# EDGAR Filing Document

**Accession Number:** 0000924383
**File Stem:** 0000950170-25-109006
**Filing Date:** 2025-8
**Character Count:** 182777
**Document Hash:** 7905bada68013e0821912f2a59533223
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000950170-25-109006.hdr.sgml**: 20250814

**ACCESSION NUMBER**: 0000950170-25-109006

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 104

**CONFORMED PERIOD OF REPORT**: 20250630

**FILED AS OF DATE**: 20250814

**DATE AS OF CHANGE**: 20250814

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Genasys Inc.
- **CENTRAL INDEX KEY:** 0000924383
- **STANDARD INDUSTRIAL CLASSIFICATION:** HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651]
- **ORGANIZATION NAME:** 04 Manufacturing
- **EIN:** 870361799
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 0930

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-24248
- **FILM NUMBER:** 251220337

**BUSINESS ADDRESS:**
- **STREET 1:** 16262 WEST BERNARDO DRIVE
- **CITY:** SAN DIEGO
- **STATE:** CA
- **ZIP:** 92127
- **BUSINESS PHONE:** 858-676-1112

**MAIL ADDRESS:**
- **STREET 1:** 16262 WEST BERNARDO DRIVE
- **CITY:** SAN DIEGO
- **STATE:** CA
- **ZIP:** 92127

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** LRAD Corp
- **DATE OF NAME CHANGE:** 20100326

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** AMERICAN TECHNOLOGY CORP /DE/
- **DATE OF NAME CHANGE:** 19940602

?xml version='1.0' encoding='ASCII'? 10-Q

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**UNITED STATES** 

**SECURITIES AND EXCHANGE COMMISSION** 

**Washington, D.C. 20549** 

------

**FORM** 10-Q

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**(Mark one)** 

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

**For the quarterly period ended** **June 30,** 2025

**or** 

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

**For the transition period from to** <u>.</u> 

**Commission File Number:** 000-24248

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![img38272234_0.jpg](img38272234_0.jpg)

GENASYS INC.

**(Exact name of registrant as specified in its charter)** 

------

---

| | |
|:---|:---|
| Delaware | 87-0361799 |
| **(State or other jurisdiction of**<br>**incorporation or organization)** | **(I.R.S. Employer**<br>**Identification Number)** |
| 16262 West Bernardo Drive, San Diego**,**<br>California | 92127 |
| **(Address of principal executive offices)** | **(Zip Code)** |

---

**(**858**)** 676-1112

**(Registrant's telephone number, including area code)** 

------

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

---

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

---

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

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

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

---

| | | | |
|:---|:---|:---|:---|
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☐ |  |  |

---

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

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

The number of shares of Common Stock, $0.00001 par value, outstanding on August 8, 2025 was 45,154,504.

------

**Table of Contents**

---

| | | |
|:---|:---|:---|
|  |  | **Page** |
| **PART I.** | [<u>FINANCIAL INFORMATION</u>](#part_i_financial_information) | 1 |
| Item 1. | [<u>Financial Statements (Unaudited)</u>](#item_1_financial_statements) | 1 |
|  | [<u>Condensed Consolidated Balance Sheets</u>](#condensed_consolidated_balance_sheets) | 1 |
|  | [<u>Condensed Consolidated Statements of Operations</u>](#condensed_consolidated_stm_of_operations) | 2 |
|  | [<u>Condensed Consolidated Statements of Comprehensive Loss</u>](#condense_cons_stmt_of_comprehensive_loss) | 3 |
|  | [<u>Condensed Consolidated Statements of Cash Flows</u>](#condensed_consolidat_stmt_of_cash_flows) | 4 |
|  | [<u>Notes to Unaudited Condensed Consolidated Financial Statements</u>](#notes_to_the_condensed_consoli_financia) | 6 |
| Item 2. | [<u>Management's Discussion and Analysis of Financial Condition and Results of Operations</u>](#mda) | 28 |
| Item 3. | [<u>Quantitative and Qualitative Disclosures About Market Risk</u>](#item_3_quantitative_and_qualitative_disc) | 39 |
| Item 4. | [<u>Controls and Procedures</u>](#item_4_controls_and_procedures) | 39 |
| **PART II.** | [<u>OTHER INFORMATION</u>](#part_ii_other_information) | 40 |
| Item 1. | [<u>Legal Proceedings</u>](#item_1_legal_proceedings) | 40 |
| Item 1A. | [<u>Risk Factors</u>](#item_1a_risk_factors) | 40 |
| Item 2. | [<u>Unregistered Sales of Equity Securities and Use of Proceeds</u>](#item_2_unregistered_sales_of_equity_sec) | 41 |
| Item 3. | [<u>Defaults Upon Senior Securities</u>](#item_3_defaults_upon_senior_securities) | 41 |
| Item 4. | [<u>Mine Safety Disclosures</u>](#item_4_mine_safety_disclosures) | 41 |
| Item 5. | [<u>Other Information</u>](#item_5_other_information) | 41 |
| Item 6. | [<u>Exhibits</u>](#item_6_exhibits) | 42 |
| [<u>Signatures</u>](#signatures) | [<u>Signatures</u>](#signatures) | 43 |

---

------

**PART I. FINANCIAL INFORMATION** 

**Item 1. Financial Statements**

**Genasys Inc.**

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value and share amounts)

---

| | | |
|:---|:---|:---|
|  | **June 30,<br>2025** | **September 30,<br>2024** |
|  | **(Unaudited)** |  |
| ASSETS |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash and cash equivalents | $5339 | $4945 |
| &nbsp;&nbsp;&nbsp;&nbsp;Short-term marketable securities | 120 | 7945 |
| &nbsp;&nbsp;&nbsp;&nbsp;Restricted cash | 95 | 95 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net of allowance for credit losses of $65 | 4648 | 3283 |
| &nbsp;&nbsp;&nbsp;&nbsp;Contract assets | 2846 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventories, net | 11426 | 7313 |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other | 7458 | 2559 |
| Total current assets | 31932 | 26140 |
| Long-term marketable securities |  | 249 |
| Long-term restricted cash | 585 | 250 |
| Property and equipment, net | 1169 | 1291 |
| Goodwill | 13451 | 13329 |
| Intangible assets, net | 6724 | 8506 |
| Operating lease right of use assets, net | 2550 | 3110 |
| Other assets | 982 | 1061 |
| Total assets | $57393 | $53936 |
| LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | $7797 | $4034 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued liabilities | 23473 | 9030 |
| &nbsp;&nbsp;&nbsp;&nbsp;Operating lease liabilities, current portion | 1075 | 1021 |
| &nbsp;&nbsp;&nbsp;&nbsp;Notes payable, at fair value - short term | 17050 |  |
| Total current liabilities | 49395 | 14085 |
| Notes payable, at fair value - long term |  | 12010 |
| Warrant liability | 2080 | 6640 |
| Deferred revenue, noncurrent | 294 | 369 |
| Operating lease liabilities, noncurrent | 2465 | 3269 |
| Total liabilities | 54234 | 36373 |
| Stockholders' equity: |  |  |
| Preferred stock, $0.00001 par value; 5,000,000 shares authorized; none issued and<br> outstanding |  |  |
| Common stock, $0.00001 par value; 100,000,000 shares authorized; 45,154,504 and 44,631,030 shares issued and outstanding as of June 30, 2025 and September 30, 2024, respectively |  |  |
| Additional paid-in capital | 126979 | 125690 |
| Accumulated deficit | (124496) | (107792) |
| Accumulated other comprehensive income (loss) | 676 | (335) |
| Total stockholders' equity | 3159 | 17563 |
| Total liabilities and stockholders' equity | $57393 | $53936 |

---

The accompanying notes are an integral part of these condensed consolidated financial statements

------

**Genasys Inc.**

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share and share amounts)

(Unaudited)

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended<br>June 30,** | **Three Months Ended<br>June 30,** | **Nine Months Ended<br>June 30,** | **Nine Months Ended<br>June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Revenues: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Product sales | $7001 | $4576 | $14215 | $9951 |
| &nbsp;&nbsp;&nbsp;&nbsp;Contract and other | 2856 | 2591 | 9514 | 7316 |
| Total revenues | 9857 | 7167 | 23729 | 17267 |
| Cost of revenues | 7260 | 3383 | 15344 | 9827 |
| Gross profit | 2597 | 3784 | 8385 | 7440 |
| Operating expenses |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative | 6422 | 6649 | 19904 | 19806 |
| &nbsp;&nbsp;&nbsp;&nbsp;Research and development | 2100 | 2496 | 6602 | 7218 |
| Total operating expenses | 8522 | 9145 | 26506 | 27024 |
| Loss from operations | (5925) | (5361) | (18121) | (19584) |
| Other (expense) income, net | (554) | (1363) | 1496 | (1236) |
| Loss before income taxes | (6479) | (6724) | (16625) | (20820) |
| Income tax expense (benefit) | 8 | (42) | 79 | (476) |
| Net loss | $(6487) | $(6682) | $(16704) | $(20344) |
| Net loss per common share - basic and diluted | $(0.14) | $(0.15) | $(0.37) | $(0.46) |
| Weighted average common shares outstanding: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Basic and diluted | 45154504 | 44598393 | 45022635 | 44216602 |

---

The accompanying notes are an integral part of these condensed consolidated financial statements

------

**Genasys Inc.** 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(Unaudited)

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended<br>June 30,** | **Three Months Ended<br>June 30,** | **Nine Months Ended<br>June 30,** | **Nine Months Ended<br>June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Net loss | $(6487) | $(6682) | $(16704) | $(20344) |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized (loss) gain on marketable securities |  | 1 | (8) | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;Unrealized foreign currency gain (loss) | 311 | (26) | 199 | 27 |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of Term Loans related to credit risk | 820 |  | 820 |  |
| Comprehensive loss | $(5356) | $(6707) | $(15693) | $(20309) |

---

The accompanying notes are an integral part of these condensed consolidated financial statements

------

**Genasys Inc.**

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

---

| | | |
|:---|:---|:---|
|  | **Nine Months Ended<br>June 30,** | **Nine Months Ended<br>June 30,** |
|  | **2025** | **2024** |
| Operating Activities: |  |  |
| Net loss | $(16704) | $(20344) |
| Adjustments to reconcile net loss to net cash used in operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 2114 | 2193 |
| &nbsp;&nbsp;&nbsp;&nbsp;Warranty provision | (12) | (56) |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventory obsolescence | 254 | 139 |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on disposition of fixed assets | 1 | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation | 1264 | 1269 |
| &nbsp;&nbsp;&nbsp;&nbsp;Partial release of valuation allowance |  | (525) |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain on change in fair value of warrants | (4560) | (21) |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on change in fair value of Term Loans | 1380 | 124 |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss on issuance of First Amendment Term Loan | 480 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Amortization of operating lease right of use asset | 570 | 584 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accretion of acquisition holdback liability |  | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;Remeasurement of acquisition contingent consideration |  | (16) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accretion of investment of marketable securities | (40) |  |
| Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable, net | (1353) | 434 |
| &nbsp;&nbsp;&nbsp;&nbsp;Contract assets | (2846) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Inventories, net | (4367) | (952) |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other | (4793) | (3995) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 3737 | 1776 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued and other liabilities | 13604 | (641) |
| Net cash used in operating activities | (11271) | (20010) |
| Investing Activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchases of marketable securities | (1401) | (11796) |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from maturities of marketable securities | 9507 | 9240 |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash paid for acquisitions net of cash acquired |  | (908) |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash paid for asset purchase holdback liability |  | (764) |
| &nbsp;&nbsp;&nbsp;&nbsp;Capital expenditures | (213) | (161) |
| Net cash provided by (used in) investing activities | 7893 | (4389) |
| Financing Activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from issuance of Close Date Term Loan and warrants, net of issuance cost |  | 13698 |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from issuance of First Amendment Term Loan | 4000 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from exercise of stock options | 43 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Proceeds from offering of common stock, net of issuance costs |  | 10449 |
| &nbsp;&nbsp;&nbsp;&nbsp;Payment of contingent consideration |  | (219) |
| &nbsp;&nbsp;&nbsp;&nbsp;Shares retained for payment of taxes in connection with settlement of restricted stock units | (18) | (12) |
| Net cash provided by financing activities | 4025 | 23916 |
| Effect of foreign exchange rate on cash | 82 | (18) |
| Net increase (decrease) in cash, cash equivalents, and restricted cash | 729 | (501) |
| Cash, cash equivalents and restricted cash, beginning of period | 5290 | 9519 |
| Cash, cash equivalents and restricted cash, end of period | $6019 | $9018 |
| Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets: |  |  |
| Cash and cash equivalents | $5339 | $8672 |
| Restricted cash, current portion | 95 |  |
| Long-term restricted cash | 585 | 346 |
| Total cash, cash equivalents and restricted cash shown in the consolidated balance sheets | $6019 | $9018 |

---

The accompanying notes are an integral part of these condensed consolidated financial statements

------

**Genasys Inc.** 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)

(Unaudited)

---

| | | |
|:---|:---|:---|
|  | **Nine Months Ended<br>June 30,** | **Nine Months Ended<br>June 30,** |
|  | **2025** | **2024** |
| Noncash investing and financing activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in unrealized (loss) gain on marketable securities | $(8) | $8 |
| &nbsp;&nbsp;&nbsp;&nbsp;Purchases of property and equipment included in accounts payable and<br> accrued liabilities | $2 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Obligation to issue common stock in connection with the Evertel acquisition | $— | $(685) |
| &nbsp;&nbsp;&nbsp;&nbsp;Shares issued in connection with the Evertel acquisition | $— | $(1924) |
| &nbsp;&nbsp;&nbsp;&nbsp;Settlement of Contingent consideration in shares of common stock | $— | $(656) |
| &nbsp;&nbsp;&nbsp;&nbsp;Holdback liability payable in connection with the Evertel acquisition | $— | $(245) |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued term loan and warrant issuance cost not paid | $— | $(119) |
| Supplemental disclosure of cash flow information |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash paid for interest | $1124 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash paid for taxes | $39 | $— |

---

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Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

**1. OPERATIONS**

Genasys Inc. ("Genasys" or the "Company") is a global provider of Protective Communications™ solutions including its Genasys Protect™ software platform and Genasys Long Range Acoustic Devices ("LRAD"). Genasys' 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 can use 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** 

*<u>General</u>* 

The Company's unaudited interim condensed consolidated financial statements included herein have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X and the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In management's opinion, the accompanying financial statements reflect adjustments necessary to present fairly the financial position, results of operations, and cash flows for those periods indicated, and contain adequate disclosure to make the information presented not misleading. Adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the footnotes. The condensed consolidated financial statements and notes thereto should be read in conjunction with the Company's audited financial statements and notes thereto for the year ended September 30, 2024, included in the Company's Annual Report on Form 10-K, as filed with the SEC on December 13, 2024. The accompanying condensed consolidated balance sheet as of September 30, 2024, has been derived from the audited consolidated balance sheet as of September 30, 2024, contained in the above referenced Form 10-K. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.

*<u>Principles of consolidation</u>*

The Company has seven wholly owned subsidiaries, Genasys II Spain, S.A.U. ("Genasys Spain"), Genasys Communications Canada ULC ("Genasys Canada"), Genasys Singapore PTE Ltd, Genasys Puerto Rico, LLC, Zonehaven LLC, Evertel Technologies LLC ("Evertel"), and one currently inactive subsidiary, Genasys America de CV. The condensed consolidated financial statements include the accounts of these subsidiaries after elimination of intercompany transactions and accounts.

*<u>Use of Estimates</u>*

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 for expected credit losses, fair value of term loans and warrant liabilities, contingent consideration, valuation of inventory, goodwill and intangible assets, warranty reserve, valuation of operating lease right of use assets and operating lease liabilities, 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.

*<u>Cash, cash equivalents and restricted cash</u>*

The Company considers all highly liquid investments with an original maturity of three months or less, when purchased, to be cash equivalents. As of June 30, 2025, the amount of cash and cash equivalents was $5,339. As of September 30, 2024, the amount of cash and cash equivalents was $4,945.

The Company considers any amounts pledged as collateral or otherwise restricted for use in current operations to be restricted cash. In addition, the Company excludes from cash and cash equivalents cash required to fund specific future contractual obligations related to business combinations. Restricted cash is classified as a current asset unless amounts are not expected to be released and available for use in operations within one year. As of June 30, 2025 and September 30, 2024, restricted cash was $680 and $345, respectively, which was restricted for a maintenance contract and corporate card payment.

*<u>Accounts receivable and allowance for credit losses</u>*

The Company maintains an allowance for credit losses primarily for estimated losses resulting from the inability or failure of individual customers to make required payments. The Company maintains an allowance under Accounting Standards Codification ("ASC") Topic 326*,* based on historical losses, changes in payment history, customer-specific information, current economic conditions, and reasonable and supportable forecasts of future economic conditions. The allowance under ASC 326 is updated as additional losses are incurred or information becomes available related to the customer or economic conditions.

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

The Company's allowance for credit losses was $65 as of both June 30, 2025 and September 30, 2024.

The Company writes off accounts receivable based on the age of the receivable and the facts and circumstances surrounding the customer and reasons for non-payment. Actual write-offs might differ from the recorded allowance.

*<u>Term Loans</u>*

The Company determined that it is eligible for the fair value option ("FVO") election in connection with the Term Loans (as defined below). The Term Loans meet the definition of a "recognized financial liability" which is an acceptable financial instrument eligible for the fair value option under ASC 825-10-15-4 and do not meet the definition of any of the financial instruments found within ASC 825-10-15-5 that are not eligible for the fair value option. The fair value option election was made to enhance the relevance and transparency of information presented related to the features embedded in the Term Loan. At the date of issuance, the fair value of the Term Loans were estimated using a discounted cash flow method. Changes in the fair value of the Term Loan, other than changes associated with the Company's own credit risk, are recorded as gains or losses in the Company's condensed consolidated statements of operations and comprehensive loss in each reporting period. Changes in fair value attributable to the Company's own credit risk are recorded in other comprehensive income or loss in the Company's condensed consolidated statements of operations and comprehensive loss in each reporting period. Under the fair value option, debt issuance costs are expensed as incurred and recorded in other expenses in the Company's condensed consolidated statements of operations and comprehensive loss.

*<u>Warrants</u>*

The warrants issued in conjunction with the Close Date Term Loan are classified as liabilities under ASC 815-40 due to not being indexed to the Company's stock. The warrants are measured at fair value using a Monte Carlo simulation to capture the down-round provision in the warrant agreement. Changes in fair value of the warrants, are recorded as gains or losses in other income in the Company's condensed consolidated statements of operations and comprehensive loss in each reporting period.

**3. RECENT ACCOUNTING PRONOUNCEMENTS** 

*Accounting pronouncements not yet adopted*

In November 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2023-07, "*Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures*" ("ASU 2023-07"). ASU 2023-07 expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, which means that it will be effective for the Company's annual periods beginning October 1, 2024, and interim periods beginning October 1, 2025. Early adoption is permitted. The Company is currently evaluating the impact the updated standard will have on disclosures within the consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, "*Income Taxes (Topic 740): Improvements to Income Tax Disclosures*" ("ASU 2023-09"). ASU 2023-09 requires disaggregated information about a reporting entity's effective tax rate reconciliation as well as disaggregated information on income tax paid. The standard is effective for fiscal years beginning after December 15, 2024, which means it will be effective for the Company's fiscal years beginning October 1, 2025. Early adoption is permitted. The Company is currently evaluating the impact the updated standard will have on disclosures within the consolidated financial statements.

In November 2024, the FASB issued ASU No. 2024-03, "*Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" ("ASU 2024-03")*. ASU 2024-03 requires additional disclosure of specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. ASU 2024-03 may be applied either prospectively with the option for retrospective application for all prior periods presented. The Company is currently evaluating the impact the updated standard will have on disclosures within the consolidated financial statements.

**4. BUSINESS COMBINATIONS** 

On October 4, 2023, the Company completed the acquisition of all of the membership interests in Evertel, pursuant to a Membership Interest Purchase Agreement ("Purchase Agreement") with Word Systems Operations, LLC ("Seller") and Evertel.

Evertel offers a secure and compliant mission-critical collaboration platform for the public safety market that connects public safety personnel, information, and tools in one space.

The Evertel acquisition was accounted for as a business combination using the acquisition method pursuant to ASC Topic 805*.* As the acquirer for accounting purposes, the Company has estimated the purchase consideration, assets acquired and liabilities assumed as of the acquisition date, with the excess of the purchase consideration over the fair value of net assets acquired recognized

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

as goodwill. The estimated fair value of assets purchased, and liabilities assumed, in certain cases may be subject to revision based on the final determination of fair value.

The consideration consisted of the following:

---

| | |
|:---|:---|
| Cash paid | $923 |
| Common stock issued | 2609 |
| Contingent consideration | 890 |
| Acquisition holdback liability | 230 |
| Working capital adjustment | (15) |
|  | $4637 |

---

The Company funded the cash portion of the total consideration with available cash on hand. The Company also issued 986,486 shares of the Company's common stock to the former owners of Evertel. The fair value of the Company's stock on the closing date was $1.95, resulting in the addition of $1,924 to additional-paid-in-capital. The contingent consideration liability is a current liability and recorded in the current portion of accrued liabilities. Under the terms of the Purchase Agreement, the Company recorded a $158 credit to additional-paid-in-capital and an addition to goodwill as this is consideration transferred to the former owners of Evertel during the second quarter of fiscal 2024, and the Company issued common stock to the former owners of Evertel and three key employees during the third quarter of fiscal 2024 to settle the obligation. The Company also recorded a holdback liability and an obligation to issue common stock as security for potential indemnification claims against the Seller. The holdback liability and the common stock was released twelve months from the closing date, subject to amounts withheld for actual, pending or potential claims. The holdback liability was recorded as a current liability at $230, which represented the fair value of the holdback liability as of the acquisition date. The fair value of the holdback liability has and will be adjusted each reporting period with the change in fair value recorded in the condensed consolidated statement of operations. The obligation to issue common stock was recorded as a credit to additional paid in capital for $527 on the acquisition date. During the second quarter of fiscal 2024, the Company and the former owners of Evertel, agreed on a working capital adjustment that resulted in a payment of $15 to the Company.

The Company incurred $151 in expenses related to this transaction. $39 of the expenses were incurred in the fourth quarter of fiscal year 2023, $12 in the first quarter of fiscal 2024, $62 in the second quarter of fiscal 2024, $18 in the third quarter of fiscal 2024, and $20 in the fourth quarter of fiscal 2024. The expense was recorded in selling, general and administrative expenses in the consolidated statement of operations.

The preliminary allocation of the purchase price as of the acquisition date is as follows:

---

| | |
|:---|:---|
| Assets acquired |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | $142 |
| &nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses | 27 |
| &nbsp;&nbsp;&nbsp;&nbsp;Intangible assets | 2550 |
| &nbsp;&nbsp;&nbsp;&nbsp;Goodwill | 2923 |
| Total Assets | $5642 |
| Liabilities assumed |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued commissions | $10 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred revenue | 470 |
| &nbsp;&nbsp;&nbsp;&nbsp;Deferred tax liability | 525 |
| Total liabilities | 1005 |
| Net assets acquired | $4637 |

---

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

---

| | | |
|:---|:---|:---|
|  | **Fair Value** | **Est. Useful<br>Life (in years)** |
| Developed technology | $2290 | 7 |
| Customer relationships | 260 | 5 |
|  | $2550 |  |

---

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

Identifiable intangible assets consist of certain technology and customer relationships purchased from Evertel. 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 6.8 years. These intangible assets are classified as Level 3 in the ASC Topic 820 three-tier fair value hierarchy.

The goodwill for Evertel is attributable to combining the Company's existing emergency communications solutions with the software and software development capabilities of Evertel to enhance product offerings. Goodwill is also attributable to the skill level of the acquired workforce. Goodwill from the Evertel acquisition will not be deductible for tax purposes.

As of June 30, 2025, $874 of the contingent consideration was issued to the former owners of Evertel. The Company paid $219 in cash and issued 236,343 shares of common stock. During the period since acquisition, the contingent consideration decreased $16 due to remeasurement adjustments. As of June 30, 2025, no contingent consideration liability remained outstanding.

The Company has included the operating results of Evertel in continuing operations in its unaudited condensed consolidated financial statements since the acquisition date.

**5.** **REVENUE RECOGNITION**

ASC 606, *Revenue from Contracts with Customers* ("ASC 606"), outlines a 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:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.Identify the contract(s) with customers

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.Identify the performance obligations

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.Determine the transaction price

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.Allocate the transaction price to the performance obligations

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.Recognize revenue when or as the performance obligations have been satisfied

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

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

*Product 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 the Company's customer obtains control of the products. A smaller portion of product revenue is recognized when the customer receives delivery of the products. A portion of products are sold through resellers and system integrators based on firm commitments from an end user, and as a result, resellers and system integrators carry little or no inventory. The Company's customers do not have a right to return product unless the product is found to be defective and therefore the Company's estimate for returns has historically been insignificant.

*Perpetual licensed software*

The sale and/or license of software products is deemed to have occurred when a customer either has taken possession of, or has the ability to take immediate possession of, the software and the software key. Perpetual software licenses can include one-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, 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.

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

*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-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 performance obligation arrangements*

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

Revenue is allocated to each performance obligation based on the fair value of each individual performance obligation 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 (Hardware and Software) and geographically to depict the nature of revenue in a manner consistent with its business operations and to be consistent with other communications and public filings. Refer to Note 19, Segment Information and Note 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 give the Company the right to invoice a customer. Sales commissions are considered incremental and recoverable costs of obtaining a contract with a customer. Subscription related commission costs are deferred and then amortized on a straight-line basis over the period of benefit. The Company may also receive consideration, per terms of a contract, from customers prior to transferring goods to the customer. The Company records customer deposits as a contract liability. Additionally, the Company may receive payments, most typically for service and warranty contracts, at the onset of the contract and before the services have been performed. In such instances, a deferred revenue liability is recorded. The Company recognizes these contract liabilities as revenue after all revenue recognition criteria are met. The table below reflects the balances of contract liabilities as of June 30, 2025 and September 30, 2024, including the change between the periods. Contract assets balance was $2,846 and $150 as of June 30, 2025 and September 30, 2024, respectively. The current and noncurrent portion of contract liabilities are included in "Accrued liabilities", respectively, on the accompanying condensed consolidated balance sheets. Refer to Note 11, Accrued and Other Liabilities for additional details.

The Company's contract liabilities were as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Customer<br>deposits** | **Deferred<br>revenue** | **Total<br>contract<br>liabilities** |
| Balance as of September 30, 2024 | $1606 | $4012 | $5618 |
| New performance obligations | 22241 | 6672 | 28913 |
| Recognition of revenue as a result of satisfying performance obligations | (7210) | (7131) | (14341) |
| Effect of exchange rate on deferred revenue |  | (9) | (9) |
| Balance as of June 30, 2035 | $16637 | $3544 | $20181 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: non-current portion |  | (294) | (294) |
| &nbsp;&nbsp;&nbsp;&nbsp;Current portion as of June 30, 2025 | $16637 | $3250 | $19887 |

---

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

*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 June 30, 2025, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $20,181, of which $14,210 was related to the Puerto Rico contract. The Company expects to recognize revenue on approximately $19,887 or 99% 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 is longer than one year. The Company only gives consideration to whether a customer agreement has a financing component if the period of time between transfer of goods and services and customer payment is greater than one year. The Company also utilizes the "as invoiced" practical expedient in certain cases where performance obligations are satisfied over time and the invoiced amount corresponds directly with the value the Company is providing to the customer.

**6. FAIR VALUE MEASUREMENTS**

The Company's financial instruments consist principally of cash equivalents, short and long-term marketable securities, accounts receivable, accounts payable, Term Loans, and warrant liabilities. 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 on 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:

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Level 1: | Inputs are based on quoted market prices for identical assets or liabilities in active markets at the measurement date. |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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. |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 were determined based on Level 1 and Level 2 inputs. The valuation techniques used to measure the fair value of the "Level 2" instruments were based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data. The valuation techniques used to measure the Term Loans and warrant liabilities were determined based on Level 3 inputs not observable in the market and significant to the instruments' valuations. Refer to Note 12, Term Loans and Warrant Liabilities, for additional information regarding the valuation techniques and significant inputs used.

Other than the Term Loans and the warrant liabilities, the Company did not have any financial instruments in the Level 3 category as of June 30, 2025 and September 30, 2024. 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. There have been no changes in Level 1, Level 2, and Level 3 and no changes in valuation techniques for financial instruments measured at fair value on a recurring basis for the periods ended June 30, 2025 and September 30, 2024.

*<u>Instruments measured at fair value on a recurring basis</u>*

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 June 30, 2025, and September 30, 2024. 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.

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** | **June 30, 2025** |
|  | **Cost<br>Basis** | **Gross<br>Unrealized<br>Gain** | **Gross<br>Unrealized<br>Loss** | **Fair<br>Value** | **Cash<br>Equivalents** | **Short-term<br>Securities** | **Long-term<br>Securities** |
| Level 1: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Money market funds | $53 | $— | $— | $53 | $53 | $— | $— |
| Level 2: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Municipal securities | 120 |  |  | 120 |  | 120 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subtotal | 120 |  |  | 120 |  | 120 |  |
| Total | $173 | $— | $— | $173 | $53 | $120 | $— |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **September 30, 2024** | **September 30, 2024** | **September 30, 2024** | **September 30, 2024** | **September 30, 2024** | **September 30, 2024** | **September 30, 2024** |
|  | **Cost<br>Basis** | **Gross<br>Unrealized<br>Gain** | **Gross<br>Unrealized<br>Loss** | **Fair<br>Value** | **Cash<br>Equivalents** | **Short-term<br>Securities** | **Long-term<br>Securities** |
| Level 1: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Money market funds | $301 | $— | $— | $301 | $301 | $— | $— |
| Level 2: |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Certificates of deposit | 401 |  |  | 401 | 152 |  | 249 |
| &nbsp;&nbsp;&nbsp;&nbsp;U.S. government agency bonds | 2591 | 3 |  | 2594 |  | 2594 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Municipal securities | 2127 | 2 |  | 2129 |  | 2129 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Corporate bonds | 3219 | 3 |  | 3222 |  | 3222 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subtotal | 8338 | 8 |  | 8346 | 152 | 7945 | 249 |
| Total | $8639 | $8 | $— | $8647 | $453 | $7945 | $249 |

---

The Company manages debt investments as a single portfolio of highly marketable securities that is intended to be available to meet current cash requirements. Historically, the gross unrealized losses related to the Company's portfolio of available-for-sale debt securities were immaterial, and primarily due to normal market fluctuations and not due to increased credit risk or other valuation concerns. Gross unrealized losses on available-for-sale debt securities was $0 as of June 30, 2025, and historically, such gross unrealized losses have been temporary in nature. The Company believes that it is probable the principal and interest will be collected in accordance with the contractual terms. The debt investment portfolio is reviewed at least quarterly, or when there are changes in credit risks or other potential valuation concerns, to identify and evaluate whether an allowance for credit losses or impairment would be necessary. Factors considered in determining whether a loss is temporary include the magnitude of the decline in market value, the length of time the market value has been below cost (or adjusted cost), credit quality, and the Company's ability and intent to hold the securities for a period of time sufficient to allow for any anticipated recovery in market value.

As of June 30, 2025 and September 30, 2024, there were no unrealized loss positions related to available-for-sale debt securities.

*<u>Instruments measured at fair value on a non-recurring basis</u>*

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

Goodwill and intangible assets are recognized at fair value during the period in which an acquisition is completed, from updated estimates during the measurement period, or when they are considered to be impaired. These non-recurring fair value measurements, primarily for intangible assets acquired, were based on Level 3 inputs. The Company estimates the fair value of these long-lived assets on a non-recurring basis based on a market valuation approach, engaging independent valuation experts to assist in the determination of fair value. There were no impairments during the nine months ended June 30, 2025 or June 30, 2024, respectively.

*Contingent consideration liability*: In connection with the Evertel acquisition, the Company recorded a liability related to future performance criteria. A payment of up to $1,050 was payable based on future performance. The Company engaged independent valuation experts to assist in determining the fair value of the contingent consideration. The contingent consideration liability was

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

initially recorded at the fair value on the acquisition date of $890 and subsequently adjusted when performance criteria were not achieved. The change in fair value was recorded in other income in the accompanying consolidated statement of operations. $874 of the contingent consideration was issued to the former owners of Evertel. The Company paid $219 in cash and issued 236,343 shares of common stock to former owners of Evertel during fiscal 2024. In October 2024, the Company issued 270,271 shares of common stock to former owners of Evertel. As of June 30, 2025, there was no remaining contingent consideration liability.

Acquisition holdback liability: In connection with the Evertel acquisition, the Company recorded a holdback liability related to potential future misrepresentations and indemnifications against third-party claims. The holdback liability was released twelve months from the closing date, subject to amounts withheld for actual, pending or potential claims. The holdback liability was recorded at the present value, which was the fair value at the acquisition date. The Company engaged independent valuation experts to assist in determining the present value of 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 original fair value. This change in fair value was recorded in other income in the accompanying consolidated statement of operations.

The change in the carrying amount of the holdback liability was as follows:

---

| | |
|:---|:---|
| Balance as of September 30, 2024 | $250 |
| Payment | (250) |
| Balance as of June 30, 2025 | $— |

---

As of June 30, 2025, there was no remaining acquisition holdback liability.

**7. INVENTORIES, NET**

Inventories, net consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **June 30,<br>2025** | **September 30,<br>2024** |
| Raw materials | $7989 | $5442 |
| Finished goods | 1870 | 1377 |
| Work in process | 2658 | 1331 |
| Inventories, gross | 12517 | 8150 |
| Reserve for obsolescence | (1091) | (837) |
| Inventories, net | $11426 | $7313 |

---

**8. PROPERTY AND EQUIPMENT, NET** 

Property and equipment, net consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **June 30,<br>2025** | **September 30,<br>2024** |
| Office furniture and equipment | $1633 | $1697 |
| Machinery and equipment | 1480 | 1480 |
| Leasehold improvements | 2294 | 2312 |
| Construction in progress | 139 | 30 |
| Property and equipment, gross | 5546 | 5519 |
| Accumulated depreciation | (4377) | (4228) |
| Property and equipment, net | $1169 | $1291 |

---

Depreciation and amortization expense for property and equipment was $108 and $112 for the three months ended June 30, 2025 and 2024, respectively. Depreciation and amortization expense for property and equipment was $335 and $335 for the nine months ended June 30, 2025 and 2024, respectively.

**9. GOODWILL AND INTANGIBLE ASSETS**

Goodwill is attributable to the acquisitions of Genasys Spain, Zonehaven, Evertel, and the Amika Mobile asset purchase and is due to combining the integrated critical communications, mass messaging solutions and software development capabilities with existing hardware products for enhanced offerings and the skill level of the acquired workforces. The Company periodically reviews

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

goodwill for impairment in accordance with relevant accounting standards. As of June 30, 2025 and September 30, 2024, goodwill was $13,451 and $13,329, respectively. There were no additions or impairments to goodwill during the nine months ended June 30, 2025. During the nine months ended June 30, 2024, $2,923 was added to goodwill as a result of the Evertel acquisition.

The changes in the carrying amount of goodwill by segment as of June 30, 2025, were as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Hardware** | **Software** | **Total** |
| Balance as of September 30, 2024 | $— | $13329 | $13329 |
| Acquisitions |  |  |  |
| Currency translation |  | 122 | 122 |
| Balance as of June 30, 2025 | $— | $13451 | $13451 |

---

The changes in the carrying amount of intangible assets by segment as of June 30, 2025, were as follows:

---

| | | | |
|:---|:---|:---|:---|
|  | **Hardware** | **Software** | **Total** |
| Balance as of September 30, 2024 | $14 | $8492 | $8506 |
| Acquisitions |  |  |  |
| Amortization | (2) | (1777) | (1779) |
| Currency translation |  | (3) | (3) |
| Balance as of June 30, 2025 | $12 | $6712 | $6724 |

---

Intangible assets and goodwill related to Genasys Spain are translated from Euros to U.S. dollars at the balance sheet date. The net impact of foreign currency exchange differences arising during the period related to goodwill and intangible assets was an increase of $119.

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

---

| | | |
|:---|:---|:---|
|  | **June 30,<br>2025** | **September 30,<br>2024** |
| Technology | $14233 | $14252 |
| Customer relationships | 2063 | 2081 |
| Trade name portfolio | 610 | 617 |
| Patents | 72 | 72 |
|  | 16978 | 17022 |
| Accumulated amortization | (10254) | (8516) |
|  | $6724 | $8506 |

---

As of June 30, 2025, future amortization expense was as follows:

---

| | |
|:---|:---|
| Fiscal year ending September 30, |  |
| 2025 (remaining three months) | 576 |
| 2026 | 2222 |
| 2027 | 2048 |
| 2028 | 1220 |
| 2029 | 329 |
| Thereafter | 329 |
| Total estimated amortization expense | $6724 |

---

Amortization expense was $577 and $619 for the three months ended June 30, 2025 and 2024, respectively. Amortization expense was $1,779 and $1,858 for the nine months ended June 30, 2025 and 2024, respectively.

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

**10. PREPAID EXPENSES AND OTHER**

Prepaid expenses and other current assets consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **June 30,<br>2025** | **September 30,<br>2024** |
| Deposits for inventory | $5122 | $4 |
| Prepaid insurance | 414 | 288 |
| Puerto Rico Income Tax Retention and Special Contribution Retention | 407 |  |
| Spain value-added tax and bank withholdings | 357 | 225 |
| Prepaid professional services | 353 | 595 |
| Prepaid commissions | 345 | 540 |
| Dues and subscriptions | 305 | 516 |
| Trade shows and travel | 94 | 116 |
| Canadian goods and services and harmonized sales tax<br> receivable | 37 | 69 |
| Other | 24 | 206 |
|  | $7458 | $2559 |

---

*Deposits for inventory*

Deposits for inventory consisted of cash payments to vendors for inventory to be delivered in the future. Balance at June 30, 2025 included $4,728 for the Puerto Rico project.

*Prepaid insurance*

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

*Puerto Rico Income Tax Retention and Special Contribution Retention*

Puerto Rico income tax retention represents amounts withheld at source and remitted to the Puerto Rico Treasury Department ("Hacienda") on behalf of the Company. These amounts are expected to be applied against the Company's Puerto Rico income tax liability in its annual return. Additionally, the Company has recorded a receivable for sales tax paid on importations into Puerto Rico. This amount may be subject to future credit, refund, or transfer to other tax obligations, pending consultation with Hacienda.

*Spain value-added tax receivable and bank withholdings*

Spain VAT is a consumption tax applied to most goods and services. Registered businesses can recover VAT paid on eligible purchases by submitting periodic tax returns. The VAT receivable represents the amount refundable from the Spanish tax authorities.

*Prepaid professional services*

Prepaid professional services consist of payments made in advance for services such as accounting, consulting and legal services.

*Prepaid commissions*

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

*Dues and subscriptions*

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

*Trade shows and travel*

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

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

*Canadian goods and services and harmonized sales tax receivable*

The goods and services tax and harmonized sales tax ("GST/HST") is a Canadian value-added tax ("VAT") that applies to many goods and services. Registrants may claim refundable tax credits for GST/HST incurred through filing periodic tax returns. This GST/HST receivable is a receivable from the Canadian Revenue Agency.

**11. ACCRUED AND OTHER LIABILITIES** 

Accrued liabilities consisted of the following:

---

| | | |
|:---|:---|:---|
|  | **June 30,<br>2025** | **September 30,<br>2024** |
| Customer deposits | $16637 | $1606 |
| Deferred revenue | 3250 | 3643 |
| Payroll and related | 2933 | 3249 |
| Accrued contract costs | 403 |  |
| Short-term provision | 153 | 155 |
| Acquisition holdback liability |  | 250 |
| Warranty reserve | 64 | 76 |
| Other | 33 | 51 |
| Total | $23473 | $9030 |

---

*Payroll and related*

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

*Deferred revenue*

Deferred revenue as of June 30, 2025, included prepayments from customers for services, including extended warranty, scheduled to be performed within the next twelve months. Deferred extended warranty consisted of warranties purchased in excess of the Company's standard warranty. Extended warranties typically range from one to two years.

*Customer deposits*

Customer deposits represent amounts paid by customers as a down payment on hardware orders to be delivered within the next twelve months. Balance at June 30, 2025 included $14,210 for the Puerto Rico project.

*Accrued contract costs*

Accrued contract costs consisted of accrued expenses for contracting a third-party service provider to fulfill repair and maintenance obligations required under a contract with a foreign military for units sold in fiscal 2011. Payments to the service provider will be made annually upon completion of each year of service. The Company is contractually obligated to provide such repair and maintenance services through November 2027. These services are being recorded in cost of revenues to correspond with the revenues for these services.

*Warranty reserve*

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

---

| | | |
|:---|:---|:---|
|  | **Nine Months Ended<br>June 30,** | **Nine Months Ended<br>June 30,** |
|  | **2025** | **2024** |
| Beginning balance | $76 | $132 |
| Warranty provision | 5 | (35) |
| Warranty settlements | (17) | (21) |
| Ending balance | $64 | $76 |

---

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

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

**12. TERM LOANS AND WARRANT LIABILITIES**

On May 13, 2024 (the "Close Date"), the Company entered into a term loan and security agreement (the "Loan Agreement"), pursuant to which the Company received $14,700 in cash proceeds in exchange for a $15,000 term loan (the "Close Date Term Loan") and the issuance of warrants to purchase up to 3,068,182 shares of the Company's common stock ("Warrants"). Because the Close Date Term Loan and Warrants were determined to be freestanding financial instruments both recorded subsequently at fair value, the proceeds received were allocated to each instrument on a relative fair value basis.

On May 9, 2025 (the "First Amendment Date"), the Company entered into a First Amendment to the Loan Agreement (the "First Amendment"), which amended the terms of the Loan Agreement. Pursuant to the First Amendment, the lenders (the "Lenders") agreed to: (i) extend an additional term loan to the Company in the aggregate principal amount of $4,000 (the "First Amendment Term Loan"), and (ii) provide a process to obtain, at the Lenders' sole discretion, an additional term loan of up to $4,000 (the "Additional Term Loan"). The terms of the existing $15,000 Close Date Term Loan remain unchanged. As of June 30, 2025, the Additional Term Loan had not been drawn.

The Loan Agreement contains customary representation and warranties of the Company, affirmative and negative covenants, including without limitation restricting the Company from certain distributions, investments, indebtedness, sales of assets, loans and payments, of the Company, events of default and remedies thereupon, indemnification obligations of the Company, termination provisions, and other obligations and rights of the parties. All obligations under the Loan Agreement are secured by substantially all of the Company's assets. As of June 30, 2025, the Company was in compliance with all financial and reporting covenants of the Loan Agreement.

The Company determined that the Close Date Term Loan and First Amendment Term Loan under the Loan Agreement (collectively the "Term Loans") were eligible for the FVO and accordingly elected the FVO for the Term Loans. This election was made because of operational efficiencies in valuing and reporting for the Term Loans in their entirety at each reporting date. As a result of electing the FVO, the Term Loans were recorded at fair value at issuance with subsequent remeasurements at fair value each reporting period. The Company recognizes the resulting gain or loss related to changes to the fair value of the Term Loans, other than changes associated with the Company's own credit risk, on the condensed consolidated statements of operations within other income. The change in fair value related to the accrued interest components of the Term Loans is also included within other income on the condensed consolidated statement of operations. The change in fair value attributable to the Company's own credit risk is recorded in other comprehensive income or loss in the Company's condensed consolidated statements of operations and comprehensive loss. Direct costs and fees related to the Term Loans were expensed as incurred within other income on the condensed consolidated statement of operations.

***Close Date Term Loan***

The principal amount of the Close Date Term Loan is $15,000 and is payable upon maturity on May 13, 2026. The Close Date Term Loan provides a two percent original issue discount to the lenders. The Company is required to make quarterly interest payments on the Close Date Term Loan. The Company may elect to pay quarterly interest on the Close Date Term Loan based on the three-month Secured Overnight Financing Rate ("SOFR") plus five percent (5%) in cash or the Company may elect to pay interest based on the three-month SOFR plus six percent (6%) with 50% paid in cash and the remainder paid by issuing shares of the Company's common stock. The Company may voluntarily redeem the Close Date Term Loan within one year of the issuance at 101% of the principal amount and after one year at par value.

The Company utilized the discounted cash flow method with reliance on the Monte Carlo simulation model to determine the fair value of the Close Date Term Loan at issuance and subsequently at each reporting date. The fair value of the Close Date Term Loan was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. One of the significant fair value assumptions is the discount rate, which was 36.4% and 26.0% as of June 30, 2025 and September 30, 2024, respectively.

A summary of the changes in the fair value of the Close Date Term Loan Level 3 rollforward is as follows:

---

| | |
|:---|:---|
| Fair value as of September 30, 2024 | $12010 |
| Change in fair value related to non-credit risk recorded within net loss | 1230 |
| Change in fair value related to credit risk in other comprehensive income | (820) |
| Fair value as of June 30, 2025 | $12420 |

---

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

***First Amendment Term Loan***

The principal of the First Amendment Term Loan is $4,000 and is payable upon maturity on December 31, 2025. The First Amendment Term Loan and any Additional Term Loan provided under the First Amendment will bear interest at a rate equal to the three-month Term SOFR plus five percent (5.00%) per annum. Interest on the outstanding principal balance of the First Amendment Term Loan and any Additional Term Loan is payable quarterly in arrears in cash. In addition, the Company will be required to pay to the Lenders, concurrently with each payment of principal under the First Amendment Term Loan and any Additional Term Loan, an additional amount such that the lenders receive a total return equal to the 30% of the principal amount being repaid, including the interest paid on such principal amount and such additional payment amount ("Minimum Return Amount".

The Company utilized the discounted cash flow method with reliance on the Monte Carlo simulation model to determine the fair value of the First Amendment Term Loan at issuance and subsequently at each reporting date. The fair value of the First Amendment Term Loan was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. One of the significant fair value assumptions is the discount rate, which was 35.1% and 35.0% as of June 30, 2025 and May 9, 2025, respectively.

The Company recognized a loss on issuance of the First Amendment Term Loan of $480 which represents the difference between the cash received for the First Amendment Term Loan and the fair value of the First Amendment Term Loan at issuance. The loss on issuance of the First Amendment Term Loan is recorded within other income on the condensed consolidated statement of operations.

A summary of the changes in the fair value of the First Amendment Term Loan Level 3 rollforward is as follows:

---

| | |
|:---|:---|
| Fair value as of September 30, 2024 | $— |
| Transfer in | 4480 |
| Change in fair value related to non-credit risk recorded within net loss | 150 |
| Change in fair value related to credit risk in other comprehensive income |  |
| Fair value as of June 30, 2025 | $4630 |

---

***Warrant Liabilities*** 

The Company issued Warrants to the lenders to purchase up to 3,068,182 shares of the Company's common stock at an initial exercise price of $2.53 per share, subject to certain adjustments. The Warrants are exercisable upon issuance through May 13, 2029 and may be exercised via cashless exercise.

The Warrants are recognized as liabilities in the condensed consolidated balance sheet and are subject to remeasurement at each balance sheet date from issuance. Any change in fair value is recognized in other income within the condensed consolidated statement of operations.

The Company utilized the Monte Carlo simulation model to determine the fair value of the warrant liabilities at issuance and subsequently at each reporting date. The fair value of the warrant liabilities is the present value of the warrant payoff at expiration; discounted at the risk-free rate. The fair value of the warrant liabilities was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

The following is a summary of the fair value assumptions applied in determining the initial fair value and the subsequent fair value of the warrant liabilities as of each respective date:

---

| | | |
|:---|:---|:---|
|  | **June 30,** | **September 30** |
|  | **2025** | **2024** |
| Discount Rate | 3.7% | 3.6% |
| Volatility | 62.0% | 58.0% |

---

A summary of the changes in the fair value of the warrant liabilities Level 3 rollforward is as follows:

---

| | |
|:---|:---|
| Fair value as of September 30, 2024 | $6640 |
| Change in fair value in net loss | (4560) |
| Fair value as of June 30, 2025 | $2080 |

---

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

**13. LEASES**

The Company determines if an arrangement is a lease at inception. The guidance in ASC 842 defines a lease as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. Operating lease ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. The Company's leases do not provide an implicit rate. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Additionally, the portfolio approach is used in determining the discount rate used to present value lease payments. The 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 fiscal 2028. The Company elected the package of practical expedients permitted under the 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 ASC 842. The Company also elected the short-term lease exemption such that the 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.

The tables below show the operating lease ROU assets and liabilities as of September 30, 2024, and the balances as of June 30, 2025, including the changes during the periods.

---

| | |
|:---|:---|
|  | **Operating<br>lease<br>ROU assets** |
| Operating lease ROU assets as of September 30, 2024 | $3110 |
| Less amortization of operating lease ROU assets | (570) |
| Effect of exchange rate on operating lease ROU assets | 10 |
| Operating lease ROU assets as of June 30, 2025 | $2550 |

---

---

| | |
|:---|:---|
|  | **Operating<br>lease<br>liabilities** |
| Operating lease liabilities at September 30, 2024 | $4290 |
| Less lease principal payments on operating lease liabilities | (760) |
| Effect of exchange rate on operating lease liabilities | 10 |
| Operating lease liabilities as of June 30, 2025 | 3540 |
| Less non-current portion | (2465) |
| Current portion as of June 30, 2025 | $1075 |

---

As of June 30, 2025, the Company's operating leases have a weighted-average remaining lease term of 3.1 years and a weighted-average incremental borrowing rate of 4.16%. The maturities of the operating lease liabilities are as follows:

---

| | |
|:---|:---|
| Fiscal year ending September 30, |  |
| 2025 (remaining three months) | $295 |
| 2026 | 1207 |
| 2027 | 1228 |
| 2028 | 1047 |
| 2029 |  |
| Thereafter |  |
| Total undiscounted operating lease payments | 3777 |
| Less imputed interest | (237) |
| Present value of operating lease liabilities | $3540 |

---

For the three months ended June 30, 2025 and 2024, total lease expense under operating leases was approximately $229 and $245, respectively. For the nine months ended June 30, 2025 and 2024, total lease expense under operating leases was approximately $690 and $736, respectively.

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

**14. INCOME TAXES** 

The Company's effective tax rate for the nine months ended June 30, 2025 and 2024 was negative 0.5% and 2.3%, respectively.

For the nine months ended June 30, 2025, the Company recorded an income tax expense of $79 using an estimated annual effective tax rate approach pursuant to ASC 740-270-25-2 and factoring in a discrete tax benefit related to the filing of the 2023 Canadian tax return. The income tax benefit of $476 for the nine months ended June 30, 2024 is primarily attributable to the partial release of $525 of U.S. valuation allowance in conjunction with the acquisition of Evertel as the acquired net deferred tax liabilities will provide a source of income for the Company to realize a portion of its deferred tax assets, for which a valuation allowance is no longer needed.

The Company continues to maintain a full valuation allowance against its U.S. and foreign deferred tax assets.

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

**15. 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 the Company'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.

**16.** **SHARE-BASED COMPENSATION** 

*Equity compensation plans*

The Amended and Restated 2015 Equity Incentive Plan ("2015 Equity Plan") expired on January 19, 2025. The 2025 Equity Incentive Plan ("2025 Equity Plan" and, together with the 2015 Equity Plan, the "Equity Plans") was adopted by the Company's Board of Directors on January 27, 2025 and approved by the Company's stockholders on March 17, 2025. The 2025 Equity Plan authorizes the issuance of stock options, restricted stock, stock appreciation rights, restricted stock units ("RSUs") and performance awards, to an aggregate of 6,000,000 shares of common stock to employees, directors, advisors or consultants. As of June 30, 2025, there were options and restricted stock units outstanding covering 4,684,060 shares of common stock under the Equity Plans, and 5,666,184 shares of common stock available for grant, for a total of 10,350,244 shares of common stock authorized and unissued under the 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. Share-based compensation is accounted for in accordance with *ASC Topic 718: Compensation - Stock Compensation*. Total compensation expense for all share-based awards is based on the estimated fair market value of the equity instrument issued on the grant date. For share-based awards that vest based solely on a service condition, compensation expense is recognized on a straight-line basis over the total requisite service period for the entire award. For share-based awards that vest based on a market condition, compensation expense is recognized on a straight-line basis over the requisite service period of each separately vesting tranche. For share-based awards that vest based on a performance condition, compensation expense is recognized for the number of awards that are expected to vest based on the probable outcome of the performance condition. Compensation cost for these awards will be adjusted to reflect the number of awards that ultimately vest.

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

*Stock options*

A summary of the activity in options of the Company as of June 30, 2025, is presented below:

---

| | | |
|:---|:---|:---|
|  | **Number of<br>Shares** | **Weighted<br>Average<br>Exercise Price** |
| Outstanding September 30, 2024 | 3695740 | $2.84 |
| Granted | 1063250 | $2.76 |
| Forfeited/expired | (358125) | $4.22 |
| Exercised | (24147) | $1.78 |
| Outstanding June 30, 2025 | 4376718 | $2.72 |
| Exercisable June 30, 2025 | 1383228 | $3.02 |

---

The aggregate intrinsic value of options outstanding and exercisable as of June 30, 2025 was $24 and $6, respectively. The aggregate intrinsic value represents the difference between the Company's closing stock price on the last day of trading for the quarter, which was $1.73 per share, and the exercise price multiplied by the number of applicable options. The total intrinsic value of stock options exercised during the nine months ended June 30, 2025 was $43 and proceeds from these exercises was $43. There was no stock options exercised during the nine months ended June 30, 2024.

The following table summarizes information about stock options outstanding as of June 30, 2025:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Range of<br>Exercise Prices** | **Number<br>Outstanding** | **Weighted<br>Average<br>Remaining<br>Contractual<br>Term** | **Weighted<br>Average<br>Exercise<br>Price** | **Number<br>Exercisable** | **Weighted<br>Average<br>Exercise<br>Price** |
| $1.70-$2.59 | 1625665 | 6.08 | $2.14 | 229101 | $1.73 |
| $2.64-$2.70 | 1538000 | 4.86 | $2.69 | 387459 | $2.69 |
| $3.09-$3.56 | 1126053 | 3.52 | $3.39 | 685231 | $3.36 |
| $3.95-$6.87 | 87000 | 3.08 | $5.21 | 81437 | $5.25 |
|  | 4376718 | 4.93 | $2.72 | 1383228 | $3.02 |

---

The Company recorded $282 and $166 of stock option compensation expense for employees, directors and consultants for the three months ended June 30, 2025 and 2024, respectively. The Company recorded $780 and $565 of stock option compensation expense for employees, directors and consultants for the nine months ended June 30, 2025 and 2024, respectively.

As of June 30, 2025, there was approximately $1,935 of total unrecognized compensation costs related to outstanding employee stock options. This amount is expected to be recognized over a weighted average period of 1.6 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.

Stock options that do not contain market-based vesting conditions are valued using the Black-Scholes option pricing model. The weighted average estimated fair value of employee stock options granted during the nine months ended June 30, 2025 and 2024, was calculated using the Black-Scholes option-pricing model with the following weighted average assumptions (annualized percentages):

---

| | | |
|:---|:---|:---|
|  | **Nine Months Ended June 30,** | **Nine Months Ended June 30,** |
|  | **2025** | **2024** |
| Volatility | 60.8% | 57.7% |
| Risk-free interest rate | 4.1% | 4.3% |
| Dividend yield | 0.0% | 0.0% |
| Expected term in years | 3.7 | 4.2 |

---

Expected volatility is based on the historical volatility of the Company's common stock over the period commensurate with the expected term of the options. The risk-free interest rate is based on rates published by the Federal Reserve Board. The contractual term of the options was seven years. The expected term is based on observed and expected time to post-vesting exercise. The expected forfeiture rate is based on past experience and employee retention data. Forfeitures are estimated at the time of the grant and revised in subsequent periods if actual forfeitures differ from those estimates. Such revision adjustments to expense will be recorded as a

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

cumulative adjustment in the period in which the estimate is changed. The Company has not paid a dividend for the nine months ended June 30, 2025 and did not pay a dividend for the nine months ended June 30, 2024.

*Performance-based stock options*

On October 8, 2022, the Company awarded performance-based stock options (PVOs) to purchase 800,000 shares of the Company's common stock to an executive officer, with a contractual term of seven years. Vesting is based upon the achievement of certain performance criteria for each of fiscal 2025 and 2026, including a minimum free cash flow margin and net revenue targets. Additionally, vesting is subject to the executive officer being employed by the Company at the time the Company achieves such financial targets. The Company has not recorded compensation expense related to these options.

On March 20, 2023, the Company granted PVOs to purchase up to 450,000 shares of the Company's stock to a key member of management with a contractual term of seven years. Vesting is based upon the achievement of certain performance criteria for each of the first three twelve-month periods following the employee's start date, including targets related to growth in the institutional ownership of the Company's common stock and growth in the trading volume of the Company's common stock during such periods. Additionally, vesting is subject to the employee being employed by the Company on each of the first three anniversaries of the employee's start date. 225,000 of these options contain a market-based vesting condition and accounting principles do not require the market condition to be achieved for compensation expense to be recognized. The Company recorded $2 and $3 of compensation expense related to these options during the three months ended June 30, 2025 and 2024, respectively. The Company recorded $8 and $127 of compensation expense related to these options during the nine months ended June 30, 2025 and 2024, respectively. PVO expense was included in the stock option compensation expense above.

The Company did not grant any PVOs during the nine months ended June 30, 2025. As of June 30, 2025, there was no unrecognized compensation related to PVOs.

*Restricted stock units*

Compensation expense for RSUs was $177 and $134 for the three months ended June 30, 2025 and 2024, respectively. Compensation expense for RSUs was $484 and $705 for the nine months ended June 30, 2025 and 2024, respectively. As of June 30, 2025, there was approximately $558 of total unrecognized compensation costs related to outstanding RSUs. This amount is expected to be recognized over a weighted average period of 0.9 years.

A summary of the Company's RSUs as of June 30, 2025, is presented below:

---

| | | |
|:---|:---|:---|
|  | **Number of<br>Shares** | **Weighted<br>Average Grant<br>Date Fair Value** |
| Outstanding September 30, 2024 | 288059 | $2.78 |
| Granted | 253816 | $2.35 |
| Vested | (234533) | $2.56 |
| Forfeited/cancelled |  | $— |
| Outstanding June 30, 2025 | 307342 | $2.59 |

---

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

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended<br>June 30,** | **Three Months Ended<br>June 30,** | **Nine Months Ended<br>June 30,** | **Nine Months Ended<br>June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Cost of revenues | $18 | $27 | $55 | $69 |
| Selling, general and administrative | 384 | 243 | 1048 | 1071 |
| Research and development | 57 | 29 | 161 | 129 |
|  | $459 | $299 | $1264 | $1269 |

---

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

**17. STOCKHOLDERS' EQUITY** 

*Summary* 

The following table summarizes changes in the components of stockholders' equity during the nine months ended June 30, 2025 and 2024, respectively (amounts in thousands, except par value and share amounts):

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Common Stock** | **Common Stock** |  |  |  |  |
|  | **Shares** | **Par Value<br>Amount** | **Additional<br>Paid-in<br>Capital** | **Accumulated<br>Deficit** | **Accumulated<br>Other<br>Comprehensive<br>Income (Loss)** | **Total<br>Stockholders'<br>Equity** |
| Balance as of September 30, 2024 | 44631030 | $446 | $125690 | $(107792) | $(335) | $17563 |
| Share-based compensation expense |  |  | 391 |  |  | 391 |
| Issuance of common stock upon exercise<br> of stock options, net | 667 |  | 1 |  |  | 1 |
| Issuance of common stock upon vesting<br> of restricted stock units | 27666 |  |  |  |  |  |
| Obligation to issue common stock in Evertel acquisition | 270271 | 3 |  |  |  |  |
| Other comprehensive loss |  |  |  |  | (207) | (207) |
| Net loss |  |  |  | (4078) |  | (4078) |
| Balance as of December 31, 2024 | 44929634 | $449 | $126082 | $(111870) | $(542) | $13670 |
| Share-based compensation expense |  | $— | $414 | $— | $— | $414 |
| Issuance of common stock upon exercise of<br> stock options, net | 23480 |  | 42 |  |  | 42 |
| Issuance of common stock upon vesting of<br> restricted stock units | 201390 | 2 | (18) |  |  | (18) |
| Other comprehensive income |  |  |  |  | 87 | 87 |
| Net loss |  |  |  | (6139) |  | (6139) |
| Balance as of March 31, 2025 | 45154504 | $451 | $126520 | $(118009) | $(455) | $8056 |
| Share-based compensation expense |  | $— | $459 | $— | $— | $459 |
| Other comprehensive income |  |  |  |  | 1131 | 1131 |
| Net loss |  |  |  | (6487) |  | (6487) |
| Balance as of June 30, 2025 | 45154504 | $451 | $126979 | $(124496) | $676 | $3159 |

---

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Common Stock** | **Common Stock** |  |  |  |  |
|  | **Shares** | **Par Value<br>Amount** | **Additional<br>Paid-in<br>Capital** | **Accumulated<br>Deficit** | **Accumulated<br>Other<br>Comprehensive<br>Loss** | **Total<br>Stockholders'<br>Equity** |
| Balance as of September 30, 2023 | 37211071 | $372 | $110379 | $(76062) | $(505) | $33812 |
| Share-based compensation expense |  |  | 446 |  |  | 446 |
| Issuance of common stock upon offering, net of<br> issuance costs | 5750000 | 57 | 10449 |  |  | 10449 |
| Issuance of common stock upon vesting of restricted stock units | 10000 |  |  |  |  |  |
| Issuance of common stock in business combination | 986486 | 10 | 1924 |  |  | 1924 |
| Obligation to issue common stock |  |  | 527 |  |  | 527 |
| Release of obligation to issue common stock | 69564 | 1 |  |  |  |  |
| Other comprehensive income |  |  |  |  | 119 | 119 |
| Net loss |  |  |  | (6724) |  | (6724) |
| Balance as of December 31, 2023 | 44027121 | $440 | $123725 | $(82786) | $(386) | $40553 |
| Share-based compensation expense |  | $— | $524 | $— | $— | $524 |
| Issuance of common stock upon vesting of<br> restricted stock units | 229233 | 2 |  |  |  |  |
| Shares retained for payment of taxes in<br> connection with settlement of restricted stock<br> units | (6846) |  | (12) |  |  | (12) |
| Settlement of contingent consideration in shares<br> of common stock | 236343 | 3 | 656 |  |  | 656 |
| Obligation to issue common stock |  |  | 158 |  |  | 158 |
| Other comprehensive loss |  |  |  |  | (59) | (59) |
| Net loss |  |  |  | (6938) |  | (6938) |
| Balance as of March 31, 2024 | 44485851 | $445 | $125051 | $(89724) | $(445) | $34882 |
| Share-based compensation expense |  | $— | $299 | $— | $— | $299 |
| Issuance of common stock upon vesting of<br> restricted stock units | 7080 |  |  |  |  |  |
| Settlement of contingent consideration in shares<br> of common stock | 111083 | 1 |  |  |  |  |
| Other comprehensive loss |  |  |  |  | (25) | (25) |
| Net loss |  |  |  | (6682) |  | (6682) |
| Balance as of June 30, 2024 | 44604014 | $446 | $125350 | $(96406) | $(470) | $28474 |

---

*Common stock activity* 

In connection with the Evertel acquisition, the Company issued 986,486 shares of common stock to the former owners of Evertel. The fair value of the Company's stock on the closing date was $1.95 which resulted in the addition of $1,924 to additional-paid-in-capital. The Company also issued 236,343 shares of common stock to the former owners of Evertel, in connection with the settlement of a portion of the contingent consideration liability. This resulted in the addition of $656 to additional-paid-in-capital.

Under the terms of the Purchase Agreement, the Company recorded an obligation to issue 81,083 shares of common stock to the former owners of Evertel and three key employees during the three months ended June 30, 2024, resulting in an addition of $158 to additional-paid-in-capital. Also, in connection with the Evertel acquisition, the Company issued 270,271 shares of the Company's common stock to the seller of Evertel twelve months from the closing date. The fair value of the Company's common stock on the closing date was $1.95, resulting in the addition of $527 to additional paid-in-capital.

During the six months ended March 31, 2024, the Company issued the final 69,564 shares to the former owners of the Amika Mobile assets in connection with the Amika Mobile asset purchase.

*Share buyback program*

In December 2022, the Board of Directors extended the Company's share buyback program through December 31, 2024. Under the program, the Company was authorized to repurchase up to $5,000 of its outstanding common shares, the program expired on December 31, 2024.

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

There were no shares repurchased during the nine months ended June 30, 2025 and 2024. All repurchased shares have been retired.

*Dividends*

There were no dividends declared in the nine months ended June 30, 2025 and 2024.

**18. NET LOSS PER SHARE** 

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

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended<br>June 30,** | **Three months ended<br>June 30,** | **Nine months ended<br>June 30,** | **Nine months ended<br>June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Net loss | $(6487) | $(6682) | $(16704) | $(20344) |
| Basic and diluted loss per share | $(0.14) | $(0.15) | $(0.37) | $(0.46) |
| Weighted average shares outstanding – basic | 45154504 | 44598393 | 45022635 | 44216602 |
| Assumed exercise of dilutive options |  |  |  |  |
| Weighted average shares outstanding – diluted | 45154504 | 44598393 | 45022635 | 44216602 |
| Potentially dilutive securities outstanding at period<br> end excluded from diluted computation as the<br> inclusion would have been antidilutive: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Options | 4376718 | 3365740 | 4376718 | 3365740 |
| &nbsp;&nbsp;&nbsp;&nbsp;RSU | 307342 | 273059 | 307342 | 273059 |
| &nbsp;&nbsp;&nbsp;&nbsp;Warrants | 3068182 | 3068182 | 3068182 | 3068182 |
| &nbsp;&nbsp;&nbsp;&nbsp;Obligation to issue common stock |  | 270270 |  | 270270 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | 7752242 | 6977251 | 7752242 | 6977251 |

---

**19. SEGMENT INFORMATION** 

The Company is engaged in the design, development and commercialization of directed and multidirectional sound technologies, voice broadcast products, and location-based mass messaging software for emergency warning and evacuation management. The Company operates in two business segments: Hardware and Software and its principal markets are North and South America, Europe, the Middle East and Asia. As reviewed by the Company's chief operating decision maker, the Company evaluates the performance of each segment based on sales and operating income. Cash and cash equivalents, marketable securities, accounts receivable, inventory, property and equipment, deferred tax assets, goodwill and intangible assets are primary assets identified by segment. The accounting policies for segment reporting are the same for the Company as a whole.

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

The following table presents the Company's segment disclosures:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended<br>June 30,** | **Three Months Ended<br>June 30,** | **Nine Months Ended<br>June 30,** | **Nine Months Ended<br>June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Revenue from external customers |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Hardware | $7656 | $5108 | $16966 | $12053 |
| &nbsp;&nbsp;&nbsp;&nbsp;Software | 2201 | 2059 | 6763 | 5214 |
|  | $9857 | $7167 | $23729 | $17267 |
| Intersegment revenues |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Hardware | $7343 | $— | $7636 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Software | 1619 | 1022 | 4724 | 4047 |
|  | $8962 | $1022 | $12360 | $4047 |
| Segment operating loss |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Hardware | $(2589) | $(1920) | $(8952) | $(7867) |
| &nbsp;&nbsp;&nbsp;&nbsp;Software | (3336) | (3441) | (9169) | (11717) |
|  | $(5925) | $(5361) | $(18121) | $(19584) |
| Other expenses: |  |  |  |  |
| Depreciation and amortization expense |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Hardware | $86 | $114 | $271 | $338 |
| &nbsp;&nbsp;&nbsp;&nbsp;Software | 599 | 633 | 1843 | 1900 |
|  | $685 | $747 | $2114 | $2238 |
| Income tax expense (benefit) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Hardware | $10 | $(8) | $81 | $(13) |
| &nbsp;&nbsp;&nbsp;&nbsp;Software | (2) | (34) | (2) | (463) |
|  | $8 | $(42) | $79 | $(476) |

---

---

| | | |
|:---|:---|:---|
|  | **June 30,<br>2025** | **September 30,<br>2024** |
| Long-lived assets |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Hardware | $1087 | $1203 |
| &nbsp;&nbsp;&nbsp;&nbsp;Software | 6806 | 8594 |
|  | $7893 | $9797 |
| Total assets |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Hardware | $35291 | $30216 |
| &nbsp;&nbsp;&nbsp;&nbsp;Software | 22102 | 23720 |
|  | $57393 | $53936 |

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**20. MAJOR CUSTOMERS, SUPPLIERS AND RELATED INFORMATION**

For the three months ended June 30, 2025, revenues from two customers accounted for 44% and 17% of total revenues with no other single customer accounting for more than 10% of revenues. For the nine months ended June 30, 2025, revenues from two customers accounted for 23% and 10% of total revenues. with no other single customer accounting for more than 10% of revenues. As of June 30, 2025, accounts receivable from three customers accounted for 23%, 14% and 12% of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

For the three months ended June 30, 2024, revenues from one customer accounted for 45% of total revenues with no other single customer accounting for more than 10% of revenues. For the nine months ended June 30, 2024, revenues from one customer accounted for 23% of total revenues with no other single customer accounting for more than 10% of revenues. As of June 30, 2024,

------

Genasys Inc.

Notes to the Condensed Consolidated Financial Statements

(in thousands, except per share and share amounts)

(Unaudited)

accounts receivable from two customers accounted for 40% and 17% of total accounts receivable, with no other single customer accounting for more than 10% of the accounts receivable balance.

Revenue from customers in the United States was $8,632 and $6,165 for the three months ended June 30, 2025 and 2024, respectively. Revenue from customers in the United States was $19,095 and $12,389 for the nine months ended June 30, 2025 and 2024, respectively. Revenues are attributed to countries based on customer's delivery location. The following table summarizes revenues by geographic region:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three months ended<br>June 30,** | **Three months ended<br>June 30,** | **Nine months ended<br>June 30,** | **Nine months ended<br>June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Americas | $8786 | $6220 | $19568 | $12837 |
| Asia Pacific | 455 | 208 | 1892 | 1029 |
| Europe, Middle East and Africa | 616 | 739 | 2269 | 3401 |
| Total Revenues | $9857 | $7167 | $23729 | $17267 |

---

The following table summarizes long-lived assets by geographic region:

---

| | | |
|:---|:---|:---|
|  | **June 30,<br>2025** | **September 30,<br>2024** |
| United States | $7799 | $9644 |
| Europe, Middle East and Africa | 94 | 153 |
| Total long lived assets | $7893 | $9797 |

---

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**Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations** 

The discussion and analysis set forth below should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the related notes included under Item 1 of this Quarterly Report on Form 10-Q, together with Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended September 30, 2024. All dollar amounts presented in this section are in thousands.

**Forward Looking Statements** 

*This report contains certain statements of a forward-looking nature relating to future events or future performance. Any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. When used in this report and other reports, statements, and information we have filed with the Securities and Exchange Commission ("Commission" or "SEC"), in our press releases, presentations to securities analysts or investors, or in oral statements made by or with the approval of an executive officer, the words or phrases 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.*

*These forward-looking statements represent our expectations, beliefs, intentions or strategies concerning future events, including, but not limited to, any statements regarding growth strategy; product and development programs; financial performance and financial condition; the continuation of historical trends; the sufficiency of our cash balances for future liquidity and capital resource needs; anticipated problems and our plans for future operations; and the economy in general or the future of the emergency communications industry.*

*We caution that these statements by their nature involve risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors. Such risks and uncertainties include, but are not limited to, risks relating to our reliance on a limited number of customers, the likely need for additional capital, actual or perceived failures or breaches of our information and security systems, continued funding of government spending, the timing of such funding, general economic and business conditions, including unforeseen weakness in the Company's markets, effects of continued geopolitical unrest and regional conflicts, competition, changes in technology and methods of marketing, changes in customer order patterns, changes in product mix, continued success in technological advances and delivering technological innovations, market acceptance of the Company's products, shortages in components or price increases that cannot be passed on to customers, inability to fully realize the expected benefits from acquisitions and restructurings or delays in realizing such benefits, challenges in integrating acquired businesses and achieving anticipated synergies, changes to export regulations, difficulties in retaining key employees and customers, changes in the market for microcap stocks regardless of growth and value and various other factors beyond our control. Some of these risks and uncertainties are identified in this Management's Discussion and Analysis of Financial Condition and Results of Operations (especially the "Liquidity and Capital Resources" section) and the section "Risk Factors" in this report and in our Annual Report on Form 10-K and you are urged to review those sections. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete list of all potential risks or uncertainties.*

*For purposes of this Quarterly Report, the terms "we," "us," "our" "Genasys" and the "Company" refer to Genasys Inc. and its consolidated subsidiaries.* 

**Overview** 

We are a global provider of Protective Communications™ solutions, including our Genasys Protect™ software platform and Long Range Acoustic Device<sup>®</sup> ("LRAD<sup>®</sup>") hardware products. Our unified software 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. Genasys 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.

Genasys Protect is a comprehensive portfolio of Protective Communications software and hardware systems serving federal governments and agencies; state and local governmental agencies, and education ("SLED"); and enterprise organizations in sectors including but not limited to oil and gas, utilities, manufacturing, automotive, and healthcare. Genasys Protect solutions have a diverse range of applications, including emergency warning and mass notification for public safety; critical event management for enterprise companies; de-escalation for defense and law enforcement; critical infrastructure protection; zone-based planning for accelerated, precise emergency response; secure and compliant cross-agency collaboration; and automated detection of real-time threats such as active shooters and severe weather.

LRAD products broadcast audible voice messages with exceptional vocal clarity from close range to 5,500 meters. We have a history of successfully delivering innovative products, systems, and solutions for mission critical situations, pioneering the acoustic hailing device ("AHD") market with the introduction of our first LRAD long-range communication systems in 2002, and creating the first multi-directional, voice-based public safety mass notification systems in 2012. Building on our proven, best in class, and reliable solutions, we offer the first and only unified, end-to-end Protective Communications platform.

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**Software Products**

**The Genasys Protect Platform**

*The Complete Protective Communications Platform* 

The Genasys Protect platform provides a full suite of Protective Communications tools for all hazards that is designed to provide targeted emergency communication, data-driven decision making, secure inter-agency collaboration, and more. Genasys Protect helps to enable preparedness, responsiveness, and collaboration to keep people, assets, and operations protected against the impacts of natural disasters, terrorism, violent civil unrest, and other dangerous situations, as well as power failures, facility shutdowns, and other non-emergency operational disruptions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.**Proven Technology:** Genasys solutions have been on the front lines for more than 40 years, providing targeted communications designed to ensure the right people get the right message - right away.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.**Modular Suite:** Built on open standards, Genasys software and hardware systems are designed to easily integrate, whether using the full Genasys suite or complementing the critical event management platforms customers already have in place.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.**Predictive Simulation:** Genasys Protect is designed to permit customers to test response plans preemptively with advanced simulation of evacuation-level events, including fires and floods, and their impact on infrastructure, including traffic patterns and perimeter establishment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.**Unified Viewpoint:** One common safety operating picture provides real-time visibility into our customers' people, assets, and environment by combining first-party data from asset / public safety-management platforms and IoT sensors with third-party data sources, including the Federal Emergency Management Agency ("FEMA"), National Oceanic and Atmospheric Administration, Department of Homeland Security, and more.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.**Unmatched Precision:** Customized zone mapping enables targeting of mass notifications at the street level, making it easier to sequence response areas from most to least critical.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.**Multichannel:** Genasys Protect is designed to allow operators to saturate their notification area by simultaneously alerting people across location-based SMS, CBC mobile push, text, email, social media, TV, radio, digital displays and acoustic devices.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.**Network Effect:** Implementation in neighboring municipalities and across public and private sector organizations within the same municipality extends coverage and enables greater precision when notifying people of threats.

**Genasys ALERT**

Genasys ALERT ("ALERT") is an interactive, cloud-based Software as a Service ("SaaS") solution that is designed to enable SLED and enterprise customers to send critical information to at-risk individuals or groups when an emergency occurs. ALERT acts as both a communications input and output, receiving information from state-of-the-art sensors and emergency services, and quickly relaying notifications, alerts, and instructions to at-risk populations and first responders. ALERT communications in public spaces can be enhanced via Genasys ACOUSTICS - connected, voice broadcast speakers - while ALERT communications among first responders and emergency personnel can be augmented and accelerated with Genasys CONNECT. ALERT clients can create and send critical, verified, and secure notifications and messages that are geographically specific and targeted using location-based SMS, CBC mobile push, text, email, social media, TV, radio, digital displays, acoustic devices, panic buttons, desktop alerts, TV, social media, and more. Additionally, Genasys is a certified provider of Integrated Public Alert and Warning System ("IPAWS") notifications. IPAWS is the federal public notification platform for the United States, which ALERT customers can use to deliver critical communications in multiple languages to specific populations.

Similarly, enterprise customers are able to send critical communications to employees, contractors, visitors, or groups based on geographic location or team status. Enterprises often use ALERT to distribute targeted notifications to customers, including billing updates, downtime notices, and more. Operated and controlled via a single dashboard that includes two-way polling, duress buttons, field check-ins, and recipient locations, ALERT integrates with various data sources, including sensors, panic buttons, emergency services, active directories, human resources, visitor management, and building control systems to find and deliver safety alerts and notifications to residents, employees, staff, contractors, temporary workers, and visitors.

ALERT sends targeted messages based on geographic location, permitting relevant information and instructions to be sent to the appropriate populations. Emergency managers can prepare for natural or man-made disasters by developing evacuation plans that map routes, shelters, traffic control locations, and road closures. This information is easily shared with the public and reduces the time it takes to execute emergency evacuations and conduct orderly repopulations. Auto-Discovery, an innovative feature of the platform, locates and connects with anyone on a wired or wireless network in a fixed area with no opt-in required. When discovered, ALERT anonymizes all recipient information and data. When an emergency occurs, these tools allow at-risk groups or individuals to be notified as quickly as possible without sacrificing their privacy.

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In addition to disseminating alerts and notifications, ALERT uses two-way communication tools, including polls and check-ins to receive feedback for enterprise clients. With direct feedback, operators can survey the safety and status of at-risk individuals, learn of developments, update notifications and/or instructions in response to new information, and more.

Similarly, enterprise customers are able to send critical communications to at-risk employees, contractors, visitors, or groups based on geographic location or team status. Operated and controlled via a single dashboard that includes two-way polling, duress buttons, field check-ins and recipient locations, ALERT integrates with various data sources, including sensors, emergency services, active directories, human resources, visitor management, and building control systems to find and deliver safety alerts and notifications to residents, employees, staff, contractors, temporary workers, and visitors.

**Genasys EVAC**

Genasys EVAC ("EVAC") - enables responding agencies to react swiftly, make collaborative decisions, and communicate event status in real time to other agencies, businesses, and the public. EVAC determines and communicates the proper scope of a response or evacuation by replacing guesswork with data-driven, zone-based intelligence. EVAC enhances safety levels for first responders, communities, and large campuses by providing:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Intelligent zones to improve evacuation planning and communication. EVAC users can build, edit, and act upon geographical location data, including shelters, facilities, and traffic;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Modeling behaviors to plan for effective responses and/or evacuation scenarios covering emergencies that include wildfires, floods, active shooters, hurricanes, and more;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Actionable communication through the Genasys Protect mobile app to keep people informed before, during, and after a critical event;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•A common operating picture across agencies to reduce response times as much as 90%; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Targeted notifications and updates to community members through a public website and free mobile app.

**Genasys CONNECT**

Genasys CONNECT ("CONNECT") is a leading cross-agency, Criminal Justice Information Services ("CJIS") compliant, collaboration platform that streamlines and secures team and one-on-one communications for first responders and public safety agencies. With real-time intelligence sharing that exceeds regulatory privacy requirements for public agencies, CONNECT's instant communication platform empowers first responders and public safety personnel to collaborate and share information in a single space with text, videos, images, and audio from any location. CONNECT provides a secure space where professionals can exchange information, make decisions, and collaborate with trust in data security. Record retention policies drive compliance that allows agencies and personnel to communicate in confidence.

Enabling public safety professionals to collaborate with other agencies throughout their region, state, and country, CONNECT provides real-time interoperability to address critical events and crisis situations more quickly through coordinated efforts. Compliant with all federal and state-level legal requirements for public safety communications, CONNECT data is protected and secured through high-level data encryption within a secure, U.S. based, government-only cloud environment.

**Hardware Products**

**Genasys ACOUSTICS**

Genasys ACOUSTICS ("ACOUSTICS") unites Genasys' next generation of mass notification speaker systems with Genasys Protect command-and-control software. Most legacy mass notification systems are sirens with limited, if any, voice broadcast capability. ACOUSTICS systems feature the industry's highest Speech Transmission Index ("STI"), large directional and omni-directional broadcast coverage areas, and an array of options, including solar power, battery backup, and satellite connectivity that enable the systems to continue to operate when power and telecommunications infrastructure goes down.

ACOUSTICS gives operators the ability to send critical alerts and notifications from emergency operations centers, and authorized computers or smart phones. ACOUSTICS provides highly audible, clear voice messaging thousands of meters away, staying on and connected even during broad power outages and network failures. ACOUSTICS are networked, remotely operated devices optimized with advanced driver and waveguide technology that enable audible voice broadcasts to be clearly heard and understood above background noise and over long distances. ACOUSTICS' reliability enables a constant stream of information, providing redundancy when key infrastructure fails during critical events.

**Genasys LRAD**

LRAD is the world's leading AHD, with the ability to project alert tones and audible voice messages with exceptional vocal clarity in a 30° beam from close range to 5,500 meters. LRADs are used throughout the world in multiple applications and circumstances to safely hail, warn, inform, direct, prevent misunderstandings, determine intent, establish large safety zones, resolve

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uncertain situations, and save lives. LRADs have been deployed in defense, law enforcement, fire rescue, critical infrastructure protection, maritime, border, and homeland security installations and applications where clear, intelligible voice communications are essential.

LRAD product models are available in varying audio outputs, communication coverage areas, sizes, functionalities, and mounting options. Several accessories and options (cameras, searchlights, mounts, and more) are also available to enhance LRAD capabilities.

All LRAD products are defined by their unparalleled audio output and clarity. LRADs use Genasys' proprietary XL driver technology, which generates higher audio output in a smaller, lighter form factor. The technology also enables voice messages and alert tones to cut through background noise and be clearly heard and understood. These competitive advantages, and constant innovation, have made LRAD the de facto standard of the global AHD industry.

**Recent Developments**

Business developments during the first nine months of fiscal 2025:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•U.S. Bureau of Reclamation ordered LRAD 950NXT integrated surveillance, security, and first response systems to replace first-generation LRAD systems at Hoover Dam

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Awarded a four-year contract by the Maui Emergency Management Agency to provide EVAC and AI-powered traffic management solutions by Ladris for the island of Maui

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Received a four-year contract from Los Angeles County for ALERT mass notification software services

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Secured a three-year, $3,350 follow-on maintenance agreement for LRAD systems deployed by the Indian Navy

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Expanded our Board of Directors to include new independent director R. Rimmy Malhotra

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Entered into a partnership with FloodMapp to combine dynamic emergency management and flood preparedness

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Announced $1,000 in domestic and international energy sector LRAD orders

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Received $4,500 in new and follow-on LRAD orders from U.S. Military

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•Entered into the First Amendment to Term Loan and Security Agreement with $4,000 First Amendment Term Loan

For several years through fiscal 2023, the Company had recognized revenue under a $110,000 U.S. Army program of record for Long Range Acoustic Devices. Final deliveries under this program occurred in the fourth quarter of fiscal year 2023. A new, larger multiyear Common Remotely Operated Weapon Station ("CROWS") program was approved by Congress in March 2024, as part of fiscal year 2024's Department of Defense budget. Due to the timing of the budget passage, and common hurdles in the initial procurement and purchase order process, revenues are not anticipated to begin until fiscal 2026. Historically, hardware revenue has been characterized by large and inconsistent orders that in aggregate have been a generator of cash for the Company.

We continue to be optimistic about our future with the fully funded award of a contract of up to $75,000 to engineer, procure and build an Early Warning System ("EWS") for Puerto Rico. We anticipate most of the revenue from this contract will be realized in our fiscal years 2025 and 2026. In addition, we continue to invest in our Genasys Protect software platform with a significant win in fiscal 2024 in Los Angeles County, in addition to wins in other counties in California, Colorado, Utah, and Oregon. The early-stage Software segment continues to generate operating losses; however, revenue continues to grow year over year and segment operating loss has improved incrementally from prior years.

With the delay in hardware orders and continued investment in software, the Company used $19,454 of cash in fiscal 2024. To address the ongoing cash needs, the Company completed a follow-on equity offering for $11,500 in October of 2023, and entered into a $15,000, two-year senior secured Term Loan agreement in May 2024 and a $4,000 increase on the Term Loan in May 2025. This capital activity is expected to enable the Company to continue operations and return to expected growth in annual revenue and generation of cash from operations as a result of the anticipated revenues under the EWS for Puerto Rico contract and the CROWS program for the U.S. Department of Defense. For the nine months ended June 30, 2025, the Company's operating activities used cash of $11,271.

**Business Outlook** 

Our products, systems, and solutions continue to gain worldwide awareness and recognition through increased marketing efforts, product demonstrations, and word of mouth as a result of positive responses and increased acceptance. We believe we have a solid global brand, technology, and product foundation, which we continue to expand to serve new markets and customers for greater business growth. We believe we have strong market opportunities for our product offerings throughout the world in the defense, public safety, emergency warning, mass notification, critical event management, enterprise safety, and law enforcement sectors as a result of increasing threats to government, commerce, law enforcement, homeland security, and critical infrastructure. Our products,

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systems, and solutions also have many applications within the fire rescue, maritime, asset protection, and wildlife preservation business segments.

Genasys has developed a global market and an increased demand for LRADs and advanced mass notification speakers. We have a reputation for producing quality products that feature industry-leading broadcast area coverage, voice intelligibility, and product reliability. We intend to continue building on our AHD market leadership position by offering enhanced voice broadcast systems and accessories for an expanding range of applications. In executing our strategy, we use direct sales to governments, militaries, large end-users, system integrators, and prime vendors. We have built a worldwide distribution channel consisting of partners and resellers that have significant expertise and experience selling integrated communication solutions into our various target markets. As our primary AHD sales opportunities are with domestic and international governments, military branches, and law enforcement agencies, we are subject to each customer's unique budget cycle, which leads to long selling cycles and uneven revenue flow, complicating our product planning.

The proliferation of natural and man-made disasters, crisis situations, and civil unrest requires technologically advanced, multichannel solutions to deliver clear and timely protective communications to help keep people safe during critical events. Businesses are also incorporating protective communication and emergency management systems that locate and help safeguard employees and infrastructure when crises occur.

By providing the only SaaS platform that unifies sensors and IoT inputs with multichannel, multi-agency alerting and notifications, Genasys seeks to deliver reliable, fast, and intuitive solutions for creating and disseminating geolocation-targeted warnings, information, and instructions before, during, and after public safety and enterprise threats.

While the software and hardware mass notification markets are more mature with many established manufacturers and suppliers, we believe that our advanced technology and unified platform provide opportunities to succeed in the large and growing public safety, emergency warning, and critical communications markets.

We intend to continue pursuing domestic and international business opportunities with the support of key representatives and resellers. We plan to grow our revenues through increased direct sales to governments and agencies that desire to integrate our communication technologies into their homeland security and public safety systems. This includes continuing to pursue further U.S. military opportunities. We also plan to pursue domestic and international emergency warning, critical event management, enterprise, government, law enforcement, fire rescue, homeland security, private and commercial security, border security, maritime security, critical infrastructure protection, and wildlife preservation business opportunities. In addition to the matters above, we are authorized for the performance of services and provision of goods pursuant to Delaware General Corporation Law.

Our research and development strategy involves incorporating further innovations and capabilities into our Genasys Protect platform to meet the needs of our target markets.

Our Genasys Protect software solutions are more complex offerings. We are pursuing certain certifications, which are often required when bidding on government and mass notification opportunities. We intend to invest engineering resources to enhance our ALERT, EVAC, and CONNECT software solutions to compete for larger emergency warning and critical communications business opportunities. We are also configuring alternative solutions to achieve lower price points to meet the needs of certain customers or applications. We also engage in ongoing value engineering to reduce the cost and simplify the manufacturing of our products.

A large number of LRAD and ACOUSTICS components and sub-assemblies manufactured by outside suppliers within our supply chain are produced within 50 miles of our facility. We do not source component parts from suppliers in China. It is likely that some of our suppliers source parts in China. Negative impacts on our supply chain could have a material adverse effect on our business.

We have been affected by price increases from our suppliers and logistics as well as other inflationary factors such as increased salary, labor, and overhead costs. We regularly review and adjust the sales price of our finished goods to offset these inflationary factors. Although we do not believe that inflation has had a material impact on our financial results through June 30, 2025, sustained or increased inflation in the future may have a negative effect on our ability to achieve certain expectations in gross margin and operating expenses. If we are unable to offset the negative impacts of inflation with increased prices, our future results could be materially affected.

During the second and third quarters of fiscal year 2025, higher tariffs impacting certain sources of the Company's materials were imposed by the U.S. government. We are monitoring these imposed tariffs and related ongoing negotiations between the U.S. government and the countries in which we source products. See *"Item 1A — Risk Factors — International trade policies, including tariffs, sanctions and trade barriers may adversely affect our business, financial condition, results of operations and prospects,*" which is incorporated herein by reference.

It is uncertain how inflation and interest rates will be impacted during the remainder of 2025 by the imposition of tariffs and other trade-related actions or inactions. World events, including the Russia-Ukraine War and the ongoing conflict in the Middle East continue to have negative effects on the global economy.

Prolonged or recurring disruptions or instability in the United States and global economies, and how the world reacts to those disruptions or instability, could have long-term impacts on our business. These business impacts could negatively affect us in a number of ways, including, but not limited to, reduced demand for our products and services, declines in our revenue and profitability,

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costs associated with complying with new or amended laws and regulations and mitigating the increased cost of the new tariffs affecting our business, declines in our stock price, reduced availability and less favorable terms of future borrowings, reduced credit-worthiness of our customers, and potential impairment of the carrying value of goodwill or other intangible assets.

**Critical Accounting Policies** 

We have identified a number of accounting policies as critical to our business operations and the understanding of our results of operations. These are described in our consolidated financial statements located in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended September 30, 2024. The impact and any associated risks related to these policies on our business operations is discussed below and throughout Management's Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported and expected financial results.

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

**Comparison of Results of Operations for the Three Months Ended June 30, 2025 and 2024 (in thousands)**

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** |  |  |
|  | **June 30, 2025** | **June 30, 2025** | **June 30, 2024** | **June 30, 2024** |  |  |
|  |  | **% of** |  | **% of** |  |  |
|  |  | **Total** |  | **Total** | **Fav (Unfav)** | **Fav (Unfav)** |
|  | **Amount** | **Revenue** | **Amount** | **Revenue** | **Amount** | **%** |
| Revenues: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Product sales | $7001 | 71.0% | $4576 | 63.8% | $2425 | 53.0% |
| &nbsp;&nbsp;&nbsp;&nbsp;Contract and other | 2856 | 29.0% | 2591 | 36.2% | 265 | 10.2% |
| Total revenues | 9857 | 100.0% | 7167 | 100.0% | 2690 | 37.5% |
| Cost of revenues | 7260 | 73.7% | 3383 | 47.2% | (3877) | (114.6)% |
| Gross profit | 2597 | 26.3% | 3784 | 52.8% | (1187) | (31.4%) |
| Operating expenses |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative | 6422 | 65.2% | 6649 | 92.8% | 227 | 3.4% |
| &nbsp;&nbsp;&nbsp;&nbsp;Research and development | 2100 | 21.3% | 2496 | 34.8% | 396 | 15.9% |
| Total operating expenses | 8522 | 86.5% | 9145 | 127.6% | 623 | 6.8% |
| Loss from operations | (5925) | (60.1%) | (5361) | (74.8%) | (564) | 10.5% |
| Other expense, net | (554) | (5.6%) | (1363) | (19.0%) | 809 | N/A |
| Loss before income taxes | (6479) | (65.7%) | (6724) | (93.8%) | 245 | (3.6)% |
| Income tax expense (benefit) | 8 | 0.1% | (42) | (0.6%) | (50) | 119.0% |
| Net loss | $(6487) | (65.8%) | $(6682) | (93.2%) | $195 | (2.9)% |
| Net revenue |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Hardware | $7656 | 77.7% | $5108 | 71.3% | 2548 | 49.9% |
| &nbsp;&nbsp;&nbsp;&nbsp;Software | 2201 | 22.3% | 2059 | 28.7% | 142 | 6.9% |
| Total net revenue | $9857 | 100.0% | $7167 | 100.0% | $2690 | 37.5% |
| US v International Revenue |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;US Revenue | $8632 | 87.6% | $6220 | 86.8% | $2412 | 38.8% |
| &nbsp;&nbsp;&nbsp;&nbsp;International Revenue | 1225 | 12.4% | 947 | 13.2% | 278 | 29.4% |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $9857 | 100.0% | $7167 | 100.0% | $2690 | 37.5% |

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The table above 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***

Revenues increased $2,690, or 38%, compared with the third fiscal quarter of the prior year. Hardware and software revenue increased $2,548 and $142, respectively, compared with the prior year quarter. The increased hardware revenue in the third quarter of fiscal 2025 was largely due to $4,333 from the initial deliveries to our Puerto Rico customer, which was recognized using the percentage-of-completion methodology, which we expect to use for the majority of future revenues from our Puerto Rico customer. The percentage-of-completion methodology we used was based on the installation labor hours incurred as a percentage of the total installation labor hours estimated for the entire Puerto Rico project. The higher software revenue was primarily due to an 8% increase in recurring revenue and offset by a small decrease in revenue from professional services performed in the quarter ended June 30, 2025.

The receipt of orders and signing of contracts is often uneven due to the timing of budget cycles, government financial issues, and military conflict. As of June 30, 2025, we had aggregate deferred revenue of $3,250 for extended warranty obligations and software support agreements.

***Gross Profit***

Gross profit decreased $1,187, or 31%, compared with the same quarter last year. The decrease in gross profit was primarily due to the impact of percentage-of-completion revenue recognition associated with the early-stage Puerto Rico project, and a less favorable hardware mix and increased tariff costs on imported components. Software's gross margin was essentially unchanged compared to the prior year quarter.

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

***Selling, General and Administrative Expenses***

Selling, general and administrative expenses decreased $227 or 3% over the prior year period. The decrease was primarily driven by lower professional services in the three months ending June 30, 2025.

We incurred non-cash share-based compensation expenses allocated to selling, general and administrative expenses in the three months ended June 30, 2025 and 2024 of $384 and $242, 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 based on sales channels.

***Research and Development Expenses*** 

Research and development expenses decreased $396, or 16%, in the fiscal third quarter compared to the prior year quarter due to the capitalization of Puerto Rico-related software development resources in the most recent fiscal quarter. Labor capitalization was $197, with the remaining decrease of $113 in expenditures from employee costs and $79 in professional services.

We incurred non-cash share-based compensation expenses allocated to research and development expenses in the three months ended June 30, 2025 and 2024 of $57 and $29, respectively.

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

***Other Expense, Net***

Other expense, net was $554 in the third quarter this fiscal year, compared to $1,363 in the prior fiscal year quarter. The loss in the current year included $480 loss on the issuance of the First Amendment Term Loan, $580 change in the fair value of the Term Loans and $406 in interest expense from the Term Loans, $104 professional expense related to the $4,000 First Amendment Term Loan, partially offset by $1,140 non-cash income from the change in fair value of warrants and $16 of interest income.

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**Comparison of Results of Operations for the Nine Months Ended June 30, 2025 and 2024 (in thousands)**

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Nine Months Ended** | **Nine Months Ended** | **Nine Months Ended** | **Nine Months Ended** |  |  |
|  | **June 30, 2025** | **June 30, 2025** | **June 30, 2024** | **June 30, 2024** |  |  |
|  |  | **% of** |  | **% of** |  |  |
|  |  | **Total** |  | **Total** | **Fav (Unfav)** | **Fav (Unfav)** |
|  | **Amount** | **Revenue** | **Amount** | **Revenue** | **Amount** | **%** |
| Revenues: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Product sales | $14215 | 59.9% | $9951 | 57.6% | $4264 | 42.8% |
| &nbsp;&nbsp;&nbsp;&nbsp;Contract and other | 9514 | 40.1% | 7316 | 42.4% | 2198 | 30.0% |
| Total revenues | 23729 | 100.0% | 17267 | 100.0% | 6462 | 37.4% |
| Cost of revenues | 15344 | 64.7% | 9827 | 56.9% | (5517) | (56.1)% |
| Gross profit | 8385 | 35.3% | 7440 | 43.1% | 945 | 12.7% |
| Operating expenses |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative | 19904 | 83.9% | 19806 | 114.7% | (98) | (0.5%) |
| &nbsp;&nbsp;&nbsp;&nbsp;Research and development | 6602 | 27.8% | 7218 | 41.8% | 616 | 8.5% |
| Total operating expenses | 26506 | 111.7% | 27024 | 156.5% | 518 | 1.9% |
| Loss from operations | (18121) | (76.4%) | (19584) | (113.4%) | 1463 | (7.5)% |
| Other income (expense), net | 1496 | 6.3% | (1236) | (7.2%) | 2732 | N/A |
| Loss before income taxes | (16625) | (70.1%) | (20820) | (120.6%) | 4195 | (20.1)% |
| Income tax expense (benefit) | 79 | 0.3% | (476) | (2.8%) | (555) | 116.6% |
| Net loss | $(16704) | (70.4%) | $(20344) | (117.8%) | $3640 | (17.9)% |
| Net revenue |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Hardware | $16966 | 71.5% | $12053 | 69.8% | 4913 | 40.8% |
| &nbsp;&nbsp;&nbsp;&nbsp;Software | 6763 | 28.5% | 5214 | 30.2% | 1549 | 29.7% |
| Total net revenue | $23729 | 100.0% | $17267 | 100.0% | $6462 | 37.4% |
| US v International Revenue |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;US Revenue | $19095 | 80.5% | $12837 | 74.3% | $6258 | 48.7% |
| &nbsp;&nbsp;&nbsp;&nbsp;International Revenue | 4634 | 19.5% | 4430 | 25.7% | 204 | 4.6% |
| &nbsp;&nbsp;&nbsp;&nbsp;Total | $23729 | 100.0% | $17267 | 100.0% | $6462 | 37.4% |

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The table above 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***

Revenues increased 6,462, or 37%, for the nine months ended June 30, 2025, compared with the same prior year period. Hardware and software revenue increased $4,913 and $1,549, respectively, compared with the prior year period. The higher revenue in the first nine months of fiscal 2025 was largely due to the higher backlog at the start of the fiscal year from increased orders received in fiscal year 2024. Backlog is a measure of purchase orders received that are scheduled to ship in the next 12 months. Hardware revenue for the current year to date included $5,563 from the initial deliveries to our Puerto Rico customer, which was in backlog at the start of the fiscal year. The higher software revenue in the first nine months was primarily due to a 31% increase in recurring revenue.

The receipt of orders and signing of contracts is often uneven due to the timing of budget cycles, government financial issues, and military conflict. As of June 30, 2025, we had aggregate deferred revenue of $3,250 for extended warranty obligations and software support agreements.

***Gross Profit***

Gross profit increased $945, or 13%, compared with the same nine-month period last year, primarily due to higher margin software revenue. Direct costs associated with recurring software revenue grow at a slower pace than such revenue, leading to higher gross margins. Gross profit as a percentage of sales for hardware was lower in the first nine months of fiscal 2025, compared with the same period in the prior year, primarily due to an unfavorable hardware sales mix driven by percentage of completion revenue recognition for early-stage hardware deliveries in Puerto Rico.

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

***Selling, General and Administrative Expenses***

Selling, general and administrative expenses were essentially unchanged compared to the prior year period. Salaries and wages increased in the period, which was offset by a reduction in tradeshow and travel costs.

We incurred non-cash share-based compensation expenses allocated to selling, general and administrative expenses in the nine months ended June 30, 2025 and 2024 of $1,048 and $1,071, 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*** 

Research and development expenses decreased $616, or 9%, in the first nine months of fiscal year 2025. $351 was for the capitalization of Puerto Rico-related software development, and $232 for lower compensation expenses and lower outside services costs.

We incurred non-cash share-based compensation expenses allocated to research and development expenses in the nine months ended June 30, 2025 and 2024 of $161 and $129, respectively.

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

***Other Income (Expense), Net***

Other income, net was $1,496 in the first nine months of fiscal 2025, compared to other expense, net of $1,236 in the prior fiscal year period. The income in the current year included $4,560 non-cash income from the change in fair value of warrants and $114 of interest income, partially offset by expenses including $1,380 change in the fair value of the Term Loans and $1,124 in interest expense from the Term Loans, $480 loss on the issuance of First Amendment Term Loan and $104 professional expense related to the $4,000 First Amendment Term Loan.

***Other Metrics***

We monitor a number of financial and operating metrics, including adjusted EBITDA, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions. Our business metrics may be calculated in a manner different than similar other business metrics used by other companies.

***Adjusted EBITDA***

Adjusted EBITDA represents our net income before other income, net income tax expense (benefit), depreciation and amortization expense, and stock-based compensation. We do not consider these items to be indicative of our core operating performance. The items that are non-cash include depreciation and amortization expense and stock-based compensation. Adjusted EBITDA is a measure used by management to understand and evaluate our core operating performance and trends, and to generate future operating plans, make strategic decisions regarding allocation of capital, and invest in initiatives focused on cultivating new markets for our solutions. In particular, the exclusion of certain expenses in calculating adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis. Adjusted EBITDA is not a measure calculated in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). We believe that adjusted EBITDA provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors. Nevertheless, use of adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Some of these limitations are: (1) although depreciation and amortization are non-cash charges, the intangible assets that are amortized and property and equipment that is depreciated, will need to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacement or for new capital expenditure requirements; (2) adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; (3) adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (4) adjusted EBITDA does not reflect tax payments or receipts that may represent a reduction or increase in cash available to us; and (5) other companies, including companies in our industry, may calculate adjusted EBITDA or similarly titled measures differently, which reduces the usefulness of the metric as a comparative measure. Because of these and other limitations, you should consider adjusted EBITDA alongside our other U.S. GAAP-based financial performance measures, net income and our other U.S. GAAP financial results.

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The following table presents a reconciliation of adjusted EBITDA to net income, the most directly comparable U.S. GAAP measure, for each of the periods indicated (in thousands):

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended<br>June 30,** | **Three Months Ended<br>June 30,** | **Nine Months Ended<br>June 30,** | **Nine Months Ended<br>June 30,** |
|  | **2025** | **2024** | **2025** | **2024** |
| Net loss | $(6487) | $(6682) | $(16704) | $(20344) |
| Other expense (income), net | 554 | 1363 | (1496) | 1236 |
| Income tax expense (benefit) | 8 | (42) | 79 | (476) |
| Depreciation and amortization | 685 | 733 | 2114 | 2193 |
| Stock-based compensation | 459 | 299 | 1264 | 1269 |
| Adjusted EBITDA | $(4781) | $(4329) | $(14743) | $(16122) |

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**Segment Results**

Segment results include net sales and operating income by segment. Corporate expenses, including various administrative expenses and costs of a publicly traded company, are included in the Hardware segment as per historical financial reporting.

**Comparison of Segment Adjusted EBITDA for the Three Months Ended June 30, 2025 and 2024 (in thousands)**

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Hardware** | **Hardware** | **Hardware** | **Software** | **Software** | **Software** |
|  | **Three Months Ended** | **Three Months Ended** |  | **Three Months Ended** | **Three Months Ended** |  |
|  | **June 30,** | **June 30,** | **Fav (Unfav)** | **June 30,** | **June 30,** | **Fav (Unfav)** |
|  | **2025** | **2024** | **%** | **2025** | **2024** | **%** |
| Revenue | $7656 | $5108 | 49.9% | $2201 | $2059 | 6.9% |
| Operating loss | (2589) | (1920) | 34.8% | (3336) | (3441) | (3.1)% |
| <u>Reconciliation of GAAP to Non-GAAP</u> |  |  |  |  |  |  |
| Depreciation and amortization | 86 | 99) | (13.1)% | 599 | 634) | (5.5)% |
| Stock-based compensation | 355 | 149 | 138.3% | 104 | 150) | (30.7)% |
| Adjusted EBITDA | $(2148) | $(1672) | 28.5% | $(2633) | $(2657) | (0.9)% |

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***Hardware Segment***

Hardware segment revenue increased $2,548, or 50%, over the prior fiscal quarter. The increase was largely due to the higher backlog at the start of this fiscal year compared to the prior year. Hardware revenue in this quarter included $4,333 of Puerto Rico project revenue.

Operating loss increased $669 in the current fiscal year quarter due to lower gross profit this year due to the Puerto Rico project percentage of completion revenue offset by lower operating expenditures on professional services.

***Software Segment***

Software segment revenue increased $142, or 7%, over the prior fiscal quarter. This primarily reflects an 8% increase in recurring revenue compared with the prior fiscal quarter.

Operating loss decreased $105 in the third quarter of the current fiscal year due to increased revenue and lower compensation and sales and marketing expenses compared to the prior year quarter.

**Comparison of Segment Adjusted EBITDA for the Nine Months Ended June 30, 2025 and 2024 (in thousands)**

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Hardware** | **Hardware** | **Hardware** | **Software** | **Software** | **Software** |
|  | **Nine Months Ended** | **Nine Months Ended** |  | **Nine Months Ended** | **Nine Months Ended** |  |
|  | **June 30,** | **June 30,** | **Fav (Unfav)** | **June 30,** | **June 30,** | **Fav (Unfav)** |
|  | **2025** | **2024** | **%** | **2025** | **2024** | **%** |
| Revenue | $16966 | $12053 | 40.8% | $6763 | $5214 | 29.7% |
| Operating loss | (8952) | (7806) | 14.7% | (9169) | (11778) | (22.2)% |
| <u>Reconciliation of GAAP to Non-GAAP</u> |  |  |  |  |  |  |
| Depreciation and amortization | 271 | 293) | (7.5)% | 1843 | 1900) | (3.0)% |
| Stock-based compensation | 978 | 860 | 13.7% | 286 | 409) | (30.1)% |
| Adjusted EBITDA | $(7703) | $(6653) | 15.8% | $(7040) | $(9469) | (25.7)% |

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***Hardware Segment***

Hardware segment revenue increased $4,913, or 41%, over the prior fiscal year period. The increase was largely due to the higher backlog at the start of this fiscal year compared with the prior year amount. Hardware revenue in the first nine months of the current fiscal year included $5,563 from deliveries on the Puerto Rico project.

Operating loss increased $1,146 in the current fiscal year period compared with the prior fiscal year period due to lower gross profit resulting from the impact of percentage of completion revenue recognition for early stage hardware activity offset by lower professional services expense this fiscal year.

***Software Segment***

Software segment revenue increased $1,549, or 30%, over the prior fiscal year period. This primarily reflects a 31% increase in recurring revenue compared with the first nine months of the prior fiscal year period.

Operating loss decreased $2,609 in the nine-month period of this fiscal year due to increased revenue and gross margin and lower operating expenses in sales and marketing expenses and compensation-related costs compared to the prior year period.

***Liquidity and Capital Resources***

Cash and cash equivalents as of June 30, 2025 were $5,339, compared with $4,945 as of September 30, 2024. We had short-term marketable securities of $120 as of June 30, 2025, compared with $7,945 as of September 30, 2024.

Our internal sources of liquidity include cash and cash equivalents, short term marketable securities, other working capital and expected future cash flows from operating activities in subsequent periods. In this context, please refer to "*Item 1A – Risk Factors – Our short-term liquidity may be materially adversely affected by administrative complexities surrounding the disbursement of funds under the Puerto Rico Early Warning System project. Furthermore, our ability to receive the full benefits of such project could be materially and adversely affected by the economic, governmental, and environmental conditions in Puerto Rico."*

Our primary external source of liquidity consists of our Term Loans, although we have also relied in the past, and may rely in the future, on equity offerings. The disclosure on our Term Loans contained in "*Note 12. Term Loans and Warrant Liabilities*" in the notes to the consolidated financial statements is incorporated herein by reference.

We continue to manage all aspects of our business including, but not limited to, monitoring the financial health of our customers, suppliers and other third-party relationships and developing new opportunities for growth.

Principal factors that could affect the availability of our internally generated funds include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•ability to meet sales projections;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•government spending levels;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•ability to execute current contract programs timely;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•timely collection of customer contract receivables;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•introduction of competing technologies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•product mix and effect on margins, including the impact of tariffs on margin;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•ability to manage current inventory levels and supply chain; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•product acceptance in new markets;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•volatility in the capital markets; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;•market price and trading volume of our common stock.

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

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***Cash Flows***

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

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| | | |
|:---|:---|:---|
|  | **Nine Months Ended** | **Nine Months Ended** |
|  | **June 30,<br>2025** | **June 30,<br>2024** |
| Cash provided by (used in): |  |  |
| Operating activities | $(11271) | $(20010) |
| Investing activities | $7893 | $(4389) |
| Financing activities | $4025 | $23916 |

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*Operating Activities*

During the nine months ended June 30, 2025, net cash used in operating activities was $11,271, resulting from a net loss of $16,704, offset by non-cash expenses of $1,451 and a net cash increase from changes in our operating assets and liabilities of $3,982. Net cash increase from changes in our operating assets and liabilities, consisted primarily of a $13,604 increase in accrued liabilities resulting from receipt of $17,278 deposit from the Puerto Rico project, $3,737 increase in accounts payable related to procurement of inventory for increased fiscal 2025 sales projections, partially offset by a $4,793 increase in prepaid expenses and other, mostly driven by the prepayment made for hardware for the Puerto Rico project, and a $4,367 increase in inventory, $2,846 increase in contract assets, and $1,353 increase in accounts receivable. Non-cash expense adjustments of $1,451, consisted primarily of $4,560 gain on fair value of warrants driven mostly by our stock price, offset by $2,114 depreciation and amortization, $1,380 loss on fair value of Term Loans, $480 loss on issuance of First Amendment Term Loan, $570 amortization of operating lease ROU assets, and $254 inventory obsolescence.

*Investing Activities*

During the nine months ended June 30, 2025, net cash provided by investing activities was $7,893, primarily due to the net proceeds received from the maturities of investments in our holdings in marketable securities of $8,106, offset by the purchase of property and equipment of $213. We anticipate additional expenditures for tooling and equipment during the balance of fiscal year 2025.

*Financing Activities*

In the nine months ended June 30, 2025, we received net proceeds of $4,025 through financing activities, primarily due to $4,000 from the First Amendment Term Loan borrowings.

**Recent Accounting Pronouncements** 

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

**Item 3. Quantitative and Qualitative Disclosures about Market Risk.**

*Foreign Currency Risk*

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

**Item 4. Controls and Procedures.**

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

**Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures**

Under the supervision and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of our disclosure controls and procedures as such term is defined under Rules 13a-15(e)

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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 June 30, 2025.

**Changes in Internal Control over Financial Reporting**

There have been no changes in our internal control over financial reporting during our fiscal quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Our process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies, which may be identified during this process.

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

**PART II. OTHER INFORMATION**

**Item 1. Legal Proceedings.**

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

**Item 1A. Risk Factors.**

There have been no material changes to the risk factors described under Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, filed with the SEC on December 13, 2024, other than the information presented below.

**International trade policies, including tariffs, sanctions and trade barriers, *and a decline in federal funding in the United States,* may adversely affect our business, financial condition, results of operations and prospects.**

The recent announcements of substantial new tariffs and other restrictive trade policies have created a dynamic and unpredictable trade landscape, which may adversely impact our business. Current or future tariffs or other restrictive trade measures may raise the costs of raw materials, components or finished goods, which may adversely impact both our product offerings and our operational expenses. Such cost increases may reduce our margins and require us to increase prices, which could harm our competitive position, reduce customer demand and damage customer relationships.

Trade disputes, trade restrictions, tariffs and other political tensions between the U.S. and other countries may also exacerbate unfavorable macroeconomic conditions including inflationary pressures, foreign exchange volatility, financial market instability, and economic recessions or downturns, which may also negatively impact customer demand for our products or services, delay purchases or renewals, limit expansion opportunities with customers, limit our access to capital, or otherwise negatively impact our business and operations. Ongoing tariff, trade restrictions and macroeconomic uncertainty has and may continue to contribute to volatility in the price of our common stock. Furthermore, a decline in, or delays in the receipt of, federal funding is impacting many of our software and hardware customers, and may lead to a reduction in demand for our products.

Ongoing uncertainty regarding trade and federal funding policies may also complicate our short- and long-term strategic planning, and that of our partners and customers, including decisions regarding hiring, product strategy, capital investment, supply chain design and geographic expansion. While we continue to monitor trade and federal funding developments, the ultimate impact of these risks remains uncertain and any prolonged economic downturn, escalation in trade tensions, deterioration in international perception of U.S.-based companies or governmental funding shortfalls could materially and adversely affect our business, results of operations, financial condition and prospects.

***Our short-term liquidity may be materially adversely affected by administrative complexities surrounding the disbursement of funds under the Puerto Rico Early Warning System project. Furthermore, our ability to receive the full benefits of such project could be materially and adversely affected by the economic, governmental, and environmental conditions in Puerto Rico.***

As a result of administrative complexities surrounding the approval process within the authority responsible for electricity generation, distribution and transmission in Puerto Rico, which is responsible for requesting disbursement of funds from FEMA, we have recently experienced delays in receiving payments under the Puerto Rico Early Warning System project. A continuation or exacerbation of these delays could materially adversely affect our liquidity position in the short term.

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Furthermore, Puerto Rico's ongoing fiscal challenges, including government debt restructuring, austerity measures, and political instability, may result in regulatory uncertainties, delays in contract execution, delays in timely payment of contract amounts due, or disruptions in governmental support or funding tied to our services related to the Puerto Rico Early Warning System project. Additionally, Puerto Rico's geographic location in the Caribbean makes it highly susceptible to hurricanes, tropical storms, earthquakes, and other natural disasters. These events can severely damage infrastructure, disrupt power and telecommunications, and hinder our ability to deliver contracted services in a timely and effective manner. The increasing frequency and intensity of such events, potentially driven by climate change, heightens the risk of prolonged service interruptions or inability to meet contractual obligations.

If the government of Puerto Rico is unable to maintain essential public services, or fund projects we are engaged in, including the Puerto Rico Early Warning System project, or if future weather events or other disasters impair our operations or supply chain, we may face significant challenges in meeting our performance obligations, which could result in penalties, reputational harm, or loss of future business, and we may not timely achieve the anticipate benefits related to the project. Any of these factors could materially adversely affect our business, results of operations, and financial condition.

**Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.** 

None.

**Item 3. Defaults Upon Senior Securities.** 

None.

**Item 4. Mine Safety Disclosures.** 

Not Applicable.

**Item 5. Other Information.**

During the quarter ended June 30, 2025, none of our directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of the Company's securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement" as that term is used in SEC regulations.

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**Item 6. Exhibits.** 

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| | |
|:---|:---|
| &nbsp;&nbsp;10.4 | [<u>First Amendment to Term Loan and Security Agreement, dated May 9, 2025 among Genasys Inc., Evertel Technologies, LLC, Zonehaven LLC, Genasys Puerto Rico, LLC, the lenders party thereto and Cantor Fitzgerald Securities, as administrative agent and collateral agent.</u>](https://www.sec.gov/Archives/edgar/data/924383/000095017025070476/gnss-ex10_4.htm) |
| &nbsp;&nbsp;31.1 | [<u>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.\*</u>](gnss-ex31_1.htm) |
| &nbsp;&nbsp;31.2 | [<u>Certification of Cassandra L. Hernandez-Monteon, 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.\*</u>](gnss-ex31_2.htm) |
| &nbsp;&nbsp;32.1 | [<u>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</u>](gnss-ex32_1.htm)<u>Cassandra L. Hernandez-Monteon</u>[<u>, Principal Financial Officer.\*</u>](gnss-ex32_1.htm) |
| &nbsp;&nbsp;101.INS | Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document |
| &nbsp;&nbsp;101.SCH | Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
| &nbsp;&nbsp;104 | Cover page formatted as Inline XBRL and contained in Exhibit 101 |

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\* Filed concurrently herewith.

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**SIGNATURES** 

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

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| | | |
|:---|:---|:---|
|  | &nbsp;&nbsp;GENASYS INC. | &nbsp;&nbsp;GENASYS INC. |
| &nbsp;&nbsp;&nbsp;&nbsp;Date: August 14, 2025 | By:  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; /s/ [Cassandra L. Hernandez-Monteon](gnss-ex31_2.htm) |
|  |  | [**Cassandra L. Hernandez-Monteon**](gnss-ex31_2.htm)**, Chief Financial Officer** |
|  |  | **(Principal Financial Officer)** |

---

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## Exhibit 31.1

**Exhibit 31.1** 

**CERTIFICATIONS** 

I, Richard S. Danforth, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Genasys Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's independent registered public accounting firm and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| |
|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Date: August 14, 2025 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Richard S. Danforth |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Richard S. Danforth |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Principal Executive Officer) |

---

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## Exhibit 31.2

**Exhibit 31.2** 

**CERTIFICATIONS** 

I, [Cassandra L. Hernandez-Monteon](gnss-ex31_2.htm), certify that:

1. I have reviewed this quarterly report on Form 10-Q of Genasys Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's independent registered public accounting firm and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| |
|:---|
| Date: August 14, 2025 |
| /s/ [Cassandra L. Hernandez-Monteon](gnss-ex31_2.htm) |
| [Cassandra L. Hernandez-Monteon](gnss-ex31_2.htm) |
| (Principal Financial Officer) |

---

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## Exhibit 32.1

**Exhibit 32.1** 

**CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER** 

**PURSUANT TO** 

**18 U.S.C. SECTION 1350,** 

**AS ADOPTED PURSUANT TO** 

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002** 

The undersigned hereby certifies, in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his or her capacity as an officer of Genasys Inc. (the "Company"), that, to his or her knowledge, the Quarterly Report of the Company on Form 10-Q for the quarter ended June 30, 2025 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operation of the Company as of the dates and for the periods presented in the financial statements included in such report.

---

| |
|:---|
| Dated: August 14, 2025 |
| /s/ Richard S. Danforth |
| Richard S. Danforth |
| President and Chief Executive Officer |
| (Principal Executive Officer) |

---

---

| |
|:---|
| /s/ [Cassandra L. Hernandez-Monteon](gnss-ex31_2.htm) |
| [Cassandra L. Hernandez-Monteon](gnss-ex31_2.htm) |
| Chief Financial Officer |
| (Principal Financial Officer) |

---

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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