PART I

Forward Looking Statements

This Annual Report on Form 10-K contains forward-looking statements relating to future events or the future performance of our company. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “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. Such statements are predictions and actual events or results may differ materially. In evaluating such statements, you should specifically consider various factors identified in this report, including the matters set forth below in “Item 1A. Risk Factors” of this Annual Report on Form 10-K, which could cause actual results to differ materially from those indicated by such forward-looking statements.

For purposes of this Annual Report, the terms “we,” “us,” “our”“Genasys” and the “Company”“Company” refer to LRAD Corporationd/b/a Genasys Inc (the “Company” or “Genasys”) and its consolidated subsidiary.subsidiaries.

Overview

On October 23, 2019, LRAD Corporation developsannounced it was rebranding as Genasys Inc. Genasys is a global provider of critical communications solutions designed to help keep people safe.  Our unified platform provides a multi-channel approach to deliver alerts, notifications, instructions and deliversinformation before, during and after public safety threats, critical events and other crisis situations.

Our multi-channel approach includes:

We have a history of successfully delivering innovative directedsystems and solutions, pioneering the acoustic productshailing device (“AHD”) market with the introduction of our first LRAD AHD in 2003, creating the first multidirectional public safety mass notification systems that beam, focusproject sirens and control soundaudible voice messages with industry-leading vocal clarity and area coverage in 2012, and recently revolutionizing the mass notification industry with the only unified platform that combines audible, highly intelligible voice broadcast systems and digital, CCaaS software mobile mass messaging solutions.

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

Technology and Products 

Our LRAD systems are a technological breakthrough in broadcasting audible, highly intelligible voice messages and tones over relatively shortlong distances and long distances.high ambient noise using minimal power. By placing soundbroadcasting audible voice messages with exceptional vocal clarity and only where needed, we not only enhance many typical speaker applications, but we offer novel sound applications that conventional speakersbullhorns, loudspeakers, public address and emergency warning systems cannot achieve. We have developed a broad product line of directional LRAD^® products using our proprietary technologies. Over the years, we redesigned and enhanced our directional LRAD products, improving quality and functionality. In 2012, using the technology that we developed for our directional speakers, we designed and developed a new line of omnidirectional LRAD ONE VOICE^® speakers. Unlike our directional products, which have a narrow 15 to 30 degree beam of sound, the omnidirectional line offers products that project sound from 60 to 360 degrees to meet the needs of the global mass notification marketplace. We now offer a variety of directional and omnidirectional sound products which meet a broad range of requirements from communicating with and deterring threats over distances up to 600 meters with our hand-held LRAD 100X to distances up to 5,500 meters with our LRAD 2000X. Our Long Range Acoustic Device^® or LRAD pioneered a new worldwide market for directional long-range acoustic hailing devices (“AHDs”) which we have sold into over 70 countries. We have been at the forefront developing new acoustic innovations and we believe we have established a significant competitive advantage in our principal markets.

Technology and Products

Our LRAD products represent a technological breakthrough that creates a directed acoustic beam using minimal power to communicate at operational ranges with authority and superior intelligibility even in high ambient noise environments. Our LRAD waswere initially developed for the U.S. Navy to fulfillfill a capability gap identified after the October 2000 attack on the USS Cole attack in 2000 and has beenCole. LRAD systems are deployed by the U.S. Army, Navy, Air Force, Marine Corps, National Guard and Coast Guard, as well as international military services, and commercial maritime, public safety and commercial security and public safety organizations around the globe since early 2003. Over the years, weorganizations. We have redesigned and enhanced our LRAD products, includingAHDs with improved voice intelligibility, output and durability. The rugged construction of our systems enables us to meet stringent military specifications. Our LRAD hailing, notificationAHDs are designed to enable users to safely hail and warning systems feature a 15 to 30 degree acoustic beamwarn, inform and a broadcast range up to 5,500 meters. Our LRAD systems also feature a rugged construction that allows our products to meet the stringent environmental requirements of military applications. Our LRAD systems broadcast highly-intelligible voice communications, prerecorded messages in multiple languages and warning tones todirect, prevent misunderstandings, determine intent, establish large safety zones, allowing operators more timeresolve uncertain situations, and distance to determine the intent, influence the behavior and gain compliance from approaching vessels, vehicles or personnel.save lives.

Our LRAD AHD product line provides a complete range of systemssolutions from single userhandheld, portable devices to permanently installed, remotely operated units. In recent years, we have addedsystems. We continue to add new models to meet specific customer requirements and to enable us to expand our technology into new markets. We have also added newvarious features such asand accessories, including wireless capability, recordablerecord on-the-fly microphones, integrated and remote electronics packages, and various amplifier configurations.amplifiers. 

In 2012, utilizingBuilding on the success of our advanced speaker technology developed for our directed products,LRAD AHDs, we designed and developed an omnidirectional speaker, the LRAD 360X.our multidirectional mass notification product line. Unlike most of the masssiren based installations, our public safety notification systems currently on the market, which are primarilybroadcast both emergency warning sirens our mass notification products provide the sameand highly intelligible voice clarity asmessages with uniform 60° - 360° coverage over local and wide areas. We believe our ability to shape the rest of the LRAD product line. The LRAD 360X is designedbroadcast coverage area, our industry-leading speech intelligibility, and our multiple system activation and control options enable us to transmit highly intelligible voice communications and warnings over a 360-degree area, unlike the more directional LRAD products. Since the initial product launch, we have expanded our omnidirectional product line to include various size offerings, a 60-degree unit, a mobile unit mounted on a trailer, and various configurations of amplifiers, power sources, software and other products to meet the needs of the mass notification market. We expect this expanded product line will make us more competitivesuccessfully compete in the large and growing mass notification market.

In 2014, we introduced the LRAD 450XL, which uses new, patent pending XL speaker technology and is designed to be the most powerful acoustic hailing device in the market today for its size and weight. In 2015, we introduced the LRAD 500RX, which is engineered and designed on our proprietary pan and tilt system and is a lighter, more compact version of our successful LRAD 1000RX. In 2016, we launched the LRAD RXL which combines the new patent pending speaker technology of our LRAD 450XL with the remotely operated pan and tilt system of our LRAD 500RX. We continue to enhance our acoustic communication technologies and product lines to provide a complete range of systems and accessories. Our patented XL driver technology, which generates higher audio output in a smaller and lighter form factor, is being incorporated into our LRAD AHD and mass notifications systems. To date, we have incorporated our XL driver technology into the LRAD 450XL, LRAD 1950XL, LRAD 950RXL, LRAD DS-60XL, LRAD 360XL, and LRAD 360XL-MID. We are enhancing our system design and manufacturing capabilities to improve the durability and performance of our units.products. Our LRAD productssystems have been competitively selected over other commercially available systems by the U.S. Department of Defense and several foreignnumerous international militaries. Our LRAD product line currently includes the following:

Our product lines include the following: 

LRAD Systems 

LRAD Directional Products:Acoustic Hailing Devices (AHDs):

We continue to buildaugment our directionalLRAD AHD product line by using our proprietary technology through the development ofto develop louder, more powerfullonger distance systems in smaller form factors, as well as incorporating customer and market-specific enhancements.

LRAD Omnidirectional Products:Public Safety Mass Notification (“PSMN”) Systems:

We continueOur PSMN voice broadcast systems feature exceptional speech intelligibility and the largest area coverage. The system can be installed independently of existing infrastructure with battery operation, Internet Protocol or satellite connectivity and with AC/Solar power charging systems. The battery capacity follows industry guidelines. Solar power and satellite connectivity options designed to develop additionalensure system operation when existing power or communication infrastructure fail. Our voice broadcast systems also have battery backup designed to power 48 hours of continuous operation.

CCaaS (Critical Communications as a Service) Software:

Using our cloud-based mobile mass messaging software, we developed our proprietary CCaaS – Critical Communications as a Service – software that integrates geolocation-targeted mobile mass messaging with command and control functionality to activate and operate our PSMN voice broadcast systems. Our CCaaS software is designed to deliver multi-channel, geolocation-targeted alerts, warnings, notifications and information to only the individuals in or entering crisis affected areas.

Integrated Solutions:

By integrating our industry-leading LRAD products to expandwith our omnidirectional product offering to meetCCaaS software, we created the needs ofonly platform that unifies highly intelligible voice broadcast systems and mobile mass messaging solutions for the growing globalpublic safety, emergency warning and mass notification market.

Strategymarkets. Our CCaaS software platform is designed to integrate with external inputs and sensors that provide platform operators the critical data they need to make informed decisions on when and where to deliver location-based audible and digital alerts and warnings.

We believe we have been instrumentalthe integration of mass messaging solutions, our enhanced software capabilities, our highly intelligible LRAD voice broadcasting systems and our platform’s compatibility with major emergency warning protocols, including FEMA’s IPAWS, Wireless Emergency Alerts (“WEA”) and others, significantly augment our existing product offerings and provide us with substantial business growth opportunities in developingnew markets.

Strategy 

The proliferation of natural disasters, crisis situations and civil disturbances 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 CCaaS software, Genasys seeks to deliver a reliable, fast and intuitive solution for sending location-based audible voice communications and geolocation-targeted messages and texts to mobile devices to help keep the public and employees safe.

Genasys has developed a global market and increasingan increased demand for AHDs in a number of business segmentsLRAD systems and markets.revolutionary public safety notification solutions. We believe we have a strong brand in this market and a reputation for producing quality products.products that feature industry-leading broadcast area coverage, 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 platform provides opportunities to succeed in the large and growing public safety, emergency warning and mass notification markets. We arealso plan to expand and strengthen domestic and international sales channels by adding key mass notification partners, distributors, and dealers.

We plan to continue building on our AHD leadership position in the field of directed or focused sound for both short-range and long-range communication with high quality, clarity and intelligibility. Our overall strategy is to offer an increasing variety ofby offering enhanced directional and omnidirectional soundmultidirectional voice broadcast systems and other productsaccessories for an increasingexpanding range of applications. In executing our strategy, we use direct sales to governments, military,militaries, large end-users, and system integrators and defense-related companies, and weintegrators. We have built a worldwide distribution channel consisting of partners and resellers that have significant expertise and experience selling integrated communicationscommunication solutions into our various target markets. SinceAs our primary AHD sales opportunities are with militariesdomestic and governments,international government, military and law enforcement agencies, we are subject to each customer’s unique budget cycle, which leads to extremely long selling cycles and uneven revenue flow, complicating our product planning.

In 2017,fiscal 2020, we planintend to continue pursuing global marketto pursue domestic and international business opportunities with the support of new business development consultants, added in late 2015key representatives and 2016, and additional planned market specific consultants for fiscal year 2017. Ourresellers. We plan is to grow revenueour revenues through increased direct sales to domestic and international militaries and large commercial and defense-related companies whothat desire to useintegrate our directed sound technology incommunication technologies into their integrated product offerings. This includes a continued strong effortbuilding on fiscal 2019 domestic defense sales by pursuing further U.S. military opportunities. We also plan to pursue U.S. military opportunities where we have seen improvement in the past year. Our focus will be primarily onmass notification, government, military, law enforcement, fire rescue, homeland and international security, private and commercial security, border security, maritime security, and wildlife preservation and control markets. Asia has been a strong market for our products in recent years, but declined in fiscal 2016 due to the timing of programs. We plan to continue to pursue these programs and others in the region to increase revenues. We also plan to focus efforts in Europe and the Middle East where we believe there is a significant opportunity for growth. While we have been developing these markets for several years, we have only begun to realize the significant potential in these worldwide marketbusiness opportunities.

We plan to continue expanding our presence and increase our market share in the global mass notification market. We entered the large mass notification market with the introduction of the LRAD 360X omnidirectional product. We have designed and developed a complimentary omnidirectional product line to increase our presence in this global market. We intend to continue expanding our product and system offerings and obtain qualifying certificates to allow access to more markets around the world. While this is a more mature marketplace with established manufacturers and suppliers, we believe that our superior technology and product and system offerings give us an opportunity to penetrate and succeed in this large, expanding market. We also plan to continue our focus on expanding and strengthening domestic and international sales channels by adding key channel partners, distributors and dealers that focus on the mass notification market.

Our research and development strategy is to continue developing innovative directed acousticinnovating voice broadcast systems and accessories, and mobile alert solutions to meet the needs of our target markets, as well as to continue to expand our omnidirectional offerings to include a more comprehensive, integrated solution.markets. Our enhanced, patent pending speaker technology introduced in 2014 was designed to provide almost twice the output of our current speakers in a significantly smaller and lighter weight form factor, with the same, highly-intelligible clarity of our original speakers. This technology was initially launched in our LRAD 450XL system and then utilized in our LRAD RXL system in fiscal year 2016. We plan to continue to incorporate this technology into additional products in the future. We continue to expand our omnidirectionalPSMN product line to include new speakersincludes emitters and speaker arrays in different sizes, as well as various configurations of amplifiers, mounts, power sources, and software. We developed and patented our XL driver technology, which generates higher audio output in smaller, lighter form factors. We have begun to pursueincorporated our XL driver technology into the LRAD 450XL, LRAD 1950XL, LRAD 950RXL, LRAD DS-60XL, LRAD 360XL, and LRAD 360XL-MID. Our LRAD PSMN systems and CCaaS software represent more complex, integrated offerings. We are pursuing certain certifications, which are often required when bidding on militarygovernment and mass notification opportunities. We intend to invest engineering resources to enhance our PSMN systems and CCaaS software to compete for larger mass notification business opportunities. We are also configuring alternative solutions to achieve lower price points to meet the needs of certain customers or applications. We also engage in ongoing value engineering to reduce the cost and simplify the manufacturing of our products. Our mass notification products represent a much more complex, integrated offering. We plan to continue investing engineering resources and capital to develop products and software to further expand our omnidirectional product line.

We intend to continue operating with financial discipline in order to create value for our shareholders. We are focused on growing our top line revenue by successfully entering new markets and expanding our market share in the global mass notification market, which we believe will translate into increased net profit growth by successfully entering into new markets and expanding our market share in the mass notification market.growth.

Manufacturing and Suppliers

Manufacturing. We believe maintaining quality manufacturing capacity is essential to the performance of our products and the growth of our business. Our technologies are different from mass producedmass-produced designs, and our manufacturing and assembly involves unique processes and materials. We contract with third partythird-party suppliers to produce various components and sub-assemblies. At the end of fiscal year 2018, the Company moved to a new facility with expanded engineering and manufacturing capacity to support current and expected business growth. In our San Diego, California facility, we complete the final assembly, test and ship our products for both commercial and government systems.products. We have refined our internal processes to improve how we design, test, and qualify product designs.products. We continue to implement rigorous manufacturing and quality processes to track production and field failures. We also perform third partythird-party testing and certification of our products to ensure that they meet rigorous military and commercial specifications. We have developed custom manufacturing equipment used to automate the production of key sub-assemblies reducing the labor component and permitting higher volume production. We implement design and component changes periodically to reduce our product costs and improve product reliability and manufacturability.

Suppliers. Our products haveWe minimize inventories and maximize the efficiency of our supply chain by having a large number of components and sub-assemblies produced by outside suppliers mostly located within 50 miles of our facilityfacility. The Company relies on one supplier for compression drivers for its LRAD products and is making efforts to take advantage of flexible turnaround, minimize inventoriesobtain alternative suppliers to reduce such reliance. The Company’s ability to manufacture its LRAD products could be adversely affected if it were to lose this sole source supplier and was unable to maximize the efficiency of our supply chain.find an alternative supplier. We also purchase a number ofseveral key components and sub-assemblies from foreign suppliers. Consequently, we are subject to the impact economic conditions can have on such suppliers and the fluctuations of foreign currency exchange rates, which could impact our lead times and product cost.costs. We have developed strong relationships with a number of our key suppliers. If these suppliers should experience quality problems or part shortages, our production schedules could be significantly delayed or our costs significantly increased.

Sales and Marketing

We market and sell products and services through our sales force based in California, Colorado, Minnesota,Florida, Wisconsin, and Spain as well as through full-time business consultants in Texas, Germany and Wisconsin.Thailand. Our corporate and administrative offices are located in San Diego, California.

We sell directly to governments, military,militaries, large end-users, and defense-related companies. We use independent representatives on a commission basis to assist us in our direct sales efforts. We also use a channel distribution model, in which we sell our products directly to independent resellers and system integrators around the world, who then sell our products (or our products integrated with other systems) to end-user customers. We are focusing our internal business development resources on building relationships with defense integrators and other large direct customers. In addition, we utilize several part-time consultants with expertise in various areas of U.S. government and defense sectors to advise us inon procedures and budget processesbudgetary policies in an effort to be successful in these areas.

We have established a global reputation for providing high quality, innovative soundvoice broadcast systems and mobile alert solutions that hashave made Genasys and LRAD an internationally recognized product brand.brands. We actively promote our brands and our products through our website, trade shows, and advertising, and weadvertising. We intend to continue increasingincrease the use of our trademarks throughout our product distribution chain and believe growing brand awareness will assist in expanding our business. We believe our reputation for technological expertise, experienced personnel,quality products, and strong service and support will also keepprovide us competitive.competitive advantages.

Customer Concentration

For the fiscal year ended September 30, 2016,2019, we did not have anyhad two customers accounting for 37% and 10% of revenues, with no other single customer accounting for more than 10% of revenues. For the fiscal year ended September 30, 2015, revenues from2018, we had one customer accountedaccounting for 15%20% of revenues, with no other single customer accounting for more than 10% of revenues.

Our revenues to date have relied on a few major customers. The loss of any customer could have a materially adverse effect on our financial condition, results of operations and cash flows. We have made progress diversifying sound technologyour revenues and expect to continue to do so in future periods.

Backlog

Our order backlog for products that are deliverable in the next 12 months was approximately $3,065,597$27,014,253 at September 30, 2016,2019, compared to $4,451,016$23,646,910 at September 30, 2015.2018. The amount of backlog at any point in time is dependent upon scheduled delivery dates to our customers and product lead times. Our backlog orders are supported by firm purchase orders.

Warranties

We generally warrant our products to be free from defects in materialsmaterial and workmanship defects for a period up to one year from the date of purchase. The warranty is generally a limited warranty, and in some instances imposes certain shipping costs on the customer. We generally provide direct warranty service, but at times we may establish warranty service through third parties. Our international warranties are generally similar to the warranties we offer in the U.S.

We also provide repair and maintenance agreements and extended warranty contracts at market rates, with terms ranging from one year to several years, as an additional source of revenue and to provide increased customer satisfaction.

Competition

Our technologies and products compete with those of other companies. The commercialCommercial and government audio industry markets are fragmented and include numerous manufacturers with audio products that vary widely in price, quality, and distribution channels. Many of our presentPresent and potential future competitors have, or may have, substantially greater resources to devote to product development. We believe we compete primarily on the originality of our products, the uniqueness of our technology and designs, and our responsiveness to customers and ourthe ability to meet their needs and, most importantly,needs. We believe the quality, ruggednessdurability, and superior performance of our products, which have been developed by incorporating feedback from our customers, and our desire to provide the highest quality product to our markets.products, also provide us competitive advantages.

Our directional LRAD products areAHD product line features the leading acoustic hailing and warning products in the market todayvoice broadcast systems for military and commercial applications. The broad category of government audio industry speakers includesOur AHD competitors such asinclude Ultra Electronics Electronics/USSI, IML Sound Commander, and others. We do not believe these competitors have achieved significant global market penetration in the government or commercial directed hailing marketsAHD market to date. We believe our LRAD AHD product line has demonstrated acceptance, and has performed extremely well in harsh environments, and can continue to compete on the basis of technical features, performance, ease of use, quality and cost. As we continue to grow this market, future competitors with greater resources may enter, with new technologies and capabilities, which could impact our competitiveness.

WithIn the introduction of the omnidirectional LRAD products, we entered the more mature and established mass notification market, which has a number of largewe compete against several domestic and international competitors, including Federal Signal Corporation,Everbridge, OnSolve, Whelen Engineering Company Inc., Siemens AG, Acoustic Technology, Inc., Eaton Corporation,Hoermann, and others. In additionWe believe our ability to powerful warning tonesoffer a reliable, fast and sirens,intuitive solution for sending location-based SMS, text, email and social media messages to mobile devices in defined geographic areas and providing the omnidirectional LRAD products provideonly platform that unifies voice broadcast and digital, CCaaS software gives us significant competitive advantages against these established organizations. Further advantages include our ability to shape the same vocal clarity,broadcast coverage area from 60° - 360°, our industry-leading voice broadcast intelligibility, and quality over long distances as our directed LRAD products.multiple system activation and control options, including satellite, TCP/IP, fiber, Wi-Fi, digital or analog radio, Ethernet or hard wire. We believe the highly intelligible voiceour platform’s ease of our omnidirectional products gives us aintegration with external sensors and inputs, and compatibility with major emergency warning protocols also provide competitive advantage against these larger organizations.advantages. We believe the domestic and international markets for public safety, emergency warning and mass notification systems are substantial and growing.

Seasonality

Government business tends to be seasonal due to government procurement and budget cycles, with the quarter ending September 30, which coincides with the United States government budget year, usually producing relatively higher sales, and the quarter ending December 31, usually producing relatively lower sales. International budget years vary by country. SinceBecause our sales are primarily to governments, governmentaldomestic and international government departments or agencies, our selling cycles tend to be long and difficult to forecast. We have not experienced any significant seasonality trends to date, but we may experience increased seasonality in the future.

Government Regulation

We are subject to a variety of government laws and regulations that apply to companies engaged in international operations, including, among others, the Foreign Corrupt Practices Act, U.S. Department of Commerce export controls, local government regulations and procurement policies and practices (including regulations relating to import-export control, investments, exchange controls and repatriation of earnings). We maintain controls and procedures to comply with laws and regulations associated with our international operations. If we are unable to remain compliant with such laws and regulations, our business may be adversely affected.

Our products are produced to comply with standard product safety requirements for sale in the United StatesU.S. and similar requirements for sale in Europe and Canada. We expect to meet the electrical and other regulatory requirements for electronic systems or components we sell throughout the world.

Financial Information about Segments and Geographic Areas

Financial information regarding our segments and the geographic areas in which we operate is contained in Note 15,17, Segment Information, and Note 18, Major Customers, Suppliers Segment and Related Information to our consolidated financial statements.

Intellectual Property Rights and Proprietary Information

We operate in an industry where innovation, investment in new ideas, and protection of resulting intellectual property rights are important drivers of success. We rely on a variety of intellectual property protections for our products and technologies, including patent, trademark and trade secret laws, and contractual obligations, and weobligations. We pursue a policy of vigorously enforcing suchour intellectual property rights.

In addition to such factors as innovation, technological expertise, and experienced personnel, we believe that a strong product offeringofferings that isare continually upgraded and enhanced will keep us competitive, and we will seek patent protection on important technological improvements that we make. We have an ongoing policy of filing patent applications to seek protection for novel features of our products and technologies. Prior to the filing and granting of patents, our policy is to disclose key features to patent counsel and maintain these features as trade secrets prior to product introduction. Patent applications may not result in issued patents covering all-important claims and could be denied in their entirety. We also file for trade name and trademark protection when appropriate. We are the owner of federally registered trademarks, including LRAD^®, LONG RANGE ACOUSTIC DEVICE^®, LRAD-X^®, LRAD-RX^®, and SOUNDSABER^®, ONE VOICE^®,and have filed for registration. Many of SOUND SHIELD^TM, many of whichour registered trademarks have earned worldwide brand recognition.

Our policy is to enter into nondisclosure agreements with each employee and consultant or third party to whom any of our proprietary information is disclosed. These agreements prohibit the disclosure of confidential information to others, both during and subsequent to employment, or the duration of the working relationship. These agreements may not prevent disclosure of confidential information or provide adequate remedies for any breach.

Research and Development

The sound reproduction market isand software markets are subject to rapid changes in technology and design with frequent improvements and new product introductions, as well as customized solutions for specific customer applications. We believe our future success will depend on our ability to enhance and improve existing technologies and to introduce new technologies and products on a competitive basis that meet the needs of our customers. Accordingly, we are continuing to engage in significant research and new product development activities.

For the fiscal years ended September 30, 20162019 and 2015,2018, we spent approximately $2.4$4.5 million and $2.0$3.5 million, respectively, on company-sponsored research and development. Future levels of research and development expenditures will vary depending on the timing of further new product development and the availability of funds to carry on additional research and development on currently owned technologies or in other areas.

Executive Officers

The current executive officers of LRAD Corporation and their ages and business experience are set forth below.

Richard S. Danforth,, age 56,60, was appointed Chief Executive Officer in August 2016. Mr. Danforth formed the strategic business consulting firm, RsD Aero, Ltd., in 2014, which provided consulting services for the Defense, Aerospace, Space and Transportation sectors, with an emphasis on M&A and Transatlantic trade.He served at DRS Technologies as Group President of DRS Integrated Defense Systems & Service (2013 – 2014); Chief Executive Officer, President and Board Member of DRS Defense Solutions (2008 – 2012); President, Command Control & Communication (2005 – 2008); President, Navy Electronics & Intelligence Systems (2004 – 2005); and Executive Vice President, Electronics Systems Group (2002 – 2004). He began his career at Raytheon in 1982 and held various manufacturing, quality assurance and program manager positions until 1996. Mr. Danforth was then appointed Vice President of Operations for Raytheon Aircraft Company (1996 – 2000). In 2000, he was named Senior Vice President of Raytheon Aircraft Company’s Commercial Aircraft Business division, where he led a staff of 370 sales, marketing and customer service staff.personnel. Mr. Danforth holds a Bachelor of Science in Industrial Technology from the University of Massachusetts Lowell and a Masters in Engineering Management from Western New England College.

Katherine H. McDermott,Dennis D. Klahn, age 56,61, was appointed as Controller/Interim Chief AccountingFinancial Officer in June 2007August 2017 and was promoted to Chief Financial Officer in September 2007. Ms. McDermott2017. Mr. Klahn has more than 30 years of accounting, finance and operations experience, which includes serving as Controller or CFO at publicly traded companies. He was most recently a Group Controller at Teledyne RD Instruments, a subsidiary of Teledyne Technologies Incorporated, between 2011 and August 2017. Prior to that role, he served as the Chief Financial Officer for National Pen Company from 2005 to 2006Controller or CFO at several companies including, ISE Corporation, Overland Storage, Inc., Anacomp, Inc., and the vice president of finance for Lantronix,International Lottery & Totalizator Systems, Inc., Mr. Klahn began his career as a publicly traded technology company, from 2000 to 2005. Ms. McDermott held a variety of senior financial positions with BauschStaff Accountant at Coopers & Lomb from 1988 to 1999 and began her career holding a number of financial positions with a component division of General Motors from 1982 to 1988. Ms. McDermott holds a Bachelor of ArtsLybrand after receiving his B.A. in Business AdministrationAccounting from St. Bonaventure University and a Masters of Business Administration from the William E. Simon School of Business Administration at the University of Rochester.Ambrose University.

Executive officers serve at the discretion of the board of directors.

Employees

At September 30, 2016,2019, we employed a total of 4683 people. Of such employees, 1223 were in research and development, 1631 were in production, quality assurance and materials control, 813 were in general and administrative and 1016 were in sales and marketing. We contract technical and production personnel from time to time on an as needed basis and use outside consultants for various services. In addition, we have an extensive worldwide network of independent representatives and resellers who actively market and sell our product.products. We have not experienced any work stoppages, and are not a party to a collective bargaining agreement and we consider our relations with our employees to be favorable.

Available Information

Our shares of common stock trade on the NASDAQ Capital Market under the symbol “LRAD.”“GNSS”. Our address is 16990 Goldentop Road, Ste. A,16262 West Bernardo Drive, San Diego, California, 92127, our telephone number is 858-676-1112, and our website is located at www.lradx.com.www.genasys.com. We make available, free of charge through our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, reports filed by our directors, executive officers and certain significant shareholders pursuant to Section 16 of the Securities Exchange Act, and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934, as soon as reasonably practical after the reports are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). The information on our website is not incorporated by reference into this report nor is it part of this report.

An investment in our company involves a high degree of risk. In addition to the other information included in this report, you should carefully consider the following risk factors in evaluating an investment in our company. You should consider these matters in conjunction with the other information included or incorporated by reference in this report. Our results of operations or financial condition could be seriously harmed, and the trading price of our common stock may decline due to any of these or other risks.

General economic and political conditions may adversely affect our business, operating results and financial condition

Our operations and performance depend significantly on worldwide economic and political conditions and their impact on levels of capital investment and government spending. Global economic and political uncertainties and foreign currency rate fluctuations could adversely influence demand for our products leading to reduced levels of investments, reductions in government spending and budgets and changes in spending priorities and behavior. We could also be adversely affected by the negative impact on economic growth resulting from federal income tax increases and continued U.S. government spending restrictions that have been occurring during recent years.

We may need additional capital for growth.

We may need additional capital to support our growth. While we expect to generate these funds from operations, we may not be able to do so. Principal factors that could affect the availability of our internally generated funds include:

Should we require additional funds, general market conditions or the then-current market price of our common stock may not support capital raising transactions and any such financing may require advance approval of our stockholders under the rules of the NASDAQ Stock Market. Our ability to obtain financing may be further constrained by prevailing economic conditions. We may be required to reduce costs, including the scaling back of research and development into new products, which could have a negative impact on our ability to compete and to innovate. If we raise additional funds by selling additional shares of our capital stock or securities convertible into or exercisable for common stock (assuming we are able to obtain additional financing), the ownership interest of our stockholders will be diluted, which could have a material negative impact on the market value of our common stock.

We have historically had a high concentration of revenues from a limited number of customers. We expect to continue to be dependent on a limited number of customers.

In fiscal year 2016,2019, we did not have anyhad two customers that accounted for 37% and 10% of revenues, respectively, and no other customers accounted for more than 10% of revenues, which shows improved diversification of our customer base.revenues. Historically, our revenues have been dependent upon a limited number of customers and we expect that we will continue to have some significant customers in future years. We do not have long-term purchase commitments with these or other significant customers, and our customers have the right to cease doing business with us at any time. Military contracts that we have been awarded have terms of indefinite delivery/indefinite quantity during the term of the contract, so there are no guaranteed purchases onunder these contracts. No assurance can be given that these or other customers will continue to do business with us or that they will maintain their historical levels of business. If our relationship with any material customer were to cease, then our revenues would decline and negatively impact our results of operations. Any such decline could result in us increasing our accumulated deficit and a need to raise additional capital to fund our operations. If our expectations regarding future sales are inaccurate, we may be unable to reduce costs in a timely manner to adjust for sales shortfalls.

Disruption and fluctuations in financial and currency markets could have a negative effect on our business.

Financial markets in the United States,U.S., Europe and Asia have experienced extreme volatility and uncertainty in recent years. Governments have taken unprecedented actions intended to address these market conditions. It is difficult to assess the extent to which these conditions have impacted our business, and the affect this has had on certain of our customers and suppliers. These economic developments affect businesses such as ours in a number of ways. The tightening of credit in financial markets adversely affects the ability of commercial customers to finance purchases and operations and could result in a decrease in orders and spending for our products as well as create supplier disruptions. Reductions in tax revenues, rating downgrades and other economic developments could also reduce future government spending on our products. There can be no assurance that there will not be a further volatility and uncertainty in financial markets, which can then lead to challenges in the operation of our business. We are unable to predict the likely effects that negative economic conditions will have on our business and financial condition.

We purchase a number of key components and sub-assemblies from foreign suppliers. Consequently, we are subject to the impact economic conditions can have on such suppliers and fluctuations in foreign currency exchange rates. Increases in our cost of purchasing these items could negatively impact our financial results if we are not able to pass these increased costs on to our customers.

We have current government contracts and our future growth is dependent, in large part, on continued sales to U.S. and international governments and businesses that sell to governments.

In fiscal year 2016,2019, direct and indirect sales to the U.S. government accounted for approximately 31%65% of our total net sales, compared to 20%49% of our total net sales in fiscal year 20152018 and 16%15% in fiscal year 2014. Sales to international governments and police agencies have increased in recent years, including a large $17.6 million product and multi-year maintenance order, of which $12.1 million in product was delivered in March 2011, and a $4.0 million product shipment to a government in the Middle East in April 2014.2017. Changes in defense spending could have an adverse effect on our current and future revenues. Sales of our products to U.S. government agencies and organizations are subject to the overall U.S. government budget and congressional appropriation decisions and processes which are driven by numerous factors, including geo-political events and macroeconomic conditions, and are beyond our control. Reduced U.S. Department of Defense spending in recent years, including sequestration spending cuts, could affect future U.S. Department of Defense military initiatives and homeland security spending. Even awards granted such as our $7.4 million contract from the U.S. Navy awarded in March 2016, may not haveresult in orders issued against it due to spending constraints. Similar issues apply to sales to international governments. We have no assurance that military interest in communication devices to minimize unnecessary force will continue or will provide future growth opportunities for our business.

We must expand our customer base in order to grow our business.

To grow our business, in addition to continuing to obtain additional orders from our existing customers, we must develop relationships with new customers and obtain and fulfill orders from new customers. We are competing against a number of large competitors in the mass notification market, and we need to establish our omnidirectional productsproduct offerings as a viable competitorcompetitors in this market to allow us to win awards against these competitors, increase our customer base and gain market share. We cannot guarantee that we will be able to increase our customer base. Further, even if we do obtain new customers, we cannot guarantee that those customers will purchase from us enough quantities of our product or at product prices that will enable us to recover our costs in acquiring those customers and fulfilling those orders. Whether we will be able to sell more of our products will depend on a number of factors, including:

We may not be able to successfully integrate acquisitions in the future, and we may not be able to realize anticipated cost savings, revenue enhancements, or other synergies from such acquisitions.

Our ability to successfully implement our business plan and achieve targeted financial results and other benefits including, among other things, greater market presence and development, and enhancements to our product portfolio and customer base, is dependent on our ability to successfully identify, consummate and integrate acquisitions. We may not realize the intended benefits of acquisitions as rapidly as, or to the extent, anticipated by our management. There can be no assurance that we will be able to successfully integrate acquired businesses, products or technologies without substantial expenses, delays or other operational or financial problems. Acquisitions involve a number of risks, some or all which could have a material adverse effect on our acquired businesses, products or technologies. Furthermore, there can be no assurance that any acquired business, product, or technology will be profitable or achieve anticipated revenues and income. Our failure to manage our acquisition and integration strategy successfully could have a material adverse effect on our business, results of operations and financial condition. The process of integrating an acquired business involves risks, including but not limited to:

Failure to successfully integrate an acquired business in the future may result in reduced levels of anticipated revenue, earnings, or operating efficiency than might have been achieved if we had not acquired such businesses.

In addition, the acquisition of any future businesses could result in the incurrence of additional debt and related interest expense, contingent liabilities, and amortization expenses related to intangible assets, which could have a material adverse effect on our financial condition, operating results, and cash flow.

The growth of our LRAD product revenues is dependent on continued acceptance of our products by government, military and developing force protection and emergency response agencies. If these agencies do not purchase our LRAD products, our revenues will be adversely affected.

Although our LRAD products are designed for use by both government and commercial customers, the government market represents a significant revenue opportunity for our products. Revenues from government agencies, including military, force protection and emergency response agencies, fluctuate each year depending on available funding and demand from our government customers. While acceptance of our products has been increasing, there are many more prospective customers within this market that could provide future growth for us, as well as international government markets which often follow the lead of the U.S. Furthermore, the force protection and emergency response market is itself an emerging market that is changing rapidly. If our LRAD products are not widely accepted by the government, military and the developing force protection and emergency response markets, we may not be able to identify other markets, and we may fail to achieve our sales projections.

Perceptions that long-range hailing devices are unsafe or may be used in an abusive manner may hurt sales of our LRAD products, which could cause our revenues to decline.

Potential customers for our LRAD products, including government, military and force protection and emergency response agencies, may be influenced by claims or perceptions that long-range hailing devices are unsafe or may be used in an abusive manner. These claims or perceptions, while unsubstantiated, could reduce our product sales.

A significant portion of our revenue is derived from our core product category.

We are dependent on our core directional product category to generate our revenues. While we have expanded our product offering to include omnidirectional products, no assurance can be given that our core directional products will continue to have market acceptance or that they will maintain their historical levels of sales. The loss or reduction of sales of this product category could have a material adverse effect on our business, results of operations, financial condition and liquidity.

We may not be successful in penetrating the mass notification market.

We launched our first omnidirectional speaker in 2012, and have subsequently expanded our offering of omnidirectional products intended to increase LRAD sales in the mass notification market. The mass notification market is substantial in size and is projecting growth over the next five years to help provide public safety and communication during natural disasters and emergency situations. There are a number of large, credible companies already established in this market. We believe the clear, intelligible voice capability of our LRADPSMN products, and our unique design and durability make our product offerings very competitive in this market. We have added selling resources to focus on this market and we have invested and plan to invest additional resources in tooling and software development to become successful in this market. However, we are a smaller company enteringcompeting in a market with established competitors that have greater resources and presence in this global market.

Our margins could be impacted as we expand into the mass notification market.

Our sales strategy for fiscal year 20172020 and beyond is to increase our market share of the growing mass notification market with our omnidirectional products.LRAD voice broadcast systems, CCaaS software and integrated solutions. A number of large companies compete in this market and dominate the market share. We believe we have a strong product platform that can successfully compete against these larger players, but we expect to confront pricing pressures, given this highly competitive environment, which may negatively impact our overall margins.

We may incur significant and unpredictable warranty costs.

Our products are substantially different from proven, mass produced sound transducer designs and are often employed in harsh environments. We may incur substantial and unpredictable warranty costs from post-production product or component failures. We generally warrant our products to be free from defects in materials and workmanship for a period up to one year from the date of purchase. We also sell extended repair and maintenance contracts with terms ranging from one to several years, which provide repair and maintenance services after expiration of the original limited warranty. At September 30, 2016,2019, we had a warranty reserve of $356,984.$150,229. While our warranty experience with our LRAD product line has been very favorable, as we build more complexity into the product, and as we expand our supplier base, issues could arise that could affect future warranty costs, which could adversely affect our financial position, results of operations and business prospects.

System disruptions and security threats to our computer networks, including breach of our or our customers’ confidential information, could have a material adverse effect on our business and our reputation.

Our computer systems as well as those of our service providers are vulnerable to interruption, malfunction or damage due to events beyond our control, including malicious human acts committed by foreign or domestic persons, natural disasters, and network and communications failures. We periodically perform vulnerability self-assessments and engage service providers to perform independent vulnerability assessments and penetration tests. However, despite network security measures, our servers and the servers at our service providers are potentially vulnerable to physical or electronic unauthorized access, computer hackers, computer viruses, malicious code, organized cyber attacks and other security problems and system disruptions. Increasing socioeconomic and political instability in some countries has heightened these risks. Despite the precautions we and our service providers have taken, our systems may still be vulnerable to these threats. A user who circumvents security measures could misappropriate proprietary information or cause interruptions or malfunctions in operations.

Additionally, the confidential information that we collect subjects us to additional risks and costs that could harm our business and our reputation. We collect, retain and use personal information of our employees, including personally identifiable information, tax return information, financial data, bank account information and other data. Although we employ various network and business security measures to limit access to and use of such personal information, we cannot guarantee that a third party will not circumvent such security measures, resulting in the breach, loss or theft of the personal information of our employees. Possession and use of personal information in our operations also subjects us to legislative and regulatory burdens that could restrict our use of personal information and require notification of data breaches. A violation of any laws or regulations relating to the collection, retention or use of personal information could also result in the imposition of fines or lawsuits against us.

Sustained or repeated system failures or security breaches that interrupt our ability to process information in a timely manner or that result in a breach of proprietary or personal information could have a material adverse effect on our operations and our reputation. Although we maintain insurance in respect of these types of events, available insurance proceeds may not be adequate to compensate us for damages sustained due to these events.

We could incur additional charges for excess and obsolete inventory.

While we strive to effectively manage our inventory, rapidly changing technology, and uneven customer demand may result in short product cycles and the value of our inventory may be adversely affected by changes in technology that affect our ability to sell the products in our inventory. If we do not effectively forecast and manage our inventory, we may need to write off inventory as excess or obsolete, which in turn can adversely affect cost of sales and gross profit.

We have previously experienced, and may in the future experience, reductions in sales of older generation products as customers delay or defer purchases in anticipation of new product introductions. We currently have established reserves for slow moving or obsolete inventory of $580,132.$530,583 at September 30, 2019. The reserves we have established for potential losses due to obsolete inventory may, however, prove to be inadequate and may give rise to additional charges for obsolete or excess inventory.

We do not have the ability to accurately predict future operating results. Our quarterly and annual revenues are likely to fluctuate significantly due to many factors, most of which are beyond our control and could result in our failure to achieve our revenue expectations.

We expect our proprietary directed and omnidirectional acoustic products, software products and technologiesintegrated solutions will be the source of substantially all our revenues for at least the near future. Revenues from these products and technologiessolutions are expected to vary significantly due to a number of factors, many of which are beyond our control. Any one or more of the factors listed below or other factors could cause us to fail to achieve our revenue expectations. These factors include:

Some or all of these factors could adversely affect demand for our products or technologies, and therefore adversely affect our future operating results.

Most of our operating expenses are relatively fixed in the short term. We may be unable to rapidly adjust spending to compensate for any unexpected sales shortfalls, which could harm our quarterly operating results. We do not have the ability to predict future operating results with any certainty.

Many potential competitors who have greater resources and experience than we do may develop products and technologies that make ours obsolete or inferior.

Technological competition from larger, more established electronic and loudspeaker manufacturers and software providers is expected to increase. Most of the companies with which we expect to compete have substantially greater capital resources, research and development staffs, marketing and distribution programs and facilities, and many of them have substantially greater experience in the production and marketing of products. In addition, one or more of our competitors may have developed or may succeed in developing technologies and products that are more effective than any of ours, rendering our technology and products obsolete or noncompetitive.

Adverse resolution of disputes, litigation and claims may harm our business, operating results or financial condition.

We settled a derivative lawsuit in 2013 and may become a party to other litigation, disputes and claims in the normal course of our business. Litigation is by its nature uncertain and unpredictable and there can be no assurance that the ultimate resolution of such claims will not exceed the amounts accrued for such claims, if any. Litigation can be expensive, lengthy, and disruptive to normal business operations. An unfavorable resolution of a legal matter could have a material adverse effect on our business, operating results, or financial condition.

Our competitive position will be seriously damaged if we cannot protect intellectual property rights and trade secrets in our technology.

We rely on a combination of contracts, trademarks and trade secret laws to establish and protect our proprietary rights in our technology. However, we may not be able to prevent misappropriation of our intellectual property, and our competitors may be able to independently develop competing technologies, or the agreements we enter into may not be enforceable. A competitor may independently develop or patent technologies that are substantially equivalent to, or superior to, our technology. If this happens, our competitive position could be significantly harmed.

We may face personal injury and other liability claims that harm our reputation and adversely affect ourour operating results and financial condition.

While our products have been engineered to reduce the risk of damage to human hearing or human health, we could be exposed to claims of hearing damage if the product is not properly operated. A person injured in connection with the use of our products may bring legal action against us to recover damages on the basis of theories including personal injury, negligent design, dangerous product or inadequate warning. We may also be subject to lawsuits involving allegations of misuse of our products. Our product liability insurance coverage may be insufficient to pay all such claims. Product liability insurance may also become too costly for us or may become unavailable for us in the future. We may not have sufficient resources to satisfy any product liability claims not covered by insurance which would materially and adversely affect our operating results and financial condition. Significant litigation could also result in negative publicity and a diversion of management’s attention and resources.

Our international operations could be harmed by factors including political instability, natural disasters, fluctuations in currency exchange rates, and changes in regulations that govern international transactions.

We sell our products worldwide. In fiscal years 20162019 and 2015,2018, revenues outside of the U.S. accounted for approximately 62%30% and 75%44% of net revenues, respectively. The risks inherent in international trade may reduce our international sales and harm our business and the businesses of our customers and our suppliers. These risks include:

These and other risks may preclude or curtail international sales or increase the relative price of our products compared to those manufactured in other countries, reducing the demand for our products. Failure to comply with U.S. and foreign governmental laws and regulations applicable to international business, such as the Foreign Corrupt Practices Act or U.S. export control regulations, could have an adverse impact on our business with the U.S. and foreign governments.

Current environmental laws, or laws enacted in the future, may harm our business.

Our operations are subject to environmental regulation in areas in which we conduct business. Our product design and procurement operations must comply with new and future requirements relating to the materials composition of our products, including restrictions on lead, cadmium and other substances. We do not expect that the impact of these environmental laws and other similar legislation adopted in the U.S. and other countries will have a substantial unfavorable impact on our business. However, the costs and timing of costs under environmental laws are difficult to predict.

Errors or defects contained in our products, failure to comply with applicable safety standards or a product recall could result in delayed shipments or rejection of our products, damage to our reputation and expose us to regulatory or other legal action.

Any defects or errors in the operation of our products may result in delays in their introduction. In addition, errors or defects may be uncovered after commercial shipments have begun, which could result in the rejection of our products by our customers, damage to our reputation, lost sales, diverted development resources and increased customer service and support costs and warranty claims, any of which could harm our business. Third parties could sustain injuries from our products, and we may be subject to claims or lawsuits resulting from such injuries. There is a risk that these claims or liabilities may exceed, or fall outside the scope of, our insurance coverage. We may also be unable to obtain adequate liability insurance in the future. Because we are a smaller company, a product recall would be particularly harmful to us because we have limited financial and administrative resources to effectively manage a product recall and it would detract management’s attention from implementing our core business strategies. A significant product defect or product recall could materially and adversely affect our brand image, causing a decline in our sales, and could reduce or deplete our financial resources.

Costs associated with our multi-year maintenance contract with a foreign military customer could be higher than expected.

We are obligated under a seven-yearfive-year repair and maintenance agreement with a foreign military customer to service $12.1 million of product sold in the quarter ended March 31, 2011.military. We have contracted with a third party service provider to administer the required services under the terms of the maintenance agreement. The revenue from the maintenance agreement with our customer is fixed and paid annually upon completion of each year of service for the seven-year period through 2019.May 2024. It is possible that the cost to repair and maintain the products and the cost to contract with our third party service provider could exceed the revenue generated by the maintenance agreement.

We rely on outside manufacturers and suppliers to provide a large number of components and sub-assemblies incorporated in our products.

Our products have a large number of components and sub-assemblies produced by outside suppliers. In addition, for certain of these items, we qualify only a single source, which can magnify the risk of shortages and decrease our ability to negotiate with our suppliers on the basis of price. If shortages occur, or if we experience quality problems with suppliers, then our production schedules could be significantly delayed or costs significantly increased, which would have a material adverse effect on our business, liquidity, results of operation and financial position.

Although we assemble our products internally, we have some sub-assemblies and components produced by third party manufacturers. We may be required to outsource manufacturing if sales of our products increase significantly. We may be unable to obtain acceptable manufacturing sources on a timely basis. In addition, from time to time we may change manufacturers and any new manufacturer engaged by us may not perform as expected. An extended interruption in the supply of our products could result in a substantial loss of sales. Furthermore, any actual or perceived degradation of product quality as a result of our reliance on third party manufacturers may have an adverse effect on sales or result in increased warranty costs, product returns and buybacks. Failure to maintain quality manufacturing could reduce future revenues, adversely affecting our financial condition and results of operations.

We derive revenue from government contracts and subcontracts, which are often non-standard, may involve competitive bidding, may be subject to cancellation with or without penalty and may produce volatility in earnings and revenue.

Our sales to government customers have involved, and are expected in the future to involve, providing products and services under contracts or subcontracts with U.S. federal, state, local and foreign government agencies. Obtaining contracts and subcontracts from government agencies is challenging, and contracts often include provisions that are not standard in private commercial transactions. For example, government contracts may:

Securing government contracts can be a protracted process involving competitive bidding. In many cases, unsuccessful bidders may challenge contract awards, which can lead to increased costs, delays and possible loss of the contract for the winning bidder.

Our success is dependent on the performance of our executive team, and the cooperation, performance and retention of our executive officers and key employees.

Our business and operations are substantially dependent on the performance of our current executive team including our Chief Executive Officer and our Chief Financial Officer. We do not maintain “key person” life insurance on any of our executive officers. The loss of one or several key employees could seriously harm our business. We cannot assure that employees will not leave and subsequently compete against us.

We are also dependent on our ability to retain and motivate high quality personnel, especially sales and skilled engineering personnel. Competition for such personnel is intense, and we may not be able to attract, assimilate or retain other highly qualified managerial, sales and technical personnel in the future. The inability to attract and retain the necessary managerial, sales and technical personnel could cause our business, operating results or financial condition to suffer.

We may not successfully address the problems encountered in connection with any potential future acquisitions.

We expect to continue considering opportunities to acquire or make investments in other technologies, products and businesses that could enhance our capabilities, complement our current products or expand the breadth of our markets or customer base. We have little experience in acquiring other businesses and technologies. Potential and completed acquisitions and strategic investments involve numerous risks and if we fail to properly evaluate and execute acquisitions and strategic investments, our management team may be distracted from our day-to-day operations, our business may be disrupted and our operating results may suffer. In addition, if we finance acquisitions by issuing equity or convertible debt securities, our stock value could be diluted.

Our disclosure controls and procedures may not prevent or detect all acts of fraud.

Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act is accumulated and communicated to management and is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our management expects that our disclosure controls and procedures and internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within our company have been prevented or detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by an unauthorized override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and we cannot assure that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected.

Failure to maintain an effective system of internal control over financial reporting could harm stockholder and business confidence in our financial reporting, our ability to obtain financing and other aspects of our business.

Maintaining an effective system of internal control over financial reporting is necessary for us to provide reliable financial reports. Section 404 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations promulgated by the SEC require us to include in our Form 10-K a report by management regarding the effectiveness of our internal control over financial reporting. The report includes, among other things, an assessment of the effectiveness of our internal control over financial reporting as of the end of the respective fiscal year, including a statement as to whether or not our internal control over financial reporting is effective. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by management. While our management has concluded that our internal control over financial reporting was effective as of September 30, 2016,2019, it is possible that material weaknesses will be identified in the future. In addition, components of our internal control over financial reporting may require improvement from time to time. If management is unable to assert that our internal control over financial reporting is effective in any future period, investors may lose confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on the Company’s stock price.

Our common stock could be delisted from the Nasdaq Stock Market.

Nasdaq’s continued listing standards for our common stock require, among other things, that (i) we maintain a closing bid price for our common stock of at least $1.00, and (ii) we maintain: (A) stockholders’ equity of $2.5 million; (B) market value of listed securities of $35 million; or (C) net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years. Any failures to satisfy any continued listing requirements could lead to the receipt of a deficiency notice from Nasdaq and ultimately to a delisting from trading of our common stock. If our common stock were delisted from Nasdaq, among other things, this could result in a number of negative implications, including reduced liquidity in our common stock as a result of the loss of market efficiencies associated with Nasdaq and the loss of federal preemption of state securities laws as well as the potential loss of confidence by suppliers, customers and employees, institutional investor interest, fewer business development opportunities, greater difficulty in obtaining financing and breaches of certain contractual obligations.

Sales of common stock issuable on the exercise of outstanding options, may depress the price of our common stock.

As of September 30, 2016,2019, we had outstanding options granted to our employees and directors to purchase 4,404,0022,219,268 shares of our common stock.stock and we had 274,849 restricted stock units outstanding. At September 30, 2016,2019, the exercise prices for the options ranged from $0.93$1.31 to $3.17 per share. The issuance of shares of common stock upon the exercise of outstanding options and the release of outstanding restricted stock units could cause substantial dilution to holders of our common stock, and the sale of those shares in the market could cause the market price of our common stock to decline. The potential dilution from these shares could negatively affect the terms on which we could obtain equity financing.

We may issue preferred stock in the future, and the terms of the preferred stock may reduce the value of your common stock.

We are authorized to issue up to 5,000,000 shares of preferred stock in one or more series. Our board of directors may determine the terms of future preferred stock offerings without further action by our stockholders. If we issue additional preferred stock, it could affect the rights or reduce the value of our common stock. In particular, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with or sell our assets to a third party. These terms may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, and sinking fund provisions.

Our stock price is volatile and may continue to be volatile in the future.

The market price of our common stock has fluctuated significantly to date. In the future, the market price of our common stock could be subject to significant fluctuations due to general market conditions and in response to quarter-to-quarter variations in:

The stock market in recent years has experienced extreme price and volume fluctuations that have affected the market price of many technology companies, and that have often been unrelated or disproportionate to the operating performance of companies.

Changes in laws or regulations or the manner of their interpretation or enforcement could adversely impact our financial performance and restrict our ability to operate our business or execute our strategies.

New laws, regulations and standards, or changes in existing laws or regulations or the manner of their interpretation or enforcement, could increase our cost of doing business and restrict our ability to operate our business or execute our strategies. This includes, among other things, compliance costs and enforcement under the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank Act”), XBRL interactive SEC filings, new SEC regulations and NASDAQ Stock Market rules. For example, under Section 1502 of the Dodd-Frank Act, the SEC has adopted additional disclosure requirements related to the source of certain “conflict minerals” for issuers for which such “conflict minerals” are necessary to the functionality or production of a product manufactured, or contracted to be manufactured, by that issuer. The metals covered by the rules include tin, tantalum, tungsten and gold, commonly referred to as “3TG.” Our suppliers may use some or all of these materials in their production processes. The rules require us to conduct a reasonable country of origin inquiry to determine if we know or have reason to believe any of the minerals used in the production process may have originated from the Democratic Republic of the Congo or an adjoining country. If we are not able to determine the minerals did not originate from a covered country or conclude that there is no reason to believe that the minerals used in the production process may have originated in a covered country, we would be required to perform supply chain due diligence on members of our supply chain. Global supply chains can have multiple layers, thus the costs of complying with these new requirements could be substantial. These new requirements may also reduce the number of suppliers who provide conflict free metals and may affect our ability to obtain products in sufficient quantities or at competitive prices. Compliance costs and the unavailability of raw materials could have a material adverse effect on our results of operations.

We continually evaluate and monitor developments with respect to new and proposed rules and cannot predict or estimate the amount of the additional costs we may incur or the timing of such costs. These new or changed laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

None.

Our executive offices, sales, research and development and production facilities are located at 16990 Goldentop Road, Ste. A,16262 West Bernardo Drive, San Diego, California. The lease of 31,36054,766 square feet commenced July 1, 20122018 and expires June 30, 2018.August 31, 2028. The aggregate monthly payments, with abatements, averaged $16,306average $36,146 per month infor the first year,fourteen months, and $25,088, $26,656, $28,224, $29,792are $74,460, $76,694, $78,994, $81,364, $83,805, $86,319, $88,909, $91,576 and $31,360$94,324 per month for the second through sixthtenth years of the lease, plus other certain costs and charges as specified in the lease agreement, including the Company’s proportionate share of the building operating expenses and real estate taxes.

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 financial statements for pending litigation.

Not applicable.

PART II

Market Information

Our common stock is traded and quoted on the NASDAQ Capital Market under the symbol “LRAD.“GNSS.” The market for our common stock has often been sporadic and limited.

The following table sets forth the high and low reported sales prices for our common stock for the fiscal years ended September 30, 20152019 and 2016:2018: