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 16262 West Bernardo Drive, San Diego, California. The lease of 54,76655,766 square feet commenced July 1, 2018 and expires August 31, 2028. The aggregate monthly payments, with abatements, average $36,146are $79 thousand, $81 thousand, $84 thousand, $86 thousand, $89 thousand, $92 thousand and $94 thousand per month for the first fourteen months, and are $74,460, $76,694, $78,994, $81,364, $83,805, $86,319, $88,909, $91,576 and $94,324 per month for the secondfourth through tenth 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.
Our common stock is traded and quoted on the NASDAQ Capital Market under the symbol “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, 20192021 and 2018:2020:
The above quotations reflect inter-dealer prices, without retail markup, markdown or commission and may not represent actual transactions.
The information required by this item is incorporated by reference to the information set forth in Item 12 of this Annual Report on Form 10-K.
No securities were sold within the past three years that were not registered under the Securities Act and not previously reported.
Information requested by this Item is not included as we are electing scaled disclosure requirements available to Smaller Reporting Companies.
The discussion and analysis set forth below should be read in conjunction with the information presented in other sections of this Annual Report on Form 10-K, including “Item 1. Business,” “Item 1A. Risk Factors,” and “Item 8. Financial Statements and Supplementary Data.” This discussion contains forward-looking statements which are based on our current expectations and industry experience, as well as our perception of historical trends, current market conditions, current economic data, expected future developments and other factors that we believe are appropriate under the circumstances. These statements involve risks and uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements.
We have identified the policies below as critical to our business operations and to understanding our results of operations. Our accounting policies are more fully described in our consolidated financial statements and related notes located in “Item 8. Financial Statements and Supplementary Data.” The impact and any associated risks related to these policies on our business operations are discussed in “Item 1A. Risk Factors” and throughout “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” when such policies affect our reported and expected financial results.
The methods, estimates and judgments we use in applying our accounting policies, in conformity with generally accepted accounting principles in the U.S., have a significant impact on the results we report in our financial statements. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates affect the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.
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-step analysis in determining when and how revenue is recognized:
Topic 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.
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 our 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. Our customers do not have a right to return product unless the product is found defective and therefore our estimate for returns has historically been insignificantinsignificant.
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-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.
The time-based license agreements include the use of a software license for a fixed term, generally 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.
We offer 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-year warranty term. Revenues from separately priced extended warranty contracts are recognized on a straight-line basis over the warranty period and maintenance contracts are recognized based on time elapsed over the service period. Revenue from other services such as training or installation is recognized when the service is completed. Warranty, maintenance and services are classified as contract and other revenues.
The Company has entered into a number of multiple element arrangements, such as when selling a product or perpetual licenses that may include maintenance and support (included in 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 fair 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 to customize 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.
We use the recognition criteria of ASC 450-20, “Loss Contingencies” to estimate the bonus amount of bonuses when it becomes probable a bonus liability will be incurred and we recognize expense ratably over the service period. We accrue bonus expense each quarter based on estimated year-end results, and then adjust the actual in the fourth quarter based on our final results compared to targets.
New pronouncements issued for future implementation are discussed in Note 3, Recent Accounting Pronouncements, to our consolidated financial statements.
The following table provides for the periods indicated certain items of our consolidated statements of operations expressed in thousands of dollars and as a percentage of net sales. The financial information and discussion below should be read in conjunction with the consolidated financial statements and notes contained in this Annual Report.
Our products have varying gross margins, so product mix may affect gross profits. In addition, our margins vary based on the sales channels through which our products are sold in a given period. We continue to implement product updates and changes, including raw material and component changes that may impact product costs. With such product updates and changes we have limited warranty cost experience and estimated future warranty costs can impact our gross margins. We do not believe that historical gross profit margins should be relied upon as an indicator of future gross profit margins.
We may expend additional resources on the marketing and selling of our products in future periods as we identify ways to optimize potential opportunities. Commission expense will fluctuate based on the nature of our sales.
Principal factors that could affect the availability of our internally generated funds include:
Principal factors that could affect our ability to obtain cash from external sources include:
Our cash flows from operating, investing and financing activities, as reflected in the consolidated statements of cash flows, are summarized in the table below:below (in thousands):
We also used cash in investing activities primarily for the purchase of product tooling, computer equipment and leasehold improvements for the new largerour operating facility. Cash used for capital expenditures was $343,123$0.2 million and $625,845$0.1 million in the fiscal years ended September 30, 20192021 and 2018,2020, respectively. In fiscal 2017, we began to expense patent and trademark costs as incurred. We anticipate additional expenditures for patents and capital expenditures in fiscal year 20202022 as we continue to invest in new products and technologies.
In December 2018, the Board of Directors approved a new share buyback program beginning January 1, 2019, under which the Company was authorized to repurchase up to $5 million of its outstanding common shares. The previous program expired onIn December 2020, the Board extended this program’s expiration date to December 31, 2018.2022. During the fiscal year ended September 30, 2019,2020, the Company repurchased 788,425156,505 shares at an average price per share of $2.75$2.54 for a total cost of $2,171,022.$0.4 million. During the fiscal year ended September 30, 2018, the Company repurchased 286,7462021, no shares at an average price per sharewere repurchased. As of $2.53 for a total cost of $725,445. At September 30, 2019,2021, $4.1 million was available for share repurchase under this program and all repurchased shares were retired.
We are committed for our facility lease through August 30, 2028, as more fully described in Note 13, Commitments and Contingencies, toLeases, in our consolidated financial statements.
The Company has a bonus plan for employees, in accordance with their terms of employment, whereby they can earn a percentage of their salary based on meeting targeted objectives for orders received, revenue, operating income and operating cash flow. All of the Company’s key employees are entitled to participate in the bonus plan. During the years ended September 30, 20192021 and 2018,2020, the Company accrued $1,295,338$2.6 million and $1,205,468$1.6 million respectively, for bonuses, and related payroll tax expense in connection with the bonus plans. Bonus related expense is included in “Accrued liabilities” on the Consolidated Balance Sheet.
We do not have any off-balance sheet arrangements, financings or other relationships with unconsolidated entities or other persons.
Information requested by this Item is not included as we are electing scaled disclosure requirements available to Smaller Reporting Companies.
The financial statements required by this item begin on page F-1 with the index to financial statements followed by the consolidated financial statements.
There have been no disagreements or any reportable events requiring disclosure under Item 304(b) of Regulation S-K.
We are required to maintain disclosure controls and procedures designed to ensure that material information related to us, including our consolidated subsidiaries, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in our Exchange Act Reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in our Exchange Act Reports is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 20192021 and, based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of September 30, 20192021, based on the guidelines established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles in the U.S. Based on this evaluation, management has concluded that the Company’s internal control over financial reporting was effective as of September 30, 2019.2021.
This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Pursuant to rules of the SEC, such attestation is not required for smaller reporting companies, which permit the Company to provide only management’s report in this Annual Report.
There have been no changes in our internal control over financial reporting since June 30, 2019,2021, in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Our process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies, which may be identified during this process.
Certain information required by this Part III is omitted from this report and is incorporated by reference to our Definitive Proxy Statement to be filed with the SEC in connection with the Annual Meeting of Stockholders to be held in 20202022 (the “Proxy Statement”).
The information with respect to our executive officers is set forth in the section entitled “Executive Officers” in Part I of this Annual Report on Form 10-K. The information required by this item with respect to our directors and corporate governance matters is incorporated by reference to the information under the captions “Election of Directors,”Directors”, “Board and Committee Matters and Corporate Governance Matters” and “Section“Delinquent Section 16(a) Beneficial Ownership Reporting Compliance”Reports” contained in Proxy Statement.
The information required by this item is incorporated by reference to the information in the Proxy Statement under the caption “Executive Compensation.”
The information required by this item is incorporated by reference to the information in the Proxy Statement under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information.”
The information required by this item is incorporated by reference to the information in the Proxy Statement under the captions “Certain Transactions” and “Independence of the Board of Directors.”
The information required by this item is incorporated by reference to the Proxy Statement, under the heading “Principal Accountant Fees and Services.”
The financial statements required by this item are submitted in a separate section beginning on page F-1 of this annual report.
None.
The following exhibits are incorporated by reference or filed as part of this report.
10.12 Commercial Promissory Note, effective March 12, 2021, issued by Genasys Inc. in favor of MUFG Union Bank, N.A. Incorporated by reference to Exhibit 10.3 on Form 8-K filed March 17, 2021. | | | 10.13 | Security Agreement, effective March 12, 2021, issued by Genasys Inc. and MUFG Union Bank, N.A. Incorporated by reference to Exhibit 10.3 on Form 8-k files March 17, 2021. | | | 10.14 | Board Adviser Agreement, dated November 1, 2021, between Genasys Inc. and John G. Coburn.+* | | | 10.15 | Board Adviser Agreement, dated November 11, 2021, between Genasys Inc. and Daniel H. McCollum.+* | | | 21. | Subsidiaries of the Registrant | | | | 21.1 | Subsidiaries of the Registrant. Incorporated by reference to Exhibit 21.1 on Form 10-K for the year ended September 30, 2018, dated December 21, 2018.* | | | | 23. | Consents of Experts and Counsel | | | | 23.1 | Consent of Squar MilnerBaker Tilly US, LLP.* | | | | 24. | Power of Attorney | | | | 24.1 | Power of Attorney. Included on signature page.* | | | | 31. | Certifications | | | | 31.1 | Certification of Richard S. Danforth, Principal Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* | | | | 31.2 | Certification of Dennis D. Klahn, Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* | | | | 32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Richard S. Danforth, Principal Executive Officer, and Dennis D. Klahn, Principal Financial Officer.* | | | | 99. | Additional Exhibits | | | | 101.INS | Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | | | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document | | | | 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | | | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | | 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | | | | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | | | 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
*
| Filed herewith.
| +
| * Filed herewith. + Management contract or compensatory plan or arrangement. |
Genasys Inc. LRAD Corporation
Index to ConsolidatedConsolidated Financial Statements Report of Independent Registered Public Accounting Firm | F-1 | Consolidated Balance Sheets as of September 30, 20192021 and 20182020 | F-2F-3
| Consolidated Statements of Operations for the Years Ended September 30, 20192021 and 20182020 | F-3F-4
| Consolidated Statements of Comprehensive LossIncome for the Years Ended September 30, 20192021 and 20182020 | F-3F-4
| Consolidated Statements of Stockholders’ Equity for the Years Ended September 30, 20192021 and 20182020 | F-4F-5
| Consolidated Statements of Cash Flows for the Years Ended September 30, 20192021 and 20182020 | F-5F-6
| Notes to the Consolidated Financial Statements | F-7F-8 – F-29F-34
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of LRAD Corporation:Genasys Inc.:
Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of LRAD Corporation and its subsidiariesGenasys Inc. (the Company) as of September 30, 20192021 and 2018,2020, the related consolidated statements of operations, comprehensive loss,income, stockholders' equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 20192021 and 2018,2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the Company’s Audit Committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. AMIKA MOBILE AND ZONEHAVEN ACQUISITIONS – FAIR VALUE OF INTANGIBLE ASSETS Critical Audit Matter Description As described in Note 4 to the consolidated financial statements, the Company completed the acquisitions of the assets and business of Amika Mobile Corporation (“Amika Mobile”) for total consideration of $8.4 million and Zonehaven Inc. (“Zonehaven”) for total consideration of $22.6 million during the year ended September 30, 2021. The acquisitions were accounted for using the acquisition method of accounting, which requires, among other things, the assets acquired and the liabilities assumed to be recognized at their fair values as of the acquisition date. Auditing the accounting for these acquisitions were complex due to the significant estimation uncertainty in determining the fair values of identified intangible assets and liabilities. We identified the valuation of intangible assets recorded in connection with the acquisitions as a critical audit matter. The fair value estimates were based on underlying assumptions about future performance of the acquired business which involves significant estimation uncertainty. The significant assumptions used to form the basis of the forecasted results included revenue growth rates, earnings metrics, and discount rates. These significant assumptions were forward-looking and could be affected by future economic and market conditions. How We Addressed the Matter in Our Audit The primary procedures we performed to address this critical audit matter included: | ■ | Obtained an understanding of the controls over the Company’s accounting for acquisitions. |
| ■ | Obtained management’s purchase price allocations detailing fair values assigned to acquired tangible and intangible assets. |
| ■ | Obtained valuation reports prepared by valuation specialist engaged by management to assist in the purchase price allocations, including determination of fair values assigned to acquired intangible assets, and reviewed the reports, and qualifications and objectivity of management specialist. |
| ■ | Engaged auditor valuation specialist to assist the engagement team in its review of management valuation specialist's reports including the valuation methods and key assumptions used by the Company. |
| ■ | Examined the completeness and accuracy of the underlying data supporting the significant assumptions and estimates used in the valuation reports, including historical and projected financial information. |
/s/ SQUAR MILNERBAKER TILLY US, LLP We have served as the Company's auditor since 2007. San Diego, California December 9, 2019November 22, 2021
LRAD CorporationGenasys Inc.
Consolidated Balance Sheets | | | September 30, | | | | | 2019 | | | 2018 | | ASSETS | | | | | | | | | Current assets: | | | | | | | | | Cash and cash equivalents | | $ | 18,819,078 | | | $ | 11,063,091 | | Short-term marketable securities | | | 3,695,364 | | | | 3,592,175 | | Restricted cash | | | 263,136 | | | | 403,427 | | Accounts receivable, net | | | 3,644,059 | | | | 2,785,997 | | Inventories, net | | | 5,835,163 | | | | 6,734,183 | | Prepaid expenses and other | | | 1,781,837 | | | | 3,091,401 | | Total current assets | | | 34,038,637 | | | | 27,670,274 | | | | | | | | | | | | Long-term marketable securities | | | 1,384,819 | | | | 1,200,541 | | Long-term restricted cash | | | 434,704 | | | | 339,556 | | Deferred tax assets, net | | | 5,387,000 | | | | 5,957,000 | | Property and equipment, net | | | 2,269,506 | | | | 2,448,725 | | Goodwill | | | 2,305,750 | | | | 2,445,990 | | Intangible assets, net | | | 1,175,634 | | | | 1,557,346 | | Other assets | | | 123,933 | | | | 241,365 | | Total assets | | $ | 47,119,983 | | | $ | 41,860,797 | | | | | | | | | | | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | | Current liabilities: | | | | | | | | | Accounts payable | | $ | 859,530 | | | $ | 3,083,344 | | Accrued liabilities | | | 8,134,341 | | | | 3,199,864 | | Notes payable, current portion | | | 279,588 | | | | 296,594 | | Total current liabilities | | | 9,273,459 | | | | 6,579,802 | | | | | | | | | | | | Notes payable, less current portion | | | 32,903 | | | | 52,358 | | Other liabilities, noncurrent | | | 2,432,272 | | | | 1,739,430 | | Total liabilities | | | 11,738,634 | | | | 8,371,590 | | | | | | | | | | | | Stockholders' equity: | | | | | | | | | Preferred stock, $0.00001 par value; 5,000,000 shares authorized; none issued and outstanding | | | - | | | | - | | Common stock, $0.00001 par value; 50,000,000 shares authorized; 32,949,987 and 33,176,146 shares issued and outstanding, respectively | | | 330 | | | | 332 | | Additional paid-in capital | | | 89,571,641 | | | | 90,251,145 | | Accumulated deficit | | | (53,731,903 | ) | | | (56,516,895 | ) | Accumulated other comprehensive loss | | | (458,719 | ) | | | (245,375 | ) | Total stockholders' equity | | | 35,381,349 | | | | 33,489,207 | | Total liabilities and stockholders' equity | | $ | 47,119,983 | | | $ | 41,860,797 | |
See accompanying notes(in thousands, except par value and share amounts)
LRAD Corporation
Consolidated Statements of Operations
| | | Years ended September 30, | | | | | 2019 | | | 2018 | | Revenues: | | | | | | | | | Product sales | | $ | 33,384,175 | | | $ | 23,495,788 | | Software, contract and other | | | 3,594,880 | | | | 2,811,002 | | Total revenues | | | 36,979,055 | | | | 26,306,790 | | Cost of revenues | | | 18,522,548 | | | | 13,567,076 | | | | | | | | | | | | Gross Profit | | | 18,456,507 | | | | 12,739,714 | | | | | | | | | | | | Operating expenses | | | | | | | | | Selling, general and administrative | | | 10,792,401 | | | | 10,692,681 | | Research and development | | | 4,527,741 | | | | 3,523,498 | | Total operating expenses | | | 15,320,142 | | | | 14,216,179 | | | | | | | | | | | | Income (loss) from operations | | | 3,136,365 | | | | (1,476,465 | ) | | | | | | | | | | | Other income and expense, net | | | 220,827 | | | | 107,023 | | | | | | | | | | | | Income (loss) from operations before income taxes | | | 3,357,192 | | | | (1,369,442 | ) | Income tax expense | | | 572,200 | | | | 2,375,600 | | Net income (loss) | | $ | 2,784,992 | | | $ | (3,745,042 | ) | | | | | | | | | | | Net income (loss) per common share | | | | | | | | | Basic | | $ | 0.09 | | | $ | (0.12 | ) | Diluted | | $ | 0.08 | | | $ | (0.12 | ) | | | | | | | | | | | Weighted average common shares outstanding: | | | | | | | | | Basic | | | 32,689,028 | | | | 32,492,645 | | Diluted | | | 33,397,095 | | | | 32,492,645 | |
LRAD Corporation
Consolidated Statements of Comprehensive Income (Loss)
| | | Years ended September 30, | | | | | 2019 | | | 2018 | | Net income (loss) | | $ | 2,784,992 | | | $ | (3,745,042 | ) | Other comprehensive income (loss) | | | | | | | | | Unrealized gain (loss) on marketable securities | | | 20,307 | | | | (7,676 | ) | Unrealized foreign currency loss | | | (233,651 | ) | | | (236,430 | ) | Comprehensive income (loss) | | $ | 2,571,648 | | | $ | (3,989,148 | ) |
| | | September 30, | | | | | 2021 | | | 2020 | | ASSETS | | | | | | | | | Current assets: | | | | | | | | | Cash and cash equivalents | | $ | 13,167 | | | $ | 23,319 | | Short-term marketable securities | | | 5,686 | | | | 4,265 | | Restricted cash | | | 279 | | | | 282 | | Accounts receivable, net | | | 7,682 | | | | 5,442 | | Inventories, net | | | 6,416 | | | | 5,949 | | Prepaid expenses and other | | | 2,255 | | | | 860 | | Total current assets | | | 35,485 | | | | 40,117 | | | | | | | | | | | | Long-term marketable securities | | | 1,875 | | | | 3,805 | | Long-term restricted cash | | | 1,082 | | | | 395 | | Deferred tax assets, net | | | 8,039 | | | | 11,095 | | Property and equipment, net | | | 1,755 | | | | 1,930 | | Goodwill | | | 23,834 | | | | 2,472 | | Intangible assets, net | | | 12,804 | | | | 943 | | Operating lease right of use assets | | | 4,862 | | | | 5,285 | | Other assets | | | 392 | | | | 125 | | Total assets | | $ | 90,128 | | | $ | 66,167 | | | | | | | | | | | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | | Current liabilities: | | | | | | | | | Accounts payable | | $ | 2,160 | | | $ | 1,370 | | Accrued liabilities | | | 14,111 | | | | 7,880 | | Notes payable | | | 296 | | | | 300 | | Operating lease liabilities, current portion | | | 899 | | | | 771 | | Total current liabilities | | | 17,466 | | | | 10,321 | | | | | | | | | | | | Notes payable, noncurrent | | | 0 | | | | 18 | | Other liabilities, noncurrent | | | 995 | | | | 293 | | Operating lease liabilities, noncurrent | | | 5,709 | | | | 6,395 | | Total liabilities | | | 24,170 | | | | 17,027 | | | | | | | | | | | | Stockholders' equity: | | | | | | | | | Preferred stock, $0.00001 par value; 5,000,000 shares authorized; none issued and outstanding | | | 0 | | | | 0 | | Common stock, $0.00001 par value; 100,000,000 shares authorized; 36,403,833 and 33,561,544 shares issued and outstanding, respectively | | | 0 | | | | 0 | | Additional paid-in capital | | | 107,110 | | | | 91,248 | | Accumulated deficit | | | (41,154 | ) | | | (41,858 | ) | Accumulated other comprehensive income (loss) | | | 2 | | | | (250 | ) | Total stockholders' equity | | | 65,958 | | | | 49,140 | | Total liabilities and stockholders' equity | | $ | 90,128 | | | $ | 66,167 | |
See accompanying notes LRAD CorporationGenasys Inc.
Consolidated Statements of Stockholders’ EquityOperations (in thousands, except per share amounts) | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | | | | | Additional | | | | | | | Other | | | Total | | | | | Common Stock | | | Paid-in | | | Accumulated | | | Comprehensive | | | Stockholders' | | | | | Shares | | | Amount | | | Capital | | | Deficit | | | Loss | | | Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance at September 30, 2017 | | | 32,158,436 | | | | 322 | | | $ | 87,956,839 | | | $ | (52,771,853 | ) | | $ | (1,269 | ) | | $ | 35,184,039 | | Share-based compensation expense | | | - | | | | - | | | | 584,873 | | | | - | | | | - | | | | 584,873 | | Issuance of common stock upon exercise of stock options, net | | | 1,179,456 | | | | 12 | | | | 2,434,875 | | | | - | | | | - | | | | 2,434,887 | | Issuance of common stock upon vesting of restricted stock units | | | 125,000 | | | | 1 | | | | - | | | | - | | | | - | | | | 1 | | Stock buyback | | | (286,746 | ) | | | (3 | ) | | | (725,442 | ) | | | - | | | | - | | | | (725,445 | ) | Other comprehensive loss | | | - | | | | - | | | | - | | | | - | | | | (244,106 | ) | | | (244,106 | ) | Net income | | | - | | | | - | | | | - | | | | (3,745,042 | ) | | | - | | | | (3,745,042 | ) | Balance at September 30, 2018 | | | 33,176,146 | | | | 332 | | | $ | 90,251,145 | | | $ | (56,516,895 | ) | | $ | (245,375 | ) | | $ | 33,489,207 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share-based compensation expense | | | - | | | | - | | | $ | 735,003 | | | $ | - | | | $ | - | | | $ | 735,003 | | Issuance of common stock upon exercise of stock options, net | | | 406,151 | | | | 4 | | | | 756,509 | | | | - | | | | - | | | | 756,513 | | Issuance of common stock upon vesting of restricted stock units | | | 156,115 | | | | 2 | | | | (2 | ) | | | - | | | | - | | | | - | | Stock buyback | | | (788,425 | ) | | | (8 | ) | | | (2,171,014 | ) | | | | | | | | | | | (2,171,022 | ) | Other comprehensive loss | | | - | | | | - | | | | - | | | | - | | | | (213,344 | ) | | | (213,344 | ) | Net income | | | - | | | | - | | | | - | | | | 2,784,992 | | | | - | | | | 2,784,992 | | Balance at September 30, 2019 | | | 32,949,987 | | | | 330 | | | $ | 89,571,641 | | | $ | (53,731,903 | ) | | $ | (458,719 | ) | | $ | 35,381,349 | |
| | | Years ended September 30, | | | | | 2021 | | | 2020 | | Revenues: | | | | | | | | | Product sales | | $ | 41,602 | | | $ | 39,509 | | Contract and other | | | 5,401 | | | | 3,501 | | Total revenues | | | 47,003 | | | | 43,010 | | Cost of revenues | | | 23,577 | | | | 20,371 | | | | | | | | | | | | Gross Profit | | | 23,426 | | | | 22,639 | | | | | | | | | | | | Operating expenses | | | | | | | | | Selling, general and administrative | | | 17,424 | | | | 12,044 | | Research and development | | | 4,918 | | | | 4,554 | | Total operating expenses | | | 22,342 | | | | 16,598 | | | | | | | | | | | | Income from operations | | | 1,084 | | | | 6,041 | | | | | | | | | | | | Other income, net | | | 54 | | | | 127 | | | | | | | | | | | | Income before income taxes | | | 1,138 | | | | 6,168 | | Income tax expense (benefit) | | | 434 | | | | (5,706 | ) | Net income | | $ | 704 | | | $ | 11,874 | | | | | | | | | | | | Net income per common share: | | | | | | | | | Basic | | $ | 0.02 | | | $ | 0.36 | | Diluted | | $ | 0.02 | | | $ | 0.35 | | Weighted average common shares outstanding: | | | | | | | | | Basic | | | 34,409,478 | | | | 33,220,915 | | Diluted | | | 35,589,148 | | | | 34,092,328 | |
See accompanying notes
LRAD CorporationGenasys Inc.
Consolidated Statements of Cash FlowsComprehensive Income (in thousands) | | | Years Ended September 30, | | | | | 2019 | | | 2018 | | Operating Activities: | | | | | | | | | Net income (loss) | | $ | 2,784,992 | | | $ | (3,745,042 | ) | | | | | | | | | | | Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | | | | Depreciation and amortization | | | 824,889 | | | | 483,087 | | Provision for doubtful accounts | | | (23,407 | ) | | | 150,000 | | Warranty provision | | | 85,078 | | | | 6,093 | | Inventory obsolescence | | | 142,288 | | | | 171,535 | | Share-based compensation | | | 735,003 | | | | 584,873 | | Deferred income taxes | | | 570,000 | | | | 2,374,000 | | Gain on disposition of asset | | | - | | | | 252 | | Loss on impairment of patents | | | - | | | | 11,133 | | Changes in operating assets and liabilities: | | | | | | | | | Accounts receivable | | | (854,676 | ) | | | 3,149,579 | | Inventories | | | 756,732 | | | | (1,648,484 | ) | Prepaid expenses and other | | | 1,358,690 | | | | (2,075,323 | ) | Other assets | | | 116,973 | | | | (60,615 | ) | Accounts payable | | | (2,211,695 | ) | | | 192,638 | | Payroll and related | | | (67,692 | ) | | | 127,623 | | Warranty settlements | | | (34,065 | ) | | | (11,395 | ) | Accrued and other liabilities | | | 5,671,921 | | | | 1,541,865 | | Net cash provided by operating activities | | | 9,855,031 | | | | 1,251,819 | | | | | | | | | | | | Investing Activities: | | | | | | | | | Purchases of marketable securities | | | (4,495,228 | ) | | | (4,920,547 | ) | Proceeds from maturities of marketable securities | | | 4,228,068 | | | | 5,190,821 | | Capital expenditures | | | (343,126 | ) | | | (625,845 | ) | Purchase of Genasys, net of cash and restricted cash acquired | | | - | | | | (2,431,795 | ) | Net cash used in investing activities | | | (610,286 | ) | | | (2,787,366 | ) | | | | | | | | | | | Financing Activities: | | | | | | | | | Proceeds from exercise of stock options | | | 703,313 | | | | 2,434,888 | | Repurchase of common stock | | | (2,171,022 | ) | | | (725,445 | ) | Proceeds from the issuance of unsecured promissory notes | | | - | | | | 62,656 | | Payments on promissory notes | | | (17,044 | ) | | | (1,175,205 | ) | Net cash (used in) provided by financing activities | | | (1,484,753 | ) | | | 596,894 | | Effect of foreign exchange rate on cash | | | (49,148 | ) | | | (59,160 | ) | Net increase (decrease) in cash, cash equivalents, and restricted cash | | | 7,710,844 | | | | (997,813 | ) | Cash, cash equivalents and restricted cash, beginning of period | | | 11,806,074 | | | | 12,803,887 | | Cash, cash equivalents and restricted cash, end of period | | $ | 19,516,918 | | | $ | 11,806,074 | | | | | | | | | | | | | | | | - | | | | - | | Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets: | | | | | | | | | Cash and cash equivalents | | $ | 18,819,078 | | | $ | 11,063,091 | | Restricted cash, current portion | | | 263,136 | | | | 403,427 | | Long-term restricted cash | | | 434,704 | | | | 339,556 | | Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows | | $ | 19,516,918 | | | $ | 11,806,074 | |
| | | Years ended September 30, | | | | | 2021 | | | 2020 | | Net income | | $ | 704 | | | $ | 11,874 | | Other comprehensive income | | | | | | | | | Unrealized loss on marketable securities | | | (8 | ) | | | (4 | ) | Unrealized foreign currency gain | | | 260 | | | | 213 | | Comprehensive income | | $ | 956 | | | $ | 12,083 | |
See accompanying notes Genasys Inc. LRAD CorporationConsolidated Statements of Stockholders’ Equity
(in thousands, except par value and share amounts) | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | | | | | Additional | | | | | | | Other | | | Total | | | | | Common Stock | | | Paid-in | | | Accumulated | | | Comprehensive | | | Stockholders' | | | | | Shares | | | Par Value | | | Capital | | | Deficit | | | Income (Loss) | | | Equity | | Balance as of September 30, 2019 | | | 32,949,987 | | | $ | 330 | | | $ | 89,572 | | | $ | (53,732 | ) | | $ | (459 | ) | | $ | 35,381 | | Share-based compensation expense | | | - | | | | 0 | | | | 980 | | | | 0 | | | | 0 | | | | 980 | | Issuance of common stock upon exercise of stock options, net | | | 583,019 | | | | 6 | | | | 1,136 | | | | 0 | | | | 0 | | | | 1,136 | | Issuance of common stock upon vesting of restricted stock units | | | 198,106 | | | | 2 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Shares retained for payment of taxes in connection with net share settlement of restricted stock units | | | (13,063 | ) | | | 0 | | | | (42 | ) | | | 0 | | | | 0 | | | | (42 | ) | Stock buyback | | | (156,505 | ) | | | (2 | ) | | | (398 | ) | | | 0 | | | | 0 | | | | (398 | ) | Accumulated other comprehensive income | | | - | | | | 0 | | | | 0 | | | | 0 | | | | 209 | | | | 209 | | Net income | | | - | | | | 0 | | | | 0 | | | | 11,874 | | | | 0 | | | | 11,874 | | Balance as of September 30, 2020 | | | 33,561,544 | | | $ | 336 | | | $ | 91,248 | | | $ | (41,858 | ) | | $ | (250 | ) | | $ | 49,140 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Share-based compensation expense | | | - | | | | 0 | | | | 1,424 | | | | 0 | | | | 0 | | | | 1,424 | | Issuance of common stock upon exercise of stock options, net | | | 104,796 | | | | 1 | | | | 210 | | | | 0 | | | | 0 | | | | 210 | | Issuance of common stock upon vesting of restricted stock units | | | 228,633 | | | | 2 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Shares retained for payment of taxes in connection with net share settlement of restricted stock units | | | (22,073 | ) | | | 0 | | | | (141 | ) | | | 0 | | | | 0 | | | | (141 | ) | Issuance of common stock in business combination | | | 2,165,824 | | | | 22 | | | | 10,938 | | | | 0 | | | | 0 | | | | 10,938 | | Obligation to issue common stock | | | - | | | | 0 | | | | 3,431 | | | | 0 | | | | 0 | | | | 3,431 | | Release of obligation to issue commons stock | | | 365,109 | | | | 3 | | | | 0 | | | | 0 | | | | 0 | | | | 0 | | Accumulated other comprehensive income | | | - | | | | 0 | | | | 0 | | | | 0 | | | | 252 | | | | 252 | | Net income | | | - | | | | 0 | | | | 0 | | | | 704 | | | | 0 | | | | 704 | | Balance as of September 30, 2021 | | | 36,403,833 | | | $ | 364 | | | $ | 107,110 | | | $ | (41,154 | ) | | $ | 2 | | | $ | 65,958 | |
See accompanying notes Genasys Inc. Consolidated Statements of Cash Flows (in thousands) | | | Years Ended September 30, | | | | | 2019 | | | 2018 | | Supplemental disclosures of cash flow information: | | | | | | | Interest paid | | $ | 2,860 | | | $ | 18,015 | | | | | | | | | | | | Noncash investing and financing activities: | | | | | | | | | Change in unrealized gain (loss) on marketable securities | | $ | 20,307 | | | $ | (7,676 | ) | | | | | | | | | | | Business combinations accounted for as a purchase: | | | | | | | | | Fair value of assets acquired | | $ | - | | | $ | 5,520,504 | | Cash paid or payable | | | - | | | | (3,011,439 | ) | Liabilities assumed | | $ | - | | | $ | 2,509,065 | |
| | Years Ended September 30, | | | | | 2021 | | | 2020 | | Operating Activities: | | | | | | | | | Net income | | $ | 704 | | | $ | 11,874 | | | | | | | | | | | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | Depreciation and amortization | | | 1,597 | | | | 800 | | Amortization of debt issuance costs | | | 11 | | | | 0 | | Provision for doubtful accounts | | | 0 | | | | 4 | | Warranty provision | | | 54 | | | | 16 | | Inventory obsolescence | | | 379 | | | | 407 | | Stock-based compensation | | | 1,424 | | | | 980 | | Realized loss on foreign currency forward contract | | | (76 | ) | | | 0 | | Unrealized (loss) gain on foreign currency forward contract | | | 0 | | | | 76 | | Deferred income taxes | | | 433 | | | | (5,708 | ) | Amortization of operating lease right of use asset | | | 694 | | | | 599 | | Accretion of acquisition holdback liability | | | 46 | | | | 0 | | | | | | | | | | | | Changes in operating assets and liabilities: | | | | | | | | | Accounts receivable, net | | | (2,138 | ) | | | (1,775 | ) | Inventories, net | | | (846 | ) | | | (521 | ) | Prepaid expenses and other | | | (1,634 | ) | | | 927 | | Accounts payable | | | 600 | | | | 477 | | Accrued and other liabilities | | | 4,902 | | | | (1,238 | ) | Net cash provided by operating activities | | | 6,150 | | | | 6,918 | | | | | | | | | | | | Investing Activities: | | | | | | | | | Purchases of marketable securities | | | (5,144 | ) | | | (8,056 | ) | Proceeds from maturities of marketable securities | | | 5,646 | | | | 5,061 | | Cash paid for acquisitions net of cash acquired | | | (15,848 | ) | | | 0 | | Capital expenditures | | | (208 | ) | | | (140 | ) | Net cash used in investing activities | | | (15,554 | ) | | | (3,135 | ) | | | | | | | | | | | Financing Activities: | | | | | | | | | Proceeds from exercise of stock options | | | 210 | | | | 1,136 | | Repurchase of common stock | | | 0 | | | | (398 | ) | Shares retained for payment of taxes in connection with settlement of restricted stock units | | | (141 | ) | | | (42 | ) | Payments on promissory notes | | | (18 | ) | | | (17 | ) | Cash paid for debt issuance costs | | | (38 | ) | | | 0 | | Net cash provided by financing activities | | | 13 | | | | 679 | | Effect of foreign exchange rate on cash | | | (77 | ) | | | 17 | | Net (decrease) increase in cash, cash equivalents, and restricted cash | | | (9,468 | ) | | | 4,479 | | Cash, cash equivalents and restricted cash, beginning of period | | | 23,996 | | | | 19,517 | | Cash, cash equivalents and restricted cash, end of period | | $ | 14,528 | | | $ | 23,996 | | | | | | | | | | | | Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets: | | | | | | | | | Cash and cash equivalents | | $ | 13,167 | | | $ | 23,319 | | Restricted cash, current portion | | | 279 | | | | 282 | | Long-term restricted cash | | | 1,082 | | | | 395 | | Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows | | $ | 14,528 | | | $ | 23,996 | |
See accompanying notes Genasys Inc. Consolidated Statements of Cash Flows (in thousands) | | | Years Ended September 30, | | | | | 2021 | | | 2020 | | Noncash investing and financing activities: | | | | | | | | | Change in unrealized loss on marketable securities | | $ | (7 | ) | | $ | (4 | ) | Common stock issued in connection with the purchase of Zonehaven | | $ | (10,938 | ) | | $ | 0 | | Obligation to issue common stock in connection with the Amika Mobile asset purchase | | $ | (1,248 | ) | | $ | 0 | | Initial measurement of operating lease right of use assets | | $ | 259 | | | $ | 5,824 | | Initial measurement of operating lease liabilities | | $ | 259 | | | $ | 7,815 | | | | | | | | | | | | Business combinations accounted for as a purchase | | | | | | | | | Fair value of net assets acquired | | $ | 30,980 | | | $ | 0 | |
LRAD CorporationGenasys Inc.
Notes to the Consolidated FinancialFinancial Statements (in thousands, except per share and share amounts) 1. OPERATIONS LRAD® Corporation, a Delaware corporation (the “Company”), is engaged in the design, development and commercialization of directed and multidirectional sound technologies, voice broadcast products, and location-based mass messaging solutions for emergency warning and workforce management. The principal markets for the Company’s proprietary sound reproduction technologies, voice broadcast products and mass messaging solutions are in North and South America, Europe, Middle East and Asia. On October 23, 2019, the Company announced that it was rebranding and began doing business as Genasys Inc. is a global provider of critical communications hardware and software solutions designed to alert, inform, and protect. The Company's unified platform receives information from a wide variety of sensors and Internet-of-Things (IoT) inputs to collect real-time information on developing and active emergency situations. The Company uses this information to create and disseminate alerts, warnings, notifications, and instructions through multiple channels before, during, and after public safety and enterprise threats, critical events, and other crisis situations.
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The Company has threeeight 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 twoGenasys Inc. (branch) in the United Arab Emirates and 2 currently inactive subsidiaries, Genasys America de CV and LRAD International Corporation. The consolidated financial statements include the accounts of these subsidiaries after elimination of intercompany transactions and accounts. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions (e.g., share-based compensation valuation, allowance for doubtful accounts, valuation of inventory and intangible assets, warranty reserve, accrued bonus and valuation allowance related to deferred tax assets) that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates. CONCENTRATION OF CREDIT RISK The Company sells its products to a large number of geographically diverse customers. The Company routinely assesses the financial strength of its customers. It is customary for the Company to require a deposit as collateral. At As of September 30, 2019,2021, accounts receivable from two2 customers accounted for 33%66% and 11%18% of total accounts receivable with no other single customer accounting for more than 10% of the accounts receivable balance. At As of September 30, 2018,2020, accounts receivable from two2 customers accounted for 12%36% and 11%24% of total accounts receivable with no other single customer accounting for more than 10% of the accounts receivable balance. The Company maintains cash and cash equivalent bank deposit accounts which, at times, may exceed federally insured limits guaranteed by the Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses in such accounts. The Company limits its exposure to credit loss by depositing its cash with high credit quality financial institutions. The Company also invests cash in instruments that meet high credit quality standards, as specified in the Company’s policy guidelines such as money market funds, corporate bonds, municipal bonds and Certificates of Deposit. These guidelines also limit the amount of credit exposure to any one issue, issuer or type of instrument. It is generally the Company’s policy to invest in instruments that have a final maturity of no longer than three years, with a portfolio weighted average maturity of no longer than 18 months. 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. At As of September 30, 2019 2021 and 2018,2020, the amount of cash and cash equivalents was $18,819,078$13,167 and $11,063,091,$23,319, respectively. 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. At As of September 30, 2019 2021 and 2018,2020, the amount of restricted cash was $697,840$1,361 and $742,983,$677, respectively, which is included in Restricted Cash“Restricted cash” and Long-term Restricted Cash.“Long-term restricted cash” in the consolidated balance sheet.
MARKETABLE SECURITIES The Company accounts for investments in debt instruments as available-for-sale. Management determines the appropriate classification of such securities at the time of purchase and re-evaluates such classification as of each balance sheet date. Marketable securities are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive loss.income. The realized gains and losses on marketable securities are determined using the specific identification method. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS The Company carries its accounts receivable at their historical cost, less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts for estimated losses considering the following factors when determining if collection of a receivable is reasonably assured:probable: customer credit-worthiness, past transaction history with the customer, current economic industry trends and changes in customer payment terms. If the Company has no previous experience with the customer, the Company may obtain reports from various credit organizations to ensure that the customer has a history of paying its creditors. The Company may also request financial information to ensure that the customer has the means of making payment. If these factors do not indicate collection is reasonably assured,probable, revenue is deferred until collection becomes reasonably assured, which is generally upon receipt of cash. There was no deferred revenue at as of September 30, 20192021 or 20182020 as a result of collection issues. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. The Company determines allowances on a customer specific basis. At As of September 30, 2019 2021 and 2018,2020, the Company had an allowance for doubtful accounts of $126,593$127 and $150,000,$130, respectively. CONTRACT MANUFACTURERS The Company employs contract manufacturers for production of certain components and sub-assemblies. The Company may provide parts and components to such parties from time to time but recognizes no revenue or markup on such transactions. During fiscal years 20192021 and 2018,2020, the Company performed assembly of products in-house using components and sub-assemblies from a variety of contract manufacturers and suppliers. INVENTORIES Inventories are valued at the lower of cost or net realizable value. Cost is determined using a standard cost system whereby differences between the standard cost and purchase price are recorded as a purchase price variance in cost of revenues. Inventory is comprised of raw materials, assemblies and finished products intended for sale. The Company periodically makes judgments and estimates regarding the future utility and carrying value of inventory. The carrying value of inventory is periodically reviewed and impairments, if any, are recognized when the expected net realizable value is less than carrying value. The Company has inventory reserves for estimated obsolescence or unmarketable inventory, which is equal to the difference between the cost of inventory and the estimated market value, based upon assumptions about future demand and market conditions. The Company increased its inventory reserve by $133,532$183 during the year ended September 30, 2019 2021 for parts and demo equipment that may not be utilized. The Company decreasedincreased its inventory reserve $21,481by $37 during the year ended September 30, 2018 due to the disposal of obsolete inventory, net of additional excess2020 for parts and obsolescence reserves recorded.demo equipment that may not be utilized. EQUIPMENT AND DEPRECIATION Equipment is stated at cost. Depreciation on machinery and equipment and office furniture and equipment is computed over the estimated useful lives of two to seven years using the straight-line method. Leasehold improvements are amortized over the life of the lease. Upon retirement or disposition of equipment, the related cost and accumulated depreciation is removed, and a gain or loss is recorded. BUSINESS COMBINATIONS The acquisition method of accounting for business combinations requires the Company to use significant estimates and assumptions, including fair value estimates, as of the business combination date and to refine those estimates as necessary during the measurement period (defined as the period, not to exceed one year, in which the Company may adjust the provisional amounts recognized for a business combination). Under the acquisition method of accounting the Company recognizes separately from goodwill the identifiable assets acquired, the liabilities assumed generally at the acquisition date fair value. The Company measures goodwill as of the acquisition date as the excess of consideration transferred, which the Company also measures at fair value, over the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed. Costs that the Company incurs to complete the business combination such as investment banking, legal and other professional fees are not considered part of consideration and the Company charges them to general and administrative expense as they are incurred.
Under the acquisition method of accounting for business combinations, if the Company identifies changes to acquired deferred tax asset valuation allowances or liabilities related to uncertain tax positions during the measurement period and they relate to new information obtained about facts and circumstances that existed as of the acquisition date, those changes are considered a measurement period adjustment and the Company records the offset to goodwill. The Company records all other changes to deferred tax asset valuation allowances and liabilities related to uncertain tax positions in current period income tax expense. Refer to Note 4, Business Combinations for information regarding business combinations during the year ended September 30, 2021.
GOODWILL AND INTANGIBLE ASSETS INTANGIBLE ASSETS Identifiable intangible assets, which consist of technology, customer relationships, non-compete agreements, patents, tradenames and trademarks, are carried at cost less accumulated amortization. Intangible assets are amortized over their estimated useful lives, based on a number of assumptions including estimated periodic economic benefit and utilization. The estimated useful lives of identifiable intangible assets hashave been estimated to be between three and fifteen years. The carrying value of intangibles is periodically reviewed and impairments, if any, are recognized when the future undiscounted cash flows realized from the assets is less than its carrying value exceeds fair value. Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the acquired net tangible and intangible assets acquired. The Company evaluates goodwill for impairment on an annual basis in our fiscal fourth quarter or more frequently if indicators of impairment exist that would more likely than not reduce the fair value of a single reporting unit below itsthe carrying amount. The Company assesses qualitative factors in order to determine whether it is more likely than not that the fair value of a reporting unit is less than itsthe carrying amount. The qualitative factors evaluated by the Company include: macro-economic conditions of the local business environment, overall financial performance, and other entity specific factors as deemed appropriate. If, through this qualitative assessment, the conclusion is made that it is more likely than not that a reporting unit’s fair value is less than its carrying amount, a two-steptwo-step impairment test is performed. Management does not consider the value of goodwill to be impaired as of September 30, 2019. 2021. Refer to Note 8,9, Goodwill and Intangible Assets for more information. LEASES
Through September 30, 2019, leases entered into are classified as either capital or operating leases. At the time a capital lease is entered into, an asset is recorded, together with its related long-term obligation to reflect the purchase and financing. At September 30, 2019 and 2018, the Company had no capital lease obligations.
Adoption of new accounting standardLEASES
The Company will adoptadopted Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC Topic 842”) in the fiscal year beginning October 1, 2019. In accordance with the guidance in Topic 842, the Company recognizes lease liabilities and corresponding right-of-use-assets for all leases with terms of greater than 12 months. Leases with a term of 12 months or less will be accounted for in a manner similar to the guidance for operating leases prior to the adoption of Topic 842.Refer to Note 3, Recent Accounting Pronouncements13, Leases for more information. SHIPPING AND HANDLING COSTS Shipping and handling costs are included in cost of revenues. Shipping and handling costs invoiced to customers are included in revenue. Actual shipping and handling costs were $277,721$232 and $291,994$259 for the fiscal years ended September 30, 20192021 and 2018,2020, respectively. Actual revenues from shipping and handling were $277,888$266 and $169,184$241 for the fiscal years ended September 30, 2019 2021 and 2018,2020, respectively. ADVERTISING Advertising costs are charged to expense as incurred. The Company expensed $21,417incurred and $28,092were $193 and $263 for the years ended September 30, 2019 2021 and 2018, respectively, for advertising costs.2020, respectively. RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as incurred. WARRANTY RESERVES The Company warrants its products to be free from defects in materials and workmanship for a period of one year from the date of purchase. The warranty is generally limited. The Company currently provides direct warranty service. Some agreements with OEM customers, from time to time, may require that certain quantities of product be made available for use as warranty replacements. International market warranties are generally similar to the U.S. market. The Company also sells extended warranty contracts and maintenance agreements. The Company establishes a warranty reserve based on anticipated warranty claims at the time product revenues are 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. The warranty reserve was $150,229$146 and $99,216 at $126 as of September 30, 20192021 and 2018,2020, respectively.
INCOME TAXES The Company determines its income tax provision using the asset and liability method. Temporary differences are differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. A valuation allowance is recorded by the Company to the extent it is more likely than not that some portion or all of the deferred tax asset will not be realized. Significant management judgment is required in assessing the ability to realize the Company’s deferred tax assets. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income and the tax rates in effect at that time. Additional information regarding income taxes appears in Note 12,14, Income Taxes. IMPAIRMENT OF LONG-LIVED ASSETS Long-lived assets and identifiablefinite-lived intangibles held for use are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sumcarrying value of undiscounted expected future cash flows is less thanan intangible asset exceeds the carrying amount of the asset,fair value, or if changes in facts and circumstances indicate this,impairment, an impairment loss is measured and recognized using the asset’s fair value. There was no impairment of long-lived assets for the yearyears ended September 30, 2019. During the year ended 2021 and September 30, 2018, the Company determined that certain patents were impaired. The impaired patents related to products no longer sold by the Company and totaled $11,133. 2020. Refer to Note 5,6, Fair Value Measurements and Note 8,9, Goodwill and Intangible Assets for information related to impairment of long-lived assets. SEGMENT INFORMATION The Company is engaged in the design, developmenta global provider of critical communications hardware and commercialization of directedsoftware solutions designed to alert, inform, and multidirectional sound technologies, voice broadcast products and location-based mass messaging solutions for emergency warning and workforce management.protect. The Company operates in two2 business segments: LRADHardware and Genasys SpainSoftware and its principleprincipal markets are North and South America, Europe, the Middle East and Asia. As reviewed by the Company’s chief operating decision maker, the Company evaluates the performance of each segment based on sales and operating income. Cash and cash equivalents, marketable securities, accounts receivable, inventory, property and equipment, deferred tax assets, goodwill and intangible assets are primary assets identified by segment. The accounting policies for segment reporting are the same for the Company as a whole and transactions between the two2 operating segments are eliminated in consolidation. Refer to Note 17,19, Segment Information, for additional information.
NET INCOME (LOSS) PER SHARE Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted net (loss) income per share reflects the potential dilution of securities that could occur if outstanding securities convertible into common stock were exercised or converted. Refer to Note 16,18, Net Income (Loss) Per Share, for additional information. DERIVATIVES The Company does not hold derivative financial instruments of a speculative nature or for trading purposes. The Company records all derivatives on the Consolidated Balance Sheet at fair value using available market information and other observable data. See Note 6, Fair Value Measurements, for additional information. FOREIGN CURRENCY TRANSLATION The Company’s reporting currency is U.S. dollars. The functional currency of the Company is the U.S. dollar. The functional currency of Genasys Spain is the Euro.Euro and the function currency of Genasys Canada is the Canadian dollar. The Company translates the assets and liabilities of Genasys Spain and Genasys Canada at the exchange rates in effect on the balance sheet date. The Company translates the revenue, costs and expenses of Genasys Spain and Genasys Canada at the average rates of exchange in effect during the period. The Company includes translation gains and losses in the stockholders’ equity section of the Company’s balance sheets in accumulated other comprehensive income or loss. Transactions undertaken in other currencies which have not been material, are translated using the exchange rate in effect as of the transaction date and any exchange gains and losses resulting from these transactions, are included in the statements of operations. The translation lossgain for the period was $233,718$260 resulting from transactions between LRADGenasys U.S. and Genasys Spain and Genasys Communications Canada ULC, the timing of transactions in relation to changes in exchange rates and the decreasefluctuation in the exchange rate between the Euroforeign currencies and the U.S. dollar. Transaction gains and losses were not significant for any period presented. SHARE-BASED COMPENSATION The Company recognized share-based compensation expense related to qualified and non-qualified stock options issued to employees, directors and directorsconsultants over the expected vesting term of the stock-based instrument based on the grant date fair value. Forfeitures are estimated at the time of the grant and revised in subsequent periods if actual forfeitures differ from those estimates or if the Company updates its estimated forfeiture rate. Refer to Note 14,16, Share-based Compensation, for additional information.
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 for the year ended September 30, 2020, as a result of this misstatement. Further, there was no impact to the consolidated financial statements as of, and for the year ended September 30, 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 consolidated balance sheet as of September 30, 2021, or the previously issued consolidated balance sheet for the year ended September 30, 2020, and therefore the misstatement was corrected in the accompanying consolidated balance sheet for the year ended September 30, 2020. All financial information contained in the accompanying notes to these consolidated financial statements has been revised to reflect the correction of this error. RECLASSIFICATIONS Where necessary, the prior year’s information has been reclassified to conform to the fiscal year 20192021 statement presentation. These reclassifications had no effect on previously reported results of operations or accumulated deficit. SUBSEQUENT EVENTS Management has evaluatedevaluates events subsequent to September 30, 20192021, through the date the accompanying consolidated financial statements wereare filed with the Securities and Exchange Commission andCommission. And noted that there have been no events or transactions which would affect the Company’s consolidated financial statements for the year ended September 30, 2019.2021.
3.3. 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(“Topic 326”), 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)326), Derivatives and Hedging (Topic 815)815) and Leases (Topic 842)842), which extends the effective date of Topic 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 fiscal year beginning October 1, 2023, and early adoption is permitted. The Company is currently reviewinghas not completed its review of the impact of this standard to assess the impact on its consolidated financial statements and related disclosures. In June 2018,statements. However, based on the FASB issued ASU No. 2018-7, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-7”), which amends and expands Topic 718 to include share-based payment transactions for acquiring goods and servicesCompany’s history of immaterial credit losses from nonemployees. The standard requires entities to measure nonemployee share-based payment transactions by estimating the fair value of the equity instrument it is obligated to issue, measure the equity-classified nonemployee share-based payment awards at the grant date, and consider the probability of satisfying performance conditions when accounting for nonemployee share based payment awards with such conditions. ASU 2018-7 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that fiscal year. Accordingly, this guidance was effective for the Company in the fiscal year beginning October 1, 2019. The Companytrade receivables, management does not anticipate that adoption will have a material impact on its consolidated financial statements and related disclosures.
In February 2018, the FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220). The amendments in this ASU allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act and will improve the usefulness of information reported to financial statement users. However, because the amendments only relate to the reclassification of the income tax effects of the Tax Cuts and Jobs Act, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. The amendments in this update also require certain disclosures about stranded tax effects. The guidance is effective for fiscal years beginning after December 15, 2018 with early adoption permitted, including interim periods within that fiscal year. Accordingly, this is effective for the Company in the fiscal year beginning October 1, 2019. The Company expects expect that the adoption of this ASUstandard will not have a material impacteffect on itsthe Company’s consolidated financial statements.
In February 2016, March 2020, the FASB issued ASU No. 2016-02,2020-04, Leases (Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU No.2020-04 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.2020-04 was subsequently amended by ASU No.2021-01,“ASCReference Rate Reform (Topic 842”848), Scope, which issued new guidance relatedrefines the scope of Topic 848 and permits optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships. The amendments of these updates are available to leasesall entities as of March 12, 2020 through December 31, 2022. The Company will adopt this standard when LIBOR is discontinued. The Company does not expect that outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than 12 months. Leases with a term of 12 months or less will be accounted for in a manner similar to the guidance for operating leases prior to the adoption of ASC 842. ASC 842 requires entities to recognize and measure leases existing at, or entered into after,this standard will have a material effect on the beginning of the earliest comparative period presented using a modified retrospective approach, with certain practical expedients available. In July 2018, the FASB issued Accounting Standards Updated No. 2018-11 (“ASU 2018-11”), which offers a practical expedient that allows entities the option to apply the provisions of ASC 842 by recognizing a cumulative effect adjustment at the effective date of adoption without adjusting the prior comparative periods presented. In March 2019, the FASB issued Accounting Standards Update 2019-01 (“ASU 2019-01”), which explicitly provides disclosure relief for interim periods during the year the standard is adopted. Under the new guidance, companies are not required to disclose the effect of such adoption in interim periods on certainCompany’s consolidated financial statement items for periods retrospectively adjusted.statements. The new guidance was effective for the Company beginning October 1, 2019. The Company adopted ASC 842 by applying modified retrospective transition approach. Under this method, financial information related to periods prior to adoption will be as originally reported under the then-current standard (ASC 840, Leases). The Company elected the following practical expedients:
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| The transitional practical expedients, which must be elected as a package and applied consistently to all leases. In electing this practical expedient package the Company is not required to:
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| reassess whether an existing or expired contract is or contains a lease
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| reassess the lease classification for any expired or existing leases and
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| reassess initial direct lease costs for all leases that commenced before the adoption
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| Short-term lease practical expedient in which the Company can elect not to apply the recognition requirements of ASC 842 to short-term leases.
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The most significant impact on our financial statements will be the recognition of a Right of Use (“ROU”) asset and lease liability for our operating leases, primarily related to the Company’s facility lease described in Note 13, Commitments and Contingencies. In addition, a portion of our existing leases are denominated in currencies other than the U.S. dollar. As a result, the associated lease liabilities will be remeasured using the current exchange rate in the applicable future reporting periods, which may result in foreign exchange gains or losses. The Company does not believe ASC 842 will materially impact our consolidated results of operations or cash flows. As a result of adopting ASC 842 effective October 1, 2019, the Company recorded an initial measurement of approximately $7.8 million of operating lease liabilities, and approximately $5.8 million of corresponding operating ROU assets, net of tenant improvement allowances. There was no cumulative effect adjustment to retained earnings as a result of the transition to ASC 842.
New pronouncements adopted In November 2016,August 2018, the FASB issued ASU No. 2016-18, Statement2018-13,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 Cash Flows (Topic 230), Restricted Cash, which amends Topic 230significant unobservable inputs used to adddevelop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or clarify guidance on the classification and presentation of restricted cashannual period presented in the statementinitial fiscal year of cash flows. The standard requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalentsadoption. All other amendments should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.applied retrospectively to all periods presented upon their effective date. The provisions of thisnew guidance are to be applied using a retrospective transition method to each period presented. ASU No. 2016-18 wasis effective for annual reporting periodsall entities for fiscal years beginning after December 15, 2017, 2019, and interim periods within those years, with early adoption permitted.fiscal years. The Company adopted ASU No. 2016-18 effective January2018-13 on October 1, 2018. For2020, with no impact to the years ended September 30, 2019 and 2018, restricted cash balances are due to a security deposit for the Company’s new facility lease, as described in Note 13, Commitments and Contingencies, and restricted cash held as collateral for notes payable, as described in Note 11, Debt. The adoption did not have a material impact on the Company's consolidated financial position, results of operations and cash flows, other than the impact discussed above.statements. In March 2016, January 2017, the FASB issued ASU No. 2016-09,2017-04, Compensation – Stock Compensation (Topic 718)Intangibles—Goodwill and Other(Topic 350): ImprovementsSimplifying the Test for Goodwill Impairment, which modifies the concept of impairment from the condition that exists when the carrying amount of a reporting unit exceeds its fair value. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to Employee Share-Based Payment Accounting.all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Under Topic 350, entities should now calculate any goodwill impairment by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge to the goodwill for the amount by which the carrying amount exceeds the reporting unit's fair value. This guidance changes how companies accountis effective for annual periods beginning after December 15, 2019. The Company adopted ASU No.2017-04 on a prospective basis on October 1, 2020, with no impact on the consolidated financial statements. 4. BUSINESS COMBINATIONS Zonehaven On June 7, 2021, the Company completed the acquisition of Zonehaven Inc. (“Zonehaven”) pursuant to the terms of an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, ZH Acquisition I Inc., a Delaware corporation and a wholly-owned subsidiary of the Company, merged with and into Zonehaven, with Zonehaven surviving the merger. Immediately following such merger, ZH Acquisition II LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company, merged with and into Zonehaven, with ZH Acquisition II LLC, changing its name to Zonehaven LLC and continuing as a wholly-owned subsidiary of the Company and with all the properties, rights, privileges, powers and franchises of Zonehaven vesting in such subsidiary, and all debts, liabilities and duties of Zonehaven, becoming the debts, liabilities and duties of such subsidiary. As a result of the transaction, the Zonehaven business is operated through Zonehaven LLC, a wholly-owned subsidiary of the Company. Zonehaven provides planning, training, and resources to first responders, public safety agencies, and communities to manage evacuations and repopulations successfully. The Company believes the acquisition of Zonehaven will expand the Company’s enterprise software solutions and enhance the Company’s unified multi-channel critical communications platform. The Zonehaven acquisition was accounted for as a business combination using the acquisition method pursuant to Accounting Standards Codification (“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 aspectscases may be subject to revision based on the final determination of share-based paymentsfair value. The consideration consisted of the following: Cash paid | | $ | 11,481 | | Common stock issued | | | 10,938 | | Shareholder representative reserve payable | | | 150 | | | | | $ | 22,569 | |
The Company funded the cash portion of the total consideration with available cash on hand. The Company also issued 2,165,824 shares of the Company’s common stock to employees. Among other things, under the new guidance, companies will no longer record excess tax benefits and certain tax deficiencies in additional paid-in-capital (“APIC”), but will instead record such items as income tax expense or benefitformer owners of Zonehaven. The fair value of the Company’s stock on the closing date was $5.05, resulting in the income statement,addition of $10,938 to additional-paid-in-capital. The shareholder representative reserve payable is a current liability and APIC pools will be eliminated. Companies will apply this guidance prospectively. Another component of the new guidance allows companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards, whereby forfeitures can be estimated, as required today, or recognized when they occur. If elected, the change to recognize forfeitures when they occur needs to be adopted using a modified retrospective approach. The guidance was effective for the Companyrecorded in the firstcurrent portion of accrued liabilities as of September 30, 2021.
The Company incurred $140 in expenses related to this transaction through September 30, 2021. These expenses were recorded in selling, general and administrative expenses in the consolidated statement of operations as follows: $40 in the fourth quarter of fiscal 2018. The adoption of this standard resulted2021, $98 in the recognitionthird quarter of $1.1 millionfiscal 2021 and $2 in the second quarter of gross deferred taxfiscal 2021. Purchase price allocation Assets acquired | | | | | Accounts receivable | | $ | 120 | | Deferred tax asset | | | 106 | | Intangible assets | | | 10,100 | | Goodwill | | | 15,538 | | Total assets acquired | | $ | 25,864 | | | | | | | | Liabilities assumed | | | | | Accounts payable | | $ | 194 | | Accrued liabilities | | | 372 | | Deferred tax liability | | | 2,729 | | Total liabilities assumed | | | 3,295 | | Net assets acquired | | $ | 22,569 | |
The estimated fair value of the identifiable intangible assets relatedacquired and their estimated useful lives are as follows: | | | Fair Value | | | Estimated Useful Lives (in years) | | Developed Technology | | $ | 8,800 | | | | 7 | | Trade Names | | | 400 | | | | 5 | | Customer Relationships | | | 900 | | | | 5 | | | | | $ | 10,100 | | | | | |
Identifiable intangible assets consist of certain technology, trade name and customer relationships purchased from Zonehaven. Identifiable intangible assets are amortized over their estimated useful lives based upon several assumptions, including the estimated period of economic benefit and utilization. The weighted average amortization period for identifiable intangible assets acquired is 6.7 years. These intangible assets are classified as Level 3 in the ASC topic 820three-tier fair value hierarchy. The goodwill for Zonehaven is attributable to combining the Company’s existing emergency communications solutions with the software and software development capabilities of Zonehaven to enhance product offerings. Goodwill is also attributable to the historical excessskill 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 Zonehaven acquisition will not be deductible for tax benefits from stockpurposes. Amika Mobile Asset Purchase 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 and enterprise critical communications based compensation that was not previously included in deferred tax assets and a corresponding increase inOttawa, Canada. The Company believes the Amika Mobile asset purchase will expand the Company’s valuation allowance.enterprise software solutions and enhance the Company’s unified multi-channel critical communications platform. In May 2014,The Amika Mobile asset purchase was accounted for as a business combination using the FASB issued ASU No. 2014-09, Revenue from Contractsacquisition 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 Customers (“ASU 2014-09”), which requires an entitythe excess of the purchase consideration over the fair value of net assets acquired recognized as goodwill.
The consideration consisted of the following: Cash paid | | $ | 4,367 | | Acquisition holdback liability | | | 613 | | Common stock to be issued | | | 3,431 | | | | | $ | 8,411 | |
Under the terms of the Asset Purchase Agreement, the Company was required to recognizedeposit a holdback liability in the amount of revenueCAD$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 which it expectsamounts withheld for actual, pending or potential claims. The Company also agreed to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. generally accepted accounting principles when it becomes effective. In July 2015, the FASB deferred the effective dateissue 191,267 shares of the standard byCompany’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 year; however, it provided companiespaid-in-capital. During the optiontwelve months ended September 30, 2021, the Company accelerated the issuance of 365,109 of such shares of common stock to adopt one year earlier, commensuratea former owner of the Amika Mobile assets. 208,692 shares of the Company’s common stock remain subject to issuance under this obligation. The cash portion of the purchase price was funded from cash on hand. The Company incurred $264 in expenses related to this transaction through September 30, 2021. These expenses were recorded in selling, general and administrative expenses in the 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. Assets Acquired | | | | | Prepaid expenses | | $ | 2 | | Property and equipment | | | 22 | | Operating lease right of use asset | | | 248 | | Intangible Assets | | | 2,820 | | Goodwill | | | 5,590 | | Total assets acquired | | $ | 8,682 | | | | | | | | Liabilities assumed | | | | | Accrued liabilities | | $ | 23 | | Operating lease liability | | | 248 | | Total liabilities assumed | | | 271 | | Net Assets acquired | | $ | 8,411 | |
The estimated fair value of the identifiable intangible assets acquired and their estimated useful lives are as follows: | | | Fair Value | | | Estimated Useful Lives (in years) | | Developed technology | | $ | 2,500 | | | | 7 | | Customer relationships | | | 320 | | | | 7 | | | | | $ | 2,820 | | | | | |
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 820three-tier fair value hierarchy. The goodwill for Amika Mobile is attributable to combining the Company’s existing emergency communications solutions with the original effective date. Accordingly,software and software development capabilities of Amika Mobile to enhance product offerings. Goodwill is also attributable to the standard was effectiveskill level of the acquired workforce. Goodwill from the Amika Mobile asset purchase will not be deductible for tax purposes. Pro forma results of operations for these acquisitions have not been presented because they are not material to the Companyconsolidated results of operations, either individually or in the fiscal year beginning October 1, 2018. Subsequently, the FASB issued additional guidance (ASUs 2015-14; 2016-08; 2016-10; 2016-12; 2016-13; 2016-20). The adoption of this guidance by the Company, effective October 1, 2018, did not have a material impact on the Company’s consolidated financial statements. Refer to Note 4, Revenue Recognition, for further detail.aggregate. 4. 5.REVENUE RECOGNITION
The Company adopted ASU 2014-092014-09 and its amendments on October 1, 2018,2018. 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: | | 1. | Identify the contract(s) with customers |
| | 2. | Identify the performance obligations |
| | 3. | Determine the transaction price |
| | 4. | Allocate the transaction price to the performance obligations |
| | 5. | Recognize revenue when the performance obligations have been satisfied |
Topic 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, 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 Revenue 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 our 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. Our customers do not have a right to return product unless the product is found defective and therefore our 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. 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 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 fair 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.
The Company disaggregates revenue by reporting segment (LRAD(Hardware and Genasys Spain)Software) and geographically to depict the nature of revenue in a manner consistent with our business operations and to be consistent with other communications and public filings. Refer to Note 17,19, Segment Information and Note 18,20, Major Customers, Suppliers and Related Information for additional details of revenues by reporting segment and disaggregation of revenue. Contract Assets and Liabilities 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 ASC 606 and, at times, recognizes revenue in advance of the time when contracts givesgive us 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 tabletables below showsreflect the balancebalances of contract assets and liabilities as of September 30, 2019 2021 and September 30, 2018, 2020, including the change between the periods. There were 0 contract assets as of September 30, 2021 and 2020. The current portion of contract liabilities and the non-current portion are included in “Accrued liabilities” and “Other liabilities, noncurrent”, respectively, on the accompanying Consolidated Balance Sheets. Refer to Note 10,11, Accrued and Other Liabilities for additional details. The Company’s contract assets are as follows:
| | | Prepaid maintenance | | | | | agreement | | Balance at September 30, 2018 | | $ | 93,750 | | New prepaid maintenance agreements | | | - | | Recognition of expense as a result of performing services | | | (93,750 | ) | Balance at September 30, 2019 | | $ | - | |
The Company’s contract liabilities are as follows: | | | Customer deposits | | | Deferred revenue | | | Total contract liabilities | | | Customer deposits | | Deferred revenue | | Total contract liabilities | | Balance at September 30, 2018 | | $ | 199,596 | | | $ | 536,458 | | | $ | 736,054 | | | Balance at September 30, 2020 | | | $ | 3,683 | | | $ | 1,024 | | | $ | 4,707 | | New performance obligations | | | 7,241,768 | | | | 1,627,331 | | | | 8,869,099 | | | 15,511 | | | 1,899 | | | 17,410 | | Recognition of revenue as a result of satisfying performance obligations | | | (2,378,273 | ) | | | (1,083,261 | ) | | | (3,461,534 | ) | | (10,493 | ) | | (1,503 | ) | | (11,996 | ) | Effect of exchange rate on deferred revenue | | | - | | | | (21,121 | ) | | | (21,121 | ) | | | 0 | | | 8 | | | 8 | | Balance at September 30, 2019 | | $ | 5,063,091 | | | $ | 1,059,407 | | | $ | 6,122,498 | | | Balance at September 30, 2021 | | | $ | 8,701 | | | $ | 1,428 | | | $ | 10,129 | | Less: non-current portion | | | - | | | | (550,885 | ) | | | (550,885 | ) | | | 0 | | | (308 | ) | | (308 | ) | Current portion at September 30, 2019 | | $ | 5,063,091 | | | $ | 508,522 | | | $ | 5,571,613 | | | Current portion at September 30, 2021 | | | $ | 8,701 | | | $ | 1,120 | | | $ | 9,821 | |
Remaining Performance Obligations Remaining performance obligations related to 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 September 30, 2019, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $6,122,498.$10,129. The Company expects to recognize revenue on approximately $5,571,613$9,821 or 91%97% of the remaining performance obligations over the next 12 months, and the remainder is expected to be recognized thereafter. Practical Expedients 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 provided to the customer.
5. 6.FAIR VALUE MEASUREMENTS
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: | Level1:
| Inputs are based on quoted market prices for identical assets or liabilities in active markets at the measurement date.
|
| | Level 1: | Inputs are based on quoted market prices for identical assets or liabilities in active markets at the measurement date. |
| Level 2: | Inputs include quoted prices for similar assets or liabilities in active markets and/or quoted prices for identical or similar assets or liabilities in markets that are not active near the measurement date. |
| | Level 3: | Inputs include management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation. |
The fair value of the majority of the Company’s cash equivalents and marketable securities was determined based on “Level 1” inputs. The fair value of certain marketable securities, long-term debt, hedge fund investments, and derivative contracts were determined based on “Level 2”Level 1 and Level 2 inputs. The valuation techniques used to measure the fair value of the “Level 2” instruments were valued based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data. The Company does 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 financial instruments measured at fair value on a recurring basismarketable securities in the “Level 3” category. Level 3 category as of September 30, 2021 or September 30, 2020. 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 years ended September 30, 2019 2021 and 2018.2020. Instruments Measured at Fair Value on a Recurring 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 September 30, 2019 2021 and 2018.2020. 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. | | | September 30, 2019 | | | September 30, 2021 | | | | | Cost Basis | | | Unrealized Gain | | | Fair Value | | | Cash Equivalents | | | Short-term Securities | | | Long-term Securities | | | Cost Basis | | | Unrealized Gain (Loss) | | | Fair Value | | | Cash Equivalents | | | Short-term Securities | | | Long-term Securities | | Level 1: | | | | | | | | | | | | | | | | | | | | | | | | | | Money market funds | | $ | 275,538 | | | $ | - | | | $ | 275,538 | | | $ | 275,538 | | | $ | - | | | $ | - | | | Money Market Funds | | | $ | 932 | | | $ | 0 | | | $ | 932 | | | $ | 932 | | | $ | - | | | $ | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Level 2: | | | | | | | | | | | | | | | | | | | | | | | | | | Certificates of deposit | | | 971,592 | | | | - | | | | 971,592 | | | | - | | | | 499,000 | | | | 472,592 | | | 1,494 | | | 0 | | | 1,494 | | | 0 | | | 694 | | | 800 | | Municipal securities | | | 240,463 | | | | 205 | | | | 240,668 | | | | - | | | | 80,336 | | | | 160,332 | | | 5,139 | | | (1 | ) | | 5,138 | | | 0 | | | 4,205 | | | 933 | | Corporate bonds | | | 3,856,766 | | | | 11,157 | | | | 3,867,923 | | | | - | | | | 3,116,028 | | | | 751,895 | | | | 928 | | | | 1 | | | | 929 | | | | 0 | | | | 787 | | | | 142 | | Subtotal | | | 5,068,821 | | | | 11,362 | | | | 5,080,183 | | | | - | | | | 3,695,364 | | | | 1,384,819 | | | | 7,561 | | | | 0 | | | | 7,561 | | | | 0 | | | | 5,686 | | | | 1,875 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 5,344,359 | | | $ | 11,362 | | | $ | 5,355,721 | | | $ | 275,538 | | | $ | 3,695,364 | | | $ | 1,384,819 | | | $ | 8,493 | | | $ | 0 | | | $ | 8,493 | | | $ | 932 | | | $ | 5,686 | | | $ | 1,875 | |
| | | September 30, 2020 | | | | | Cost Basis | | | Unrealized Gain | | | Fair Value | | | Cash Equivalents | | | Short-term Securities | | | Long-term Securities | | Level 1: | | | | | | | | | | | | | | | | | | | | | | | | | Money Market Funds | | $ | 365 | | | $ | 0 | | | $ | 365 | | | $ | 365 | | | $ | - | | | $ | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | Level 2: | | | | | | | | | | | | | | | | | | | | | | | | | Certificates of deposit | | | 1,195 | | | | 0 | | | | 1,195 | | | | 0 | | | | - | | | | 1,195 | | Municipal securities | | | 3,777 | | | | 4 | | | | 3,781 | | | | 0 | | | | 2,431 | | | | 1,350 | | Corporate bonds | | | 3,091 | | | | 3 | | | | 3,094 | | | | 0 | | | | 1,834 | | | | 1,260 | | Subtotal | | | 8,063 | | | | 7 | | | | 8,070 | | | | 0 | | | | 4,265 | | | | 3,805 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 8,428 | | | $ | 7 | | | $ | 8,435 | | | $ | 365 | | | $ | 4,265 | | | $ | 3,805 | |
| | | September 30, 2018 | | | | | Cost Basis | | | Unrealized Gain | | | Fair Value | | | Cash Equivalents | | | Short-term Securities | | | Long-term Securities | | Level 1: | | | | | | | | | | | | | | | | | | | | | | | | | Money market funds | | $ | 410,393 | | | $ | - | | | $ | 410,393 | | | $ | 410,393 | | | $ | - | | | $ | - | | | | | | | | | | | | | | | | | | | | | | | | | | | | Level 2: | | | | | | | | | | | | | | | | | | | | | | | | | Certificates of deposit | | | 499,000 | | | | - | | | | 499,000 | | | | - | | | | - | | | | 499,000 | | Corporate bonds | | | 4,302,661 | | | | (8,945 | ) | | | 4,293,716 | | | | - | | | | 3,592,175 | | | | 701,541 | | Subtotal | | | 4,801,661 | | | | (8,945 | ) | | | 4,792,716 | | | | - | | | | 3,592,175 | | | | 1,200,541 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 5,212,054 | | | $ | (8,945 | ) | | $ | 5,203,109 | | | $ | 410,393 | | | $ | 3,592,175 | | | $ | 1,200,541 | |
Instruments Measuredmeasured at Fair Value on a Non-Recurring Basis AssetsNonfinancial assets: Nonfinancial assets such as goodwill, other intangible assets, long-lived assets held and liabilities thatused, and right-of-use assets (“ROU assets”) are measured at fair value onwhen there is an indicator of impairment and recorded at fair value only when impairment is recognized or for a non-recurring basis includebusiness combination.
Goodwill and intangible assets and goodwill, which are recognized at fair value during the period in which an acquisition is completed, from updated estimates and assumptions 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 unobservable inputs. In the event of an impairment, theThe Company determinesestimates the fair value of the goodwill and intangiblethese long-lived assets usingon a discounted cash flownon-recurring basis based on a market valuation approach, which contains significant unobservable inputs and therefore is considered a Level 3 fair value measurement. The unobservable inputsengaging independent valuation experts to assist in the analysis generally include future cash flow projections and a discount rate.determination of fair value. The following table presents categories of long-livednonfinancial assets that were subject to non-recurring fair value measurementsmeasurement during the yeartwelve months ended September 30, 2019:2021. There were no business combinations or indicators of impairment for the twelve months ended September 30, 2020. Certain intangible assets, operating lease ROU assets and goodwill are subject to foreign currency translation adjustments. | | | Fair Value Measurements at September 30, 2019 | | | | | Carrying Value | | | Active Markets for Identifiable Assets (Level 1) | | | Observable Inputs (Level 2) | | | Unobservable Inputs (Level 3) | | | Non-Cash Impairment Loss | | Intangible assets from Genasys acquisition | | $ | 1,142,814 | | | $ | - | | | $ | - | | | $ | 1,142,814 | | | $ | - | | Goodwill | | $ | 2,305,750 | | | $ | - | | | $ | - | | | $ | 2,305,750 | | | $ | - | | Patents | | $ | 32,820 | | | $ | - | | | $ | - | | | $ | 32,820 | | | $ | - | |
| | | Carrying Value | | | Level 1 | | | Level 2 | | | Level 3 | | Goodwill from Zonehaven acquisition | | $ | 15,538 | | | $ | 0 | | | $ | 0 | | | $ | 15,538 | | Intangible assets from Zonehaven acquisition | | $ | 9,594 | | | $ | 0 | | | $ | 0 | | | $ | 9,594 | | Goodwill from Amika Mobile asset purchase | | $ | 5,853 | | | $ | 0 | | | $ | 0 | | | $ | 5,853 | | Intangibles from Amika Mobile asset purchase | | $ | 2,531 | | | $ | 0 | | | $ | 0 | | | $ | 2,531 | | Operating lease ROU asset from Amika Mobile asset purchase | | $ | 248 | | | $ | 0 | | | $ | 0 | | | $ | 248 | | Holdback liability from Amika Mobile asset purchase | | $ | 687 | | | $ | 0 | | | $ | 0 | | | $ | 687 | |
Holdback Liability: In connection with the Amika Mobile asset purchase, the Company recorded a holdback liability related to potential future adjustments to assets and liabilities, misrepresentations and indemnifications against third-party claims. Adjustments of up to CAD$1,000 (USD$787) will be deducted from the asset purchase holdback liability for up to three years from the closing date. The holdback liability was recorded at the present value which was the fair value at the acquisition date. The Company did not recognize non-recurring fairengaged independent valuation experts to assist in determining the present value adjustments relatedof the holdback liability. The expected future payment was discounted using a rate representative of the Company’s payment risk and credit rating. Accretion is recorded in each subsequent reporting period based on the discount factor used to arrive at the impairment of intangible assets for the year ended September 30, 2019. The $140,240original fait value. This change in fair value is recorded in the accompanying consolidated statement of Goodwill from operations. The changes in the carrying amount of the holdback liability is as follows: Balance at acquisition date | | $ | 613 | | Accretion | | | 46 | | Currency translation | | | 28 | | Balance at September 30, 2021 | | $ | 687 | |
Foreign currency forward contract: In August 2020, 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. As of September 30, 20182020, 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 of the fair value hierarchy. The valuation techniques used to measure the fair value were based on quoted market prices. On October 1, 2020, the foreign currency forward contract was settled 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 of $76 was recorded in accrued liabilities in the consolidated balance sheet as of September 30, 2019 is due to the change in foreign currency rates. The following table presents categories of long-lived assets that were subject to non-recurring fair value measurements during the year ended September 30, 2018:2020.
| | | Fair Value Measurements at September 30, 2018 | | | | | Carrying Value | | | Active Markets for Identifiable Assets (Level 1) | | | Observable Inputs (Level 2) | | | Unobservable Inputs (Level 3) | | | Non-Cash Impairment Loss | | Intangible assets from Genasys acquisition(a) | | $ | 1,520,006 | | | $ | - | | | $ | - | | | $ | 1,520,006 | | | $ | - | | Goodwill from Genasys acquisition(b) | | $ | 2,445,990 | | | $ | - | | | $ | - | | | $ | 2,445,990 | | | $ | - | | Patents(c) | | $ | 37,340 | | | $ | - | | | $ | - | | | $ | 37,340 | | | $ | (11,133 | ) |
| (a)
| Represents acquired intangible assets from the acquisition of Genasys Spain. There was no impairment related to these assets. Refer to Note 8, Goodwill and Intangible Assets, for more information.
|
| (b)
| Represents acquired goodwill from the acquisition of Genasys Spain. There was no impairment related to these assets. Refer to Note 8, Goodwill and Intangible Assets, for more information.
|
| (c)
| During the year ended September 30, 2018, the Company determined that certain patents were impaired. The impaired patents related to products no longer sold by the Company.
|
6.7. INVENTORIES
Inventories consisted of the following: | | | September 30, | | | | | 2019 | | | 2018 | | Raw materials | | $ | 5,060,331 | | | $ | 4,487,273 | | Finished goods | | | 998,607 | | | | 1,768,544 | | Work in process | | | 306,809 | | | | 875,417 | | Inventories, gross | | | 6,365,747 | | | | 7,131,234 | | Reserve for obsolescence | | | (530,584 | ) | | | (397,051 | ) | Inventories, net | | $ | 5,835,163 | | | $ | 6,734,183 | |
The Company relies on one supplier for compression drivers for its LRAD products and is making efforts to obtain 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 find an alternative supplier.
| | | September 30, | | | | | 2021 | | | 2020 | | Raw materials | | $ | 5,449 | | | $ | 5,220 | | Finished goods | | | 842 | | | | 841 | | Work in process | | | 877 | | | | 456 | | Inventories, gross | | | 7,168 | | | | 6,517 | | Reserve for obsolescence | | | (752 | ) | | | (568 | ) | Inventories, net | | $ | 6,416 | | | $ | 5,949 | |
7.8. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following: | | | September 30, | | | September 30, | | | | | 2019 | | | 2018 | | | 2021 | | | 2020 | | Office furniture and equipment | | $ | 1,332,443 | | | $ | 1,326,784 | | | $ | 1,261 | | | $ | 1,181 | | Machinery and equipment | | | 1,223,726 | | | | 1,095,099 | | | 1,270 | | | 1,184 | | Leasehold improvements | | | 2,019,794 | | | | - | | | 2,154 | | | 2,056 | | Construction in progress | | | 7,565 | | | | 2,001,539 | | | | 0 | | | | 8 | | Property and equipment, gross | | | 4,583,528 | | | | 4,423,422 | | | 4,685 | | | 4,429 | | Accumulated depreciation | | | (2,314,022 | ) | | | (1,974,697 | ) | | | (2,930 | ) | | | (2,499 | ) | Property and equipment, net | | $ | 2,269,506 | | | $ | 2,448,725 | | | $ | 1,755 | | | $ | 1,930 | |
| | | Year Ended September 30, | | | | | 2019 | | | 2018 | | Depreciation expense | | $ | 521,492 | | | $ | 251,186 | |
At September 30, 2018, construction in progress primarily included leasehold improvement costs incurred to renovate and prepare the Company’s new facility for its operations. Refer to Note 13, Commitments and Contingencies, for more information on the facility lease.
| | | Years ended September 30, | | | | | 2021 | | | 2020 | | Depreciation expense | | $ | 406 | | | $ | 498 | |
8. 9.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 Companyhardware products for enhanced offerings and the skill level of the workforce.acquired workforces. The Company periodically reviews goodwill for impairment in accordance with relevant accounting standards. During the year ended September 30, 2021, the Company added a total of $21,128 in goodwill related to the Zonehaven acquisition and the Amika Mobile asset purchase. As of September 30, 2021 and September 30, 2020, goodwill was $23,834 and $2,472, respectively. There were no additions or0 impairments to goodwill during the yearyears ended September 30, 2019. At September 30, 2019 2021 and September 30, 2018, goodwill was $2,305,750 and $2,445,990, respectively.2020. During the year ended September 30, 2018, the Company determined that certain patents were impaired. These patents supported products that are no longer sold by the Company. The Company recorded a non-cash loss on the impairment of these patents of $11,133 for the year ended September 30, 2018. There was no impairment loss for the year ended September 30, 2019.
Intangible assets and goodwill related to Genasys Spain are translated from EurosEuro to U.S. dollars at the balance sheet date. The net impact of foreign currency exchange differences arising during year ended September 30, 2019,the period related to goodwill and intangible assets was a reductiondecrease of $219,325.$32. Intangible assets and goodwill related to Amika Mobile are translated from Canadian dollars to U.S. dollars at the balance sheet date. The net impact of foreign currency exchange differences arising during the year ended September 30, 2021, related to goodwill and intangible assets from the Amika Mobile asset purchase was an increase of $398. During the year ended September 30, 2021, the Company added $13,052 in intangible assets related to the Zonehaven acquisition and the Amika Mobile asset purchase. The changes in the carrying amount of goodwill by segment for the year ended September 30, 2021, are as follows: | | | Hardware | | | Software | | | Total | | Balance as of September 30, 2020 | | $ | 0 | | | $ | 2,472 | | | $ | 2,472 | | Acquisitions | | | 0 | | | | 21,128 | | | | 21,128 | | Currency translation | | | 0 | | | | 234 | | | | 234 | | Balance as of September 30, 2021 | | $ | 0 | | | $ | 23,834 | | | $ | 23,834 | |
The Company’s intangible assets consisted of the following: | | | September 30, | | | September 30, | | | | | 2019 | | | 2018 | | | 2021 | | | 2020 | | Technology | | $ | 611,043 | | | $ | 648,208 | | | $ | 12,065 | | | $ | 655 | | Customer relationships | | | 584,477 | | | | 620,026 | | | 1,855 | | | 627 | | Trade name portfolio | | | 212,537 | | | | 225,464 | | | 625 | | | 228 | | Non-compete agreements | | | 230,248 | | | | 244,252 | | | 244 | | | 247 | | Patents | | | 72,126 | | | | 72,126 | | | | 72 | | | | 72 | | | | | | 1,710,431 | | | | 1,810,076 | | | 14,861 | | | 1,829 | | Accumulated amortization | | | (534,797 | ) | | | (252,730 | ) | | | (2,057 | ) | | | (886 | ) | | | | $ | 1,175,634 | | | $ | 1,557,346 | | | $ | 12,804 | | | $ | 943 | |
| | | Year Ended September 30, | | | | | 2019 | | | 2018 | | Amortization Expense | | $ | 303,397 | | | $ | 231,901 | |
The changes in the carrying amount of intangible assets by segment for the year ended September 30, 2021, are as follows: | | | Hardware | | | Software | | | Total | | Balance as of September 30, 2020 | | $ | 29 | | | $ | 914 | | | $ | 943 | | Acquisitions | | | 0 | | | | 12,920 | | | | 12,920 | | Amortization | | | (4 | ) | | | (1,187 | ) | | | (1,191 | ) | Currency translation | | | 0 | | | | 132 | | | | 132 | | Balance as of September 30, 2021 | | $ | 25 | | | $ | 12,779 | | | $ | 12,804 | |
| | | Years ended | | | | | September 30, | | | | | 2021 | | | 2020 | | Amortization expense | | $ | 1,191 | | | $ | 302 | |
Estimated amortization expense for the twelve monthsfiscal year ending September 30, 2020 | | $ | 294,242 | | 2021 | | | 239,586 | | 2022 | | | 217,073 | | 2023 | | | 186,683 | | 2024 | | | 173,734 | | Thereafter | | | 64,316 | | Total estimated amortization expense | | $ | 1,175,634 | |
2022 | | | 2,169 | | 2023 | | | 2,137 | | 2024 | | | 2,123 | | 2025 | | | 1,995 | | 2026 | | | 1,855 | | Thereafter | | | 2,525 | | Total estimated amortization expense | | $ | 12,804 | |
9.10. PREPAID EXPENSES AND OTHER
| | | September 30, | | | September 30, | | | | | 2019 | | | 2018 | | | 2021 | | | 2020 | | Deposits for inventory | | $ | 1,064,640 | | | $ | 1,366,069 | | | $ | 997 | | | $ | 54 | | Leashold improvement receivable | | | - | | | | 1,132,017 | | | Prepaid insurance | | | 194,285 | | | | 162,822 | | | 395 | | | 264 | | Prepaid rent | | | 87,782 | | | | - | | | Prepaid maintenance agreement | | | - | | | | 93,750 | | | Dues and subscriptions | | | 88,031 | | | | 92,097 | | | 213 | | | 151 | | Prepaid professional services | | | 158 | | | 0 | | Prepaid commissions | | | 82 | | | 0 | | Trade shows and travel | | | 95 | | | 103 | | Other | | | 347,099 | | | | 244,646 | | | | 315 | | | | 288 | | | | | $ | 1,781,837 | | | $ | 3,091,401 | | | $ | 2,255 | | | $ | 860 | |
Deposits for inventory Deposits for inventory consisted of cash payments to vendors for inventory to be delivered in the future. Leasehold improvement receivable
Leasehold improvement receivable represents amounts owed to the Company by the landlord for costs incurred to renovate and prepare the Company’s new facility for use. The lease provided an allowance for tenant improvements of $1,588,214. Refer to Note 13, Commitments and Contingencies, for additional information about this lease. As of September 30, 2019, the Company has received the full tenant improvement allowance.
Prepaid Rent Prepaid rent consists of payments made in advance for the Company’s facility lease.
Prepaid Insuranceinsurance
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. Prepaid maintenance agreementDues and subscriptions
At March 31, 2011, prepaid expenses included $1,500,000 paid to a third party service providerDues and subscriptions consist of payments made in connection with the Company’s obligations under a sales contract to a foreign military service to provide repairadvance for software subscriptions and maintenance services over an eight year period for products sold thereunder. The total prepaid expense wastrade and professional organizations. These payments are amortized on a straight-line basis at an annual rate of $187,500 over the eight-year contract period to correspond with the revenues for these services, and was recognized as a component of cost of sales. The amortizationterm of the prepaid maintenance agreement was completed duringagreements.
Prepaid professional services Prepaid professional services consist of payments made in advance for services such as accounting and legal services. Prepaid commissions Prepaid commissions represent 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 ended March 31, 2019. As of September 30, 2018, $93,750benefit, which is four years. Amortization of prepaid commissions is included in selling, general and administrative expenses in the total prepayment was classified as a current asset.accompanying consolidated statement of operations. Trade shows and travel Trade shows and travel consists of payments made in advance for trade show events. 10.11. ACCRUED AND OTHER LIABILITIES
Accrued liabilities consisted of the following: | | | September 30, | | | September 30, | | | | | 2019 | | | 2018 | | | 2021 | | | 2020 | | Payroll and related | | $ | 2,050,324 | | | $ | 2,041,735 | | | $ | 3,726 | | | $ | 2,545 | | Deferred revenue | | | 508,522 | | | | 460,086 | | | 1,120 | | | 731 | | Customer deposits | | | 5,063,091 | | | | 199,596 | | | 8,701 | | | 3,683 | | Accrued contract costs | | | 252,833 | | | | 197,034 | | | 416 | | | 719 | | Severance | | | - | | | | 152,730 | | | Warranty reserve | | | 150,229 | | | | 99,216 | | | 146 | | | 126 | | Deferred rent | | | 109,342 | | | | 49,467 | | | Other | | | | 2 | | | | 76 | | Total | | $ | 8,134,341 | | | $ | 3,199,864 | | | $ | 14,111 | | | $ | 7,880 | |
Other liabilities - noncurrent consisted of the following: | | | September 30, | | | September 30, | | | | | 2019 | | | 2018 | | | 2021 | | | 2020 | | Deferred rent | | $ | 1,881,387 | | | $ | 1,663,058 | | | Deferred extended warranty revenue | | | 550,885 | | | | 76,372 | | | $ | 308 | | | $ | 293 | | Asset purchase holdback liability | | | | 687 | | | | 0 | | Total | | $ | 2,432,272 | | | $ | 1,739,430 | | | $ | 995 | | | $ | 293 | |
Payroll and related Accrued payroll and related consisted primarily of accrued bonus, accrued vacation, accrued sales commissions and benefits at September 30, 2019 and 2018.benefits. Deferred Revenuerevenue Deferred revenue at as of September 30, 2019 2021 included prepayments from customers for services, including extended warranty, scheduled to be performed in the year ended September 30, 2020.2022. Customer Depositsdeposits Customer deposits represent amounts paid by customers as a down payment on hardware orders to be delivered during the year ended September 30, 2020.2022. Accrued contract costs Accrued contract costs consist 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. Severance
Severance liability at September 30, 2018 consistedof accrued payments to former employees of Genasys Spain that was paid during the year ended September 30, 2019.
Deferred Rent
Deferred rent liability as of September 30, 2019 consists of the difference between the average rental amount charged to expense and amounts payable under the lease for the Company’s operating facility. Deferred rent also includes cash and leasehold incentives from the landlord in the aggregate amount of $1,990,729 as of September 30, 2019 to compensate for costs incurred by the Company to make the office space ready for operation (leasehold incentives). Prior to the adoption of ASC 842, leasehold incentives received from a landlord are deferred and recognized on a straight-line basis as a reduction to rent expense over the lease term. Refer to Note 3, Recent Accounting Pronouncements for further detail on the adoption of ASC 842.
Warranty Reservereserve Details of the estimated warranty reserve were as follows: | | | September 30, | | | September 30, | | | | | 2019 | | | 2018 | | | 2021 | | | 2020 | | Beginning balance | | $ | 99,216 | | | $ | 104,518 | | | $ | 126 | | | $ | 150 | | Warranty provision | | | 85,078 | | | | 6,093 | | | 56 | | | 16 | | Warranty settlements | | | (34,065 | ) | | | (11,395 | ) | | | (36 | ) | | | (40 | ) | Ending balance | | $ | 150,229 | | | $ | 99,216 | | | $ | 146 | | | $ | 126 | |
The Company establishes a warranty reserve based on anticipated warranty claims at the time product revenue is recognized. Factors affecting warranty reserve levels include the number of units sold, anticipated cost of warranty repairs and anticipated rates of warranty claims. The Company evaluates the adequacy of the provision for warranty costs each reporting period and adjusts the accrued warranty liability to an amount equal to estimated warranty expense for products currently under warranty. Deferred extended warranty revenue Deferred extended warranty revenue consists of warranties purchased in excess of the Company’s standard warranty. Extended warranties typically range from one to two years. Asset purchase holdback liability In connection with the Amika Mobile asset purchase, the Company recorded a holdback liability related to potential future adjustments to assets and liabilities, misrepresentations and indemnifications against third-party claims. Adjustments of up to CAD$1,000 (USD$787) will be deducted from the asset purchase holdback liability for up to three years from the closing date. The liability is recorded at fair value in the consolidated balance sheet. 11. 12.DEBT
In connection with the acquisition of Genasys Spain the Company assumed certain debts of Genasys Spain. The balances of the acquired debt consist of loans with governmental agencies as of September 30, 2019. 2021. Loans with governmental agencies represent interest free loans granted by ministries within Spain for the purpose of stimulating economic development and promoting research and development. Loans with governmental agencies as of September 30, 2019 2021 are as follows: Agency | | Due Date | | | Principal | | Due Date | | Principal | | | Ministry of Economy and Competitiveness | | February 2, 2022 | | | | 49,355 | | February 2, 2022 | | $ | 17 | | | Ministry of Economy and Competitiveness | | February 2, 2024 | | | | 263,136 | (a) | February 2, 2024 | | | 279 | | (a) | | | | | | | $ | 312,491 | | | | $ | 296 | | |
| (a)
| This loan is secured by $263,136 of cash pledged as collateral by Genasys Spain, which is the current balance of the loan. This amount represents 66.6% of the original principal received. This amount is included in restricted cash at September 30, 2019. The Company expects the Ministry of Economy and Competitiveness to declare the terms of the loan satisfied within fiscal year 2020 and that the outstanding balance of the loan will be paid in full during fiscal year 2020. Accordingly, this has been included in the current portion of notes payable as of September 30, 2019.
|
(a) This loan is secured by $279 of cash pledged as collateral by Genasys Spain, which is the current balance of the loan. This amount represents 66.6% of the original principal received. This amount is included in restricted cash as of September 30, 2021. The Company expects the Ministry of Economy and Competitiveness to declare the terms of the loan satisfied within the next twelve months and that the outstanding balance of the loan will be paid in full during the next twelve months. Accordingly, this has been included in the current portion of notes payable as of September 30, 2021. The changes in the carrying amount of debt for the year ended September 30, 2021, are as follows: Balance as of September 30, 2020 | | $ | 318 | | Payments | | | (19 | ) | Currency translation | | | (3 | ) | Balance as of September 30, 2021 | | $ | 296 | |
The following is a schedule of future annual payments as of September 30, 2019:2021: 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 September 30, 2021, there were 0 borrowings on the revolving line of credit. The Company incurred and capitalized $38 of issuance costs related to this revolving line of credit. These issuance costs have and will be amortized on a straight-line basis over the term of the loan. 2020 | | $ | 279,588 | | 2021 | | | 16,452 | | 2022 | | | 16,451 | | 2023 | | | - | | Total | | $ | 312,491 | |
13. LEASES The Company determines if an arrangement is a lease at inception. The guidance in Topic 842 defines a lease as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. Operating 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 ROU asset includes any lease payments made and excludes lease incentives and initial direct costs incurred. The Company is party to operating leases for office and production facilities and equipment under agreements that expire at various dates through 2028. The Company elected the package of practical expedients permitted under the new lease standard. In electing the practical expedient package, the Company is not required to reassess whether an existing or expired contract is or contains a lease, reassess the lease classification for expired or existing leases nor reassess the initial direct costs for leases that commenced before the adoption of Topic 842. The Company also elected the short-term lease exemption such that the new lease standard was applied to leases greater than one year in duration. Leases with an initial term of twelve months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. For leases beginning on or after October 1, 2019, lease components are accounted for separately from non-lease components for all asset classes. Certain of the Company’s leases contain renewal provisions and escalating rental clauses and generally require the Company to pay utilities, insurance, taxes and other operating expenses. The renewal provisions of existing lease agreements were not included in the determination of the operating lease liabilities and the ROU assets. Variable payments such as excess usage fees on existing equipment leases were not included in the determination of the lease liabilities and the ROU assets as the achievement of the specified target that triggers the variable lease payment is not considered probable. In addition, the Company’s facility lease in Spain has an escalating lease clause based on a consumer price index which is considered a variable lease payment and is not included in the determination of the lease liability and ROU asset. A 10% increase in the index would increase the total lease liability approximately $19. The Company’s leases do not contain any residual value guarantees or material restrictive covenants. Upon adoption of Topic 842 as of October 1, 2019, the Company recognized on its consolidated balance sheet an initial measurement of approximately $7,815 of operating lease liabilities, and approximately $5,824 of corresponding operating ROU assets, net of tenant improvement allowances. There was no cumulative effect adjustment to retained earnings as a result of the transition to Topic 842. The adoption of Topic 842 did not have a material impact on the Company’s consolidated statement of operations.
During the year ended September 30, 2021, the Company added an additional operating ROU asset of $259 and operating lease liabilities of $259 for office space. The tables below show the operating ROU assets and liabilities as of September 30, 2020, and the balances as of September 30, 2021, including the changes during the periods. | | | Operating ROU assets | | Operating lease ROU asset at September 30, 2020 | | $ | 5,285 | | Additional operating lease ROU assets | | | 259 | | Less amortization of operating lease ROU assets | | | (694 | ) | Effect of exchange rate on operating lease ROU assets | | | 12 | | Operating lease ROU assets at September 30, 2021 | | $ | 4,862 | |
| | | Operating lease liabilities | | Operating lease liabilities at September 30, 2020 | | $ | 7,166 | | Additional operating lease liabilities | | | 259 | | Less lease principal payments on operating lease liabilities | | | (829 | ) | Effect of exchange rate on operating lease liabilities | | | 12 | | Operating lease liabilities at September 30, 2021 | | | 6,608 | | Less non-current portion | | | (5,709 | ) | Current portion at September 30, 2021 | | $ | 899 | |
As of September 30, 2019, 2021, the current portionCompany’s operating leases have a weighted-average remaining lease term of debt is $279,5886.7 years and a weighted-average discount rate of 4.1%. The maturities of the noncurrent portion of debt is $32,903.operating lease liabilities are as follows: Fiscal year ending September 30, | | | | | 2022 | | $ | 1,151 | | 2023 | | | 1,089 | | 2024 | | | 1,084 | | 2025 | | | 1,057 | | 2026 | | | 1,069 | | Thereafter | | | 2,139 | | Total undiscounted operating lease payments | | | 7,589 | | Less imputed interest | | | (981 | ) | Present value of operating lease liabilities | | $ | 6,608 | |
For the years ended September 30, 2021 and 2020, total lease expense under operating leases was approximately $991 and $902, respectively. For the year ended September 30, 2021, short-term lease expense was $3. The Company did not have any short-term lease expense during the year ended September 30, 2020. 12.14. INCOME TAXES
Income taxes consisted of the following: | | | Years ended September 30, | | | Years ended September 30, | | | | | 2019 | | | 2018 | | | 2021 | | | 2020 | | Current tax provision | | | | | | | | | | Federal | | $ | - | | | $ | - | | | $ | 0 | | | $ | 0 | | State | | | 2,200 | | | | 1,600 | | | | 1 | | | | 2 | | Total current tax provision | | | 2,200 | | | | 1,600 | | | 1 | | | 2 | | Deferred provision | | | | | | | | | | Federal | | | 484,500 | | | | 2,017,900 | | | 368 | | | (4,852 | ) | State | | | 85,500 | | | | 356,100 | | | | 65 | | | | (856 | ) | Total deferred provision | | | 570,000 | | | | 2,374,000 | | | | 433 | | | | (5,708 | ) | | | | | | | | | | | | | | | | Provision for income taxes | | $ | 572,200 | | | $ | 2,375,600 | | | Provision (benefit) for income taxes | | | $ | 434 | | | $ | (5,706 | ) |
A reconciliation of income taxes at the federal statutory rate of 21% to the effective tax rate was as follows: | | | Years ended September 30, | | | | | 2019 | | | 2018 | | Income taxes computed at the federal statutory rate | | $ | 715,000 | | | $ | (332,000 | ) | Change in valuation allowance | | | (5,000 | ) | | | 2,711,000 | | Change in tax rate | | | - | | | | 6,754,000 | | Expired net operating loss carryforwards | | | - | | | | 441,000 | | Nondeductible compensation, interest expense and other | | | 40,000 | | | | 39,000 | | State income taxes, net of federal tax benefit | | | 155,000 | | | | (41,000 | ) | Change in R&D credit carryover | | | (66,000 | ) | | | (133,000 | ) | Stock options and other prior year true-ups | | | (142,000 | ) | | | (499,000 | ) | Acquired deferred tax assets of Genasys Spain | | | (7,800 | ) | | | (6,564,400 | ) | Refundable Federal AMT Credit | | | 28,000 | | | | - | | State business credit utilization | | | (145,000 | ) | | | - | | Provision for income taxes | | $ | 572,200 | | | $ | 2,375,600 | |
| | | Years ended September 30, | | | | | 2021 | | | 2020 | | Income taxes computed at the federal statutory rate | | $ | 239 | | | $ | 1,296 | | Change in valuation allowance | | | 435 | | | | (7,134 | ) | Nondeductible compensation, interest expense and other | | | 57 | | | | 24 | | State income taxes, net of federal tax benefit | | | 210 | | | | 364 | | Change in R&D credit carryover | | | 19 | | | | (219 | ) | Stock options and other prior year true-ups | | | (175 | ) | | | (7 | ) | Foreign rate differential | | | (117 | ) | | | (21 | ) | State business credit utilization | | | (234 | ) | | | (9 | ) | Provision (benefit) for income taxes | | $ | 434 | | | $ | (5,706 | ) |
The types of temporary differences between the tax basis of assets and liabilities and their approximate tax effects that give rise to a significant portion of the net deferred tax asset at as of September 30, 20192021 and 20182020 were as follows: | | | At September 30, | | | At September 30, | | | | | 2019 | | | 2018 | | | 2021 | | | 2020 | | Deferred tax assets | | | | | | | | | | | | | Net operating loss carryforwards | | $ | 12,682,000 | | | $ | 13,644,000 | | | $ | 11,769 | | | $ | 11,985 | | Research and development credit | | | 5,856,000 | | | | 5,805,000 | | | 5,479 | | | 5,686 | | Share-based compensation | | | 506,000 | | | | 532,000 | | | 538 | | | 317 | | Equipment | | | (78,000 | ) | | | (41,000 | ) | | Patents | | | 24,000 | | | | 35,000 | | | 8 | | | 15 | | Accruals and other | | | 1,222,000 | | | | 818,000 | | | 2,487 | | | 2,526 | | State tax deduction | | | (6,000 | ) | | | (5,000 | ) | | Federal AMT Credit | | | 24,000 | | | | 53,000 | | | Allowances | | | 169,000 | | | | 133,000 | | | | 237 | | | | 183 | | Gross deferred tax asset | | | 20,399,000 | | | | 20,974,000 | | | 20,518 | | | 20,712 | | | | | | Deferred tax liabilities | | | | | | Equipment | | | (352 | ) | | (405 | ) | Operating ROU assets | | | (1,222 | ) | | (1,334 | ) | Acquired intangible assets | | | | (2,592 | ) | | | 0 | | Gross deferred tax liabilities | | | (4,166 | ) | | (1,739 | ) | Less valuation allowance | | | (15,012,000 | ) | | | (15,017,000 | ) | | | (8,313 | ) | | | (7,878 | ) | Total deferred tax assets, net of valuation allowance | | $ | 5,387,000 | | | $ | 5,957,000 | | | $ | 8,039 | | | $ | 11,095 | |
At As of September 30, 2019,2021, the Company had net deferred tax assets of approximately $5,387,000.$8,039. The deferred tax assets are primarily composed of federal and state NOL carryforwards and federal and state research and development (“R&D”) credit carryforwards. At As of September 30, 2019,2021, the Company had federal NOL carryforwards of approximately $44,398,000,$35,819, which expire from 20222023 through 2037.2037, except for $1,262 that have an indefinite carryforward period. The Company also has an estimated $2,257,000$2,373 and $794,000$176 of federal and state R&D tax credits, respectively, at as of September 30, 2019,2021, a portion of which will begin to expire in the 2020current tax year.
The Company reviews its ability to realize its deferred tax assets on a quarterly basis. In doing so, management considers historical and projected taxable income of the Company, along with any tax planning strategies and any other positive or negative evidence. Realization is dependent on generating sufficient taxable income prior to the expiration of the loss carryforwards and other deferred assets. The Company has sustained profitability over seven of the ten most recent fiscal years. In the past few years, the Company has developed products and expanded its marketing efforts into the mass notification market, which is a very large and growing market. While the Company is still in the early stages of market penetration, it has increased its confidence in forecasted taxable income based on growth opportunities in this market. It has also increased its forecasted revenues and taxable income for its directional product opportunities, where it is a leading player in the world market. As a result, during the quarter ended September 30, 2015, the Company determined it was more likely than not that a portion ofexpects to utilize the deferred tax assets will be realized and, accordingly, released a portion of the valuation allowance. While the Company has cumulative income from 2017 to 2019, future profits are uncertain and a portion of the Company’s tax attributes may expire prior to utilization. The Company adjusted its deferred tax asset value in the quarter ended September 30, 2019future, except for those related to federal R&D tax credit carryforwards and net operating loss carryforwards, R&D credits and foreign tax credits related to Genasys Spain and Genasys Canada and continues to maintain a valuationpartial allowance of $15,012,000.$8.313. Since future financial results may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary. As of September 30, 2019, 2021, the Company had no unrecognized tax benefits. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company is subject to taxation in the U.S. and various state jurisdictions. All of the Company’s historical tax years are subject to examination by the Internal Revenue Service and various state jurisdictions due to the generation of NOL and credit carryforwards. The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. Subsequently, the SEC issued Staff Accounting Bulletin (“SAB”) 118, which allows for the recording of provisional amounts related to U.S. tax reform and subsequent adjustments related to U.S. tax reform during a measurement period not to exceed one year from the enactment date. Accordingly, the Company remeasured its net deferred tax assets on a provisional basis based on the rates at which they are expected to be realized in the future, which is generally 21% resulting in a decrease to our net deferred tax assets of $2,374,000 for the year ended September 30, 2018. As of September 30, 2019, the Company’s accounting for the applicable elements of the legislation is complete and there were no material changes to the provisional amounts previously recorded.
13.15. COMMITMENTS AND CONTINGENCIES
Leases The Company leases office equipment and operating facilities. During the year ended September 30, 2019, these leases were categorized as operating leases. On October 1, 2019, the Company adopted ASC 842 which requiresrequired lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than 12 months. Refer to Note 3, Recent Accounting Pronouncements13, Leases for further detail on the adoption of ASC 842.lease commitments. Facility Lease
On July 1, 2018, the Company entered into a lease for 54,766 square feet to replace the expired lease of the prior San Diego facility as the Company’s executive offices, research and development, assembly and operational facilities. The lease commenced July 1, 2018 and will expire August 30, 2028. The aggregate monthly payments, with abatements, averaged $36,146 per month for the first fourteen months, and are $74,460, $76,694, $78,994, $81,364, $83,805, $86,319, $88,909, $91,576 and $94,324 per month for the second through tenth years of the lease, plus certain other costs and charges as specified in the lease agreement, including the Company’s proportionate share of the building operating expenses and real estate taxes. The lease provided an allowance for tenant improvements of $1,588,214, which was classified as deferred rent on the Company’s consolidated balance sheet and is being amortized as an offset to rent expense with a corresponding charge to amortization expense on a straight-line basis over the term of the lease.
Total operating lease expense, including facilities and office equipment commitments, recorded by the Company for the years ended September 30, 2019 and 2018 was 1,050,784 and $956,535, respectively.
The obligations under all operating leases are as follows:
Years ending September 30, | | | | | 2020 | | $ | 1,005,217 | | 2021 | | | 1,032,090 | | 2022 | | | 1,059,088 | | 2023 | | | 1,011,894 | | 2024 | | | 1,008,177 | | Thereafter | | | 4,247,218 | | Total lease obligations | | $ | 9,363,684 | |
Employment Agreements The Company entered into an employment agreement in August 2016 with itsour chief executive officer that provides for severance benefits including twelve months’ salary and health benefits, a pro-rata share of his annual cash bonus for the fiscal year in which the termination occurs to which he would have become entitled had he remained employed through the end of suchthe fiscal year and if his employment is terminated during fiscal year 2019 or later, vesting of a pro-rata share of the stock options held by him that are subject to performance-based vesting based on the extent to which the required performance criteria are achieved in the year of termination and on the portion of the year he was employed.vesting. The agreement also has a change ofin control clause whereby in the event of a specified termination event, the chief executive officer would be entitled to receive in a single lump sum (a) an amount equal to two times the sum of his base salary then in effectspecific severance and his then target annual cash bonus, (b) a pro-rata share of his annual cash bonus for such year and (c) the cost of his and his dependents’ coverage under COBRA for an 18-month period. In addition, in such event, (i) all of the time-vesting stock options held will vest, unless theequity vesting benefits if specified termination occurs within the first year of his employment, in which case only the number of options scheduled to vest on the first anniversary of his employment date will vest pro-rated for the period of time he was employed during such one-year period, (ii) 375,000 of the stock options held that are subject to performance-based vesting will vest and (iii) if employment is terminated during fiscal year 2019 or later, a pro-rata share of the stock options held that are subject to performance-based vesting will vest based on the extent to which the required performance criteria are achieved for the fiscal year in which the termination occurs and based on the period of time he was employed during such fiscal year prior to the termination.events occur. There are were no other employment agreements with executive officers or other employees providing future benefits or severance arrangements. Bonus Plan In fiscal 2019 and 2018, theThe Company hadhas a bonus plan for employees, in accordance with their terms of employment, whereby they can earn a percentage of their salary based on meeting targeted objectives for orders received, revenue, operating income, and operating cash flow. In fiscalFor the year 2019, ended September 30, 2021, the company exceededCompany recorded $2,625 of bonus expense. For the minimum targeted levelyear ended September 30, 2020, the Company recorded $1,554 of orders received, revenues and cash provided by operating activities and has accrued $1,295,338 ofbonus expense. In fiscal year 2018, the company exceeded the minimum targeted level of orders received and revenues and accrued $1,205,099 of expense.
Employee Benefit—Benefit—401K Plan The Company has a defined contribution plan (401(k)(401(k)) covering its employees. Matching contributions are made on behalf of all participants at the discretion of the board of directors. During the fiscal years ended September 30, 20192021 and 2018,2020, the Company made matching contributions of $220,234$219 and $130,511,$206, respectively. Litigation The Company may at times be involved in litigation in the ordinary course of business. The Company will, from time to time, when appropriate in management’s estimation, record adequate reserves in the Company’s financial statements for pending litigation. Amika Mobile asset purchase In connection with the Amika Mobile asset purchase, the Company recorded a holdback liability related to potential future adjustments to assets and liabilities, misrepresentations and indemnifications against third-party claims. Adjustments of up to CAD$1,000 (USD$787) will be deducted from the asset purchase holdback liability for up to three years from the closing date. The liability is recorded at fair value in the consolidated balance sheet. 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 the addition of $3,431 to additional paid-in-capital. During the year ended September 30, 2021, the Company accelerated the issuance of 365,109 of such shares of common stock to a former owner of the Amika Mobile assets. 208,692 shares of the Company’s common stock remain subject to issuance under this obligation. Guarantees and Indemnifications The Company enters into indemnification provisions under (i) its agreements with other companies in its ordinary course of business, typically with business partners, contractors, customers and landlords and (ii) its agreements with investors. Under these arrangements, the Company may indemnify other parties such as business partners, customers, underwriters, and investors for certain losses suffered, claims of intellectual property infringement, negligence and intentional acts in the performance of services, and violations of laws including certain violations of securities laws. The Company’s obligation to provide such indemnification in such circumstances would arise if, for example, a third party sued a customer for intellectual property infringement and the Company agreed to indemnify the customer against such claims. The Company is unable to estimate with any reasonable accuracy the liability that may be incurred pursuant to such indemnification obligations. Some of the factors that would affect this assessment include, but are not limited to, the nature of the claim asserted, the relative merits of the claim, the financial ability of the parties, the nature and amount of damages claimed, insurance coverage that the Company may have to cover such claims, and the willingness of the parties to reach settlement, if any. Because of the uncertainty surrounding these circumstances, the Company’s indemnification obligations could range from immaterial to having a material adverse impact on its financial position and its ability to continue in the ordinary course of business. The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements in the past, and the Company had no liabilities recorded for these agreements as of September 30, 20192021 and 2018.2020.
Under its bylaws, the Company has agreed to indemnify its officers and directors for certain events or occurrences arising as a result of the officer or director serving in such capacity. In addition, the Company executed indemnification agreements in June 2013 with the then current Directors and Officers of the Company, indemnifying them from any expenses arising out of any claims. All directors and officers have executed indemnification agreements. The term of the indemnification period is for the officer or director’s lifetime. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. However, the Company has a director and officers’ liability insurance policy that limits its exposure and enables it to recover a portion of any future amounts paid. As a result of its insurance policy coverage, the Company does not believe that a material loss exposure related to these agreements is either probable or can be reasonably estimated. Accordingly, the Company has no liability recorded for these agreements as of September 30, 20192021 and 2018.2020. 14.16. SHARE-BASED COMPENSATION
Stock Option Plans At As of September 30, 2019, 2021, the Company had two equity incentive plans. The 2005 Equity Incentive Plan (“(“2005 Equity Plan”) was terminated with respect to new grants in March 2015 but remains in effect for grants issued prior to that time. The Amended and Restated 2015 Equity Incentive Plan (“(“2015 Equity Plan”) was approvedadopted by the Company’s Board of Directors on December 6, 2016 and approved by the Company’s stockholders on March 14, 2017. The amendment 2015 Equity Plan was amended by the Company’s Board of Directors on December 8, 2020, to increase the Equity Incentive Plan, approved in 2015, authorizesnumber of shares authorized for issuance asfrom 5,000,000 to 10,000,000. On March 16, 2021, the Company’s stockholders approved a plan amendment. The 2015 Equity Plan authorizes the issuance of stock options, restricted stock, stock appreciation rights, restricted stock units and performance awards, to an aggregate of 5,000,00010,000,000 new shares of common stock to employees, directors, advisors or consultants. At As of September 30, 2019, 2021, there were options and restricted stock units outstanding covering 499,49485,000 and 1,994,6233,059,853 shares of common stock under the 2005 Equity Plan and the 2015 Equity Plan, respectively, and 1,874,1645,088,115 shares of common stock available for grant, for a total of 4,368,281 currently available8,232,968 shares of common stock authorized and unissued under the two equity plans.
Share-Based Compensation The Company’s employee stock options have various restrictions that reduce option value, including vesting provisions and restrictions on transfer and hedging, among others, and are often exercised prior to their contractual maturity. There were no295,000 options granted during the year ended September 30, 2019. 2021 and 231,270 granted during the year ended September 30, 2020. The weighted average estimated fair value of employee stock options granted during the yearyears ended September 30, 20182021 and 2020, was calculated using the Black-Scholes option-pricing model with the following weighted average assumptions (annualized percentages): | | | 2018 | | Volatility | | | 45.4 | % | Risk free interest rate | | | 2.18 | % | Forfeiture rate | | | 10.0 | % | Dividend yield | | | 0.0 | % | Expected life in years | | | 4.6 | | Weighted average FV | | $ | 0.89 | |
| | | Years ended | | | | | September 30, | | | | | 2021 | | | 2020 | | Volatility | | | 48.5 | % | | | 44.5 | % | Risk-free interest rate | | | 0.7 | % | | | 1.4 | % | Dividend yield | | | 0.0 | % | | | 0.0 | % | Expected term in years | | | 6.5 | | | | 5.4 | |
The Company did not pay a dividend in fiscal 2019 or in fiscal 2018. Expected volatility is based on the historical volatility of the Company’s common stock over the period commensurate with the expected lifeterm of the options. The risk-free interest rate is based on rates published by the Federal Reserve Board. The contractual term of the options was seven years. The expected lifeterm is based on observed and expected time to post-vesting exercise. The expected forfeiture rate is based on past experience and employee retention data. Forfeitures are estimated at the time of the grant and revised in subsequent periods if actual forfeitures differ from those estimates. Such revision adjustments to expense will be recorded as a cumulative adjustment in the period in which the estimate is changed. The Company did not pay a dividend in fiscal 2021 or fiscal 2020.
As of September 30, 2019,2021, there was approximately $415,449$982 of total unrecognized compensation costs related to outstanding stock options and restricted stock units.options. This amount is expected to be recognized over a weighted average period of 1.31.90 years. To the extent the forfeiture rate is different from what the Company anticipated, stock-based compensation related to these awards will be different from the Company’s expectations.
Performance-Based Stock Options On August 1, 2016, the Company awarded a performance-based stock option (PVO) to purchase 750,000 shares of the Company’s common stock to a key executive, with a contractual term of seven years. At the grant date, there were 375,000 performance-based stock options assigned to performance criteria within each of fiscal 2019 and 2020.Vesting iswas based upon the achievement of certain performance criteria for each of fiscal 2019 and 2020 (375,000 shares for each year) including a minimum free cash flow margin and net revenue targets at four different target levels for each of the years.targets. Additionally, vesting iswas subject to the executive being employed by the Company at the time the Company achieves such financial targets. The Company determined that ascertain performance conditions related to the 2019 and 2020 performance criteria were achieved. 187,500 options related to the 2019 performance criteria vested and 375,000 options related to the 2020 performance criteria vested. The Company recorded a total of $459 in stock-based compensation expense for these options through September 30, 2020, in selling, general and administrative expenses in the consolidated statement of operations. On October 4, 2019, it is probable that somethe Company awarded a performance-based stock option (PVO) to purchase 800,000 shares of the Company’s common stock to a key executive, with a contractual term of seven years. Vesting is based upon the achievement of certain performance conditions will be achievedcriteria for each of fiscal 2022 and 2023 including a minimum free cash flow margin and net revenue targets. Additionally, vesting is subject to the executive being employed by the Company at the time the Company achieves such financial targets. The Company has notrecorded $128,025 in share-basedstock-based compensation expense related to these options foroptions. The Company did not grant any PVO’s during the year ended September 30, 2019. The Company will continue to review these targets each quarter and will adjust the expected outcome as needed, recognizing compensation expense cumulatively in such period for the difference in expense. The Company did not grant any PVOs in the year ended September 30, 2019.2021. Restricted Stock Units On March 14, 2017,During fiscal 2018, the Board of Directors approved a grant of 25,000granted 93,330 restricted stock units (“RSUs”) to employees that vested equally over three years on each of the Company’s non-employee directors that vested on the firstthree anniversary dates of the grant date.grant. These were also issued at a market value of $197,500,$210, which waswere expensed on a straight linestraight-line basis throughover the March 14, 2018 vest date.three-year life of the grants.
On March 20, 2018,During fiscal 2019, the Board of Directors approved an additional grant of 25,000granted 99,300 RSUs to employees that will vest equally over three years on each of the Company’sfirstthree anniversary dates of the grant. These were issued at a market value of $248, which have and will be expensed on a straight-line basis over the three-year life of the grants.
On March 10, 2020, each non-employee directorsmember of the Board of Directors received a grant of 30,000 RSUs that vested on the first anniversary of the grant date. These were issued at a market value of $278,750,$425, which were expensed on a straight linestraight-line basis through the March 20, 2019 10, 2021 vest date. Also, duringin fiscal 2018, 93,3302020, 81,270 RSUs were granted to employees that will vest equally over three years on each of the first three anniversary datesdate of the grant. These were issued at a market value of $210,176,$258, which have and will be expensed on a straight linestraight-line basis over the three year-year life of the grants. On February 7, 2019,March 16, 2021, each non-employee member of the Board of Directors approved non-employee director compensation to include an annualreceived a grant of 30,00027,883 RSUs to each of the Company’s five non-employee directors that will vest on the first anniversary of the grant date. These were issued at a market value of $412,500,$1,100, which have been and will be expensed on a straight-line basis through the March 12, 2020 16, 2022 vest date. Also, during the fiscal 2019, 99,3002021, 145,950 RSUs were granted to employees that will vest equally over three years on each of the first three anniversary datesdate of the grant. These were issued at a market value of $248,250,$989, which have and will be expensed on a straight linestraight-line basis over the three year-year life of the grants. On June 7, 2021, 5,000 RSUs with immediate vesting were granted to an employee at a market value of $25. These were expensed during the quarter ended June 30, 2021. On September 1, 2021, two new members of the Board of Directors received a grant of 17,500 RSUs which will vest on March 16, 2022. These were issued at a market value of $184, which have and will be expensed on a straight-line basis through the March 16, 2022 vest date. Compensation expense for RSUs was $470,857$1,130 for the year ended September 30, 2019. 2021. Compensation expense for RSUs was $276,438$584 for the year ended September 30, 2018.2020.
Restricted Stock Unit Summary Information A summary of restricted stock units of the activity of RSUsCompany as of September 30, 2019 2021 is presented below: | | | Number of Shares | | | Weighted Average Grant Date Fair Value | | | Number of Shares | | | Weighted Average Grant Date Fair Value | | Outstanding September 30, 2018 | | | 218,330 | | | $ | 2.24 | | | Outstanding September 30, 2020 | | | 303,014 | | | $ | 2.82 | | Granted | | | 249,300 | | | $ | 2.65 | | | 325,365 | | | $ | 7.06 | | Released | | | (156,115 | ) | | $ | 2.23 | | | (228,633 | ) | | $ | 2.83 | | Forfeited/cancelled | | | (36,666 | ) | | $ | 2.39 | | | | (277 | ) | | $ | 2.26 | | Outstanding September 30, 2019 | | | 274,849 | | | $ | 2.59 | | | Outstanding September 30, 2021 | | | | 399,469 | | | $ | 6.27 | |
Stock Option Summary Information A summary of the activity in options to purchase the capital stock of the Company as of September 30, 20192021 is presented below: | | | Number of Shares | | | Weighted Average Exercise Price | | | Number of Shares | | | Weighted Average Exercise Price | | Outstanding September 30, 2018 | | | 3,394,858 | | | $ | 2.18 | | | Outstanding September 30, 2020 | | | 2,659,305 | | | $ | 2.56 | | Granted | | | - | | | $ | - | | | 295,000 | | | $ | 6.71 | | Forfeited/expired | | | (769,439 | ) | | $ | 2.99 | | | (104,125 | ) | | $ | 2.57 | | Exercised | | | (406,151 | ) | | $ | 1.86 | | | | (104,796 | ) | | $ | 2.01 | | Outstanding September 30, 2019 | | | 2,219,268 | | | $ | 1.94 | | | Exerciseable September 30, 2019 | | | 1,405,578 | | | $ | 1.93 | | | Outstanding September 30, 2021 | | | | 2,745,384 | | | $ | 3.02 | | Exerciseable September 30, 2021 | | | | 1,541,176 | | | $ | 2.24 | |
The aggregate intrinsic value for options outstanding and options exercisable at as of September 30, 20192021 was $3,107,958$6,343 and $1,985,062,$4,610, respectively. The aggregate intrinsic value represents the difference between the Company’s closing stock price on the last day of trading during the year, which was $3.35$5.18 per share, and the exercise price multiplied by the number of applicable options. The total intrinsic value of stock options exercised during the year ended September 30, 2019 2021 was $638,140$725 and proceeds from these exercises was $756,513.$211. The total intrinsic value of stock options exercised during the year ended September 30, 2018 2020 was $752,729$2,578 and cash receivedproceeds from these exercises was $2,434,888.$1,136. The Company recognized $638,140$514 and $752,729$1,442 as a tax benefit in the income tax provision for the years ended September 30, 2019 2021 and 2018,2020, respectively. The following table summarizes information about stock options outstanding at as of September 30, 2019:2021: Range of
Exercise Prices | | | Number Outstanding | | | | Weighted Average Remaining Contractural Life | | | | Weighted Average Exercise Price | | | | Number Exercisable | | | | Weighted Avrage Exercise Price | | | $1.31 | - | $1.76 | | | 637,876 | | | | 3.25 | | | $ | 1.65 | | | | 576,155 | | | $ | 1.64 | | | $1.86 | - | $1.86 | | | 160,142 | | | | 3.21 | | | $ | 1.86 | | | | 160,142 | | | $ | 1.86 | | | $1.99 | - | $1.99 | | | 1,125,000 | | | | 3.84 | | | $ | 1.99 | | | | 375,000 | | | $ | 1.99 | | | $2.02 | - | $1.99 | | | 296,250 | | | | 2.07 | | | $ | 2.49 | | | | 294,281 | | | $ | 2.50 | | | | | | | | 2,219,268 | | | | 3.39 | | | $ | 1.95 | | | | 1,405,578 | | | $ | 1.94 | |
| | | | | | | | | Weighted Average | | | Weighted Average | | | | | | | Weighted Average | | Range of | | Number | | | Remaining | | | Exercise | | | Number | | | Exercise | | Exercise Prices | | Outstanding | | | Contractual Term | | | Price | | | Exercisable | | | Price | | $1.31 | - | $1.86 | | | 324,157 | | | | 2.00 | | | $ | 1.64 | | | | 324,157 | | | $ | 1.64 | | $1.99 | - | $1.99 | | | 937,500 | | | | 2.44 | | | $ | 1.99 | | | | 937,500 | | | $ | 1.99 | | $2.16 | - | $3.17 | | | 65,000 | | | | 0.37 | | | $ | 2.48 | | | | 65,000 | | | $ | 2.48 | | $3.39 | - | $3.40 | | | 1,133,727 | | | | 5.09 | | | $ | 3.39 | | | | 166,863 | | | $ | 3.40 | | $5.05 | - | $8.03 | | | 285,000 | | | | 6.30 | | | $ | 6.66 | | | | 47,656 | | | $ | 6.87 | | | | | | | | 2,745,384 | | | | 3.83 | | | $ | 3.02 | | | | 1,541,176 | | | $ | 2.24 | |
The Company recorded $264,146$294 and $308,435$396 of stock option compensation expense for employees, directors and consultants for the years ended September 30, 2019, 2021, and 2018,2020, respectively.
The amounts of share-based compensation expense for restricted stock units and stock options are classified in the Consolidated Statements of Operations as follows: | | | Year ended September 30, | | | Year ended September 30, | | | | | 2019 | | | 2018 | | | 2021 | | | 2020 | | Cost of revenues | | $ | 15,792 | | | $ | 21,388 | | | $ | 40 | | | $ | 20 | | Selling, general, and administrative | | | 665,295 | | | | 479,165 | | | Selling, general and administrative | | | 1,344 | | | 939 | | Research and development | | | 53,916 | | | | 84,320 | | | | 40 | | | | 21 | | | | | $ | 735,003 | | | $ | 584,873 | | | $ | 1,424 | | | $ | 980 | |
117. STOCKHOLDERS’5. STOCKHOLDERS’ EQUITY
Common Stock Activity On March 18, 2021, the Company filed an amendment to its Certificate of Incorporation, as amended, with the Secretary of State of Delaware to increase the authorized number of shares of common stock of the Company from 50,000,000 to 100,000,000 shares (the “Amended Certificate”). The Amended Certificate was approved by the Company’s stockholders at the Company’s Annual Meeting of Stockholders on March 16, 2021. During the year ended September 30, 2019,2021, the Company issued 406,151104,796 shares of common stock and obtained gross proceeds of $756,513$210 in connection with the exercise of stock options. During the year ended September 30, 2018,2020, the Company issued 1,179,456583,019 shares of common stock and obtained gross proceeds of $2,434,887$1,136 in connection with the exercise of stock options. During the year ended September 30, 2019, 2021, the Company issued 156,115228,633 of shares of common stock upon full vesting of RSUs. During the year ended September 30, 2018, 2020, the Company issued 125,000198,106 of shares of common stock upon full vesting of RSUs. In connection with the Amika Mobile asset purchase, the Company agreed to issue 191,267 shares of the Company’s common stock to the former owner of the Amika Mobile assets on each of the first, second and third anniversaries of the closing date. The total number of shares of common stock the Company is obligated to issue is 573,801. The fair value of the Company’s common stock on the closing date was $5.98, resulting in the addition of $3,431 to additional paid-in-capital. During the year ended September 30, 2021, the Company accelerated the issuance of 365,109 of such shares of common stock to a former owner of Amika Mobile. 208,692 shares of the Company’s common stock remain subject to issuance under this obligation. In connection with the Zonehaven acquisition, the Company issued 2,165,824 shares of the Company’s common stock to the former owners of Zonehaven. The fair value of the Company’s stock on the closing date was $5.05, resulting in the addition of $10,938 to additional-paid-in-capital. Preferred Stock The Company is authorized under its certificate of incorporation and bylaws to issue 5,000,000 shares of preferred stock, $0.00001 par value, without any further action by the stockholders. The board of directors has the authority to divide any and all shares of preferred stock into series and to fix and determine the relative rights and preferences of the preferred stock, such as the designation of series and the number of shares constituting such series, dividend rights, redemption and sinking fund provisions, liquidation and dissolution preferences, conversion or exchange rights and voting rights, if any. Issuance of preferred stock by the board of directors could result in such shares having dividend and or liquidation preferences senior to the rights of the holders of common stock and could dilute the voting rights of the holders of common stock. NoNaN shares of preferred stock were outstanding during the fiscal years ended September 30, 20192021 or 2018.2020.
Share Buyback Program The Board of Directors approved a share buyback program in 2015 under which the Company was authorized to repurchase up to $4 million of its outstanding common shares. In December 2017, the Board of Directors extended the program through December 31, 2018.
In December 2018, the Board of Directors approved a new share buyback program beginning January 1, 2019 and expiring on December 31, 2020, under which the Company was authorized to repurchase up to $5 million of its outstanding common shares. In December 2020, the Board of Directors extended the buyback program until December 31, 2022. The previous program expired on December 31, 2018.
DuringThere were 0 shares repurchased during the year ended September 30, 2019, 788,4252021. During the fiscal year ended September 30, 2020, 156,505 shares were repurchased for $2,171,022. During the year ended $398. As of September 30, 2018, 286,746 shares were repurchased2021, $4.1 million was available for $725,445. At share repurchase under this program. As of September 30, 2019, 2021, all repurchased shares were retired.
16.18. NET INCOME (LOSS)PER SHARE
Basic earnings per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period increased to include the number of dilutive potential common shares outstanding during the period. The dilutive effect of outstanding stock options is reflected in diluted earnings per share by application of the treasury stock method, which assumes that the proceeds from the exercise of the outstanding options are used to repurchase common stock at market value. Under the treasury stock method, an increase in the fair market value of the Company’s common stock can result in a greater dilutive effect from potentially dilutive securities. If the Company has losses for the period, the inclusion of potential common stock instruments outstanding would be anti-dilutive. In addition, under the treasury stock method, the inclusion of stock options with an exercise price greater than the per-share market value would be antidilutive. Potential common shares that would be antidilutive are excluded from the calculation of diluted income per share. The following table sets forth the computation of basic and diluted earnings per share: | | | Year ended September 30, | | | Years Ended | | | | | 2019 | | | 2018 | | | September 30, | | Net income (loss) | | $ | 2,784,992 | | | $ | (3,745,042 | ) | | | | | | | | | | | | | 2021 | | | 2020 | | Basic income (loss) per share | | $ | 0.09 | | | $ | (0.12 | ) | | Diluted income (loss) per share | | $ | 0.08 | | | $ | (0.12 | ) | | Net income | | | $ | 704 | | | $ | 11,874 | | | | | | Basic income per share | | | $ | 0.02 | | | $ | 0.36 | | Diluted income per share | | | $ | 0.02 | | | $ | 0.35 | | | | | | | | | | | | | Weighted average shares outstanding - basic | | | 32,689,028 | | | | 32,492,645 | | | 34,409,478 | | | 33,220,915 | | Assumed exercise of dilutive options | | | 708,067 | | | | - | | | | 1,179,670 | | | | 871,413 | | Weighted average shares outstanding - diluted | | | 33,397,095 | | | | 32,492,645 | | | | 35,589,148 | | | | 34,092,328 | | | | | | | | | | | | | Potentially diluted securities outstanding at period end excluded from diluted computation as the inclusion would have been antidilutive: | | | | | | | | | | Options | | | 573,750 | | | | 3,394,858 | | | 1,035,000 | | | 893,750 | | RSU | | | - | | | | 218,330 | | | 0 | | | 0 | | Obligation to issue common stock | | | | 208,692 | | | | 0 | | Total | | | 573,750 | | | | 3,613,188 | | | | 1,243,692 | | | | 893,750 | |
17.19. SEGMENT INFORMATION
The Company is engaged in the design, development and commercialization of directedcritical communications hardware and multidirectional sound technologies, voice broadcast productssoftware solutions designed to alert, inform, and location-based mass messaging solutions for emergency warning and workforce management.protect. The Company operates in two2 business segments: LRADHardware and Genasys SpainSoftware and its principleprincipal markets are North and South America, Europe, the Middle East and Asia. As reviewed by the Company’s chief operating decision maker, the Company evaluates the performance of each segment based on sales and operating income. Cash and cash equivalents, marketable securities, accounts receivable, inventory, property and equipment, deferred tax assets, goodwill and intangible assets are primary assets identified by segment. The accounting policies for segment reporting are the same for the Company as a whole and transactions between the two2 operating segments are not material.
The following table presents the Company’s segment disclosures: | | | Year ended September 30, | | | | | 2021 | | | 2020 | | | | | | | | | | | | Revenue from external customers | | | | | | | | | Hardware | | $ | 44,233 | | | $ | 41,395 | | Software | | | 2,770 | | | | 1,615 | | | | | $ | 47,003 | | | $ | 43,010 | | | | | | | | | | | | Intersegment revenues | | | | | | | | | Hardware | | $ | 0 | | | $ | 0 | | Software | | | 1,823 | | | | 1,692 | | | | | $ | 1,823 | | | $ | 1,692 | | | | | | | | | | | | Segment operating income (loss) | | | | | | | | | Hardware | | $ | 7,871 | | | $ | 8,771 | | Software | | | (6,787 | ) | | | (2,730 | ) | | | | $ | 1,084 | | | $ | 6,041 | | | | | | | | | | | | Other expenses: | | | | | | | | | Depreciation and amortization expense | | | | | | | | | Hardware | | $ | 375 | | | $ | 483 | | Software | | | 1,222 | | | | 317 | | | | | $ | 1,597 | | | $ | 800 | | | | | | | | | | | | Income tax expense (benefit) | | | | | | | | | Hardware | | $ | 434 | | | $ | (5,706 | ) | Software | | | 0 | | | | 0 | | | | | $ | 434 | | | $ | (5,706 | ) |
For the year ended September 30, 2019:
| | | Revenue from External Customers | | | Intercompany Revenues | | | Operating Income | | | Depreciation and amortization expense | | | Interest Expense | | | Income Tax Expense | | LRAD | | $ | 34,931,448 | | | $ | - | | | $ | 3,097,498 | | | $ | 517,081 | | | $ | - | | | $ | 572,200 | | Genasys Spain | | | 2,047,607 | | | | 907,785 | | | | 38,867 | | | | 307,808 | | | | - | | | | - | | | | | $ | 36,979,055 | | | $ | 907,785 | | | $ | 3,136,365 | | | $ | 824,889 | | | $ | - | | | $ | 572,200 | |
| | | | Long-lived assets | | | Total Assets | | | LRAD | | | $ | 2,283,344 | | | $ | 42,470,356 | | | Genasys Spain | | | $ | 3,467,546 | | | $ | 4,649,627 | | | | | | $ | 5,750,890 | | | $ | 47,119,983 | |
For the year ended September 30, 2018:
| | | Revenue from External Customers | | | Intercompany Revenues | | | Operating Income (loss) | | | Depreciation and amortization expense | | | Interest Expense | | | Income Tax Expense | | LRAD | | $ | 24,836,795 | | | $ | - | | | $ | (1,387,902 | ) | | $ | 254,618 | | | $ | - | | | $ | 2,375,000 | | Genasys Spain | | | 1,469,995 | | | | 313,110 | | | | (88,563 | ) | | | 228,469 | | | | 20,949 | | | | - | | | | | $ | 26,306,790 | | | $ | 313,110 | | | $ | (1,476,465 | ) | | $ | 483,087 | | | $ | 20,949 | | | $ | 2,375,000 | |
| | | Long-lived assets | | | Total Assets | | LRAD | | $ | 2,478,144 | | | $ | 36,770,872 | | Genasys Spain | | | 3,973,917 | | | | 5,089,925 | | | | | $ | 6,452,061 | | | $ | 41,860,797 | |
| | | September 30, | | | | | 2021 | | | 2020 | | Long-lived assets | | | | | | | | | Hardware | | $ | 1,748 | | | $ | 1,924 | | Software | | | 36,645 | | | | 3,421 | | | | | $ | 38,393 | | | $ | 5,345 | | | | | | | | | | | | Total assets | | | | | | | | | Hardware | | $ | 50,364 | | | $ | 61,152 | | Software | | | 39,764 | | | | 5,015 | | | | | $ | 90,128 | | | $ | 66,167 | |
18. 20.MAJOR CUSTOMERS, SUPPLIERS AND RELATED INFORMATION
Major Customers For the fiscal year ended September 30, 2019, 2021, revenues from two customers1 customer accounted for 37% and 10%58% of total revenues with no other single customer accounting for more than 10% of total revenues. For the fiscal year ended September 30, 2018,2020, revenues from one1 customer accounted for 20%63% of total revenues with no other single customer accounting for more than 10% of total revenues. As of September 30, 2021, accounts receivable from 2 customers accounted for 66% and 18% of total accounts receivable. As of September 30, 2020, accounts receivable from 2 customers accounted for 36% and 24% of total accounts receivable.
Revenue from customers in the United States was $37,888 for the year ended September 30, 2021. Revenue from customers in the United States was $32,765 for the year ended September 30, 2020. The following table summarizes revenues by geographic region. Revenues are attributed to countries based on customer’s delivery location. | | | Years ended September 30, | | | Years ended September 30, | | | | | 2019 | | | 2018 | | | 2021 | | | 2020 | | Americas | | $ | 27,981,225 | | | $ | 16,488,624 | | | $ | 39,064 | | | $ | 34,815 | | Europe, Middle East, and Africa | | | 2,420,106 | | | | 3,238,533 | | | Asia Pacific | | | 6,577,724 | | | | 6,579,633 | | | 4,470 | | | 5,716 | | | | | $ | 36,979,055 | | | $ | 26,306,790 | | | Europe, Middle East and Africa | | | | 3,469 | | | | 2,479 | | Total Revenues | | | $ | 47,003 | | | $ | 43,010 | |
The following table summarized long lived assets by geographic region. | | | Year ended September 30, | | | | | 2021 | | | 2020 | | United States | | $ | 26,880 | | | $ | 1,924 | | Americas (excluding the United States) | | | 8,395 | | | | 0 | | Asia Pacific | | | 0 | | | | 0 | | Europe, Middle East and Africa | | | 3,118 | | | | 3,421 | | | | | $ | 38,393 | | | $ | 5,345 | |
Suppliers The Company has a large number of components and sub-assemblies produced by outside suppliers, some of which are sourced from a single supplier, which can magnify the risk of shortages and decrease the Company’s ability to negotiate with suppliers on the basis of price. In particular, the Company depends on one supplier of compression drivers for its LRAD products. If supplier shortages occur, or quality problems arise, then production schedules could be significantly delayed or costs significantly increased, which could in turn have a material adverse effect on the Company’s financial condition, results of operation and cash flows. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LRAD CORPORATION
| December 9, 2019GENASYS INC.
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| | | November 22, 2021 | | By:
| /s/ RICHARD S. DANFORTH
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| Richard S. Danforth
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| By: | /S/ RICHARD S. DANFORTH |
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| Richard S. Danforth |
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| Chief Executive Officer |
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POWER OF ATTORNEY Know all persons by these presents, that each person whose signature appears below constitutes and appoints Richard S. Danforth, and each of them, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming that all said attorneys-in-fact and agents, or any of them or their or his substitute or substituted, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of registrant in the capacities and on the dates indicated. Date: December 9, 2019November 22, 2021 | By | | /s/S/ RICHARD S. DANFORTH | | | | Richard S. Danforth Chief Executive Officer (Principal Executive Officer) | | | | | | Date: December 9, 2019November 22, 2021 | By | /S/ DENNIS D. KLAHN | | | /s/ Dennis D. Klahn,
| | | | Dennis D. Klahn, Chief Financial Officer
(Principal Financial and Accounting Officer) | | | | | | Date: December 9, 2019November 22, 2021 | By | | /s/S/ SCOTT L. ANCHIN | | | | Scott L. Anchin Director | | | | | | Date: December 9, 2019November 22, 2021 | By | | /s/S/ LAURA M. CLAGUE | | | | Laura M. Clague Director | | | | | | Date: December 9, 2019November 22, 2021 | By | | /s/ GENERAL JOHN G. COBURN S/ RICHARD H. OSGOOD III | | | | | General John G. CoburnRichard H. Osgood III
Director | | | | | | Date: December 9, 2019November 22, 2021 | By | | /s/ DANIEL H. MCCOLLUM S/ SUSAN LEE SCHMEISER | | | | | Daniel H. McCollumSusan Lee Schmeiser
Director | | | | | | Date: December 9, 2019November 22, 2021 | By | | /s/ RICHARD H. OSGOOD III S/ CALTHA SEYMOUR | | | | | Richard H. Osgood IIICaltha Seymour
Director |
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