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

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

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

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

The number of shares of Common Stock, $0.00001 par value, outstanding on ~~May 3,~~July 26, 2016 was 31,798,853.

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

General

The Company’s unaudited condensed consolidated financial statements included herein have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In ~~our~~management’s opinion, the accompanying statements reflect adjustments necessary to present fairly the financial position, results of operations, and cash flows for those periods indicated, and contain adequate disclosure to make the information presented not misleading. Adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the footnotes. The condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended September 30, 2015 included in the Company’s Annual Report on Form 10-K, as filed with the SEC on December 3, 2015. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.

Principles of Consolidation

The Company has a currently inactive wholly owned subsidiary, LRAD International Corporation, which the Company formed to conduct international marketing, sales and distribution activities. The condensed consolidated financial statements include the accounts of this subsidiary after elimination of intercompany transactions and accounts.

Reclassifications

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

3. RECENT ACCOUNTING PRONOUNCEMENTS

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-09,Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This guidance changes how companies account for certain aspects of share-based payments 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 benefit in the income statement, 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. All of the guidance will be effective for the Company in the fiscal year beginning October 1, 2017. Early adoption is permitted. The Company is currently evaluating the impact of this guidance, if any, on its financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842), which issued new guidance related to leases 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. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new guidance must be adopted using the modified retrospective approach and will be effective for the Company in the fiscal year beginning October 1, 2019. Early adoption is permitted. The Company is incurrently evaluating the ~~process~~impact of ~~determining the effects the adoption will have~~this guidance, if any, on its ~~consolidated~~ financial statements and related disclosures.

In July 2015, the FASB issued ASU No. 2015-11,Inventory (Topic 330): Simplifying the Measurement of Inventory. The guidance requires an entity to measure inventory at the lower of cost or net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation, rather than the lower of cost or market in the previous guidance. This amendment applies to inventory that is measured using first-in, first-out (FIFO). This amendment is effective for public entities for fiscal years beginning after December 15, 2016, including interim periods within those years. A reporting entity should apply the amendments prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the impact of this guidance, if any, on its consolidated financial statements and related disclosures.

~~In June 2014, the FASB issued ASU No. 2014-12,~~~~Compensation – Stock Compensation: Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved~~ ~~after the Requisite Service Period~~.The guidance requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. The guidance was effective and was implemented by the Company in the quarter beginning January 1, 2016. It had no effect on the Company’s financial statements or related disclosures.

In May 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers (“ASU 2014-09”), which requires an entity to recognize the amount of revenue to which it expects 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 date of the standard by an additional year; however, it provided companies the option to adopt one year earlier, commensurate with the original effective date. Accordingly, the standard will be effective for the Company in the fiscal year beginning October 1, 2018, with an option to adopt the standard for the fiscal year beginning October 1, 2017. The Company is currently evaluating this standard and has not yet selected a transition method or the effective date on which it plans to adopt the standard, nor has it determined the effect of the standard on its financial statements and related disclosures.

4.	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:

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 Company’s cash equivalents and marketable securities was determined based on Level 1 and Level 2 inputs. The Company ~~does~~did not have any marketable securities in the Level ~~1 category as of March 31, 2016, or in the Level~~ 3 category as of ~~March 31,~~June 30, 2016 or September 30, 2015. The Company believes that the recorded values of its other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

Instruments Measured at Fair Value

The following tables present the Company’s cash equivalents and marketable securities’ costs, gross unrealized gains and losses, and fair value by major security type recorded as cash equivalents or short-term or long-term marketable securities as of ~~March 31,~~June 30, 2016 and September 30, 2015.

March 31, 2016

Cost Basis

Unrealized
Gains/(Losses)

Fair
Value

Cash
Equivalents

Short-term
Securities

Long-term
Securities

Level 2:

Certificates of deposit
$ 3,296,188 $ - $ 3,296,188 $ - $ 1,248,466 $ 2,047,722
Municipal securities
563,991 302 564,293 155,477 408,816 -
Corporate bonds
1,206,931 (1,131 ) 1,205,800 - 976,106 229,694
Subtotal
5,067,110 (829 ) 5,066,281 155,477 2,633,388 2,277,416

Total
$ 5,067,110 $ (829 ) $ 5,066,281 $ 155,477 $ 2,633,388 $ 2,277,416

	June 30, 2016
			Unrealized			Fair		Cash		Short-term		Long-term
	Cost Basis		Gains/(Losses)			Value		Equivalents		Securities		Securities

Level 1:
Money Market Funds	$	-	$	-		$	628,206	$	628,206	$	-	$	-

Level 2:
Certificates of deposit	$	3,047,164	$	-		$	3,047,164	$	-	$	999,289	$	2,047,875
Municipal securities		436,012		88			436,100		55,112		380,988		-
Corporate bonds		952,827		(137	)		952,690		-		952,690		-
Subtotal		4,436,003		(49	)		4,435,954		55,112		2,332,967		2,047,875

Total	$	4,436,003	$	(49	)	$	5,064,160	$	683,318	$	2,332,967	$	2,047,875

	September 30, 2015
			Unrealized			Fair		Cash		Short-term		Long-term
	Cost Basis		Gains/(Losses)			Value		Equivalents		Securities		Securities

Level 1:
Money Market Funds	$	301,193	$	-		$	301,193	$	301,193	$	-	$	-

Level 2:
Certificates of deposit		3,296,238		-			3,296,238		-		249,072		3,047,166
Municipal securities		654,205		293			654,498		160,058		494,440		-
Corporate bonds		509,029		(594	)		508,435		-		508,435		-
Subtotal		4,459,472		(301	)		4,459,171		160,058		1,251,947		3,047,166

Total	$	4,760,665	$	(301	)	$	4,760,364	$	461,251	$	1,251,947	$	3,047,166

September 30, 2015

Cost Basis

Unrealized
Gains/(Losses)

Fair
Value

Cash
Equivalents

Short-term
Securities

Long-term
Securities

Level 1:

Money Market Funds
$ 301,193 $ - $ 301,193 $ 301,193 $ - $ -

Level 2:

Certificates of deposit
3,296,238 - 3,296,238 - 249,072 3,047,166
Municipal securities
654,205 293 654,498 160,058 494,440 -
Corporate bonds
509,029 (594 ) 508,435 - 508,435 -
Subtotal
4,459,472 (301 ) 4,459,171 160,058 1,251,947 3,047,166

Total
$ 4,760,665 $ (301 ) $ 4,760,364 $ 461,251 $ 1,251,947 $ 3,047,166

6. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	June 30,			September 30,
	2016			2015
Machinery and equipment	$	958,072		$	940,289
Office furniture and equipment		1,004,269			877,011
Leasehold improvements		71,738			67,913
Property and equipment, gross		2,034,079			1,885,213
Accumulated depreciation		(1,527,428	)		(1,413,250	)
Property and equipment, net	$	506,651		$	471,963

March 31,
2016

September 30,
2015

Machinery and equipment
$ 956,759 $ 940,289
Office furniture and equipment
968,655 877,011
Leasehold improvements
71,738 67,913
Property and equipment, gross
1,997,152 1,885,213
Accumulated depreciation
(1,492,846 ) (1,413,250 )
Property and equipment, net
$ 504,306 $ 471,963

Six months ended
March 31,

2016

2015

Depreciation expense
$ 94,251 $ 117,176

	Nine months ended
	June 30,
	2016		2015
Depreciation expense	$	128,833	$	178,179

7. ACCRUED LIABILITIES AND OTHER LIABILITIES—NONCURRENT

Accrued liabilities consisted of the following:

					June 30,		September 30,
	March 31, 2016		September 30, 2015		2016		2015

Payroll and related	$	969,724	$	330,916	$	1,200,915	$	330,916
Deferred revenue		795,532		51,345		339,095		51,345
Warranty reserve		253,801		289,660		261,328		289,660
Accrued contract costs		-		197,034		98,517		197,034
Other		-		1,600		-		1,600
Total	$	2,019,057	$	870,555	$	1,899,855	$	870,555


Other liabilities - noncurrent consisted of the following:

Deferred rent	$	110,078	$	121,996	$	104,119	$	121,996
Extended warranty		64,021		25,958		52,951		25,958
Total	$	174,099	$	147,954	$	157,070	$	147,954

Payroll and related

Payroll and related consists primarily of accrued payroll, benefits and related taxes for a Separation Agreement entered into with the Company’s CEO during the quarter ended March 31, 2016, as well as ~~accrued~~ vacation, sales commissions, and ~~sales commissions.~~payroll for the two week period ended June 30, 2016.

Deferred Revenue

Deferred revenue consists primarily of prepayments from customers in advance of product shipment as well as revenue for shipments to customers that can’t be recognized due to shipping terms.

Warranty Reserve

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

													Three month ended						Nine months ended
	Three month ended March 31,						Six months ended March 31,						June 30,						June 30,
	2016			2015			2016			2015			2016			2015			2016			2015
Beginning balance	$	292,379		$	325,107		$	315,618		$	314,311		$	317,822		$	327,236		$	315,618		$	314,311
Warranty provision		48,570			21,476			26,303			40,674			4,307			(20,954	)		30,610			19,720
Warranty settlements		(23,127	)		(19,347	)		(24,099	)		(27,749	)		(7,850	)		(5,511	)		(31,949	)		(33,260	)
Ending balance	$	317,822		$	327,236		$	317,822		$	327,236		$	314,279		$	300,771		$	314,279		$	300,771

									June 30,		September 30,		June 30,		September 30,
	March 31, 2016		September 30, 2015		March 31, 2016		September 30, 2015		2016		2015		2016		2015
Short-term warranty reserve	$	253,801	$	289,660	$	253,801	$	289,660	$	261,328	$	289,660	$	261,328	$	289,660
Long-term warranty reserve		64,021		25,958		64,021		25,958		52,951		25,958		52,951		25,958
Total warranty reserve	$	317,822	$	315,618	$	317,822	$	315,618	$	314,279	$	315,618	$	314,279	$	315,618

Accrued contract costs

We have contracted with a third party service provider to administer the required services under the terms of a repair and maintenance agreement with a foreign military. This payment is made in arrears each year.

8. INCOME TAXES

At ~~March 31,~~June 30, 2016, the Company had federal net operating losses (“NOLs”) and related state NOLs. The Company released $8,339,000 of its valuation allowance against its deferred tax assets in the quarter ended September 30, 2015 as it determined that it was more likely than not that those assets would be realized. The Company continues to maintain a valuation allowance of $12,175,000 as the Company believes that the negative evidence that it will be able to recover these net deferred tax assets outweighs the positive evidence.

The Company recorded an income tax benefit of ~~$856,106~~$862,720 and income tax expense of $1,600, reflecting effective tax rates of ~~45.0%~~52.9% and 0.2% for the ~~six~~nine months ended ~~March 31,~~June 30, 2016 and 2015, respectively. The nine months ended June 30, 2015 also included a $9,266 income tax benefit adjustment from the year ended September 30, 2014. The change in the effective tax rate in the ~~six~~nine months ended ~~March 31,~~June 30, 2016, compared to the same period in the prior year, is primarily due to the partial release of our valuation allowance in the prior year, resulting in current year tax benefit.

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

9. COMMITMENTS AND CONTINGENCIES

Litigation

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

Bonus Plan

The Company has an incentive bonus plan for fiscal year 2016 designed to motivate its employees to achieve the Company’s financial objectives. All of the Company’s employees are entitled to participate in the incentive plan. Target Bonus Amounts (“Target”) vary based on a percentage of the employee’s base salary which range from 10% to 50% of base salary and a bonus payment may be made at three levels, including at 50% of Target, at 100% of Target and at 200% of Target, depending upon the achievement by the Company of specified earnings per share goals. Included in such calculation is the cost of the incentive plan. For purposes of the earnings per share calculation, the number of shares outstanding will be held constant as of October 1, 2015. During the ~~six~~nine months ended ~~March 31,~~June 30, 2016 and 2015, the Company accrued $0 and $323,098, respectively, for bonuses and related payroll tax expenses in connection with the bonus plans.

10. SHARE-BASED COMPENSATION

Stock Option Plans

At ~~March 31,~~June 30, 2016, 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 2015 Equity Incentive Plan (“2015 Equity Plan”) was approved by the Company’s Board of Directors on January 19, 2015 and by the Company’s stockholders on March 18, 2015. The 2015 Equity Plan authorizes for issuance as stock options, restricted stock, stock appreciation rights, restricted stock units and performance awards, an aggregate of 5,000,000 new shares of common stock to employees, directors, advisors or consultants. At ~~March 31,~~June 30, 2016, there were options outstanding covering ~~2,537,836~~2,537,419 and ~~907,500~~813,750 shares of common stock under the 2005 Equity Plan and 2015 Equity Plan, respectively.

Stock Option Activity

The following table summarizes information about stock option activity during the ~~six~~nine months ended ~~March 31,~~June 30, 2016:

						Number			Weighted Average
	Number of Shares			Weighted Average Exercise Price		of Shares			Exercise Price
Outstanding October 1, 2015		2,852,419		$	2.35		2,852,419		$	2.35
Granted		717,500		$	1.83		725,000		$	1.82
Forfeited/expired		(124,583	)	$	2.56		(226,250	)	$	2.25
Outstanding March 31, 2016		3,445,336		$	2.23
Exercisable March 31, 2016		2,668,982		$	2.30
Outstanding June 30, 2016							3,351,169		$	2.24
Exercisable June 30, 2016							2,780,311		$	2.30

Options outstanding are exercisable at prices ranging from $0.93 to $3.17 and expire over the period from 2020 to 2023 with an average life of ~~5.9~~5.5 years. The aggregate intrinsic value of options outstanding and exercisable at ~~March 31,~~June 30, 2016 was ~~$122,360~~$198,578 and ~~$100,482,~~$160,699, respectively.

Share-Based Compensation

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

	Three months ended March 31,				Six months ended March 31,				Three months ended				Nine months ended
	2016		2015		2016		2015		June 30,				June 30,
Cost of revenue	$	6,101	$	6,851	$	11,738	$	11,671
									2016		2015		2016		2015
Cost of revenues									$	6,157	$	7,024	$	17,895	$	18,695
Selling, general and administrative		128,405		125,224		246,360		230,446		115,864		119,653		362,224		350,099
Research and development		25,811		45,332		50,159		66,737		26,001		26,186		76,160		92,923
Total	$	160,317	$	177,407	$	308,257	$	308,854	$	148,022	$	152,863	$	456,279	$	461,717

The employee stock options granted in the ~~six~~nine months ended ~~March 31,~~June 30, 2016 and 2015 had a weighted-average estimated fair value of $0.62 per share and $1.13 per share, respectively, using the Black-Scholes option pricing model with the following weighted-average assumptions (annualized percentages):

									Nine months ended
	Six months ended March 31,								June 30,
	2016				2015				2016			2015
Volatility		49.0%	-	52.0%		51.0%	-	62.0%	49.0%	-	52.0%	51.0%	-	62.0%
Risk-free interest rate		1.1%	-	1.7%		1.0%	-	1.6%	1.1%	-	1.7%	1.0%	-	1.6%
Forfeiture rate			10.0%				10.0%			10.0%			10.0%
Dividend yield		2.2%	-	2.7%			0.0%		2.2%	-	2.7%		0.0%
Expected life in years		3.2	-	4.6%		3.2	-	4.6%	3.2	-	4.6	3.2	-	4.6%

The Company declared its first dividend in the quarter ended December 31, 2015, so dividend yield assumptions were added to the valuation of options granted based on the expected annual yield. Expected volatility is based on the historical volatility of the Company’s common stock over the period commensurate with the expected life of the options. The risk-free interest rate is based on rates published by the Federal Reserve Board. The expected life 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 or if the Company updates its estimated forfeiture rate. Such amounts will be recorded as a cumulative adjustment in the period in which the estimate is changed.

Since the Company has an NOL carryforward as of ~~March 31,~~June 30, 2016, no excess tax benefit for the tax deductions related to share-based awards was recognized for the ~~six~~nine months ended ~~March 31,~~June 30, 2016 and 2015. As of ~~March 31,~~June 30, 2016, there was approximately ~~$800,000~~$600,000 of total unrecognized compensation cost related to non-vested share-based employee compensation arrangements. The cost is expected to be recognized over a weighted-average period of ~~1.8~~1.4 years.

11. STOCKHOLDERS’ EQUITY

Summary

The following table summarizes changes in the components of stockholders’ equity during the ~~six~~nine months ended ~~March 31,~~June 30, 2016:

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Retained

Comprehensive

Stockholders'

Shares

Amount

Capital

Earnings

Loss

Equity

Balances, September 30, 2015
32,898,461 $ 329 $ 87,608,034 $ (49,658,850 ) $ (301 ) $ 37,949,212
Share-based compensation expense
- - 308,257 - - 308,257
Repurchase of common stock
(1,099,608 ) (11 ) (1,748,445 ) - - (1,748,456 )
Common stock cash dividends
- - - (636,661 ) - (636,661 )
Other comprehensive income
- - - - (528 ) (528 )
Net loss
- - - (1,044,736 ) - (1,044,736 )
Balances, March 31, 2016
31,798,853 $ 318 $ 86,167,846 $ (51,340,247 ) $ (829 ) $ 34,827,088

~~Stock Purchase Warrants~~

The Company previously had 1,627,945 shares purchasable under outstanding warrants at an exercise price of $2.67, which expired on February 4, 2016. It did not have any warrants outstanding as of March 31, 2016.

													Accumulated
							Additional						Other			Total
	Common Stock						Paid-in			Retained			Comprehensive			Stockholders'
	Shares			Amount			Capital			Earnings			Loss			Equity
Balances, September 30, 2015		32,898,461		$	329		$	87,608,034		$	(49,658,850	)	$	(301	)	$	37,949,212
Share-based compensation expense		-			-			456,279			-			-			456,279
Repurchase of common stock		(1,099,608	)		(11	)		(1,748,445	)		-			-			(1,748,456	)
Common stock cash dividends		-			-			-			(954,650	)		-			(954,650	)
Other comprehensive income		-			-			-			-			253			253
Net loss		-			-			-			(767,814	)		-			(767,814	)
Balances, June 30, 2016		31,798,853		$	318		$	86,315,868		$	(51,381,314	)	$	(48	)	$	34,934,824

Share Buyback Program

The Board of Directors approved a share buyback program in 2013 under which the Company was authorized to repurchase up to $4 million of its outstanding common shares. This program expired on December 31, 2015 and in December 2015, the Board of Directors approved a new buyback program for calendar year 2016 under which the Company is authorized to repurchase up to $4 million of its outstanding common shares. During the ~~six~~nine months ended ~~March 31,~~June 30, 2016, 1,099,608 shares were repurchased for $1,748,456 under these two programs.

Dividends

On December 3, 2015, the Company announced a cash dividend of $0.01 per share on the Company’s common stock, payable on January 29, 2016 to stockholders of record on January 15, 2016. On February 4, 2016, the Company announced a cash dividend of $0.01 per share on the Company’s common stock, payable on March 30, 2016 to stockholders of record on March 15, 2016. On May 10, 2016, the Company announced a cash dividend of $0.01 per share on the Company’s common stock, payable on June 30, 2016 to stockholders of record on June 15, 2016. Dividends charged to retained earnings in the three and ~~six~~nine months ended ~~March 31,~~June 30, 2016 were ~~$317,988~~$317,989 and ~~$636,661,~~$954,650, respectively. There were no dividends declared in the prior year periods.

12.~~INCO~~MEINCOME (LOSS) PER SHARE

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

	Three months ended					Nine months ended
	June 30,					June 30,
	2016		2015			2016			2015
Numerator:
Income (loss) available to common stockholders	$	276,922	$	(63,947	)	$	(767,814	)	$	732,198

Denominator:
Weighted average common shares outstanding		31,798,853		33,152,714			32,028,153			33,214,242
Assumed exercise of dilutive options and warrants		62,455		-			-			524,374
Weighted average dilutive shares outstanding		31,861,308		33,152,714			32,028,153			33,738,616

Basic income (loss) per common share	$	0.01	$	(0.00	)	$	(0.02	)	$	0.02
Diluted income (loss) per common share	$	0.01	$	(0.00	)	$	(0.02	)	$	0.02

Potentially dilutive securities outstanding at period end excluded fromthe diluted computation as the inclusion would have been antidilutive:
Options		2,348,083		1,405,250			2,895,669			1,405,250
Warrants		-		1,627,945			-			1,627,945
Total		2,348,083		3,033,195			2,895,669			3,033,195

Three months ended
March 31,

Six months ended
March 31,

2016

2015

2016

2015

Numerator:

Income available to common stockholders
$ (664,663 ) $ 290,511 $ (1,044,736 ) $ 796,145

Denominator:

Weighted average common shares outstanding
31,828,167 33,253,719 32,146,928 33,244,929
Assumed exercise of dilutive options and warrants
- 594,246 - 571,876
Weighted average dilutive shares outstanding
31,828,167 33,847,965 32,146,928 33,816,805

Basic income per common share
$ (0.02 ) $ 0.01 $ (0.03 ) $ 0.02
Diluted income per common share
$ (0.02 ) $ 0.01 $ (0.03 ) $ 0.02

Potentially dilutive securities outstanding at period end excluded fromthe diluted computation as the inclusion would have been antidilutive:

Options
2,989,836 1,418,250 2,989,836 1,318,250
Warrants
- 1,627,945 - 1,627,945
Total
2,989,836 3,046,195 2,989,836 2,946,195

The discussion and analysis set forth below should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the related notes included under Item 1 of this Quarterly Report on Form 10-Q, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended September 30, 2015.

This report contains certain statements of a forward-looking nature relating to future events or future performance. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the only means of identifying forward-looking statements. Prospective investors are cautioned that such statements are only predictions and actual events or results may differ materially. In evaluating such statements, prospective investors should specifically consider various factors identified in this report and any matters set forth under Part I, Item 1A (Risk Factors) of our Annual Report on Form 10-K, which could cause actual results to differ materially from those indicated by such forward-looking statements.

Our Company develops and delivers highly intelligible, directed Long Range Acoustic Devices^® (“LRAD^®”)that beam, focus and control sound over short and long distances. By placing sound only where needed, we not only enhance many typical speaker applications, but we offer novel sound applications that conventional speakers cannot achieve.

Our LRAD-X^® product line offers a variety of directed sound products, which use focused acoustic output to clearly transmit critical information, instructions and warnings over long distances. The LRAD-X product line features clear voice intelligibility and meets the military’s stringent environmental requirements in a number of packages and form factors, from our hand held LRAD 100X to our LRAD 2000X unit, which communicates up to 5,500 meters.Through the use of powerful voice commands, prerecorded messages in multiple languages, and warning tones, our LRAD-X products are designed to create large safety zones while determining the intent and influencing the behavior of an intruder. We continue to expand our LRAD-X product line to provide a complete range of systems and accessories to meet a broad range of diverse applications including fixed and mobile military deployments, maritime security, critical infrastructure and perimeter security, commercial security, border and homeland security, law enforcement and emergency responder communications, asset protection and wildlife preservation and control.Our LRAD-X products have been competitively selected over other commercially available systems by the United States military and by several international militaries.

~~In 2012, we built~~Building on the success of our LRAD-X directional technology, ~~to launch~~in 2012 we launched our first omnidirectional product, the LRAD 360X. Unlike the existing siren based systems in the market, the LRAD 360X is designed with the same characteristics as our directed products - highly intelligible voice broadcasts and the ability to communicate and alert over long distances. Since the LRAD 360X product launch, we have developed our ONE VOICE^® omnidirectional mass communication product line, which includes a mobile, fully-integrated, trailer-mounted mass communication system, and other enhancements to provide a more fully integrated solution for municipalities, military bases, airports, college/business campuses, etc. We expect that the ONE VOICE product line will allow us to expand our business opportunities into the large and growing worldwide emergency warning and mass notification market. Through increased focus and investment in ~~worldwide~~domestic and international sales and marketing activities, ~~our LRAD-X and ONE VOICE products~~we have pioneered a new global market, selling ~~into over 70 countries, for~~our directional LRAD-X long-range acoustic hailing devices (“AHDs”) and advanced ONE VOICE omnidirectional mass notification ~~systems.~~systems into over 70 countries.

Revenues in the ~~second~~third fiscal quarter ended ~~March 31,~~June 30, 2016, were ~~$3.6~~$5.0 million, ~~a decrease~~an increase from ~~$4.5~~$3.5 million in the ~~second~~third fiscal quarter of 2015. The ~~decrease~~increase in revenues ~~was primarily due to the timing~~resulted from two large shipments into Southeast Asia – $1.1 million for public safety and $760,000 for navy vessels – as well as diverse shipments across a number of ~~customer orders~~markets, including police, border and ~~delays in awarding contracts. We~~perimeter security, oil and gas, prisons, U.S. and foreign military and military vehicles. While we continue to experience delays in projects in both U.S. and international markets due to various reasons, ~~but~~ we saw some improvement during our third fiscal quarter. We are aggressively pursuing these opportunities to try to bring them to closure. Based on the timing of budget cycles, as well as financial issues and military conflict in certain areas of the world, delays in awarding contracts often occur, resulting in uneven quarterly revenues. Demand for our products remains strong and we continue to build awareness and interest in our LRAD-X and ONE VOICE mass notification products throughout the world. On a quarter over quarter basis, our revenues are expected to remain uneven. Gross profit ~~decreased as a result of the lower revenues~~increased compared to the same quarter in the prior year as a result of higher revenues and ~~lower~~ fixed overhead ~~cost absorption.~~absorption, partially offset by lower product margin due to product mix. Operating expenses increased by ~~41.2%~~21.8% from ~~$2.0~~$1.8 million to ~~$2.9~~$2.2 million in the quarter ended ~~March 31,~~June 30, 2016, primarily due to ~~$836,000 of one-time~~increased salaries, benefits and consultants, recruiting expenses related to ~~our response~~the CEO search and commissions due to ~~and settlement of a proxy contest initiated by one of our stockholders, and separation costs related to the June 30, 2016 departure of our CEO.~~increased revenues. We reported a net ~~loss~~income of ~~$665,000~~$277,000 for the quarter, or ~~($.02)~~$0.01 per diluted share, compared to a net ~~income~~loss of ~~$291,000,~~$64,000, or ~~$.01~~$0.00 per ~~diluted~~ share for the same quarter in the prior year.

Our product line-up continues to gain worldwide awareness and recognition through media exposure, trade show participations, product demonstrations and word of mouth as a result of positive responses and increased acceptance of our products. We believe we have a solid global brand, technology and product foundation with our LRAD-X directed product line, which we have expanded over the years to service new markets and customers for greater business growth. We have launched a line of omnidirectional products targeted to meet the needs of the large and growing mass notification market. We believe that we have strong market opportunities for our directional and omnidirectional product offerings within the global government and military sector, as well as increasing commercial applications as a result of continued threats to governments, commerce and law enforcement, and in wildlife preservation and control applications. We intend to continue expanding our international mass notification business, particularly in the Middle East, Europe and Asia where we believe there are greater market opportunities for our omnidirectional products. Our selling network has expanded through the addition of marketing and business development personnel as well as continuing to improve and increase our relationships with key integrators and sales representatives within the United States and in a number of worldwide locations. However, we may continue to face challenges in fiscal 2016 and 2017 due to continuing economic and geopolitical conditions in some international regions, as well as the upcoming U.S. presidential election. We anticipate continued ~~uncertainty with~~ U.S. Military spending uncertainty due to ongoing defense budget delays and spending reductions. We continue to pursue large business opportunities, but it is difficult to anticipate how long it will take to close these opportunities, or if they will ever ultimately come to fruition. It is also difficult to determine whether our omnidirectional product will be accepted as a viable solution in the mass notification market, which includes a number of large, well-known competitors.

We have identified a number of accounting policies as critical to our business operations and the understanding of our results of operations. These are described in our consolidated financial statements located in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended September 30, 2015. The impact and any associated risks related to these policies on our business operations is discussed below and throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported and expected financial results.

The methods, estimates and judgments we use in applying our accounting policies, in conformity with 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. The estimates affect the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

Comparison of Results of Operations for the Three Months Ended~~March 31,~~June 30, 2016 and 2015

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

Revenues ~~decreased~~increased in the current quarter compared to the prior year due partially to the timing of customer orders and shipments. The receipt of orders will often be uneven due to the timing of approvals or budgets. We continue to experience delays in projects in both U.S. and international markets due to various reasons, but we are aggressively pursuing these opportunities to try to bring them to closure. Demand for our products remains strong and we had shipmentsRevenues during the quarter ~~for~~were very diverse, selling into 31 countries and into various markets, including police, border and perimeter security, oil and gas, prisons, U.S. and foreign military and military vehicles. We delivered a ~~variety of applications including~~$1.1 million public safety order and a ~~$710,000~~$760,000 order for ~~Latin American prison security, $544,000 for mass notification projects primarily in~~navy vessels into Southeast Asia ~~public safety, law enforcement and energy security. We were also awarded a $7.4 million, multi-year, firm-fixed-price, indefinite-delivery/indefinite-quantity contract from~~during the ~~U.S. Navy and made our first delivery under the contract award.~~quarter. At ~~March 31,~~June 30, 2016, we had aggregate deferred revenue of ~~$795,532~~$339,095 for ~~orders that had shipped but were not recognized due to shipping terms, or that have been paid for prior to March 31, 2016.~~prepayments from customers in advance of product shipment.

The ~~decrease~~increase in gross profit in the quarter was primarily due to the ~~decrease~~increase in revenue ~~lower product margins as a result of product mix,~~ and ~~lower~~increased absorption of our fixed overhead ~~costs.~~costs, partially offset by lower product margins.

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

Selling, general and administrative expenses included one-time expenses of $835,772 related to our response to and settlement of a proxy contest initiated by one of our stockholders, and separation costs related to the June 30, 2016 departure of our CEO. In addition, expenses increased by ~~$126,268~~$83,749 for salaries, benefits and consultants, primarily for business development personnel, $79,448 for recruiting expenses, primarily for a CEO search, $66,514 for increased commission expense, $28,972 for increased marketing expenses, and ~~marketing personnel additions, and $9,376~~$23,448 of other increases. ~~These expenses were partially offset by a $109,866 reduction for bonus accrual and a $51,053 reduction for sales commissions.~~

We incurred non-cash share-based compensation expenses allocated to selling, general and administrative expenses in the three months ended ~~March 31,~~June 30, 2016 and 2015 of ~~$128,405~~$115,864 and ~~$125,224,~~$119,653, respectively.

We may expend additional resources on the marketing and selling of our products in future periods as we identify ways to optimize potential opportunities. Commission expenses will fluctuate based on the nature of our sales.

Research and development expenses increased compared to the prior year primarily due to ~~$101,258~~$64,132 for increased staffing and benefits, ~~and $817 of other expenses, partially offset by decreases of $43,843~~$44,953 for development and testing expenses, and ~~$30,015 for a reduction in bonus accrual.~~$3,340 of other expenses.

Included in research and development expenses for the three months ended ~~March 31,~~June 30, 2016 and 2015 was ~~$25,811~~$26,001 and ~~$45,332~~$26,186 of non-cash share-based compensation costs, respectively.

Research and development costs vary period to period due to the timing of projects, the availability of funds for research and development and the timing and extent of the use of outside consulting, design and development firms. We continually improve our product offerings and we have further expanded our product line in 2016 with new products, customizations and enhancements. Based on current plans, we expect research and development costs to continue in the current fiscal year on a basis comparable to the prior year.

The ~~decrease~~increase in net income was primarily due to the ~~decrease~~increase in revenues, ~~and the one-time expenses related to a proxy contest and separation costs related to the planned departure~~partially offset by an increase in operating expenses. We recognized an income tax benefit of ~~our CEO. In~~$6,614 during the quarter ended ~~September~~June 30, ~~2015, we reversed~~2016, compared to a ~~portion of our valuation allowance against our deferred tax asset. In the quarter ended March 31, 2016, we recognized a tax~~ benefit of ~~$546,511. The Company recorded the $1,600 minimum tax payment~~$9,266 in the same quarter of the prior ~~year.~~year from prior year tax adjustments.

Comparison of Results of Operations for the~~Six~~Nine Months Ended~~March 31,~~June 30, 2016 and 2015

Revenues decreased in the first ~~six~~nine months of 2016, compared to the prior year due to the timing of customer orders and delays in awarding contracts. The receipt of orders will often be uneven due to the timing of approvals or budgets. WeWhile we continue to experience delays in projects in both U.S. and international markets due to various reasons, ~~but we believe that these orders are achievable. Demand for~~ our ~~products remains strong and we had shipments~~third fiscal quarter showed signs of improvement. Shipments during the first ~~six~~nine months ~~for~~included a wide variety of applications including ~~prisons,~~global public safety, border and perimeter security, energy companies, mass notification, ~~energy security, law enforcement/~~oil and gas, prisons, U.S. and foreign military ~~police,~~and military vehicles, the U.S. Navy and the U.S. Coast Guard. We were also awarded a $7.4 million, multi-year, firm-fixed-price, indefinite-delivery/indefinite-quantity contract from the U.S. Navy and made our first delivery under the contract award. With the orders we anticipate closing and our current backlog scheduled to deliver during the current fiscal year ending Septembervehicles. At June 30, ~~2016, the second half of the fiscal year should be much stronger. At March 31,~~ 2016, we had aggregate deferred revenue of ~~$795,532~~$339,095 for prepayments from customers in advance of product ~~shipment as well as shipments to customers that could not be recognized due to shipping terms.~~shipment.

The decrease in gross profit in the ~~quarter~~year was primarily due to the decrease in revenue, lower product margins as a result of product mix, and lower absorption of our fixed overhead costs.

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

Selling, general and administrative expenses included one-time expenses of ~~$835,772~~$897,157 related to our response to and settlement of a proxy contest initiated by one of our stockholders, ~~and~~ severance costs related to the ~~June 30, 2016~~ departure of our CEO, and recruiting costs related to the search for a new CEO. In addition, expenses increased by ~~$246,292~~$334,331 for salaries, benefits and consultants, primarily for business development and marketing personnel additions, ~~$27,672~~$56,644 for marketing and trade shows and ~~$37,030~~$80,899 of other increases. These expenses were partially offset by a ~~$212,366~~$218,333 reduction for bonus accrual ~~and a $65,833 reduction for sales commissions.~~compared to the prior year.

We incurred non-cash share-based compensation expenses allocated to selling, general and administrative expenses in the ~~six~~nine months ended ~~March 31,~~June 30, 2016 and 2015 of ~~$246,360~~$362,224 and ~~$230,446,~~$350,099, respectively.

Research and development expenses increased compared to the prior year primarily due to ~~$177,244~~$241,377 for increased staffing and benefits, ~~$24,799~~$43,414 for ~~depreciation,~~development and ~~$2,808 other expense,~~testing expenses and $35,818 for depreciation, partially offset by a $76,558 reduction for bonus accrual, ~~and $16,578~~$16,763 for non-cash share based compensation expense and $3,148 of other expense.

Included in research and development expenses for the ~~six~~nine months ended ~~March 31,~~June 30, 2016 and 2015 was ~~$50,159~~$76,160 and ~~$66,737~~$92,923 of non-cash share-based compensation costs, respectively.

Research and development costs vary period to period due to the timing of projects, the availability of funds for research and development and the timing and extent of the use of outside consulting, design and development firms. We continually improve our product offerings and we have further expanded our product line in fiscal 2016 with new products, customizations and enhancements. Based on current plans, we expect research and development costs to continue in the current fiscal year on a basis comparable to the prior year.

The decrease in net income was primarily due to the decrease in revenues and the one-time expenses related to a proxy contest and settlement, and severance and recruiting costs related to the departure of our CEO. In the ~~quarter ended September 30, 2015, we reversed a portion of our valuation allowance against our deferred tax asset. In the six~~nine months ended ~~March 31,~~June 30, 2016, we recognized a tax benefit of ~~$856,106. The Company recorded the $1,600 minimum tax payment in~~$862,720, compared to a benefit of $7,666 for the same period of the prior year.

Cash and cash equivalents at ~~March 31,~~June 30, 2016 was ~~$14,976,589,~~$15,546,733, compared to $18,316,103 at September 30, 2015. During the ~~six~~nine months ended ~~March 31,~~June 30, 2016, the Company ~~invested $612,219 of cash equivalents in short and long-term marketable securities,~~ used $1,748,456 for the repurchase of common stock and ~~$636,661~~$954,650 for the payment of cash dividends. Other than cash and expected future cash flows from operating activities in subsequent periods, we have no unused sources of liquidity at this time.

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

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

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

Net loss of ~~$1,044,736~~$767,814 for the ~~six~~nine months ended ~~March 31,~~June 30, 2016 was increased by ~~$414,533~~$231,401 of non-cash items that ~~include~~included deferred income taxes, share-based compensation, ~~expense,~~ depreciation and amortization, warranty provision, provision for doubtful accounts and inventory obsolescence. Cash ~~generated from~~provided by operating activities in the current year reflected an increase in ~~accrued~~payroll and ~~other liabilities~~related of ~~$1,172,443~~$869,999, primarily for payroll costs related to the separation agreement with the Company CEO and other payroll expenses for June 30, 2016 that were not paid until July 1, 2016. It also reflected an increase in accounts payable of $750,313, accrued and other liabilities of $169,756 for increased deferred revenue for customer prepayments, ~~andrevenue that was not recognized due to shipping terms, increase in accounts payable of $738,256 which includes costs related to the proxy contest~~ and decreased prepaid expenses and other – noncurrent of ~~$93,742.~~$140,613. Cash used in operating activities included an increase in accounts receivable of ~~$361,037,~~$442,115, an increase in inventories of ~~$287,325,~~$257,354, an increase in prepaid expenses and other of ~~$82,637~~$15,115 and warranty settlements of ~~$24,099.~~$31,949. Net income of ~~$796,145~~$732,198 for the ~~six~~nine months ended ~~March 31,~~June 30, 2015 was adjusted for ~~$492,510~~$706,292 of non-cash items that include share-based compensation expense, depreciation and amortization, warranty provision and inventory obsolescence. Cash ~~generated from~~provided by operating activities in the prior year reflected a decrease in accounts receivable of ~~$1,936,920~~$1,549,018 due to collections from a high year-end balance, an increase in accounts payable of ~~$206,149,~~$570,066, and a decrease in prepaid expenses and other – noncurrent of ~~$93,743.~~$140,614. Cash used in operating activities included a decrease in ~~accrued~~payroll and ~~other liabilities~~related of ~~$2,617,351,~~$2,425,472, primarily for the payment of bonuses earned in fiscal 2014, increased inventories of $1,224,048 based on our current sales forecast, a decrease in accrued and other liabilities of $562,312 from a reduction of prepayments from customers, increased ~~inventories of $689,050 based on our current sales forecast, increased~~ prepaid expenses and other of ~~$169,544~~$75,767 and ~~$27,749~~$33,260 for warranty settlements.

We had accounts receivable of ~~$2,477,360~~$2,547,420 at ~~March 31,~~June 30, 2016, compared to $2,116,323 at September 30, 2015. The level of trade accounts receivable at ~~March 31,~~June 30, 2016 represented approximately 6346 days of revenues compared to 44 days of revenues at September 30, 2015. ~~The increase in days is primarily due to the lower revenues.~~ Terms with individual customers vary greatly. We typically require thirty-day terms from our customers if credit is approved. Our receivables can vary dramatically due to overall sales volume, quarterly variations in sales, timing of shipments to and receipts from large customers, payment terms, and the timing of contract payments.

At ~~March 31,~~June 30, 2016 and September 30, 2015, our working capital was ~~$22,476,815~~$22,835,909 and $25,601,714, respectively. The reduction in working capital was primarily due to use of $1,748,456 to repurchase common shares, ~~$835,772~~$954,650 for cash dividends paid, $897,157 for one-time expenses related to a proxy contest initiated by a stockholder of the Company, severance costs paid to our CEO on June 30, 2016 and ~~severance and related~~recruiting costs related to the ~~June 30, 2016 departure of our~~search for a new CEO, $744,187 increase in deferred revenue primarily due to prepayments from customers in advance of product shipment as well as revenue for shipments to customers that can’t be recognized due to shipping terms and $636,661 paid for cash dividends, offset by a transfer of ~~$769,750~~$999,291 of investments from long-term to ~~short-term marketable securities.~~short-term.

In the ~~six~~nine months ended ~~March 31,~~June 30, 2016, we increased our holding of short and long-term marketable securities by ~~$612,219,~~$81,476, compared to ~~$4,544,977~~$4,741,067 purchased in the ~~six~~nine months ended ~~March 31,~~June 30, 2015.

We also use cash in investing activities primarily for the purchase of tooling, computer equipment and software, and investment in new or existing patents. Cash used in investing activities for equipment and patents was ~~$132,252~~$163,521 and ~~$172,086~~$273,482 for the ~~six~~nine months ended ~~March 31,~~June 30, 2016 and 2015, respectively. We anticipate some additional expenditure for equipment and patents during the balance of fiscal year 2016.

In the ~~six~~nine months ended ~~March 31,~~June 30, 2016 and 2015, we used $1,748,456 and ~~$158,740~~$965,474 for the repurchase of common stock. In the nine months ended June 30, 2016 and 2015, we received $0 and $494,834, respectively, from the exercise of stock options.

On December 3, 2015, we announced a cash dividend of $0.01 per share on our common stock, payable on January 29, 2016 to stockholders of record as of the close of business on January 15, 2016. On February 4, 2016, we announced a cash dividend of $0.01 per share on our common stock, payable on March 30, 2016 to stockholders of record as of the close of business on March 15, 2016. On May 10, 2016, the Company announced a cash dividend of $0.01 per share on the Company’s common stock, payable on June 30, 2016 to stockholders of record on June 15, 2016. We paid a total of ~~$636,661~~$954,650 in dividends during the ~~six~~nine months ended ~~March 31,~~June 30, 2016, compared to $0 in the ~~six~~nine months ended ~~March 31,~~June 30, 2015.

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

The Company’s interest income is sensitive to fluctuations in the general level of U.S. interest rates. Changes in U.S. interest rates affect the interest earned on the Company’s cash. The Company’s exposure to market risk for changes in interest rates is minimal as a result of maintaining cash in savings accounts. The Company currently does not have any debt that could be subject to interest fluctuation or market risk.

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

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.

Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of our disclosure controls and procedures as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of ~~March 31,~~June 30, 2016.

There have been no changes in our internal control over financial reporting during our fiscal quarter ended ~~March 31,~~June 30, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Our process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies, which may be identified during this process.

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

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

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

The Board of Directors approved a share buyback program in 2013 under which the Company was authorized to repurchase up to $4 million of its outstanding common shares. This program expired on December 31, 2015 and a new share buyback program for $4 million was approved for calendar year 2016. Shares repurchased under the plans have been retired. At March 31, 2016, we did not hold any treasury shares.None

~~The following table discloses the stock repurchases during the quarter ended March 31, 2016:~~

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

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

16990 Goldentop Rd. Ste. A, San Diego, California	92127
~~California~~	~~92127~~
(Address of principal executive offices)	(Zip Code)


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☒

							June 30,
							2016			September 30,
	March 31, 2016 (Unaudited)			September 30, 2015			(Unaudited)			2015

ASSETS
Current assets:
Cash and cash equivalents	$	14,976,589		$	18,316,103		$	15,546,733		$	18,316,103
Short-term marketable securities		2,633,388			1,251,947			2,332,967			1,251,947
Accounts receivable		2,477,360			2,116,323
Accounts receivable, less allowance of $11,018 and $0, respectively								2,547,420			2,116,323
Inventories, net		5,202,430			4,926,172			5,182,118			4,926,172
Prepaid expenses and other		648,303			565,666			580,781			565,666
Total current assets		25,938,070			27,176,211			26,190,019			27,176,211

Long-term marketable securities		2,277,416			3,047,166			2,047,875			3,047,166
Deferred tax assets		9,196,706			8,339,000			9,203,560			8,339,000
Property and equipment, net		504,306			471,963			506,651			471,963
Intangible assets, net		60,748			58,385			59,574			58,385
Prepaid expenses and other - noncurrent		485,196			578,938			438,325			578,938
Total assets	$	38,462,442		$	39,671,663		$	38,446,004		$	39,671,663

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,442,198		$	703,942		$	1,454,255		$	703,942
Accrued liabilities		2,019,057			870,555			1,899,855			870,555
Total current liabilities		3,461,255			1,574,497			3,354,110			1,574,497
Other liabilities - noncurrent		174,099			147,954			157,070			147,954
Total liabilities		3,635,354			1,722,451			3,511,180			1,722,451
Commitments and contingencies (Note 9)

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;31,798,853 and 32,898,461 shares issued and outstanding		318			329
Common stock, $0.00001 par value; 50,000,000 shares authorized;31,798,853 and 32,898,461 shares issued and outstanding, respectively								318			329
Additional paid-in capital		86,167,846			87,608,034			86,315,868			87,608,034
Accumulated deficit		(51,340,247	)		(49,658,850	)		(51,381,314	)		(49,658,850	)
Accumulated other comprehensive loss		(829	)		(301	)		(48	)		(301	)
Total stockholders' equity		34,827,088			37,949,212			34,934,824			37,949,212
Total liabilities and stockholders' equity	$	38,462,442		$	39,671,663		$	38,446,004		$	39,671,663

											Three months ended						Nine months ended
	Three months ended March 31,					Six months ended March 31,					June 30,						June 30,
	2016			2015		2016			2015		2016			2015			2016			2015
Revenues:
Product sales	$	3,339,707		$	4,252,815	$	5,903,514		$	8,398,887	$	4,753,898		$	3,256,564		$	10,657,412		$	11,655,451
Contract and other		262,267			233,415		519,992			472,771		288,271			249,351			808,263			722,122
Total revenues		3,601,974			4,486,230		6,423,506			8,871,658		5,042,169			3,505,915			11,465,675			12,377,573
Cost of revenues		1,970,512			2,189,425		3,493,682			4,215,696		2,601,731			1,804,905			6,095,413			6,020,601

Gross profit		1,631,462			2,296,805		2,929,824			4,655,962		2,440,438			1,701,010			5,370,262			6,356,972

Operating expenses:
Selling, general and administrative		2,276,694			1,466,197		3,736,786			2,868,219		1,568,226			1,286,095			5,305,012			4,154,314
Research and development		597,635			569,418		1,158,837			1,047,122		632,416			519,991			1,791,253			1,567,113
Total operating expenses		2,874,329			2,035,615		4,895,623			3,915,341		2,200,642			1,806,086			7,096,265			5,721,427

(Loss) income from operations		(1,242,867	)		261,190		(1,965,799	)		740,621
Income (loss) from operations												239,796			(105,076	)		(1,726,003	)		635,545

Other income		31,693			30,921		64,957			57,124		30,512			31,863			95,469			88,987

(Loss) income from operations before income taxes		(1,211,174	)		292,111		(1,900,842	)		797,745
Income tax (benefit) expense		(546,511	)		1,600		(856,106	)		1,600
Net (loss) income	$	(664,663	)	$	290,511	$	(1,044,736	)	$	796,145
Income (loss) from operations before income taxes												270,308			(73,213	)		(1,630,534	)		724,532
Income tax benefit												(6,614	)		(9,266	)		(862,720	)		(7,666	)
Net income (loss)											$	276,922		$	(63,947	)	$	(767,814	)	$	732,198

Net (loss) income per common share
- basic and diluted	$	(0.02	)	$	0.01	$	(0.03	)	$	0.02
Net income (loss) per common share- basic and diluted											$	0.01		$	(0.00	)	$	(0.02	)	$	0.02
Weighted average common shares outstanding:
Basic		31,828,167			33,253,719		32,146,928			33,244,929		31,798,853			33,152,714			32,028,153			33,214,242
Diluted		31,828,167			33,847,965		32,146,928			33,816,805		31,861,308			33,152,714			32,028,153			33,738,616
Cash dividends declared per common share	$	0.01		$	-	$	0.02		$	-	$	0.01		$	-		$	0.03		$	-

	Three months ended March 31,					Six months ended March 31,
	2016			2015		2016			2015

Net (loss) income	$	(664,663	)	$	290,511	$	(1,044,736	)	$	796,145
Other comprehensive (loss) income, net of tax:
Unrealized (loss) gain on marketable securities, net of tax		3,679			308		(529	)		1,098
Other comprehensive (loss) income		3,679			308		(529	)		1,098
Comprehensive (loss) income	$	(660,984	)	$	290,819	$	(1,045,265	)	$	797,243

	March 31, 2016
	Cost Basis		Unrealized Gains/(Losses)			Fair Value		Cash Equivalents		Short-term Securities		Long-term Securities

Level 2:
Certificates of deposit	$	3,296,188	$	-		$	3,296,188	$	-	$	1,248,466	$	2,047,722
Municipal securities		563,991		302			564,293		155,477		408,816		-
Corporate bonds		1,206,931		(1,131	)		1,205,800		-		976,106		229,694
Subtotal		5,067,110		(829	)		5,066,281		155,477		2,633,388		2,277,416

Total	$	5,067,110	$	(829	)	$	5,066,281	$	155,477	$	2,633,388	$	2,277,416

	Six months ended																	Nine months ended
	March 31, 2016						March 31, 2015											June 30, 2016						June 30, 2015
				% of Total					% of Total			Increase/(Decrease)									% of Total						% of Total			Fav(Unfav)
	Amount			Revenues			Amount		Revenues			Amount			%			Amount			Revenues			Amount			Revenues			Amount			%
Revenues:
Product sales	$	5,903,514			91.9	%	$	8,398,887		94.7	%	$	(2,495,373	)		(29.7%	)	$	10,657,412			93.0	%	$	11,655,451			94.2	%	$	(998,039	)		(8.6%	)
Contract and other		519,992			8.1	%		472,771		5.3	%		47,221			10.0	%		808,263			7.0	%		722,122			5.8	%		86,141			11.9	%
Total revenues		6,423,506			100.0	%		8,871,658		100.0	%		(2,448,152	)		(27.6%	)		11,465,675			100.0	%		12,377,573			100.0	%		(911,898	)		(7.4%	)

Cost of revenues		3,493,682			54.4	%		4,215,696		47.5	%		(722,014	)		(17.1%	)		6,095,413			53.2	%		6,020,601			48.6	%		(74,812	)		(1.2%	)
Gross profit		2,929,824			45.6	%		4,655,962		52.5	%		(1,726,138	)		(37.1%	)		5,370,262			46.8	%		6,356,972			51.4	%		(986,710	)		(15.5%	)

Operating expenses:
Selling, general and administrative		3,736,786			58.2	%		2,868,219		32.3	%		868,567			30.3	%		5,305,012			46.3	%		4,154,314			33.6	%		(1,150,698	)		(27.7%	)
Research and development		1,158,837			18.0	%		1,047,122		11.8	%		111,715			10.7	%		1,791,253			15.6	%		1,567,113			12.7	%		(224,140	)		(14.3%	)
Total operating expenses		4,895,623			76.2	%		3,915,341		44.1	%		980,282			25.0	%		7,096,265			61.9	%		5,721,427			46.3	%		(1,374,838	)		(24.0%	)

Income from operations		(1,965,799	)		(30.6%	)		740,621		8.4	%		(2,706,420	)		(365.4%	)
(Loss) income from operations																			(1,726,003	)		(15.0%	)		635,545			5.1	%		(2,361,548	)		(371.6%	)

Other income		64,957			1.0	%		57,124		0.6	%		7,833			13.7	%		95,469			0.8	%		88,987			0.7	%		6,482			7.3	%

Income from continuing operations before income taxes		(1,900,842	)		(29.6%	)		797,745		9.0	%		(2,698,587	)		(338.3%	)
Income tax (benefit) expense		(856,106	)		(13.3%	)		1,600		0.0	%		(857,706	)	na
Net income	$	(1,044,736	)		(16.3%	)	$	796,145		9.0	%	$	(1,840,881	)		(231.2%	)
(Loss) income from continuing operations before income taxes																			(1,630,534	)		(14.2%	)		724,532			5.8	%		(2,355,066	)		(325.0%	)
Income tax benefit																			(862,720	)		(7.5%	)		(7,666	)		(0.1%	)		855,054		na
Net (loss) income																		$	(767,814	)		(6.7%	)	$	732,198			5.9	%	$	(1,500,012	)		(204.9%	)

Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced programs		Maximum dollar value of shares that may yet be purchased under the program

January 1, 2016 - January 31, 2016		-		-		-	$	4,000,000
February 1, 2016 - February 29, 2016		68,400	$	1.54		68,400	$	3,894,664
March 1, 2016 - March 31, 2016		-		-		-	$	3,894,664
Total		68,400				68,400


31.1	Certification of ~~Thomas R. Brown,~~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 Katherine H. McDermott, 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 ~~Thomas R. Brown,~~Richard S. Danforth, Principal Executive Officer and Katherine H. McDermott, Principal Financial Officer.*

101.INS	XBRL Instance Document*


101.SCH	XBRL Taxonomy Extension Schema Document*

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document*

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*

101.LAB	XBRL Taxonomy Extension Label Linkbase Document*

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document*


	LRAD CORPORATION

Date: ~~May 10,~~August 2, 2016	By:	/s/ KATHERINE H. MCDERMOTT
		Katherine H. McDermott, Chief Financial Officer
		(Principal Financial Officer)

							June 30,			September 30,
	March 31, 2016			September 30, 2015			2016			2015
Raw materials	$	4,504,144		$	4,562,535		$	4,510,534		$	4,562,535
Finished goods		880,680			763,227			932,878			763,227
Work in process		248,851			20,588			160,292			20,588
Inventories, gross		5,633,675			5,346,350			5,603,704			5,346,350
Reserve for obsolescence		(431,245	)		(420,178	)		(421,586	)		(420,178	)
Inventories, net	$	5,202,430		$	4,926,172		$	5,182,118		$	4,926,172