except per share and share amounts)

(Unaudited)

Under the terms of the Asset Purchase Agreement, the Company is 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 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. The cash portion of the purchase price was funded from cash on hand.

The Company incurred $264 in expenses related to this transaction through March 31, 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.

Purchase Price Allocation

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 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 820 three-tier fair value hierarchy.

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.

The Company adopted the guidance in Topic 606 on October 1, 2018. The Company adopted the new standard using the full retrospective approach.

Topic 606 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most revenue recognition guidance, including industry-specific guidance. This new revenue recognition model provides a five-stepfive-step analysis in determining when and how revenue is recognized:

(in thousands, except per share and share amounts)

(Unaudited)

Topic ASC 606 requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the consideration a company expects to receive in exchange for those goods or services.

The Company derives its revenue from the sale of products to customers, contracts, software license fees, other services and freight. The Company sells its products through its direct sales force and through authorized resellers and system integrators. The Company recognizes revenue for goods including software when all the significant risks and rewards have been transferred to the customer, no continuing managerial involvement usually associated with ownership of the goods is retained, no effective control over the goods sold is retained, the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transactions will flow to the Company and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Software license revenue, maintenance and/or software development service fees may be bundled in one arrangement or may be sold separately.

Product Revenuerevenue

Product revenue is recognized as a distinct single performance obligation when products are tendered to a carrier for delivery, which represents the point in time that the Company’s customer obtains control of the products. A smaller portion of product revenue is recognized when the customer receives delivery of the products. A portion of products are sold through resellers and system integrators based on firm commitments from an end user, and as a result, resellers and system integrators carry little or no inventory. The Company’s customers do not have a right to return product unless the product is found defective and therefore the Company’s estimate for returns has historically been insignificant

Perpetual licensed software

The sale and/or license of software products is deemed to have occurred when a customer either has taken possession of, or has the ability to take immediate possession of the software and the software key. Perpetual software licenses can include one-yearone-year maintenance and support services. In addition, the Company sells maintenance services on a stand-alone basis and is therefore capable of determining their fair value. On this basis, the amount of the embedded maintenance is separated from the fee for the perpetual license and is recognized on a straight-line basis over the period to which the maintenance relates.

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

Time-based licensed software

The time-based license agreements include the use of a software license for a fixed term, generally one-year,one-year, and maintenance and support services during the same period. The Company does not sell time-based licenses without maintenance and support services and therefore revenues for the entire arrangements are recognized on a straight-line basis over the term.

Warranty, maintenance and services

The Company offers extended warranty, maintenance and other services. Extended warranty and maintenance contracts are offered with terms ranging from one to several years, which provide repair and maintenance services after expiration of the original one-yearone-year warranty term. Revenues from separately priced extended warranty and maintenance contracts are recognized based on time elapsed over the service period and classified as contract and other revenues. Revenue from other services such as training or installation is recognized when the service is completed.

Multiple element arrangements

The Company has entered into a number of multiple element arrangements, such as the sale of a product or perpetual licenses that may include maintenance and support (included in the price of perpetual licenses) and time-based licenses (that include embedded maintenance and support, both of which may be sold with software development services, training, and other product sales). In some cases, the Company delivers software development services bundled with the sale of the software. In multiple element arrangements, the Company uses either the stand-alone selling price or an expected cost plus margin approach to determine the fair value of each element within the arrangement, including software and software-related services such as maintenance and support. In general, elements in such arrangements are also sold on a stand-alone basis and stand-alone selling prices are available.

Revenue is allocated to each deliverable based on the relative stand-alone selling pricefair value of each individual element and is recognized when the revenue recognition criteria described above are met, except for time-based licenses which are not unbundled. When software development services are performed and are considered essential to the functionality of the software, the Company recognizes revenue from the software development services on a stage of completion basis, and the revenue from the software when the related development services have been completed.

(in thousands, except per share and share amounts)

(Unaudited)

The Company disaggregates revenue by reporting segment (Hardware and Software) and geographically to depict the nature of revenue in a manner consistent with the Company’sits business operations and to be consistent with other communications and public filings. Refer to Note 19,18, Segment Information and Note 20,19, Major Customers, Suppliers and Related Information for additional details of revenues by reporting segment and disaggregation of revenue.

Contract Assetsassets and Liabilitiesliabilities

The Company enters into contracts to sell products and provide services and recognizes contract assets and liabilities that arise from these transactions. The Company recognizes revenue and corresponding accounts receivable according to Topic ASC 606 and, at times, recognizes revenue in advance of the time when contracts give the Company the right to invoice a customer. Sales commissions are considered incremental and recoverable costs of obtaining a contract with a customer. Subscription related commission costs are deferred and then amortized on a straight-line basis over the period of benefit. The Company may also receive consideration, per terms of a contract, from customers prior to transferring goods to the customer. The Company records customer deposits as a contract liability. Additionally, the Company may receive payments, most typically for service and warranty contracts, at the onset of the contract and before the services have been performed. In such instances, a deferred revenue liability is recorded. The Company recognizes these contract liabilities as revenue after all revenue recognition criteria are met. The table below showsreflects the balancebalances of contract assets and liabilities as of March 31, 2021 2022 and September 30, 2020, 2021, including the change between the periods. There were 0 contract assets as of March 31, 2022 and September 30, 2021. The current portion of contract liabilities and the non-current portion are included in “Accrued liabilities” and “Other liabilities, noncurrent”, respectively, on the accompanying Condensed Consolidated Balance Sheets.condensed consolidated balance sheets. Refer to Note 11,10, Accrued and Other Liabilities for additional details.

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

The Company’s contract liabilities were as follows:

Remaining Performance Obligationsperformance obligations

Remaining performance obligations related to Topic ASC 606 represent the aggregate transaction price allocated to performance obligations under an original contract with a term greater than one year, which are fully or partially unsatisfied at the end of the period.

As of March 31, 2021, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $4,003.$7,029. The Company expects to recognize revenue on approximately $3,789$6,722 or 95%96% of the remaining performance obligations over the next 12 months, and the remainder is expected to be recognized thereafter.

Practical Expedientsexpedients 

In cases where the Company is responsible for shipping after the customer has obtained control of the goods, the Company has elected to treat these activities as fulfillment activities rather than as a separate performance obligation. Additionally, the Company has elected to capitalize the cost to obtain a contract only if the period of amortization would be longer than one year. The Company only gives consideration to whether a customer agreement has a financing component if the period of time between transfer of goods and services and customer payment is greater than one year. The Company also utilizes the “as invoiced” practical expedient in certain cases where performance obligations are satisfied over time and the invoiced amount corresponds directly with the value the Company is providing to the customer.

The Company’s financial instruments consist principally of cash equivalents, short and long-term marketable securities, accounts receivable, and accounts payable. The fair value of a financial instrument is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:

(in thousands, except per share and share amounts)

(Unaudited)

The fair value of the Company’s cash equivalents and marketable securities waswere determined based on Level 1 and Level 2 inputs. The Company did not have any marketable securities invaluation techniques used to measure the Level 3 category asfair value of March 31, 2021the “Level 2” instruments were based on quoted market prices or September 30, 2020.model-driven valuations using significant inputs derived from or corroborated by observable market data. The Company believes that the recorded values of its other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations. The Company did not have any marketable securities in the Level 3 category as of March 31, 2022 or September 30, 2021. There have been no changes in Level 1, Level 2, and Level 3 and no changes in valuation techniques for financial instruments measured at fair value on a recurring basis for the periods ended March 31, 2022 and September 30, 2021.

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

Instruments Measuredmeasured at Fair Valuefair value on a Recurring Basisrecurring basis

Cash equivalents and marketable securities: The following tables present the Company’s cash equivalents and marketable securities’ costs, gross unrealized gains and losses, and fair value by major security type recorded as cash equivalents or short-term or long-term marketable securities as of March 31, 2021 2022 and September 30, 2020. 2021. Unrealized gains and losses from the remeasurement of marketable securities are recorded in accumulated other comprehensive income (loss) until recognized in earnings upon the sale or maturity of the security.

Foreign currency forward contractInstruments measured at fair value on a non-recurring basis

Nonfinancial assets: In August 2020,Nonfinancial assets such as goodwill, other intangible assets, long-lived assets held and used, and right-of-use (“ROU”) assets are measured at fair value when there is an indicator of impairment and recorded at fair value only when impairment is recognized or for a business combination. 

Goodwill and intangible assets are recognized at fair value during the period in which an acquisition is completed, from updated estimates during the measurement period, or when they are considered to be impaired. These non-recurring fair value measurements, primarily for intangible assets acquired, were based on Level 3 inputs. The Company entered into a foreign currency forward contract as an economic hedge against exposure to changes in the Canadian dollar in connection with the Amika Mobile asset purchase. At September 30, 2020, the notional value of the foreign currency forward contract was CAD$6,955 with a maturity date in October 2020. The foreign currency forward contract was classified under Level 2 ofestimates the fair value hierarchy. of these long-lived assets on a non-recurring basis based on a market valuation approach, engaging independent valuation experts to assist in the determination of fair value.

The valuation techniques usedfollowing table presents nonfinancial assets that were subject to measure the fair value were based on quoted market prices. On October 1, 2020,measurement during thesix months ended March 31, 2022. Certain intangible assets, operating lease ROU assets and goodwill are subject to foreign currency forward contract was settledtranslation adjustments. There were no business combinations or indicators of impairment for CAD$6,955 (USD$5,281), resulting in a realized loss of $48 on the contract that was recorded in earnings as other income (expense). The foreign currency forward contract liability was recorded in accrued liabilities in the consolidated balance sheet as of September 30, 2020.six months ended March 31, 2022.

Genasys Inc.

7.6. INVENTORIES, NET

Inventories, net consisted of the following:

8.7. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:

Depreciation expense was $101$102 and $132$101 for the three months ended March 31, 2021 2022 and 2020, respectively. Depreciation expense was2021, respectively, and $199 and $200 and $266 for the six months ended March 31, 2021 2022 and 2020,2021, respectively.

9.8. GOODWILL AND INTANGIBLE ASSETS

Goodwill is attributable to the acquisitionacquisitions of Genasys Spain and 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 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.

There were no additions to goodwill during the six months ended March 31, 2022. During the six monthsyear ended March 31,September 30, 2021, the Company added $5,590a total of $21,128 in goodwill related to the Zonehaven acquisition and the Amika Mobile asset purchase. As of March 31, 2022 and September 30, 2021, goodwill was $23,830 and $23,834, respectively. There were no0 impairments to goodwill during the six months ended March 31, 2021.2022.

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

The changes in the carrying amount of goodwill by segment for the six months ended March 31, 2022, were as follows:

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 increasea decrease of $4.$125. Intangible assets and goodwill related to Amika Mobile are translated from Canadian dollars to U.S. dollars at the balance sheet date. During the six months ended March 31, 2021, the Company added $2,820 in intangible assets related to the Amika Mobile asset purchase. The net impact of foreign currency exchange differences arising during the period related to goodwill and intangible assets was an increase of $474. $135.

The changes in the carrying amount of intangible assets by segment for the six months ended March 31, 2022, were as follows:

The Company’s consolidated intangible assets consisted of the following:

As of March 31, 2022, future amortization expense is as follows:

Amortization expense was $541 and $169 for the three months ended March 31, 2022 and 2021, respectively, and $1,083 and $352 for the six months ended March 31, 2022 and 2021, respectively.

Genasys Inc.

10.9. PREPAID EXPENSES AND OTHER

Prepaid expenses and other current assets consisted of the following:

Deposits for inventory

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

Prepaid 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 consistconsisted 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.

Prepaid professional services

Prepaid professional services consisted of payments made in advance for services such as accounting and legal services.

Prepaid commissions

Prepaid commissions represented the current portion of sales commissions paid in connection with obtaining a contract with a customer. These costs are deferred and are amortized on a straight-line basis over the period of benefit, which is typically between three and five years. Amortization of prepaid commissions is included in selling, general and administrative expenses in the accompanying condensed consolidated statement of operations.

Trade shows and travel

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

Genasys Inc.

11.10. ACCRUED AND OTHER LIABILITIES

Accrued liabilities consisted of the following:

Other liabilities-noncurrent consisted of the following: 

Payroll and related

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

Deferred Revenuerevenue

Deferred revenue as of March 31, 2021 2022, included prepayments from customers for services, including extended warranty, scheduled to be performed in the twelve months ending March 31, 2022.2023.

Customer Depositsdeposits

Customer deposits represent amounts paid by customers as a down payment on hardware orders to be delivered duringin the next twelve months. months ending March 31, 2023.

Accrued contract costs

Accrued contract costs consistconsisted of accrued expenses for contracting a third-partythird-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.

Warranty Reservereserve

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

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.

12.11. DEBT

In connection with the acquisition of Genasys Spain the Company assumedacquired 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 March 31, 2021. 2022. 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 March 31, 2021 2022 are as follows:

The following is a schedulechanges in the carrying amount of future annual payments as of debt for the six months ended March 31, 2021:2022, are as follows:

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 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 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 March 31, 2023. As of March 31, 2021, 2022, there were no0 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 were recorded in prepaid expenses and other assets in the condensed consolidated balance sheet and have and will be amortized on a straight-line basis over the term of the loan.

13.12. LEASES

The Company determines if an arrangement is a lease at inception. The guidance in Topic ASC 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 lease 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.

Genasys Inc.